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Backgrounder: The High Costs of Privatization

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One of the most popular reasons for privatization and contracting out is the promise of cost savings. But research and the repeated experiences of cities and states across the country have shown that cost savings often fail to materialize or are much lower than originally projected. This trend is prevalent in privatization contracts in many different sectors. Contracts related to health and human services, municipal services, information technology, school support services, prisons, and transportation are just a few of the areas where rampant cost overruns and vastly overstated cost savings projections have been documented.

One of the most popular reasons for privatization and contracting out is the promise of cost savings. But research and the repeated experiences of cities and states across the country have shown that cost savings often fail to materialize or are much lower than originally projected. This trend is prevalent in privatization contracts in many different sectors. Contracts related to health and human services, municipal services, information technology, school support services, prisons, and transportation are just a few of the areas where rampant cost overruns and vastly overstated cost savings projections have been documented.