5.1  What is Competitive Neutrality?

Competitive Neutrality removes the net competitive advantages that accrue to a government business by virtue of its public sector ownership. This allows a like-with-like value for money assessment between a PSC and private bids, by removing the effects of public ownership and including equivalent costs that would otherwise be incurred.

Competitive advantages from public sector ownership typically include taxes, such as land tax, that are only levied on private enterprises. Competitive disadvantages may also arise from public sector ownership and these are typically heightened public scrutiny and reporting requirements not faced by a private enterprise.

Figure 5-1 illustrates the role of Competitive Neutrality in the construction of a PSC.

Figure 5-1  The PSC process and Competitive Neutrality