The Need for a Privatization Process: Lessons from Development and Implementation

Abstract

The decision to privatize state services is often a controversial one. What are the pitfalls commonly encountered, and how can a state avoid them? In Massachusetts, a healthy clash of interests between a Republican governor eager to privatize and a Democratic legislature responsive to state employees provides important lessons. Bruce Wallin finds that many mistakes, of both a political and policy nature, were made by an administrative crusade. The legislative response, a bill regulating privatization, suggests that it is best to establish a decision-making process for privatization that is well specified, inclusive, and ideally has some independent check on the decisions. Privatization of government services, or the use of the private sector to attain public goals, has taken center stage in federal, state, and local government attempts to reform service delivery and lower cost (Gore, 1993; Gormley, 1991; Chi, 1993; Florestano, 1994; Cigler, 1990). Although much has been written about the advantages and disadvantages of privatization, the conditions which support it, and the service areas most readily privatized (Savas, 1987; Donohue, 1989), there has been remarkably little discussion in the literature of how the privatization decision process might best be structured, especially at the state level (Kettl, 1993a). That is, how should the rules for privatization be written? Who should be involved? How should proposals be initiated? What guidelines are needed? This article discusses such questions based on a case study of Governor William Weld's privatization efforts in Massachusetts. Applied piecemeal in many states, privatization has not yet become an overarching theme for most states. While states differ in many ways, lessons can be learned from an analysis of the privatization politics and policy decisions of a state like Massachusetts, where privatization has been aggressively pursued by a Republican governor and equally aggressively opposed by a Democratically controlled legislature. Indeed privatization became one of the cornerstones of an administration that has increasingly attracted national attention, and yet, at the same time it remained a focal point of controversy within the Commonwealth. Although case studies have their limitations, they are clearly instructional in the early years of policy development and implementation (Pressman and Wildavsky, 1997). In their separate reviews of efforts at the state level, Florestano (1994), Kettl (1993a), and Chi (1993) have noted the need for more information on what states are doing with privatization, and how they are doing it. Privatization must be done carefully. To overcome bureaucratic intransigence, union opposition, and partisan politics, proponents of privatization may feel that they have to aggressively promote their agenda. Privatization may then become a goal in itself, when it should be viewed as a means to more efficient and less costly provision of government services. Ideologically driven/overly promoted privatization crusades can, like most crusades, have innocent victims, with unintended consequences for those who deliver government services and for those who benefit from them. Opponents of privatization, on the other hand, may oppose its implementation for narrowly selfish personal or political reasons. Privatization in the states is most often initiated in and implemented by the executive branch, with governors cited as the most active players in one survey (Chi, 1993, 24). Although the gubernatorial perspective can provide insight on alternative service delivery, the Massachusetts experience suggests that legislative involvement may be beneficial and may provide an important check on potentially overzealous privatization. Decisions that, in effect, weigh flexibility, efficiency, and cost savings in the provision of government services against expertise, stability, and control are important ones and are best made with input from both administrative and political perspectives. …