THE PROS AND CONS OF OUTSOURCING

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Aubrey Frederick Grant
9 years ago
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1 THE PROS AND CONS OF OUTSOURCING The first speaker was a government employee who has worked on both sides of the discussion. The second speaker was a professional in the area of privatization of State Park concession operations. Arguments for Privatization Helps government save money Provides high quality services in some areas Is necessary when government lacks expertise or personnel to carry out the program Often times provides more innovative approaches and technology Helps dissolve unnecessary government monopolies Against Privatization Does not save government and taxpayers money Often leads to significant rate increases for customers Diminishes accountability of government officials Leads to privatized services and functions being compromised because of private providers profit motives Lowers government employees morale and brings fear of displacement to affected workers Key to understanding this entire discussion. Government and its officials determine what is a Required Service or a Desired Service. Such as Police and Fire, Schools, Streets and Roads, Social Services vs. Parks, Art Cultural, Libraries, Residential Street Lighting Variables for Consideration Contracts Most important aspect of any privatization venture is the contract. Must spell out every aspect of the operation if both the agency and the provider are to be successful. Cost of Operations, Union Employee Consideration, Performance Monitoring

Arguments for Privatization Helps government save money Provides high quality services in some areas Is necessary when government lacks expertise or personnel to carry out the program Often times

2 Great Lakes Training Institute February 21, 2008

3 Privatization of governmental functions has been extensively discussed d for more than two decades We will discuss the pros and cons of privatization: First from a government employee who has worked on both sides of the discussion Second from a true professional in the area of privatization of State Park concession operations

government employee who has worked on both sides of the discussion Second from a

4 For Privatization Helps government save money Provides high quality services in some areas Is necessary when government lacks expertise or personnel to carry out the program Often times provides more innovative approaches and technology Helps dissolve unnecessary government monopolies

personnel to carry out the program Often times provides more innovative

5 Allows private providers to offer services more effectively due to flexibility and less red tape Slows growth of government Introduces competition between government employees and private providers

Slows growth of government Introduces competition

6 Does not same government and taxpayers money Often leads to significant rate increases for customers Diminishes accountability of government officials Leads to privatized services and functions being compromised because of private providers profit motives Lowers government employees morale and brings fear of displacement to affected workers

privatized services and functions being compromised because of private providers

7 ` ` Key to understanding this entire discussion. Government and its officials determine what is a Required Service or a Desired Service Required Services: Police and Fire Streets and Roads Water Waste Water Refuse Removal Schools Social Services Inspectors

Service or a Desired Service Required Services: Police and Fire

8 Desired Services Parks Art Cultural Animal Control Engineering i Services Residential Street Lighting Recreation Programs Urban Forestry Libraries

9 Services are typically Funded through Total Tax Support Tax Support and User Fees Fully Supported by User Fees Not Supported by Taxes or User Fees Privatization of services often occurs when a government has a desire to offer a service but does not have the financial support or technical expertise to provide the service.

Privatization of services often occurs when a government has a desire to offer a

10 Service Type Examples Military Quasi Military Boarder Guards, DEA, CIA Federal Emergency Agency (FEMA) Roads: Trends in pay roads Social Services Food Stamps Food Stamps Welfare Food Banks

11 Internal Revenue Service (IRS) Waste Management Prisons / Jails (New Trend in this field) Parks Federal, State, County Local

12 Human Resources Law Enforcement Maintenance Garbage Mowing Facility Maintenance Water Waste Water Resale Operations Overnight facility Golf Courses Marinas IT Services Engineering g Services

Water Resale Operations Overnight facility Golf

13 Capital Costs for Development and Construction Long Term Debt Service / Long Term Lease Arraignments Contracts Most important aspect of any privatization venture is the contract. Must spell out every aspect of the operation if both the agency and the provider are to be successful.

14 Performance Monitoring (Types) Customer Service Monitoring Both government and private industry have made great strides in this area over the past 10 years. Does not mean that customer service has improved, but it is something that is being looked at by most agencies and even more by the private entities. Financial Monitoring Was not a strong motivation for government in the past. It was a service (like it or not) Government has gotten much better in this area over the past 15 years

Does not mean that customer service has improved, but it is something that is being looked at by most agencies and even

15 Cost of Operations Personnel costs: Unproven but seen a reversal in this area over the past 15 years. It is now less expensive for a private company to manage a facility than a government agency Union Employee Considerations Of l k d h l k Often overlooked when looking at existing operations and choosing to go to privatization but must be considered

It is now less expensive for a private company to manage a facility than a government

16 Profit Centers: Places where fees are generally collected with the intent to provide a service and a return on the investment is made by either the government or a private company Non-Profit Center: These are typically y a function of government where the agency will privatize a service to a company where there never was a potential for the government to make money. Contracts for these functions are typically written to save government money.

function of government where the agency will privatize a service to a company where there never was a potential

17 ` New Concept by Government in which they take a government service typically supported by tax dollars and change it into a profit center: Garbage Collection x Once supported by taxes x Moved to a fee base system to off set certain costs such as Recycling materials x Moved to a fee based system where the entire process is now ffee b d with ith a requirement i t off citizens iti tto participate ti i t based x Moved to a private contractor who makes a profit by providing the service of refuse collection

Recycling materials x Moved to a fee based system where the entire process is now ffee b d with ith a requirement i t off

18 EMS Services: Government agencies are now charging citizens i for EMS service. Charging insurance companies and or the citizen themselves. May still be partially supported by taxes Police Services: Not new concept: Speed Traps Generate substantial revenue for a government agency Cameras mounted at Traffic Intersections: This concept has moved to private companies now providing hardware and even sending out the citations. In exchange for this service they get a percentage of fines Revenue back to them.

May still be partially supported by taxes Police Services: Not new concept: Speed Traps Generate substantial revenue for a

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