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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.

UE News - 03/98


Home -> UE News -> 1998 Archives -> Article

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