Privatization of Government

We have all heard politicians talk about the benefits of privatizing government can save money. In actuality, the savings are not always there. Obscured fees for items such as contract monitoring and sub-par administration can end up costing more than the cost to perform the same tasks in-house. The Government Finance Officers Association estimates that hidden and indirect fees add up to 25% of the actual contract price. The Government of Accountability office found that the way the consultants were conducting the financial reports make cost savings appear greater than they really were. In 2007, a survey by the International City/County Management Association, 52% of governments ended up bringing services back because the savings did not add up. In Wisconsin, the Legislative Audit Bureau revealed that Department of Transportation for the state ended up squandered well over $ 1 million dollars by outsourcing to private contractors. The report also revealed that 60% of the outsourced positions, had they been done in-house, would have not only been cost effective but also saved the state about $1.2 million. Another myth is that private corporations tend to do a better job than the local sector. However, studies show that many private contractors fail to deliver. Many companies even leave communities without the services promised or any way to recover any assets. Another downside to this with any private corporation, they main goal is profit, by any means necessary. During 2010, Gary Indiana, they cancelled a decade long contract with its main water company, United Way. In mid-2008, the state found that the company violated the discharge limits 84 times in 2 years. Inspectors also found over 20 pieces of equipment broken and below standards as well as incomplete monitoring reports. When the state cancelled their contract with United Water, they reduce their overhead costs from $16 million down to $8 million a year.
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The public is also under the misconception that once private corporations move in; they (public officials) in some way remain in control. In many instances the non-compete clause can allow companies to privatize assets and decree decisions that affect the public. The purpose of a non-compete clause is to prevent competitors and government alike, from making any policy decisions that may affect that company’s profit. In the past, these contracts have prevented both cities and states from making much needed improvements that might hurt the contractor’s profits. * Two judges in Pennsylvania received $2.6 million over seven years from Pennsylvania Child Care LLC, a private company that operated a juvenile detention center. The judges helped secure the company a 20-year, $58 million contract with the county and aggressively sentenced children for minor infractions to ensure that the detention center remained at capacity. In early 2009, the two judges were charged with racketeering, extortion, bribery, money laundering, and fraud, among other crimes.[xvii] * In 2009, the former president of the Jefferson County, Alabama county commission was convicted of taking bribes to steer government business to J.P. Morgan. The county commissioners followed advice of a J.P. Morgan consultant and set up an unorthodox financing scheme to refinance the debt on its sewer system. The county paid $120 million in fees -- six times the prevailing rate - to buy interest-rate swaps from J.P. Morgan and several other financial institutions. Within five years, the bad advice had increased the county's debt by $277 million. Low-income residents bore the consequences as the county raised sewer rates again and again to stave off bankruptcy

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