What Happened?
A recent report from the Manning Foundation for Democratic Education concluded that the city of Calgary would enjoy significant savings if it privatized many of its services to local residents and businesses. Because the city is feeling pressure to reduce spending, the foundation argues outsourcing many services to private contractors will lower overall expenditures without sacrificing the quality of services offered to residents.
The Goal
The Manning Foundation for Democratic Education found Calgary spending increased 51 percent from 2006 to 2011. That increase could be minimized if services such as recycling and recreational activities were presented to residents by private organizations and nonprofits.
While Calgary already outsources some of its services to private partnerships, others are still maintained by the city. Transit infrastructure and waste removal could easily be transferred to a private contractor. Other services such as electricity may not, however, prove to be as financially beneficial to the city.
Another way the foundation believes Calgary can reduce its out-of-control spending is by conducting annual reviews of its services and processes to pinpoint areas of duplication or unnecessary programs. The review process should evaluate each process’ cost effectiveness as well as importance in the community.
Weigh The Options
Cities across the country are experimenting with public-private partnerships to reduce costs while improving services to residents. Most municipalities approach a potential privatization project by conducting a feasibility study to determine what services are proving to be inefficient, and call for bids from private companies interested in contracting with the local government. The end result can be significant savings in both time and money for local agencies.
According to Governing, however, there are many instances when a privatization plan may not be the best route for specific services or localities. To prevent a privatization plan from turning into a costly endeavor through hidden expenses and disorganization, many cities are creating a centralized entity to manage the program permanently. When outsourcing deals fail to be monitored and reviewed on a regular basis, there is an increased risk of disasters and unwanted surprises to arise and derail savings.
When examining potential solutions to a budget crisis, local officials should investigate the possibility of privatization of certain services to ensure it is a cost-effective strategy. When collecting bids from private contractors, do not only consider the proposed costs, but also the long-term strategy, reputation and success rate presented by each firm. In many circumstances, the least expensive offer may seem the most cost-effective but results in costly errors or expensive disruptions.
Furthermore there are many forms of privatization of municipal services available to local governments. The National League of Cities reported American cities work with a private company for an average of 23 out of 65 standard services. The types of privatization include:
- Contracting/outsourcing: City purchases services or functions from private sector provider
- Public-private partnership: Joint venture between city and private entity is launched for collaborative delivery
- Contract bidding: Public and private sectors bid on contracts for services
- Asset sale/lease: Cities sell or lease assets to private companies for increased revenue
- Vouchers: Coupons used to buy services from private entities
- Government corporations: Government agency functions like a private business
- Volunteer partnerships: Volunteers man services for local government
- Complete privatization: Entire service is taken over by private company
Partner With Private Entity
Gov1 has followed privatization trends closely, from airport management to trash removal.