Privatization

Submitted by: James Cameron, Senior Associate

Privatization, in the technical sense, is "the transfer of ownership from the public sector (government) to the private sector (business)." However, as the term is more commonly used it also refers to a government subcontracting a service or function to a private firm. Governmental entities outsource services and activities for reasons that can vary greatly from one setting to the next. The impetus to privatize might include lack of manpower and staff expertise to cost containment.

Privatization within municipal utilities may be as simple as contracting out meter reading or customer service responsibilities such as billing and collections. It can also be as comprehensive as full operation of the filtration and distribution system for water utilities and treatment and collection systems for sewer utilities. Privatization of city and town services may include street sweeping, refuse pick-up or management of municipally-owned facilities such as parking garages, pools and recreation centers.

Contracts may range from one year to 20 years in length. Public-private partnership agreements that include an up-front investment from the private company for capital improvements are usually long-term in nature and include repayment within the terms of the contract.

Our firm has experience in determining if privatization may be the right answer for your community's needs. Please contact us at footnotes@umbaugh.com if we can be of assistance with your analysis.