http://reason.org/authors http://reason.org/authors info@reason.org http://www.pjdoland.com/chai/?v=0.1 http://reason.org/news/show/cost-savings-from-privatizatio <h3>Executive Summary</h3> <p>Opponents of privatization and other methods of increasing competition in government-financed services frequently claim that privatization/competition rarely results in cost savings for government or society at large. In fact, some argue that privatization increases costs to the taxpayer.</p> <p>These claims are refuted by a substantial body of research that has documented significant savings from privatization/competition. More than 100 studies over the course of the last 20 years have demonstrated privatization/competition cost savings in service areas from airport operation to weather forecasting.</p> <p>The wide variety of reasons for the cost savings include, for example: 1) better management techniques; 2) better and more productive equipment; 3) greater incentives to innovate; 4) incentive pay structures; 5) more efficient deployment of workers; 6) greater use of part-time and temporary employees; 7) utilization of comparative-cost information; and 8) more work scheduled for off-peak hours. All these benefits stem primarily from the introduction of competition into the bidding process to perform the service.</p> <p>Insulated from competition, most government units have lower incentives to-or are even prohibited from-adopting the productivity-increasing techniques of private firms. When government units compete against private bidders to provide a service, cost savings are significant regardless of who wins the contract because the government unit typically responds by cutting its costs greatly.</p> <p>The following service-by-service table is a compilation of cost studies that compare the costs of inhouse (sole-source) government agencies versus alternative-and mostly private-sector providers. It is derived from my book, <em>Competition in Government Financed Services</em>, published by Quorum Books in 1992. The over 100 independent studies typically found cost reductions of 20 percent to 50 percent that resulted from privatization and, more importantly, increased competition.</p> 127651@http://reason.org Mon, 01 Mar 1993 00:00:00 ESTinfo@reason.org (John Hilke)