Monday, January 29, 2007
Tweet[IWS] CRS: PRIVATIZATION & THE FEDERAL GOVERNMENT: AN INTRODUCTION [28 December 2006]
IWS Documented News Service
_______________________________
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
________________________________________________________________________
Order Code RL33777
Congressional Research Service (CRS)
Privatization and the Federal Government: An Introduction
December 28, 2006
Kevin R. Kosar, Analyst in American National Government, Government and Finance Division
http://www.opencrs.com/rpts/RL33777_20061228.pdf
[full-text, 36 pages]
Summary
During the past two decades, the privatization of federal agencies and activities
has been much debated. That said, privatization here defined as the use of the
private sector in the provision of a good or service, the components of which include
financing, operations (supplying, production, delivery), and quality control is not
a recent phenomenon. Since its founding in 1789, the federal government has used
private firms to provide goods and services. Hence, privatization is of perennial
interest to Congress.
This report is an introduction to privatization in the federal governmental
context. It discusses the emergence of privatization on the federal policy agenda in
the late 1970s and early 1980s. To some, privatization appeared as an answer to the
purported failures of big government. Privatization attracted political support due
to its rhetorically persuasive rationales, purported benefits, and political
attractiveness. However, privatization also has been controversial. Critics have
complained that privatization is a form of union busting and that privatization can
have unforseen and undesirable consequences.
This report also supplies a typology of the various means through which federal
agencies and activities have been privatized. The typology shows that privatization
is not an either/or proposition. Rather, privatization, as this reports definition
implies, is a matter of degree. Policymakers may transfer to the private sector one
or more of the components of government provision of goods and services
however many they deem appropriate.
Next, the report explains the distinction between privatization and
marketization, an alternative to privatization, which is the structuring of a
government agency so that it provides goods and services in the efficient manner of
a private firm. Marketization retains an activity within the governmental sector;
privatization moves the components of an activity to the private sector. This
distinction is significant because entities within these differing sectors tend to behave
differently. Private sector firms tend to be self-directing and profit-seeking;
government agencies tend to be process-oriented and pursue the multiple and
sometimes conflicting goals assigned to them by Congress and the President. Hence,
policymakers who wish to improve an agencys efficiency or performance, but are
leery of privatization, may find marketization an attractive option.
Finally, the report notes that, whenever policymakers consider privatizing a
federal agency or activity, a fundamental issue arises Which activities are
essential to the state and should remain directly accountable to the elected
representatives of the people and which may be carried out by the private sector?
This question is complex and value-laden; no definitive answer exists. Thus, the
decision to privatize is inherently controversial.
This report will not be updated.
Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Privatization: A Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Background: The Recent Political Salience of Privatization . . . . . . . . . . . . . . . . . 3
The Rhetorically Potent Rationales for Privatization . . . . . . . . . . . . . . . . . . 4
Purported Benefits of Privatization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Political Attractiveness of Privatization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Criticisms of Privatization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Means of Privatization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Divestiture/Load-Shedding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Contracting for Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Contracting for Services (Outsourcing) . . . . . . . . . . . . . . . . . . . . . . . . 15
Vouchers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Quasi Governmental Entities/GOCO . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Third-Party Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Grants to Private Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Prize Competitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Use of Volunteers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Privatization: Ramifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Behavior of the Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Accountability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Privacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Marketization: An Alternative to Privatization? . . . . . . . . . . . . . . . . . . . . . . . . . 23
Agency Franchises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
User Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Government Corporations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Competitive Sourcing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
To Privatize or Not The Inevitability of Political Controversy . . . . . . . . . . . . 30
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
______________________________
This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.
Stuart Basefsky
Director, IWS News Bureau
Institute for Workplace Studies
Cornell/ILR School
16 E. 34th Street, 4th Floor
New York, NY 10016
Telephone: (607) 255-2703
Fax: (607) 255-9641
E-mail: smb6@cornell.edu
****************************************
_______________________________
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
________________________________________________________________________
Order Code RL33777
Congressional Research Service (CRS)
Privatization and the Federal Government: An Introduction
December 28, 2006
Kevin R. Kosar, Analyst in American National Government, Government and Finance Division
http://www.opencrs.com/rpts/RL33777_20061228.pdf
[full-text, 36 pages]
Summary
During the past two decades, the privatization of federal agencies and activities
has been much debated. That said, privatization here defined as the use of the
private sector in the provision of a good or service, the components of which include
financing, operations (supplying, production, delivery), and quality control is not
a recent phenomenon. Since its founding in 1789, the federal government has used
private firms to provide goods and services. Hence, privatization is of perennial
interest to Congress.
This report is an introduction to privatization in the federal governmental
context. It discusses the emergence of privatization on the federal policy agenda in
the late 1970s and early 1980s. To some, privatization appeared as an answer to the
purported failures of big government. Privatization attracted political support due
to its rhetorically persuasive rationales, purported benefits, and political
attractiveness. However, privatization also has been controversial. Critics have
complained that privatization is a form of union busting and that privatization can
have unforseen and undesirable consequences.
This report also supplies a typology of the various means through which federal
agencies and activities have been privatized. The typology shows that privatization
is not an either/or proposition. Rather, privatization, as this reports definition
implies, is a matter of degree. Policymakers may transfer to the private sector one
or more of the components of government provision of goods and services
however many they deem appropriate.
Next, the report explains the distinction between privatization and
marketization, an alternative to privatization, which is the structuring of a
government agency so that it provides goods and services in the efficient manner of
a private firm. Marketization retains an activity within the governmental sector;
privatization moves the components of an activity to the private sector. This
distinction is significant because entities within these differing sectors tend to behave
differently. Private sector firms tend to be self-directing and profit-seeking;
government agencies tend to be process-oriented and pursue the multiple and
sometimes conflicting goals assigned to them by Congress and the President. Hence,
policymakers who wish to improve an agencys efficiency or performance, but are
leery of privatization, may find marketization an attractive option.
Finally, the report notes that, whenever policymakers consider privatizing a
federal agency or activity, a fundamental issue arises Which activities are
essential to the state and should remain directly accountable to the elected
representatives of the people and which may be carried out by the private sector?
This question is complex and value-laden; no definitive answer exists. Thus, the
decision to privatize is inherently controversial.
This report will not be updated.
Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Privatization: A Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Background: The Recent Political Salience of Privatization . . . . . . . . . . . . . . . . . 3
The Rhetorically Potent Rationales for Privatization . . . . . . . . . . . . . . . . . . 4
Purported Benefits of Privatization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Political Attractiveness of Privatization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Criticisms of Privatization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Means of Privatization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Divestiture/Load-Shedding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Contracting for Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Contracting for Services (Outsourcing) . . . . . . . . . . . . . . . . . . . . . . . . 15
Vouchers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Quasi Governmental Entities/GOCO . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Third-Party Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Grants to Private Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Prize Competitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Use of Volunteers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Privatization: Ramifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Behavior of the Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Accountability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Privacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Marketization: An Alternative to Privatization? . . . . . . . . . . . . . . . . . . . . . . . . . 23
Agency Franchises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
User Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Government Corporations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Competitive Sourcing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
To Privatize or Not The Inevitability of Political Controversy . . . . . . . . . . . . 30
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
______________________________
This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.
Stuart Basefsky
Director, IWS News Bureau
Institute for Workplace Studies
Cornell/ILR School
16 E. 34th Street, 4th Floor
New York, NY 10016
Telephone: (607) 255-2703
Fax: (607) 255-9641
E-mail: smb6@cornell.edu
****************************************
# posted by SBasefsky : 3:16 PM
