Efforts to privatize federal functions continued to expand in 1997, most noticeably in the outsourcing of support services by the U.S. military, according to a new report.
In its twelfth annual privatization report, the Reason Foundation's Public Policy Institute contends that outsourcing has flourished because of Vice President Al Gore's National Partnership for Reinventing Government and a Republican majority in Congress.
"Privatization continues to be a significant part of improving service delivery, cutting costs and helping shrink the scope of government," the report argues.
Since Defense Secretary William Cohen decided that operating utilities is not a military mission, privatization of utilities has skyrocketed, the report says. Of 250 electrical systems on U.S. military bases, only nine remain in-house. The remaining systems are either privatized, in the process of privatization or under consideration for privatization. Of 103 natural gas systems at military bases, 14 have been outsourced and only four are run by the military itself.
Other military support services are heading to the private sector as well. For example, the Navy has begun shifting services such as vehicle maintenance, data processing and child care to the private sector. Nationwide, the Navy is planning a reduction of 10,663 jobs, including 8,403 civilian jobs, according to the report.
The report also notes that divestitures of federal assets and enterprises continued in 1997. Occidental Petroleum paid $3.65 billion for a 78 percent stake in the Elk Hills Naval Petroleum Reserve. The Treasury Department has approved a plan to privatize the U.S. Enrichment Corp., which supplies enriched uranium for use in commercial nuclear power plants, through a public stock offering that could net the government more than $2 billion.
The Office of Personnel Management's former Investigations Service, which was turned into an employee-owned firm via an employee stock ownership plan in 1996, is succeeding as a private entity. Based on it's first-year results, the new company, called the U.S. Investigations Service, projected that it would save taxpayers three times the originally projected $20-$25 million over its first five years.
There has also been a "new burst of congressional interest" in privatization, the report says. Sen. Sam Brownback, R-Kan., has proposed the sale of the Strategic Petroleum Reserve, and Rep. Scott Klug, R-Wis., has sponsored a bill to create a commission to study how to sell Los Alamos National Laboratory.
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