Why should taxpayers pay for private businesses to make a profit delivering
public services when the public sector can deliver them on a nonprofit basis?
An analysis of child support enforcement programs in five states contracted
out to Policy Studies, Inc. (PSI) finds that the private firm performed
better and more efficiently than government agencies doing the same job.
The reason was not that government managers were any less talented or hardworking,
nor was it that the private company paid its employees less. But there
were five areas where the private sector had a competitive advantage.
- PSI developed and implemented a computerized tracking and document
generation system in its Nebraska operation within six months, whereas
state governments require two to three years just to define what they want
their system to do.
- Since the private firm gives worker teams bonuses for reaching higher
quarterly collection goals, which are then increased, the workers have
met 60 percent higher goals over the past three years, whereas in Massachusetts
collective bargaining agreements prevent measuring employee performance.
- A private company can rent space in about 10 days using two employees,
whereas government checks and balances generally require a year and involve
20 or more employees to rent space.
- A private company can reward star employees and rid itself of deadwood,
whereas public agencies often find it difficult to keep their best staff
and to dismiss their worst.
- Private companies typically receive a percentage of their child support
collections as a fee, with the percentage decreasing each year, forcing
improved productivity or lost profit, whereas state agencies are generally
reimbursed a set percentage of what they spend by the federal government,
regardless of how productively the money is spent.
Source: "Public Vs. Private Service Delivery: A Case Study,"
Center For Restructuring Government Newsletter, May 1997, Pioneer Institute
for Public Policy Research, 85 Devonshire Street, 8th Floor, Boston, MA
02109, (617) 723-2277.
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