The "managed competition" recycling experiment officially starts today in Chicago-- where public employees will go head to head with private contractors to determine who can deliver the most efficient, cost-effective recycling service for the City of Chicago.
The competition is set to last six months, and the winner will provide the entire city with recycling-- right now, only about a third of Chicago has recycling service.
So, while we wait and see who wins the bid, here are some basic principles that the Mayor should consider when looking to outsource city services:
- Consider hidden costs. Private companies often promise to cut municipal costs, but often shift other costs and risks onto the public.
- Ensure ongoing competition. Privatization should not simply replace a public entity with a private monopoly. Privatized services should be subject to ongoing competition from multiple bidders, for instance, during regular contract reviews or they should not be privatized.
- Strong transparency. Services should be subject to just as much transparency once they are privatized as they did when they were in the public sector. "Proprietary secrets" should not trump the public’s right to know.
- Allow the public sector to bid. This will help ensure that the public isn’t getting ripped off, though the details of the cost accounting process will matter a lot.
- Don’t build the “anticipated savings” as assumptions into the budget. A very significant number of municipal service privatizations get brought back in house within a few years because they don’t turn out to save money. Presenting unrealized savings into budget presumptions is bad budget practice and skews decision making when elected leaders are forced to choose between these hoped for benefits and real cuts to other programs.
To read more about this managed competition, go here and here.