EXECUTIVE SUMMARY
Introducing competition into the delivery of public services, as through competitive contracting, can help stretch scarce tax dollars, often saving 20-50 percent. Politically, however, privatization can be extremely difficult, since public employees often view privatization as a threat to their livelihood.
The cooperation of public workers is essential to a successful privatization program, and public officials should communicate a commitment to fair treatment for current employees. Fortunately, privatization need not be a hardship for public workers. There are a number of techniques available to officials to insulate workers almost entirely from the potential of job loss, including:working within the rate of attrition; having contractors hire displaced workers; and offering early retirement incentives.
Other strategies exist to ease the transition to a competitive environment. For example, public departments should not only be encouraged to compete against private contractors but should also be offered guidance to help make them competitive.
Gaining the cooperation of public-sector managers is also important, since they frequently fear a loss of control and diminished authority. It is possible to restructure managerial incentives to promote good decision making. If some of the benefits of productivity gains accrue to their departments, public managers are more likely to take advantage of cost-effective approaches to service provision such as competitive contracting.
Structuring privatizations so that employees are treated fairly can make possible changes that ultimately benefit citizens and taxpayers. Though often difficult to introduce, the ultimate goal of privatization—quality services at lower costs-is popular with voters.