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New
York Times...
Is Privatization a
Bad Deal for Cities and States?
To save money, New York is turning the clock back on outsourcing by
replacing private contractors with city workers.
Former Gov. Mario Cuomo once said, “It is not government’s obligation
to provide services, but to see they’re provided.” He’s right:
government workers don’t need to be the ones providing many services.
Government program budgets are too rarely tied to results, so poor
performance is often perversely rewarded with budget increases.
Public sector managers already understand this. For decades, they’ve
increasingly relied on contracting out for the delivery of a wide range
of services, including waste collection, vehicle fleet operations, road
maintenance, child welfare services and many more. A recent National
League of Cities and American University survey of over 300 local
government managers found 93 percent support contracting.
This should come as no surprise. Contracting works by introducing
competition into an otherwise monopolistic system of public service
delivery. Governments operate free from competitive forces and without
a bottom line. Agency and program budgets are too rarely tied to
results, so poor performance in government is often perversely rewarded
with budget increases.
Contracting usually generates cost savings for taxpayers between 5 and
20 percent on average, though the benefits of competition extend far
beyond cost control. For example, service quality improvements,
improved risk management, innovation, and access to outside expertise
are other benefits often cited by satisfied government customers.
Contracting out is simply a policy tool, and like any tool, it can be
used well or poorly. There are two critical ingredients to successful
government contracting. First, public managers should think carefully
about the service quality standards they want to achieve, and then
develop strong, performance-based contracts that hold contractors
accountable for meeting them. Measurable performance standards should
be built into contracts, along with incentives for exceeding standards
and penalties for underperformance.
Second, once a performance-based contract is in place, government
managers must monitor and enforce the terms of the contract to ensure
that contractors perform.
Government contracting needs to be seen as part of a larger fiscal
management toolkit that includes performance assessment, priority-based
budgeting, sunset reviews, and many other approaches to reform. But
make no mistake — when done with proper care and diligence, competitive
contracting is a powerful and widely-used tool to drive down costs,
improve performance and, in the end, help governments more effectively
serve taxpayers.
Read it at the New York Times
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