Frequently, privatization is looked at as a "miracle cure" to reduce a budget deficit, improve productivity, and downsize government by dissolving government monopolies. Most of the time, however, employees are laid off which places a burden on other social services and tax dollars, quality of services suffer, and private monopolies are formed because market competition is not guaranteed.

 

Does privatization of public services save money?

Privatization of public services does not save money. Frequently, contractors low-ball or underbid to win a contract, raising their rates after they become established. Many times, there are cost over runs which require increased tax dollars to make up the shortfall. As contractors are in business to make a profit, earnings are written into the contract as well as selling additional services and supplies to the government at a high markup. Contractors always save money by reducing personnel and cutting services making everyone suffer in the long run. In addition, government officials rarely consider "hidden costs" involved with privatization. These costs can include converting public services to private providers, monitoring and enforcing the agreements, free office space and utilities often provided to contractors, and the expense of bringing the service back in-house should something happen with the contractor.

 

Are contractors as accountable as public employees to the citizens?

No. Contractors are not required to open their records or decision making processes to the public. Contractors are also not bound by the open meeting laws or freedom of information acts. Also, contractors frequently have loose employee screening requirements which can put the public at risk. Taxpayers seldom have recourse when a private enterprise fails to perform and tax dollars have already been sent out of state.

 

What does privatization do to state and local economies?

Privatization exports tax dollars from employees and the locality to large corporations located outside the community. Cities and towns lose public sector jobs and wages which sometimes cripples their already fragile economies. Contracts with local businesses that provide supplies and equipment to government agencies often see their contracts canceled once a large corporation that supplies itself takes over. There may be no mandate for competitive bidding leaving the door open for price fixing. Privatization also creates opportunities for criminal activity. Bribery, kickbacks, and political patronage, and bid rigging have occurred in many instances where entrepreneurs were attempting to get public contracts.

 

Should service recipients be concerned about privatization?

Certainly. The quality of services that are contracted out are jeopardized by a contractors incentive to make money. A less desirable workforce is created by replacing experienced public servants with inexperienced contract workers making near minimum wage. This less experienced workforce usually lack the skills and training to do the job. Employee turnover rates frequently increase when services are contracted out to low paid unskilled labor and safety regulations are sometimes avoided in order to maximize profits.

 

Should taxpayers be concerned about privatization?

Absolutely. Contracting with corporations located outside the community takes tax dollars outside of the local economy. Privatization frequently costs much more than keeping the service in-house. Corporate operating costs and earnings are written into the contracts and taxpayers ultimately foot the bill. Many contracts do not include costs for emergencies or unforeseen circumstances. Government agencies are usually charged separately for work not included in the contract. In some situations, public employees must "pick up the pieces" from work not completed or shoddy work performed by the contractor which ultimately costs additional tax dollars.