Some cities have begun allowing private-sector companies to compete with city departments to provide some services. Both the cities and their employees are benefiting.

One of the most aggressive and successful competitions is in Indianapolis.

• Between 1992 and 1994, Indianapolis moved 50 services into the competitive marketplace, saving the city $28 million.

• To compete for transportation services, the city Transportation Department streamlined its operations, won the bid over private companies and achieved a 25 percent saving over previous operating costs.

Phoenix, which recently won the international Bertelsman Prize for best-run city, puts its garbage collection up for bidding.

• The city is divided into five zones, and every five years the city's Department of Public Works and private waste haulers make competitive bids to serve each zone.

• One zone has gone back and forth between the public and private sector three times.

• The city estimates that the competition has saved taxpayers nearly $1.8 million annually since 1978.

In Philadelphia, 13 services have been privatized since October 1992 and another 30 have been identified for competition. The manager of the contracting program estimates that cost savings average 40 to 50 percent.

One of the salutary effects in many of the cities is that, in order to stave off privatization, city government units have discovered ways to shave as much as 20 to 30 percent from their previous costs.

Source: David Littmann, "Privatization Benefits Taxpayers and Unions," Detroit News, April 10, 1994, reprinted in Michigan Privatization Report, No. 94-2, Summer 1994, Mackinac Center for Public Policy, 119 Ashman Street, Midland, Michigan 48640, (517) 631-0900.