Candidates love to extol the need to make government run like a business. The alliteration of “public-private partnership” is often offered as the tonic. It is all so seemingly sensible and polls as popular as motherhood and apple pie.
It’s argued that all we need to do is replace bloated, expensive, out-of-touch bureaucracies with inherent efficiencies of market-driven, customer-focused, cheaper, faster and more efficient private firms. This siren song of privatization runs deep in current political discourse.
Increasingly, states are turning to public-private partnerships and privatization in a quest to downsize government, address budget shortfalls and meetinfrastructure needs. Services such as caring for prisoners, finding foster parents, managing state parks, building highways, operating airports and providing education are contracted out to the private sector.
While politicians have been quick to embrace privatization, the practice has met with mixed success. Governments often reflect political priorities aligned with the common good; those priorities may not easily align with free-market incentives. The profit motive can, in fact, interfere with public policy goals.
Privatization should be pursued with caution and transparency. It should never be perceived as the default for achieving efficiencies. I know too many able and creative public-sector leaders and employees whose success in achieving savings and enhancing performance easily matches the performance of the private sector. State leaders have often achieved success by empowering public-sector employees to find solutions that work.
The success of some privatization efforts and the failure of others leads one to ask, “When does privatization work best?”
Contracting with private firms to provide government services or to operate government assets is a complicated undertaking. Since many such contracts are designed to provide the state with upfront savings, the long-term costs and consequences can be overlooked in the rush to obtain immediate benefits. A contract that seems like a “win-win” today can become an unexpected burden on taxpayers if someone isn’t sweating the details as the contract is being crafted.
The successful efforts to privatize government services provide insight into when the private sector will outperform government. When the task is crystal clear, specific goals are easily defined. Rewards can be offered for meeting those goals, and the private sector is most able to succeed. When government objectives are diffuse and complex, privatization is less likely to succeed.
Anyone who tries to sell privatization on budget savings alone isn’t doing the public any favors. While many privatization initiatives have achieved savings, those who care about providing government services aligned with advancing the common good will look beyond the intoxicating quick fix and engage in the tough work of crafting contracts that clearly define the tasks to be completed, balance risks, set forth objectives and provide appropriate reward for success.
David Adkins is the executive director of the Council of State Governments.
