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Is Privatization the Answer?

In these days of decreasing local government budgets and staff, privatization of services is looking more and more appealing. However, before you start privatizing all your local government services, think about this: in 2012, 18 percent of local governments brought previously privatized services back in-house! And only 37 percent of local governments that have privatized one or more services systematically evaluate that provider’s service delivery.

                Privatization can help local governments meet budgeting goals and still deliver the same level of services—but only when it is thoroughly evaluated. Private service delivery is not inherently worse than public service delivery, but nor is it inherently cheaper. The benefits of privatization come from different organizations competing for the local government’s contract and saving the local government money by reducing its need to build infrastructure, and from the local government being able to focus on policy rather than service details.

                Today, almost any service under the sun—from civil engineering to human resource, from parks and recreation to library management—can be privatized. The key to remember is that while privatization can be a great tool for saving money without cutting services, it must be carefully monitored and thoughtfully implemented if its full potential is to be realized.

To learn more about privatization, check out these resources!

  • The article “Steps to Effective Privatization” provides seven steps to ensure that privatization of services is successful. The most important step is keeping the service complaint mechanism in-house. This allows the local government to monitor the quality of the private services and hold the provider accountable.
  • The Benefits of Privatization of State and Municipal Functions: Issues, Trends and Case Histories,” a presentation that Insparisk gave to the Maryland City County Management Association, covers many of the benefits of privatization, along with the challenges and issues that local governments need to account for when considering this strategy. 
  • A Blueprint for Privatization and Competition” provides a case study of Mecklenburg County, North Carolina. Offering detailed steps for ensuring that privatization of service delivery is beneficial to the local government and its residents, the document includes a score card for evaluating privatization agreements
  • What’s Wrong with The Phoenix Model?” is an insightful document that dispels many of the myths of privatization, which the authors call “competivization.” This article shows how local governments really can be a model of efficiency and describes the role that private service delivery can play. icma.org/Documents/Document/Document/4183
  • Alternative Public Service Delivery Systems,” a PowerPoint presentation given by Stephen G. Harding at this year’s annual conference, covers the pros and cons of private service delivery and ends with a case study of the city of Jurupa Valley, California.

Have you found privatization to work in your community? Comment below to tell us what you think!

Best,

Robin Saywitz

ICMA Knowledge Network Intern

rsaywitz@icma.org

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