Abstract
Faced with significant funding shortfalls for the construction, repair, maintenance, and operations of public infrastructure and delivery of public services, governments have searched for strategies to alleviate the funding shortages. Privatization has emerged as a promising alternative to traditional service‐delivery approaches. Contracting out the operations of public services, a subset of privatization, offers significant cost savings through competitive bidding for public services. A model that provides a method for making valid cost comparisons between the total costs of private and public performance of public services is presented. Special attention is given to the computation of the additional costs of contract performance. A case study involving solid waste collection and disposal is provided to demonstrate the use of the cost comparison model.
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