The Business Services Association, which represents major employers with between them more than 300,000 staff and a turnover in excess of £4bn, said in evidence to Lord Nolan that some other companies had reached the point where they would not bid for local government work at all.
Others scrutinised a local authority's record closely when it issued an invitation to tender before deciding whether or not to submit a bid.
The association's director-general, Norman Rose, said some estimates suggested that member companies would no longer choose to deal with up to 50% of local authorities in England and Wales.
'So if a service has not gone to the private sector in those rounds, it is unlikely to go to one next time,' said Mr Rose. 'One London authority recently found themselves unable to attract ANY outside bidders for a service in this position.'
Commenting as he submitted his evidence, Mr Rose said: 'It is time rather more consideration was given to the needs of the council taxpayer and a little less to protecting inefficient local authorities.
'At best, some of their practices are misguided and misplaced leading to overpricing, overmanning and poorer services. At worst they are dishonest, withholding information from bidders and sharing a determination that work will not go outside come what may.
'At the same time there is no doubt that a significant number of local authorities have learnt the value of contracting out non core services to private companies with the quality of service and value for money it brings.'
The BSA has made a number of recommendations to improve propriety, even handiness, quality and value for money coupled with a partnership approach to enable both sides to get most from their contractual relationship.
In particular it calls for:
-- Audit Commission powers to establish performance indicators for different local authority functions
-- Value for money should be defined in a way which allows quality and best value indicators to be included alongside price
-- As much emphasis should be placed on improvement to services as on price
-- The District Authority should oblige local authorities which did not meet those standards to put the particular service out to tender, with internal bidders disbarred because they clearly could not meet required performance standards
-- A partnership approach should be encouraged between the service provider and the local authority
-- Compulsory competitive tendering should be replaced by a voluntary system based on value for money
-- Tendering procedures should be transparent with the same information available to all bidders
'Together these initiatives would offer the council tax payer some real improvements in the quality of some of their services, with the knowledge that contracts were being fairly let and they were getting best value.'