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.