Privatizing Gov’t Services – Makes Sense?

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This topic contains 12 replies, has 11 voices, and was last updated by  Jaime Gracia 7 years, 3 months ago.

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  • #164761

    Steve Ressler
    Keymaster

    Anyone see this NY Times article about Sandy Spring, GA that has privatized almost all of their services – http://www.nytimes.com/2012/06/24/business/a-georgia-town-takes-the-peoples-business-private.html?pagewanted=4&hpw

    Do people think we’ll see more of this? Are there advantages to this? What are the biggest disadvantages?

  • #164785

    Jaime Gracia
    Participant

    Although you would never see privatizing at this scale across government, outsourcing services where they make sense is good management and a good investment.

    Putting aside the heated rhetoric about the costs of contractors vs. government employees, a significant factor is the ability to get qualified, flexible, and efficient services in the private sector relatively quickly.

    Ultimately it about mission, and the balanced workforce assessments are integral to achieving these goals.

  • #164783

    Mark Sullivan
    Participant

    It’s certainly a novel approach. Almost all levels of government carry out a portion of the public’s work through private firms, but it is certainly rare to outsource the majority or entirety of it. There was a good article on the topic in Governing Magazine:

    http://www.governing.com/topics/mgmt/pros-cons-privatizing-government-functions.html

    Two thoughts come to mind. First, I think it’s useful to apply a principle from macroeconomics: comparative advantage. as every first year econ student learns, some nations are better at producing certain goods than others. If we can get countries to produce (and trade) more of what they can produce most efficiently, then we can create more total value for everyone. I think the same is true in delivery of government services. If a private firm can deliver a public service more effectively than a public agency, then by all means we should contract the function. Incidentally, I would apply this same principle towards outsourcing to non-profit orgs and sharing work across agencies and jurisdictions.

    Second, we need to always focus on performance and outcomes. All to often, public organizations look to shift work out to private firms without having assessed the core of the performance problem they are trying to solve, defining clear outcomes expected, or understanding how they will evaluate performance. Absent a solid framework for performance contracting, no private firm will be able to achieve better results than thier public agency predecessor.

  • #164781

    Steve Ressler
    Keymaster

    Agreed – need performance/outcomes/and competition. Also a key focus on what is government’s core competency – you never want to outsource that in business

  • #164779

    Chris Stinson
    Participant

    In the short term, it will save money. In the long term, the amount you spend to keep the savings (by changing vendors/contracts) may cost you more. And once you switch, no matter how much more it ends up costing you over time, you can never go back.

  • #164777

    Mark Hammer
    Participant

    From the sounds of it, Sandy Springs exists in some very special and favorable circumstances. I grow anxious when I see something that is essentially a rare opportunity get perceived and transformed into a “best practice”.

    A great many Canadians associate this with privatization: http://en.wikipedia.org/wiki/Walkerton_Tragedy

  • #164775

    Peter G. Tuttle
    Participant

    This is the part I like: “To dissuade companies from raising prices or reducing the quality of service, the town awarded contracts to a couple of losing bidders for every winner it hired. The contracts do not come with any pay or any work — unless the winning bidder that prevailed fails to deliver.” It sends a pretty clear message that there is already somebody there …waiting…to do the work if the first vendor has problems. Knowing this might help folks focus on performance and outcomes, as mentioned in a previous posting. Cheers.

  • #164773

    Corey McCarren
    Participant

    That’s a good idea. Keep the incentive to perform there by letting the winners know they aren’t the only fish in the sea.

  • #164771

    David B. Grinberg
    Participant

    Will we see more privatizing of Government services? Only if Mitt Romney becomes President and shutters Federal agencies, firing countless thousands of Feds — as the Romniac has already promised to appease extremist elements of the GOP. Regardless of the POTUS, the exception to less “contracting out” will always be at the Pentagon, as the infamous “Military Industrial Complex” still reins supreme, just as it did half a century ago when President Eisenhower warned us of it. See three minute video of Ike’s speech at http://www.youtube.com/watch?v=8y06NSBBRtY

    DBG

  • #164769

    Steve Ressler
    Keymaster

    I actually think we’ll see the biggest impact on privatization at local government level – where financial impact is there & locals have to meet their budget. But we’ll see

  • #164767

    Michael Stevens
    Participant

    Pick the government service wisely…

    Early in my career, I went into management at a government contractor that conducts background and security clearance investigations. The contractor used to be a division of a well-known government agency but was privatized in the late 1990’s by the Clinton/Gore administration.

    I learned real fast what mattered most and it was not a quality investigation that may impact national security. I would be on bi-weekly or monthly teleconferences with management groups from the investment firm that owned the company, asking me to project how fast and how many investigations my team could close so they can project revenue and bring in nice returns for investors. Their goals grew each month and it was difficult to balance the quality of service we provided the government and the revenue growth we owed the investors, not to mention being a buffer to the investigators that cared about doing a good job.

    It bugged me so much I wrote a paper about it in grad school! The paper was about that balancing act as a government contractor, when the product and mission are so important but revenue matters too. I then jumped to working for the government agency.

    I definitely see the benefits at a local level, but pick your service to privatize wisely.

  • #164765

    Henry Brown
    Participant

    IMO: this probably is doomed to failure;

    as in the article: … “… Applying for a business license? Speak to a woman with Severn Trent, a multinational company based in Coventry, England. Want to build a new deck on your house? Chat with an employee of the Collaborative, a consulting firm based in Boston. Need a word with people who oversee trash collection? That would be the URS Corporation, based in San Francisco.

    Even the city’s court, which is in session on this May afternoon, next to the revenue division, is handled by a private company, the Jacobs Engineering Group of Pasadena, Calif. The company’s staff is in charge of all administrative work, though the judge, Lawrence Young, is essentially a legal temp, paid a flat rate of $100 an hour. …

    been my experience that, especially on the local level, the citizens/customers want someone locally to hold responsibile/accountable..

  • #164763

    Allison Primack
    Participant

    Here is what some people said when I posted this topic to GovLoop’s LinkedIn:

    Matt RoyerHi Allison, I work for company (SAFEbuilt, inc) that primarily provides building department services and other related services such as licensing and code enforcement to municipalities across the country. Most of these services are fee based services. The fees are intended to cover the cost of the service, but in sluggish times costs can exceed revenue for the service. What we’ve experienced is that communities can’t flex staffing levels easily with the ever changing construction industry. For services such as these a private company can move resources around to accomodate for the slow times and bring resources in to support the busy times. All of this can be structured to reduce or eliminate the risk of fixed costs exceeding revenue levels. The other benefit realized by municipalities is the competitive nature of a consultant raises the service level expectations and the need for continuous improvement. There are many excellent municipal building departments out there, so I don’t intend to say their aren’t. I can provide many examples of communities that have recognized savings and service improvements.

    Charles Driggers PMP, ITILv3, Lean Six Sigma – Black BeltAn outside consultant can be extremely effective in many situations where his/her skills and emotional intelligence is needed. Let me know if you see such an opportunity in Detroit.

    Eric JassoPrivatizing rarely works. I don’t know how many thousands of dollars have been spent in nearly 20 years at studies to privatize parts of my and other departments. It doesn’t always add up, especially with ISF’s.

    Adrienne Bitoy Jackson, MS Ed., B.S. PMPOften people think privatization is a tremendous cost saver because it outsources/seems to save related employment costs. However, contractual agreements with poorly defined scope, quality compliance, and cost containment measures can make privatization a very risky and expensive proposition. With financially volatile industries, it can actually be ill-advised.

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