Competition with government contracts

When governments give out contracts to private firms for public services how do you make sure companies don't just undercut on quality to undercut on price?

One way to do this is not allowing companies to make bids on contracts based on price but based on quality. Companies would get paid based on every person they did services for and meeting minimum standards.

New contracts would be under high initial scrutiny to make sure they met minimum standards and if they didn't meet standards they would not be paid and could lose their contract.

• Being a good consumer

Government have to make steps to make sure the public are informed about the quality of services. If people are uninformed about the quality competitors offer, or unwilling to change to a competitor this can drastically harm improvements to services.

People can still make bad decisions by not thinking long term or understanding the bigger picture, as well as generally making bad choices such as with exercise and eating healthy. Government should try and inform people on long term results as well as larger stats rather than just focusing on individuals satisfaction rating.
If the government still believe people are making poor choices government could step in and force policy on private companies such as healthy meals in all schools, though this should be a last step.

• How to reduce cost?

One way to try and reduce cost is having strict rules over their accounts, looking at profits and reducing the tariffs paid out to companies for the same service. 
The main problem are companies hiding profits this is why it might be advised to have stricter rules on these companies to police their accounts, another option is to always have a government competitor making sure government isn't being overpriced by a service we can do better at a lower cost.

• Local government vs national

I would like local government to have more accountability so they could decide on the best quality and price for local people, until people are more informed about their local government and hold their local government to account, I believe it's best for central government to decide what tariffs will be given to each region and what companies will be awarded contracts. local government can only provide new contractors ,help companies provide better services and refer people to companies in certain cases.

Not in all cases do you want the individual to make the choice on the service they are given such as prisoners choice on prisons and vulnerable people such as drug addicts on rehabilitation services. In certain cases you want local government to choose on behalf of a third party, as tariffs are set by central government local government will more likely choose based on quality as there is no cost element.

• When competition doesn't work

When you have a lack of competition, such as high number of children and low level of school places, we will have to be quick to spot such situations and tougher restrictions will come in place to make sure companies still offer good services and in the worse cases government take over if companies do not meet standards.