Issues to Consider in Privatizing Government Services

Rather than employing public agency staff to perform essential governmental services, some agencies are contracting out such services in a move toward privatization.

Privatization as a form of P3:  In an article entitled "Privatization: Determining the Role of P3s," that appeared in the August 2014 edition of Government Finance Review, author Kyle Steitz refers to privatization as a form of Public-Private Partnerships (P3) even though P3s are often focused on "economic development projects proposed by developers who are looking for financial assistance from a jurisdiction that stands to benefit from the project."

Key privatization considerations:  In reviewing whether to privatize our contract out government services, the article suggests the following issues that must be addressed:

• Preliminary evaluation
• Retaining advisors or experts
• Public participation
• Economic and fiscal impact analysis
• Financial negotiations
• Service level implications
• Risk assessment
• Monitoring of performance and results

Contracting implications:  Privatizing existing governmental functions requires a different set of decision-making processes and contract documents than is typical for when government agencies procure services. And, of course, agencies must address considerations of what is permitted by applicable laws and the impact of privatization on collective bargaining (union) agreements in place for agency employees who may be affected by privatization.

Mike Purdy's Public Contracting Blog
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