Monday, January 30, 2012

Privatization Trap - Stuck with Outsourcing in Nebraska?

Articles here and here describe the alarming situation with privatized foster case services in Nebraska.  Despite an uproar over horrible service provided by the private contractors, the director of the state's child welfare services says that the state agency is now dependent on the private firms and is unable to to bring the work in-house to deal with the problems.  This is one of the worst features of privatization - pushed as a panacea for budget woes, government agencies rush into the arrangements, and then cannot switch providers or end the arrangements if the contractor fails to do the work properly.  Privatization advocates complain that government workers are unmotivated - but how motivated are the employees at the firm with the government contract, knowing that the agency cannot feasibly end the contract?

Here are some other gems from the articles that are sadly typical of privatization fiascoes.  First, state legislators now admit that the state rushed into privatization hastily, in response to pressure (lobbying) from the firms who wanted the contracts.  Second, three of the five firms hired have folded (dropped out), leaving undone the work they contracted to do - and the state cannot find replacement contractors.  The two remaining firms have had high turnover in employees, resulting in a significant decline in the quality of service - case managers do not know the names or addresses of the children they are supposed to be monitoring.  Advocates complain that the job security afforded state employees makes them inefficient, but they ignore the hidden costs of high turnover rates, especially in providing certain social services.  The privatizing firms assure us that they can fire unproductive employees and can pay the productive ones less than the state does - both of which present problems with turnover rates.  Third, the remaining to contractors, recognizing the desperate situation of the agency, are threatening to pull out if they do not get their contracts renewed with favorable terms.  Fourth, as often happens, the projected savings were simply a hoax:

"A report by the Legislature's Performance Audit Committee last year found that the reform effort lacked specific goals, had no clear timetable and failed to consider the true cost of a reform that is now $30 million more expensive than original projections."


  1. Oh! so oh! so many cases...unfortunately...

  2. Thanks so much for this post. There is very good and helpful information in this post. Keep up the good work.
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  3. privatization is never been good, it only symbolize weary of gov't to give services to the peopleoutsourcing