Privatization
Is Not Cost Effective,
Study Finds
"Privatization is not a successful method for ensuring that citizens
get the services they require from government in a cost-effective manner," says
Elliott Sclar in the conclusion of a study The Privatization of Public Services,
Lessons from Case Studies.
Published by the Economic Policy Institute the study looks at three
examples of contracting out public-sector "blue collar" work. These jobs were
considered to be the easiest to privatize, Sclar writes, "yet problems of
accountability and control still proved difficult."
"The reality of public work is that it is complex both to perform and
to administer," he says.
COSTS RISE
In Albany, N.Y., where the city fired municipal mechanics and started
sending city vehicles to private shops, costs rose by at least 20 percent. Among other
reasons, costs mounted due to double billing, overcharging and unnecessary work. The city
fought back by adding to the municipal bureaucracy.
Promising to establish "entrepreneurial government" in
Massachusetts, Gov. William Weld moved quickly to contract out state highway maintenance.
Based on its own study, the Office of the State Auditor found that contracting out cost
the state $1.1 million.
The state’s highway maintenance contract allowed the contractor
"to perform the most profitable rather than the most useful work;" as a result,
most of the work was done either poorly or not at all.
Faced with the election of a pro-privatization mayor, the public employees
union in Indianapolis negotiated a restructuring plan which preserved mechanic jobs while
eliminating some middle management positions. The new program resulted in improved service
quality and faster turn-arounds.
