Steps to Effective Privatization

ARTICLE | Nov 19, 2012


Contracting with a private firm for delivery of services to residents is not guaranteed to be successful. In fact, according to the results of ICMA’s recently conducted survey “Profile of Local Government Service Delivery Choices,” 18% of local governments have brought back in house services that were previously contracted out. There are steps that local governments can take to help ensure that contracting out will be a successful delivery choice. The top seven activities reported by survey respondents that have undertaken steps to ensure success in implementing private service delivery are:

  • Identify successful uses of private alternatives in other jurisdictions
  • Propose implementation of private alternatives on a trial basis
  • Hire consultants to analyze the feasibility of private alternatives
  • Allow government departments to compete with the private sector
  • Apply private alternatives to new services
  • Apply private alternatives to growing services
  • Keep the service complaint mechanism in-house.

The last item is of particular importance. If the complaint mechanism is handled by the private firm delivering the service, the local government risks losing the ability to accurately monitor the quality of service delivery and thus loses the data necessary to hold the firm accountable.

Only 37% of local governments reported use of techniques to systematically evaluate private service delivery. Regular monitoring and evaluation of private service delivery is essential to ensuring that the private firm is meeting the expectations stipulated in the contract. Local governments have a responsibility to verify that the money spent on service delivery is used efficiently and effectively. Local governments that evaluate service delivery provided by a private firm show that they evaluate cost, compliance with delivery standards specified in the contract, and citizen satisfaction. The highest numbers of local governments use the following techniques:

  • Monitor citizen complaints
  • Analyze demographic and financial data
  • Conduct field observations.

Success requires effort. By taking the steps necessary to consider, implement, and evaluate private service delivery, local governments can ensure that they have made a good investment with taxpayer dollars.