Core Public Capacity

• Government can lose the institutional knowledge and workforce capacity to perform public functions • Difficult and costly to recruit and retrain staff for outsourced services if the contractor fails or leaves • Control of public assets driven by private commercial interests The loss of core public capacity can be a detrimental consequence of privatization. Decreasing the public workforce is usually a large factor in the projected cost savings of privatization. When a government cuts personnel – from financial administrators to truck drivers – and turns over core functions to private entities, it loses valuable institutional knowledge, expertise, and capacity to perform those functions. The loss of core capacity causes two major problems. First, effective contract management and oversight relies on government employees who have a thorough understanding of the function being privatized. When privatization is rushed and cost savings become the main focus, a governmental entity often lets go of valuable personnel, increasing the risk of contract abuses and substandard performance. Secondly, public capacity becomes especially important in cases of contract cancellation. When contractors fail or break a contract, bringing a major function back in-house is difficult and costly if the experienced government staff has been discharged. Texas is currently contending with this problem in its public benefits eligibility system. In anticipation of the system privatization, many experienced state case workers left their jobs. After the contract was cancelled for poor performance, the agency no longer had its experienced eligibility staff and struggled for several years to adequately rebuild its workforce. The loss of public capacity can add significant complications to contract cancellation and affect the quality of public services and assets.