Privatizing Functions of State Government

Abstract

Privatization of traditional governmental functions has been extensively discussed in the United States for more than two decades, and states have chosen a wide range of programs for privatization and selected a variety of implementation and oversight strategies. In this report we examine the potential for privatization, privatization pitfalls, and ways to optimize the success of privatization effects. Privatization can be attractive for one of two different reasons. It may provide a revenue benefit when the contracting entity can provide the service at a lower cost than that experienced by the governing entity. Typically, lower costs arise from lower personnel costs or through the use of less expensive methods and technologies, including IT solutions. It may also be attractive because privatization may allow government to perform specific services more effectively or more efficiently than it could with its own employees. Typically, these situations occur when a private entity can be more flexible in the deployment of personnel and resources andwhen dealing with new technologies or processes.