The Critical Difference Between Contracting and Privatizing
Since the 1980s government institutions – from small towns all the way up to federal agencies — have been handing over control of public services to the private sector. The trend stems from the common belief that private companies can help governments save or make money by doing jobs quicker and cheaper, or managing a public asset more efficiently. This is called privatization. In theory, the idea of contracting public services to private companies to cut costs makes sense. If someone is willing to fix streets or maintain sewers for less money, that should be a plus for a government’s bottom line.
But that being said, once a service or department is privatized there is a substantial loss of control at the local level. When an entity such as a city privatizes a utility service it usually means that ownership changes hands. And with a change of ownership cities lose control of matters like the establishment of policy, setting of rates, terms of service, terms for system expansions, leaving those decisions and how they will be implemented to an outside party.
PeopleService is a contract operations firm and there is a huge difference between what we do compared to what a city experiences under privatization. When a city hires a contract operator such as PeopleService, policy, setting of rates, terms of service, terms for system expansion, etc. all remain the responsibility of the city. PeopleService has a very narrow and specifically designed role, and that is the operation and maintenance of the system. When the City is considering a change in policy or terms of service, PeopleService will certainly share our experiences in other locations with the city and consult with them, but the final decision remains with the elected members of the City Council.
We understand why a city would consider privatizing a utility service. The most common reason is economic.
The truth is… many of the water and wastewater systems serving communities in the United States are getting older and are in need of expensive updates and replacements. That takes capital. Communities over the years have fought to keep rates as low as possible for their customers, and thus don’t have the capability to fund necessary system updates without a very large increase in rates. By privatizing the utility, they shift the burden of raising capital to another party, but that doesn’t make the problems go away. It just adds another layer of bureaucracy and inefficiency to an already difficult situation.
When it finally comes time to make those big repairs and necessary upgrades the money still comes from the same source… the citizens of that town or city will still bear the tax burden to replace damaged and old sewer infrastructure. Once those systems are privatized, the decisions of what to do, how to do and how to finance those repairs are in the hands of an outside entity and the choices they make may not best reflect the needs of the community they represent.
PeopleService is a contract operations firm working directly with cities, hand in hand, lending our expertise and knowledge of the industry to help them make the very best decisions. Because in the end we feel that those decisions should be informed decisions. Decisions that are best made by the people elected to make the hard choices, by the people who know their communities and the people they serve best.
We are PeopleService and we are a partner standing beside you, advising you and helping you to make the very best decisions for your community.