THE PROS AND CONS OF OUTSOURCING

The first speaker was a government employee who has worked on both sides of the discussion. The second speaker was a professional in the area of privatization of State Park concession operations.

Arguments for Privatization

Helps government save money

Provides high quality services in some areas

Is necessary when government lacks expertise or personnel to carry out the program

Often times provides more innovative approaches and technology

Helps dissolve unnecessary government monopolies

Against Privatization

Does not save government and taxpayers money

Often leads to significant rate increases for customers

Diminishes accountability of government officials

Leads to privatized services and functions being compromised because of private providers profit motives

Lowers government employees morale and brings fear of displacement to affected workers

◦ Key to understanding this entire discussion. Government and its officials determine what is a Required Service or a Desired Service. Such as Police and Fire, Schools, Streets and Roads, Social Services vs. Parks, Art Cultural, Libraries, Residential Street Lighting

Variables for Consideration

Contracts

◦ Most important aspect of any privatization venture is the contract. Must spell out every aspect of the operation if both the agency and the provider are to be successful.

Cost of Operations, Union Employee Consideration, Performance Monitoring

Great Lakes Training Institute February 21, 2008February 21, 2008

Privatization of governmental functions has b t i l di d f th tbeen extensively discussed for more than two decades

We will discuss the pros and cons of privatization:

First from a government employee who has worked on both sides of the discussionSecond from a true professional in the area of privatization of State Park concession operations

For PrivatizationHelps government save moneyProvides high quality services in some areasIs necessary when government lacks expertise or personnel to carry out the programprogramOften times provides more innovative approaches and technologyapproaches and technologyHelps dissolve unnecessary government monopolies

Allows private providers to offer services more effectively due to flexibility and less red tapeSlows growth of governmentSlows growth of governmentIntroduces competition between government employees and private providersemployees and private providers

Does not same government and taxpayers moneymoneyOften leads to significant rate increases for customersDiminishes accountability of government officialsLeads to privatized services and functionsLeads to privatized services and functions being compromised because of private providers profit motivesLowers government employees morale and brings fear of displacement to affected workersworkers

Key to understanding this entire discussion. Government and its officials determine what is a Required Service or a Desired Serviceis a Required Service or a Desired Service

Required Services:Required Services:◦ Police and Fire Schools◦ Streets and Roads Social Services◦ Water Waste Water Inspectors◦ Refuse Removal

Desired ServicesDesired Services

◦ ParksParks◦ Art Cultural◦ Animal Control

E i i S i◦ Engineering Services◦ Residential Street Lighting◦ Recreation Programsg◦ Urban Forestry◦ Libraries

Services are typically Funded through◦ Total Tax Support◦ Tax Support and User Fees◦ Fully Supported by User Fees◦ Fully Supported by User Fees◦ Not Supported by Taxes or User Fees

◦ Privatization of services often occurs when a government has a desire to offer a service but does not have the financial support or technical expertise pp pto provide the service.

Service Type Examples

MilitaryQuasi Military Boarder Guards, DEA, CIAFederal Emergency Agency (FEMA)R d T d i dRoads: Trends in pay roadsSocial Services◦ Food Stamps◦ Food Stamps◦ Welfare◦ Food Banks

Internal Revenue Service (IRS)Waste ManagementPrisons / Jails (New Trend in this field)Parks Federal , State, County Local

◦ Human ResourcesLaw Enforcement◦ Law Enforcement◦ Maintenance

GarbageMowingFacility MaintenanceWater Waste Water

Resale OperationsOvernight facilityGolf CoursesMarinas

IT ServicesEngineering Servicesg g

Capital Costs for Development and ConstructionLong Term Debt Service / Long Term Lease ArraignmentsArraignmentsContracts◦ Most important aspect of any privatization ventureMost important aspect of any privatization venture

is the contract. Must spell out every aspect of the operation if both the agency and the provider are to be successfulbe successful.

Performance Monitoring (Types)◦ Customer Service Monitoring

Both government and private industry have made great strides in this area over the past 10 years.p yDoes not mean that customer service has improved, but it is something that is being looked at by most agencies and even more by the private entities.agencies and even more by the private entities.

◦ Financial MonitoringWas not a strong motivation for government in the past It was a service (like it or not)past. It was a service (like it or not)Government has gotten much better in this area over the past 15 years

Cost of Operations◦ Personnel costs: Unproven but seen a reversal in

this area over the past 15 years. It is now less expensive for a private company to manage a p p p y gfacility than a government agency

Union Employee ConsiderationsOf l k d h l k◦ Often overlooked when looking at existing operations and choosing to go to privatization but must be considered

Profit Centers:Pl h f ll ll d i h h◦ Places where fees are generally collected with the intent to provide a service and a return on the investment is made by either the government or a

i tprivate companyNon-Profit Center:◦ These are typically a function of government where yp y g

the agency will privatize a service to a company where there never was a potential for the government to make money. Contracts for these functions are typically written to save government money.

New Concept by Government in which they take a government service typically supported by tax dollars and change it into a profit center:dollars and change it into a profit center:◦ Garbage Collection

Once supported by taxesMoved to a fee base system to off set certain costs such as Recycling materialsMoved to a fee based system where the entire process is now f b d ith i t f iti t ti i tfee based with a requirement of citizens to participateMoved to a private contractor who makes a profit by providing the service of refuse collection

EMS Services:G i h i i i f◦ Government agencies are now charging citizens for EMS service. Charging insurance companies and or the citizen themselves. M ill b i ll d b◦ May still be partially supported by taxes

Police Services:◦ Not new concept: Speed Traps Generate substantialNot new concept: Speed Traps Generate substantial

revenue for a government agency◦ Cameras mounted at Traffic Intersections: This

concept has moved to private companies nowconcept has moved to private companies now providing hardware and even sending out the citations. In exchange for this service they get a percentage of fines “Revenue” back to them.p g