LYCOS RETRIEVER 
Privatization: Services
built 642 days ago
The appeal of privatization is based on the flawed economic assumption that private companies can provide the same services as public school employers at lower costs. Theoretically, a good contract with a private firm could provide the same services with the same quality, responsiveness and accountability as an in-house operation. The problem is that to achieve this, a private contractor is very likely to charge more than it costs to provide the service in-house. Private contractors need to earn profits, finance corporate overhead and pay taxes. These factors drive the cost of the contract up and/or the quality and quantity of the service down. Time after time, districts that try to save money by hiring private contractors end up with inferior service, higher costs or both.
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In Stockton, citizens gathered enough signatures to require a vote on contracting out their services, but then the Mayor got the City Council to do an end run around the citizens and vote for privatization before the vote could take place. Citizens responded by circulating new petitions requiring a vote. With limited resources, they were up against OMI-Thames-RWE which donated $75,000 in one week's time to defeat the petition drive. This raises serious question about corporations undermining the democratic process, all the more serious when a public resource essential to life itself is involved.
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Franchising is another form of privatization according to E. C. Pasour Jr., a professor at North Carolina State University. Franchising is a monopoly privilege awarded to a private firm that provides the service but with the price of the service being regulated and determined by the state. Most utilities, such as gas, electricity, and telephone service, are provided under the franchise form of privatization. A relatively recent service, cable TV, is ... generally awarded as a monopoly privilege. Another important distinction of monopoly franchising is that the consumer makes direct payments to the provider for the service.
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The profit motive, opponents of privatization say, distorts the function of prisons towards incapacitation and away from the provision of rehabilitative services that would help prisoners rejoin society productively, and curb recidivism. Corrections firms have no incentive, they say, to provide costly rehabilitative treatment and services. Industry analysts respond that it all depends on the contract. There is much potential for contracts to be structured in ways that provide incentives to firms to provide services such as drug treatment (Lissner, et al, 1998.). Indeed, in Puerto Rico and Australia, pilot programs are being conducted with so called "outcome-based contracting", wherein fees are tied to the impact and measured outcomes of incarceration (Cornell et al, 1998).
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[I]n the early 1990s, the government decided to apply the same solution that had sorted out other former "national joke" industries: privatization. The solution worked at first. For a couple of years after privatization, the network boomed. Passenger numbers rose by one-third, the service provided more trains, prices dropped and the trains even ran on time.
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Driven by wrong-minded public officials and corporate greed, privatization and contracting out all too often fail the tests of cost effectiveness or quality. Time and time again, the public pays more and gets lower quality of services while public workers are laid off and corruption scandals make the news. Perry’s Texas toll-road boondoggle is just the latest – and one of the largest – example of a corporate giveaway. What will they privatize next?
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