Governors Scott Walker (WI) and Chris Christie (NJ) have proposed privatizing more of their states’ services. The BPI faculty debate this long-rising trend. (More)
Wisconsin’s Department of Commerce may become “a public-private hybrid” under a proposal by Gov. Scott Walker (R). While Milwaukee County Executive, Walker contracted out county courthouse security and janitorial services, the mental health center, and even tried to privatize the county zoo. New Jersey Governor Chris Christie’s new budget assumes $50 million in savings from privatizing “unspecified services” that may include toll collection and other state and municipal services.
Although privatization has a long history, the trend toward privatizing core government functions – from military logistics to intelligence gathering and analysis, to schools, public assistance, police, and prisons – has accelerated since the 1980s. Tonight and tomorrow, our faculty and guests debate the merits and risks of privatization. Our moderator is the BPI Squirrel.
Squirrel@BPI: Good evening and welcome to the first Faculty Debate here at Blogistan Polytechnic Institute. Our topic is the privatization of public services and we’re thrilled to have such a wonderful panel: Roby NJ, Norbrook, addisnana, DWG, winterbanyan, JimW, and RevGerry.
Each of you has a sponge golf ball on the table in front of you. These are to keep Pootie the Precious entertained, and while I’m sure they would not cause any physical injury, please don’t hurl them when you disagree with someone. Not even if he joked about turning squirrels into hats.
Roby NJ: In my defense, your fur is warm and handsome. Fear not though, tonight I brought my own hats.
Squirrel@BPI: Thank you, Roby. The format for this debate is a series of questions exploring different issues of privatization. We will have three questions tonight, and three tomorrow night. For each question, I will ask one panelist for a response and another panelist for a rebuttal. The panelists for each response and rebuttal were selected at random and the list was kept in a sealed envelope in the bottom of Pootie the Precious’ litter box, just like we do for the annual Bippie Awards.
I will now open that envelope. Umm, this campus really needs a better vault.
Now that my eyes have stopped watering, the first question is:
How can a private contractor, requiring a profit, provide equal or better public services at less cost to taxpayers?
The Pro-Privatization Response goes to Roby NJ:
Roby NJ: Well great. For this question, I’ll put on my smug Corporatist hat, so I can think more favorably about privatizing. Equal or better, at lower cost? (Pulls hat down firmly) Hmmm…
If you’re just looking at the surface, I admit that it is hard for a private business to, for example, dig and fill holes any better than the Government Hole-Digging-And-Filling-Agency that doesn’t have to return a profit to the owners. We want private contractors to take over public services when market forces on both revenue and cost sides encourage efficiency and engender innovation and agility. Profit is the reward for businesses that risk capital in the endeavor. It’s not about comparing static labor and production models for private vs. public operation, it’s about replacing inefficient or stagnant government-run operations with a private sector enterprise that has the freedom to change and modernize operations, pay market rates for labor and supplies, increase productivity (meaning more output at lower cost), and charge market rates for products and services.
Squirrel@BPI: Thank you for that Response, Roby. The Rebuttal goes to Norbrook:
Norbrook: Thank you for inviting me to participate tonight. Using private industry to provide a government service removes it from the government realm into the private sector. In terms of contracting private industry to do so, one must remember that to the private sector, this is a low-risk endeavor, in that the tasks, equipment, etc. have already been established or purchased. In order to make a profit, the contractor will pay lesser wages, skimp on some aspects, and minimize non-specified services. Lower wages means a higher turnover and a loss of expertise as time goes on. I used to be an outsourcing consultant. I have several dozen pages on “when to outsource” as well as “why it’s not a good idea.” Sadly, most people in decision-making positions don’t want to hear “it’s not a good idea.”
Squirrel@BPI: Thank you, Norbrook. I hope you and all of our panelists will share more of your experiences in the open discussion after the debate. Our second question is:
Can a single decision-maker, government, innovate and adapt as well as private contractors who face competition and shareholder pressures?
The Pro-Public Response goes to addisnana:
addisnana: I’d also like to thank you for inviting me, and for the bowl of macadamia nuts. They were delicious.
Squirrel@BPI: I wondered where I’d left those.
addisnana: Oops. Sorry. As to the question, I give you Lawrence Livermore National Labs. Government is basically the only organization with the commitment to basic research that provides a platform for applied innovations that are commercialized by business. R&D 100 Awards are “the Oscars of Invention” and LLNL has won 135 of these since 1978. LLNL has an office of Industry Partnering and Technology Transfer to ensure that the fruits of its research can be commercialized by American industry. LLNL has been working on hydrogen fuel for some time. Think of where that important project might be if our beleaguered automobile industry was championing it. Government can make decisions for our long-term strategic interests and sustain the commitment in ways that private industry simply cannot.
Squirrel@BPI: Thank you for that Response, addisnana. And thank you, Chef, for the extra bowl of macadamia nuts. The Rebuttal goes to Roby NJ:
Roby NJ: Did I say smug Corporatist hat? I meant snug. It’s starting to constrict blood flow to my brain. I was hoping for one of those pro-public service questions so I could put on my comfortable Progressive’s Beret, with squirrelish tufts. No? I have to answer this one?
LLNL’s mandate is to innovate, and then partner with private industry to commercialize those inventions. That’s a model of public/private partnership we can all agree on. However, LLNL is not the Mother Teresa of basic research. A local community watchdog group has a long history of protesting their lack of transparency and poor compliance with environmental protection laws. But the main point is in the question: a private contractor taking over from a government entity will indeed have financial pressure to perform. And that pressure – from shareholders/investors, whose money is at risk, and from competitors, who might offer the same service for less – requires the business to be flexible, agile, and adaptable in order to generate profits and grow.
Squirrel@BPI: Thank you for that Rebuttal, Roby. Our last question for tonight is:
What keeps a corporation with an entrenched government contract from operating like a monopoly, efficient only at maximizing its own profits?
The Pro-Privatization Response goes to … Roby NJ:
Roby NJ: OK, my head is really hurting now. Plus, the other panelists are throwing sponge golf balls at me. Can’t I please have one of those squirrelly hippy questions?
Squirrel@BPI: Don’t talk about my hips.
Roby NJ: Sorry. I didn’t mean to imply … never mind.
I won’t pretend privatization is immune to corruption and abuse. There are two questions here. The first – to privatize at all – would be driven by a local government’s needs to cut costs that it can’t recapture in taxes and fees. The second – to privatize with an exclusive contract (“monopoly” is such an unpleasant word) – is appropriate when the contractor’s costs to provide the service are heavily loaded up-front, or when multiple contractors would duplicate effort (e.g.: garbage collection). Such contractors offer services the government can’t afford to provide, with exclusive contracts so they can provide those services at lower costs. The public wins two ways, and only loses when government fails to require and enforce accountability for performance.
Squirrel@BPI: Thank you for that Response, Roby. And the Rebuttal goes to DWG:
DWG: I get the last word tonight? Thanks, I think. An exclusive contract for critical services often defeats accountability. A monopoly allows a contractor to develop infrastructure that cannot be easily replaced when performance benchmarks are not met. Consider the case of private security contractor Blackwater, now XE. Despite gross misconduct, the firm continues to receive government contracts because other firms lack the resources to provide the services. Exclusive contracts create an un-level playing field, freezing out potential competitors. In order to enforce accountability, the penalties for underperformance have to be large enough to allow the government to recover all up-front infrastructure costs. Otherwise, replacing an underperforming contractor becomes cost-prohibitive.
Squirrel@BPI: Thank you for that Rebuttal, DWG. Please feel free to discuss these issues further between yourselves. I’m going to clean Pootie the Precious’ litter box. Maybe my eyes won’t water so much during the rest of the debate, which resumes tomorrow night at 8pm ET.
Good night and good nuts.