Privatization: Metropolitan Boston Transit Authority (MBTA) and the California State Compensation Insurance Fund
According to Robert B. Denhardt, Public Administration an Action Orientation, privatization "is the use of non governmental agencies to provide goods or services previously provided by government." (P.95). Privatization comes in various degrees, from the outright selling or transfer of government ownership of assets (for example public utilities), to, as is more common in the United States - the contracting of goods or services to private firms.
Contracting is not something new in government. For example the Defense Department procures new weapons systems from the private sector all the time and the Pentagon oversees contracts totaling more than $150 billion a year. From the outset, it must be made clear that privatization is an enormously complex issue for which there is no simple solution. However, it is an idea that has grown tremendously popular among politicians (and by natural extension Administrators who must carry out policy issues once policy decisions are made by the politicians) in recent years.
The idea of privatization will likely not diminish as cash starved governments from the federal to the local levels seek to reduce costs while promoting efficiency. It is this idea of reducing costs that will be the focus of this paper. We will see as the debate unfolds that when it comes to government, costs alone is not always the determining factor in the delivery of goods and services. There are many arguments that cost reduction does not necessarily improve efficiency nor does it guarantee equal delivery in the delivery of goods and services (equality being a fundamental constitutional value). Finally, we will examine an anomaly in the debate, the California State Compensation Fund - an agency that fulfils its mandate, has consistently met the criteria of "efficiency" in government, yet has come under the pressure to privatize its operations.
There are two common areas of privatization, transportation and garbage collection. In Boston for example, the Metropolitan Boston Transit Authority undertook a huge effort to privatize public transportation. The result was a "private company and a coalition of unions each tentatively chosen to run their own network of MBTA buses, at costs considerably below what the authority now pays according to a Boston Globe article (Metro, Monday Feb. 3, 1997). How they arrived at this strange equation is unknown but the stated goal was to cut costs though competition. "Such arrangements reflect the belief that competition brings out the best among contenders-and that by inserting government units into a competitive environment, service recipients stand to gain much while risking little." (Ammons, D. and Hill D. pg. 12).
Opponents of privatization argue that "any cost savings are attributable to reductions in service quality or to worker exploitation, especially through...