Why, What, & How to Privatize City Services

(Page 3 of 3)

Revenue-generating assets (garages, parking meters, etc.); and

Major public infrastructure assets (roads, water/wastewater systems, airports, etc.).

How to Privatize?

Privatization must be implemented well for it to work. A successful privatization process will ensure transparency, accountability, and the delivery of high-performance services through a strong, performance-based contract. By utilizing best practices and lessons learned from experiences of other governments the likelihood of achieving those results is greatly enhanced. Among them:

Rethink the status quo, and ask the "make or buy" question. Taking a page from management guru Peter Drucker, every "traditional" service or function should have to prove its worthiness and proper role and place within government.

Think big. The central question on the subject of outsourcing should not be, "What can we privatize?" but, rather, "What can't we privatize?" Outside of public safety services, the courts, and policymaking functions, the private sector has proven repeatedly most things can be privatized.

Bundle services for better value. Local governments may find greater economies of scale, cost savings and/or value for money through bundling several-or even all-services in a given department (e.g., public works) or departmental subdivision (e.g., facility management and maintenance) into an outsourcing initiative, rather than treat individual services or functions separately.

Focus on contract-management expertise. Successful privatization initiatives require good contract negotiation, management and monitoring skills on the part of city managers. The more that local governments use privatization, the greater the degree to which the city manager's role will center on contract administration-monitoring and enforcing contracts to ensure that the contractor's performance lives up to their contractual obligations.

Establish a Centralized Procurement Unit. Governments should maintain an expert team of procurement and competition officials to guide individual departments in developing their privatization initiatives.

Apply the "Yellow Pages Test" through Regular Commercial Activity Inventories.  Local government managers should regularly scour all government agencies, services and activities and classify each as either "inherently governmental" (i.e., should only be performed by public employees) or "commercial" (i.e., services routinely undertaken by private sector vendors) in nature.  This famous "Yellow Pages Test" helps government concentrate on delivering core, "inherently governmental" services while partnering with the private sector for commercial activities.

Utilize Performance-Based Contracting. It is crucial that local governments identify good performance measures to fairly compare competing bids and accurately evaluate provider performance after the contract is awarded. Performance-based contracts should be used as much as possible to place the emphasis on obtaining the results the city wants achieved, rather than focusing merely on inputs and trying to dictate precisely how the service should be performed.

Establish Guidelines for Cost Comparisons. Local governments should establish formal guidelines for cost comparisons to make sure that all costs are included in the "unit cost" of providing a service so that an "apples-to-apples" comparison of competing bidders may be made.

Utilize "Best Value" Contracting. Initiatives that are considered best practices for government procurement and service contracting utilize "best value" techniques where, rather than purchase based on cost or "lowest bid" alone, governments choose the best mix of quality, cost, and other factors in selecting a service vendor.

Ensure Contractor Accountability through Rigorous Monitoring and Performance Evaluation. Regular monitoring and performance evaluations are essential to ensure accountability and transparency, and that the local government's management and the service provider are on the same page.

Len Gilroy is director of government reform at Reason Foundation. This story is part of Reason Saves Cleveland With Drew Carey: How to Fix "The Mistake on The Lake" and Other Once-Great American Cities. Watch the documentary series here. For downloadable iPod, HD, and audio versions of this episode go here.

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • ||

    The reason for the widespread appeal of privatization is simple: It works.

    And yet, a significant portion of the populace profess horror at the notion of privatization. Which indicates, to me, that the thing we need most desperately to privatize are the government schools.

  • ||

    And yet, a significant portion of the populace profess horror at the notion of privatization.

    Maybe because those of us who aren't naive rubes know that privatization in this context is a synonym for crony capitalism.

    We've got plenty of privatization going on here in Chicago and the results haven't been that great.

    And when the IRS outsourced collections activity for tax deadbeats, it wound up costing more than if they would have done it in house.

    Privatization is great...for politically connected connected firms. They get to profit from tax dollars, aren't any more accountable than a public employee and don't give a whit about quality because they have a contract.

    No thanks.

  • ||

    Gotta go with Tom on this one. If there's no competition, "privatization" has no benefit. There may be a slight benefit in that private firms, even acting as government contractors, are going to be more efficient than the government itself, but other than that, what's the gain?

    If any company that wanted to could offer DMV services, we'd see an improvement. But if the government "chooses" only one to offer these services, very little will change.

  • dave b.||

    Never thought I'd say this, but I agree with ChicagoTom. Just look at 'privatization' of prisons to see how well this works.

    I'd also argue that this arrangement is the worst of both worlds, because not only does the gov't-connected 'private' company get taxpayer dollars and no accountability (Blackwater, Halliburton, etc), they also form lobbies to keep the gravy train rolling. Witness the newly formed correctional officers lobbies who shut down diversionary programs for nonviolent first-time offenders.

  • CrackertyAssCracker||

    I like what Rothbard had to say about prisons specifically: There are "public goods" and there are "public bads". Prisons are "public bads", and because privatization is more efficient, you don't want to privatize these.

  • ||

    Thanks for this interesting comment!
    eurosportbet bonus

  • ||

    Yup i have to admin this is absolutly true but it really works well.

    It's like having a free love tarot reading and get all the advice you need.

  • ||

    It's a very interesting feature, argan I will surely use it for a while

  • ||

    Biceps Tenodesis Definition. A Biceps tenodesis is a procedure that cuts the attachment of the biceps tendon on the and reattaches it to the humerus.

  • DJF||

    Wouldn’t real privatization include the private decision of people to pay for the services. So if you want a Zoo you and your fellow Zoo lovers would pay for the Zoo.

    What the article is advocating is not privatization but contracting of government jobs using tax money. Instead of the city treasury department sending you a tax bill you now have the politicians hiring Goldman Sach to send you a tax bill which is then given to the Zoo division of Lockheed Martin

  • ||

    Preach on brother! Some years ago Atlanta flirted with privatization of garbage collection. Just outside the city limits you could get backyard pickup of your garbage for about half of what the city charged for curbside pickup. Once the unions and civil rights crowd got ginned up, that was the end of that. Can't have those poor inner city folk paying half price for better service.

  • ||

    What the article is advocating is not privatization but contracting of government jobs using tax money

    Exactly. The privatization being advocated is nothing but a way to transfer public monies to politically favored private firms.

    Every time I see this type of privatization it's followed up with no-bid contracts or the winner of the bidding process just happens to be someone who used to be or has connections to a major political player.

    I'm all for getting the government out of doing certain jobs altogether, but in most cases, contracting government work to a private firm doesn't tend to be a good deal for anyone except the contractor.

  • Jersey Patriot||

    Writ large, this is neo-liberalism. Raise taxes, spruce up public facilities, then sell them either to political cronies or western capitalists for pennies on the dollar. The public, who has paid taxes for years, even decades, and had free access, suddenly has it sold out from under them, at a loss, and now pay for access.

    As additional insult, government regulation is altered to favor the newly private companies. Government money flows to the new company explicitly, or the government cartelizes the new industry, protecting it from competition.

    Down with schmibertarianism.

  • anonymous||

    "privatization" is politician-speak for stealing (from taxpayers, eminent domain victims, nationalized businesses, etc.) and then instead of nominally letting the government administrate it for the public good, instead just handing it over to whoever gives you the most favors.

  • ||

    I admire your comment, thank you for this good comment:)

    Jouer et miser sur les epreuves de paris sportif en ligne.

  • ||

    Privatize? We need to get the government - local and state and Federal - out of most of the things they do now.

    "Park operations and maintenance; Zoo operations and maintenance; Stadium and convention center management; Library services; Mental health services and facilities; Animal shelter operations and management; School construction (including financing), maintenance & non-instructional services"

    Parks, zoos, stadiums, convention centers? Whose purposes is served by the cities, counties and states building those things? How about golf courses? Why can't cities and counties and states build chess clubs? How about model railroads? None of those things are properly governmental; the governments do them because powerful factions in the politics of the areas want them done with "government" money instead of paying for whatever-it-is themselves.

    Mental health facilities? Libraries? Animal shelters - true name: dog pounds, where the animals are kept then killed? What is all this? Stuff that those who are in charge want to have, either out of ego or misplaced charity. It's charity when I reach into my pocket to pay for it; when I reach into your pocket(s), it isn't charity any more.

    The well is dry, stop using the water to help your friends and hurt your enemies. Leave the tax money in the pockets of those who earned it, where they can do some good with it. So, maybe they don't want to pay for an opera house or a world-class symphony? Use your own money, thieves!!

  • ||

    I see I left out schools. Swell; I get to wear the uniform for 24 years, getting shot at and hit and killing other folks without much that looks like a good reason, and while I'm away supposedly "defending the country", you bastards are letting Bill Ayers and other communist and/or anti-Americans re-organize the schools to destroy what I thought I was defending? Bull. Get all governments at all levels out of education, everywhere. Damned idiots!

  • ||

    When privatization means sale, lock, stock, and barrel, then I like it. You wanna privatize the zoo? Great. Sell it.

    When privatization is just a polysyllabic euphemism for leasing and/or subcontracting, I'm really much less impressed.

    I guess the upside is that the operation is now staffed by non-civil service employees, which is a plus, no doubt, but I can't think of any other advantages.

  • ||

    Great SITE for documentaries check it out, knowledge is power

    freeviewdocumentaries com

  • OO======D||

    Lick my balls, jj. Suck me dry.

  • ||

    Mixing social necessities with the profit motive is always a recipe for disaster. Corners are cut to maximize profits and services suffer. Privatization should be reserved for wants alone.

  • The Republican Heretic||

  • Andrew||

    Expirical data shows that privatization doesn't work, at least for the type of services currently provided by the goverment. Large businesses generally have their own accounting, IT, security,even ganitorial services for the same reason it is more cost effective to perform those functions internally. The author is a idiot!

  • ||

    We can do even better. Total privatization of education: get the government totally out of the mix. End compulsory attendance laws. Give pink slips to the administrators, the teachers, the regulators. Sell the facilities. Let parents, teachers, and entrepreneurs create cheaper and more effective solutions. Education typically takes up about half of local government spending, and it has become more expensive and less effective for decades.

  • Libertarian extremist||

    Let's privatize security. We can carry own guns and shoot criminals and get rid of corrupt courts all together.

  • ||

    We can help just a little against the Marxist, Obama agenda by signing the attached petition:


  • Tom||

    Hey Reason,

    What's with all the corporatist articles lately?

    The "privatization" they're talking about is just crony corporate welfare.

    Seriously. This is such bullshit.

  • abercrombie milano||

    I don't got your point. But thank you all the same.

  • oksupra.net||

    Supra sneakers

    Mens Supra shoes

    There are some classic Supra sneakers, and I am sure that everyone knows, the unstoppable Supra Skytop. This is easily the most popular Supra footwear per minute, simply go to the MTV and shows the cult by wearing them. Supra Thunder shoes becomes the most popular style of the Mens Supra shoeson 2010. You should know that Supra Suprano shoes are loving by the most young people who also like the skateboarding. In particular, Supra Indy should continue with the Skate scene in recent years their cause. Supra Strapped NSabove was recently that II of the above are the same love, said above Supra Skytop NS world tour. It is the prefect design that wearing the Supra Society shoes while you are playing the skateboarding. Supra Cruizer on the hot sale for you.

  • Cheap Chanel Watch||

    Cheap Chanel Watch

    Chanel J12 Wathces

    Cheap Chanel Watch would be the good choice on 2010. A Chanel bestseller since its launch in 2000,Characterized by Chanel J12 Wathces - the brands first sports watch - Chanel Ceramic Chronograph Watches, now has a mirror image - Chanel J12 White Watches Series. The Chanel Ladies Watches undergoes a metamorphosis to opalescent white with amazing effect. Chanel Mens Watches are well-known in the world. Chanel Unisex Watches must be the good choice. Chanel Pursesare cool and fashionable, bring you a fresh and brandnew feeling. Chanel Handbags also is the hot item in the summer.

  • christian louboutin platform p||

    href="http://www.christianlouboutinsaless.com/christian-louboutin-wedges-c-15.html">Christian louboutin Wedges

  • men air max shoes ||

    Tucked away in our nike air max 2010 mens running shoes subconscious is an idyllic vision. We see ourselves on a long nike air max 2010 trip that spans the continent. We are traveling by train. Out air max 2009 windows, we drink in the passing scene of cars on nearby highways, of children waving at nike red air max 2009 crossing, of cattle grazing on air max 95 black distant hillside, of smoke pouring from a power plant, of row upon nike air 95 row of corn and wheat, of flatlands and valleys, of mountains and rolling air max 90 hillsides, of city skylines and village halls. But uppermost in our minds is the final destination. On a certain blue air max 90 for women day at a certain hour, we will pull into the station. Bands will be playing and flags nike air max 180 waving. Once we get there, so many wonderful dreams will come true and the pieces of our black nike air max shoes lives will fit together like a completed jigsaw puzzle. How restlessly we pace the aisles, bing the minutes for nike air max light shoes loitering --waiting, waiting, waiting for womens nike air max station.Sooner or later, we must realize there is no station, no one air max ltd classic place to arrive at once and for all. The true joy of air max shoes store life is the trip. The station is only a dream. It constantly outdistances us.So stop pacing the aisles and counting the miles. In stead, climb more nike air max white mountains, eat more ice cream, go barefoot more often, swim more rivers, watch more women air max shoes sunsets, laugh more, cry less. Life must be lived as we go along. The station will come men air max shoes soon enough. http://www.sellnikeairmax.com/ LIJ

  • ugg discount outlets||

    Sometimes I sound like I’m arguing, when I’m actually not. I just have a way of putting my posts stronger than intended.It’s easier to keep out of the conversation and not take the chance of being misunderstood.

  • blancpain replica watches||

    I love your website!d

  • ||

    Superbe article, vraiment simple et utile. Bravo pour sa mise sports betting
    en ligne. C’est ce genre d’information que le public liga 1 (et moi en particulier) recherche.

  • ||

    i found the what to privatize section really informative.And my opinion is that doing so can go a long way,as the article pointed out,in delivering quality service at cheaper costs.so,yeah,this is much needed.well written article
    help for single mothers

  • 50 Inch Flat Screen Tv||

    Another excellent post, thank you, this is why I continue visiting here!

  • zicocn||

    thank you! I like this news, I also have information to share, here is my message.
    I think you will like the leading China wholesale electronics marketplaces

  • ||

    It is a good news that no need to go at the match place, because we can see that game live on our T.V. Really a blatant post uggs outlet

  • ||

    It is a good news that no need to go at the match place, because we can see that game live on our T.V. Really a blatant post uggs outlet

  • site de poker||

    great article ! thanks for all

  • parier match||

    excellent post ! thanks

  • parier match||

    j'adore toutes vos informations ! merci pour tous ce que vous dites

  • zeturf||

    great thanks

  • ||

    thanks for sharing it
    forex trading

  • ||

    What an amazing content is this and surely it makes realize each and everyone who read this. Thanks for providing so fantastic and sweet suggestions ....i really appreciate it.
    saltwater aquarium
    Happy to see your blog as it is just what I’ve looking for and excited to read all the posts. I am looking forward to another great article from you.

  • gyro bowl||

    I don't like privatizing and it only takes from the people.

  • pariuri sportive||

    Great post I would like to thank you for the efforts you have made in writing this interesting and knowledgeable article.

  • Parier Sport||

    I like your point of view, but I think some things should never be privatized...

  • funny pictures||

    Well I like this post becasue It help me in gaining quality information
    funny pictures

  • ห้องน้ำ||

    Expirical data shows that privatization doesn't work, at least for the type of services currently provided by the goverment.

  • Peanut Machine||

    The people which will be talked about in a hundred years from now are probably nowhere near the media limelight as Steve Jobs.

  • your bookmaker||

    Our (and the world's) economic meltdown is the direct result of the 'free market' that is espoused over and over because it benefits weathy people and corporatio­ns. Do we ALL care so little about our fellow man that we do not want them to have what we have? Do we think it is beneficial to all to keep people as little more than slaves to drive the profits of the 'free market'?

    Call Obama a 'socialist­' if you will, but if 'spreading the wealth around' is his agenda, I'm all for it!

  • Ceasuri Barbatesti||

    I agree with "Decades of successful privatization policies have proven that private sector innovation and initiative can do certain things better than the public sector."

  • Rochii Casual||

    I think that access to outside expertise is very important to!

  • gyro bowl reviews||

    I do agreed that government should privatized all service delivery to make it more efficient and but make sure that it will not burden the tax payer will more taxes to pay. It will definitely improve the service delivery area. gyro bowl reviews

  • ||

    This is a really nice article, thanks for sharing it. stargames


Get Reason's print or digital edition before it’s posted online

  • Progressive Puritans: From e-cigs to sex classifieds, the once transgressive left wants to criminalize fun.
  • Port Authoritarians: Chris Christie’s Bridgegate scandal
  • The Menace of Secret Government: Obama’s proposed intelligence reforms don’t safeguard civil liberties