• Reduced quality of services
• Degrading of assets through poor maintenance
Across the country, the privatization track record is full of service failures and deteriorating infrastructure. Private investors or contractors naturally have an overriding interest in making profit, which creates incentives to let quality slip and assets degrade.
When governments turn over control of public assets like water systems, roads and parks to private interests, corner-cutting on maintenance, repairs and quality control is common. In many water privatization cases, the quality of the water declines after a private company takes control of the system, sometimes to the point of greatly compromising the health of residents.
When government jobs are contracted out -- from school bus drivers to welfare eligibility caseworkers -- service quality often declines because employees of private contractors typically lack the training or experience needed to maintain the same level of service.
Some contracts contain incentives for contractors to value quantity over quality. Since a good quality service usually takes more time than inferior service, contract structures in which a company is paid a variable amount per client can be detrimental. They encourage the company to increase the number of clients they serve, regardless of the quality of service provided to each client. In some social services contracts, for instance, companies encourage caseworkers to process as many clients as possible, instead of placing an emphasis on quality, which can take longer.
In 2005, Virginia signed the largest contract in the state's history, for Northrop Grumman Corp. to manage the state's information technology system for 10 years. The $2.3 billion contract, seen by many as a potential model for other states, was intended to save money and improve the quality of the large, intricate system by transferring operations to the private company. But as of late 2009, with more than 80 state agencies relying on Northrop Grumman for their information technology needs, the project is behind schedule and has been plagued by numerous problems, including a decline in service quality and many technical glitches.
In Milwaukee, a coalition of environmental, community, labor and faith organizations succeeded in convincing the city council to indefinitely shelve plans to privatize the water system and go back to the drawing boards for solutions to the city's budget crisis. The coalition, Keep Public Our Water (KPOW), protested that evidence from other privatized water systems indicated substantial risks of poor water quality, rate increases and lost jobs.
The San Diego mayor has tried since 2005 to privatize many city departments through "managed competition," a process borrowed from the Bush administration. As of January 2010, advocacy efforts have headed off the outsourcing until protections are in place to safeguard public accountability, service quality and workers' health coverage.
In 2001, North Carolina's General Assembly called for sweeping changes to the state's mental health care system. The state privatized the provision of local and regional mental health services by requiring that local jurisdictions contract out delivery of services. As a result, the quality of care that North Carolinians with mental illness receive has declined while allegations of fraud and waste have increased. North Carolina is trying to pick up the pieces of its shattered system, but the many negative effects associated with the privatized system are still felt across the state today.
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