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An Assessment of the Risks and Benefits of Prison Privatization

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Since the opening of the first private prison in 1984, the industry has expanded rapidly throughout both state and federal corrections. Currently, the two largest corporations are Correctional Corporation of America (CCA), established 1984, and GEO [formerly Wackenhut Corrections Corporation], respectively. CCA & GEO reported combined revenues in excess of $2.9 Billion in 2010, suggesting that the privatization of prisons is an economically lucrative corporate venture.

The primary arguments supporting the privatizations of prison are purported cost savings of up to 20% annually due to lower wage and benefit costs for labor, lower procurement costs, and more efficient administration and operation. Extensive research has been conducted over the past twenty 25 years assessing these claims as well as the overall performance and public safety record of privately operated prisons. Conflicting research findings make it difficult to accurately assess cost and performance comparisons between public and privately operated facilities. Inconsistency in the research is acknowledged in the literature and by Corrections Corporation of America spokesman, Steve Owen, who stated: ”There is a mixed bag of research out there. It’s not as black and white and cut and dried as we would like (Oppel, 2011).” A major obstacle in assessing the advantages and disadvantages of privatization is due to the methodological weaknesses of most of the earlier cost studies [see Appendix A for an explanation of the methodological flaws reported in privatization studies]. According to a 2001 Bureau of Justice Assistance (BJA) report:

“Only a few studies can be relied upon in a debate over cost efficiency of prisons. It is generally accepted that the best research conducted to date… showed no or very minimal differences with respect to costs. The remaining studies had serious methodological flaws that limit their ability to reach firm conclusions (Austin & Coventry, 2001:37).”

Further caution must be exercised in reviewing studies conducted at federal facilities since there are unique statutory regulations that impact wage levels (McDonald & Carlson, 2005), and the Bureau of Prisons does not gather the same type of data from its private facilities as that collected at its other facilities in order to conduct methodologically sound cost comparisons (GAO, 2007:10). See Appendix A for discussion of difficulties in comparing federal to state privatization outcomes.

Drawing upon the wide range of research available, this paper will report on outcomes in the areas of  cost savings, public and institutional safety, recidivism, impact on state economic development, and the possible influence privatization can have in the formulation of effective correctional policies.