It's a huge myth that the private sector is more efficient. Especially in the case of public goods.

Conservatives have been spreading that lie successfully for the past 30+ years and are still at it.

Personally, I'm going to take this report with a grain of salt. I didn't see much in the way of evidence and an awful lot of unsubstantiated claims. While I'd really like the story to be true, I'm not ready, just yet, to sing the praises of government run projects.

Tell me why government is more efficient? Why are corporations having trouble competing? My guess is that if you dig a little deeper their are mitigating factors, on both sides, that could significantly change the conclusions of this story and our opinions of it.

More facts, more evidence.....

***regarding busing in Pennsylvania

• Contracting out significantly increases total costs. For example, if the “typical” district (with enrollment and other variables equal to the average for all districts) shifts from contracting out none of its transportation services to contracting out for all of its services, costs increase an estimated $223,861 (in 2008 dollars).
• Contracting out also increases costs to the state, in part because the state reimburses contracted transportation services at a higher rate than district self-provided services. In the typical district, increasing contracting out from zero to 100% increases costs to the state by $231,903.
• For local school districts, there is no statistically significant difference (at the 5% level) between what they pay for transportation services when they contract out versus when they self-provide transportation—in effect, the more generous state reimbursement of contracting out compensates for the increase in total costs.
from----> http://keystoneresearch.org/sites/default/files/RunawaySpending.pdf

hardly an unsubstantiated claim...

I totally missed it...

Anyway, after reading it a few things became clear.

My first question is, why does the state reimburse contracted services at a higher rate? There may be a legit reason, but it's not clear to me in the document.

My next observation is that the costs my be a reflection of an inefficient system on both sides (school system and contractors). This study has shown that transportation is more expensive when provided by contractors, but it really only skims over the why.

In some cases switching was cost prohibitive or time consuming, in other instances their simply weren't enough contractors willing to bid and if I had to guess I'd say there are instances where people making decisions on who receives the contacts are awarding higher then normal rates in return for favors.

While the reality in that contacting out is more expensive, I'm not convinced that when mitigating factors are controlled that private contracting would not be able to compete.

Now having said that, the changes necessary to make the system sufficiently efficient to address mitigating issues may be incredibly disruptive and costly on their own.

In a perfect world, would contracting be more expensive? Maybe, maybe not. I know it's not a perfect world, but looking at it this way can help address where the inefficiencies are and finding out if they can be corrected in a cost effective manner.

In the end the circumstances that surround this issue may be the mitigating factor. In other words, the way that contractors are hired, the inability of local governments to adequately request competitive bids, local corruption and a general inability for the system to be nimble enough to leverage competition.

We may have to accept these inefficiencies and adapt to them, or we can look at the system in a broader scope to address the issue.

I have decided to play devils advocate in this situation and don't really claim to have all the information needed to make a definitive judgment of the situation, but hope that it got a few people to thinking.

Thanks!

the most efficient method is used along with the best training methods, materials and so on, by both the government and private entity.

The private entity will cost more, because they have one item on their ledger the government doesn't: they must turn a profit. All other things equal, the private sector loses every time.

For instance, health care in this country costs much more than any other country in the world because of private insurance - they make more money the more they deny claims. Yet countries with healthier populations have greater productivity and a better standard of living. This is why every other first world country has single payer health in one form or another.

By definition, private sector must charge more to make a profit. There's no secret to school busing, for instance, as used in the article. You get buses that will safely make the rounds on a timely schedule, get drivers to drive them safely, devise routes to pick up and take back children. Maintenance and upkeep on the buses, a discipline plan of some sort for the riders. That's about it. All the costs are identical - whether school buses are bought by the district or by a company, they will cost the same - drivers will cost the same - the routes will be run to the same schools with the same kids, using the same price fuel. The difference truly is that the private company must show a profit, and that is the savings figure cited in the article.

There are no secrets or sources available to the private company that will enable them to deliver more cheaply than the district. They can do it short-term by cutting maintenance or hiring DWI convicts or so on, but that's changing the product or service, not providing it.

Our own district tried using a private company to disburse direct deposit pay to employees quite a few years back. The company discovered that by holding the money for a few days, they could earn interest on the money provided by the district for their employees, so they did so. After twice holding up pay for a week, they were fired, justly, and no one has ever suggested trying that again.

not to prove you wrong, just to continue a thought provoking conversation.

Ok, so in a perfect world, with all things being equal, government is more efficient because it does not require profits.

I'm in IT (specifically in data management) I've worked for at least a dozen federal fovernment agencies, places like The US Patent office (one of the only government run organizations to turn profit), ATF, IRS, Secret Service, and the Pentagon to name a few.

The problem I've seen is one of incentives. If profit is not an incentive, then what incentives do people have for keeping costs down? How many times I've seen equipment purchased and never used just to maintain next years budget.

The problem is, as I've said, one of incentives. That's not to say that some agencies in government haven't recognized this and begun to offer incentives as a way to manipulate incentives, but profit is a big incentive to cut costs at all levels.

The prevailing attitude among a lot of people I ran across in my time in government (I work at a non-profit hospital these days that grosses 300 million a year in revenue) is that government was this nebulous thing. People viewed their waste the same way they view their votes. They didn't think their waste, or theft, or failure to get competitive bids mattered in the grand scheme.

I think a government system that invests in a system that recognizes and rewards individuals, even if that system has a cost associated with it, will find that it will, in the end pay for itself.

In the end this is about managing incentives. If the system incentivizes the individual with personal recognition and/ or reward to keep costs down then that incentive is to the benefit of the system as a whole.

At the local level this is more easily accomplished because people can see the direct result of over-spending and how it affects them. The thing I worry about with a national health care system (or any national system) is that in the pot of billions and billions of dollars that people (individuals or small groups) don't see their reaching into that pot and taking money and failing to provide the level of service that money should provide as making a difference.

It's so easy to become apathetic and cynical.