Local Government and Civil Society:

Privatization and Contracting Out

THE PROBLEM

Models of Social Services Systems: The Context of Privatization and Contracting

I. Overview: Concepts- New Public Management Principles

a. Social Services

b. Re-inventing Government

c. Subsidiarity

d. Privatization

e. Contracting Out II. Private Provision of Services:

a. Use of conventional Markets: no public sector involvement (Purely private)

b. Contracts with public agencies

c. Monopoly Franchises

d. Management Contracts

e. Vouchers

f. Consumer Cooperatives

III. Service Delivery Systems and Categories of Service Delivery- Issue- Size: hard services or soft with capital or recurrent costs

a. Macro- Physical Services- Highways, Sewerage Main Lines, Electricity [Deconcentrated or Privatized] b.Micro- Physical Services- [Devolved, or Delegated ]

c. Social Services-Health, Education or Community Development (such as Social Funds) [Delegated or Contracted]

d. Investment or Production [Privatized]

IV. Private Provision: Defined

a. Use of conventional Markets

g. Contracts with public agencies

h. Monopoly Franchises

i. Management Contracts

j. Vouchers

k. Consumer Cooperatives V. Privatization A Process: The process of divesting direct civil service responsibility for the provision of public services or the collection of revenues

1. Ideal: Key to the provision of efficient and effective goods and services (Savas)

a. The Need for Exclusion

b. User Fees not taxes: the principle of tolls

c. Need to exclude Collective, and some would argue, common pool goods from privatization

d. Worthy goods (health, education, etc.) are not collective goods

2. Reasons: (Madsen Pirie)

a. High Production costs b. Low levels of efficiency c. Featherbedded labor costs

d. Pork Barrel Capital Allocations

e. Low level consumer input

f. Poor Maintenance and loss of service

g. Inability of political leaders to impose cost control

h. Free Riders

2. Means:

a. Liquidation- Close down (Load Shedding)

b. Divestiture- Sell off in whole or in part government shares

c. Public-Private partnerships

d. Commercialization- autonomy and user fees

e. Public Sector Reform- Cutback- the infamous 19% first cut f. Transfer to a public service organization or union

g. Contracting Out

3. Criticism:

a. Private sector and NGOs are not necessarily more effective and efficient than government agencies (Paul Nelson)

b. Loss of Coverage for social services (Rule of Structural Adjustment)

c. Can replicate private sector within government (Core of Reinventing Government argument-Osborne and Gabler)

1. Steering rather than Rowing

2. Customer Driven Government

3. Competition within Government and between units 4. Key is decentralization not privatization d. Privatization enhances corruption. Enhanced by cultural differences (Gifts vs. Kickbacks; corruption as lobbying the Executive- Klitgaard) REFERENCES

Robert Klitgaard, Controlling Corruption (Berkeley: University of California Press, 1988).

David Osborne and Ted Gaebler, Reinventing Government: How the Entrepreneurial Spirit is Transforming the Public Sector (New York: Plume Books, 1992).

Madsen Pirie, Dismantling the State: The Theory and Practice of Privatization (Dallas, TX: National Center for Policy Analysis, 1986).

Gabriel Roth, The Private Provision of Public Services in Developing Countries (Washington, D.C.: World Bank and Oxford University Press, 1987).

E.S. Savas, Privatization: The Key to Better Government (Chatham, NJ: Chatham House, 1987).