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Privatization Eight reasons not to contract out public services: 1. Higher costs – Even though a service is contracted out, school districts must still bear the cost of contract administration, including preparation of the contract and monitoring of a contractor’s performance. Also, private companies’ expenses for services may be greater because they must make a profit and pay taxes. These factors do not affect the costs of publicly performed services. 2. Poorer service for citizens – Since the objective of private firms is to maximize profits, companies are always looking to “cut corners.” These actions may result in decreased quality and quantity of services. Again, school district monitoring is necessary to detect this decline. 96 – AR Handbook 3. Increased chance for corruption – As detailed in Government for Sale (an AFSCME-commissioned book on contracting out of public services), bribery, kickbacks, and payoffs have long been associated with contracting out. Companies, in a desire to expand profits, may often engage in questionable or illegal practices. Even with competitive and open bidding, corruption is still a real danger for school districts that decide to contract out. 4. Failure to perform service – Contractors may cease or curtail operations because of bankruptcy, financial problems, lack of equipment, or for other reasons. This could leave a school district without vital services and cause severe hardship for its citizens. 5. Ballooning costs and dependency – To obtain a contract, a firm may offer a very low price in its first contract, hoping that the school district will become completely dependent on its services. After contracting out services, school districts will often sell their equipment, making it impossible for them to resume operation in the future. The contractor then will raise prices for performing the service. 6. Problems in drawing up adequate contracts – It is extremely difficult to formulate contracts that will ensure a school district gets what it wants for the price it pays. Lack of experience in writing performance- contracting specifications can create loopholes for contractors and result in a decrease of services for the school district.


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