This article from the Boston Globe describes the current call for proposals by the Governor of New Hampshire for privatizing the state's prisons. Fortunately, the Governor has not fully committed himself to the plan, but says he is merely exploring options. The problem with this tactic is that bidders are aware that they can low-ball on their initial offer, get the administration committed enough to it to invest political capital on the idea of privatizing the prisons, and then without much scrutiny get a contract. Once they have the state locked in, they can raise their price significantly the first time the contract is up for renewal, and the state will be in a much weaker bargaining position, as it no longer has the personnel on the payroll to bring the prisons back in-house in order to save money. In addition, four bids from contractors who likely know each other (private prison operators is a small industry) is not likely to provide true competition - and therefore, fails to deliver the benefits of a free market, such as efficiency or discipline. I predict this will NOT save the state any money in the long run, even if the initial bids seem irresistible.
- Dru Stevenson