Outsourcing: Higher Costs, Inferior Services

09/21/2016 05:21 pm ET Updated Sep 22, 2016

It was somewhat lost in the late-summer news lull, but a momentous Justice Department decision to abandon the use of private prisons could be the leading edge of a movement toward more humane incarceration and better public services more generally.

Prisons-for-profit are a menace to public safety and a stain on our criminal justice system. They experience high rates of assault, with overcrowding problems, inexperienced staff, shoddy medical care and deplorable sanitary conditions. And they don’t provide meaningful cost-savings to boot.

This problem isn’t limited to corrections. For decades, there has been a rush to contract out a host of functions traditionally provided by the public sector. Motivated largely by corporate greed, this outsourcing is also an ideological attack on honorable public service workers.

In a recent Washington Post op-ed, billionaire investor Peter Thiel trots out this tired strawman argument and all-too-convenient scapegoat. “Democrats enable incompetence,” Thiel writes, “because they are beholden to public-sector unions that expect their members to get paid whether or not they do the job.”

At a moment of astronomical CEO pay and vast income inequality, Thiel wants to blame supposedly lazy government workers and their unions for our problems. But the only laziness here is in Thiel’s crude stereotyping.

In fact, public service workers are dedicated to getting the job done -- whether they’re school bus drivers getting children safely home rain or shine, sanitation workers rising before dawn to collect the garbage, or first responders fearlessly rushing to accident sites.

They’re not in it for the fame and fortune. But they take great pride in their work and ask for nothing more than fair pay, decent benefits, some retirement security and a voice on the job.

They are also bonded to and invested in their communities – one of the reasons they can deliver top-notch, cost-effective public services that can’t be matched by outsiders.

Outsourcing compromises quality and comes with hidden costs, like contract monitoring and compliance, which can increase the price tag by as much as 25 percent. Private firms often secure contracts with low-ball bids, then jack up the price over time. And outsourcing very often means a race to the bottom -- good jobs are replaced by poverty wages and unsafe conditions, undermining the stability of the local economy.

In Florida, outsourcing of child welfare case management led to a higher rate of abuse and less stable foster care placements. The District of Columbia Public Schools ended up paying $7 million more for 15 million fewer meals from their food services vendor. $300,000 is a lot of money for a small town like New Albany, Indiana. That’s how much they saved per year when they went back to insourcing wastewater treatment and sewer management.

Also, outsourcing often leads directly to corruption, as beholden politicians award contracts in exchange for generous campaign contributions or even (in the case of former Virginia Governor Robert McDonnell) personal gifts.

The bottom line for public service workers is the public good, the strength and safety of their communities. The bottom line for private contractors is, well, the bottom line. They are accountable to shareholders. Their incentive structure is about making money, not making our prisons, schools or roads better.

When you put corporate profits ahead of public services, it’s good for the 1 percent and the C-suite. Less so for the people paying for and depending on those services.

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