GAO produces pocket privatization primer

A pattern arises from the General Accounting Office's new pocket-sized privatization handbook: Six state and local governments were studied for the report, six lessons were learned, and an average of six questions per lesson were included in the report.

The subliminal "666" pattern is no doubt pure coincidence, but it comes at a time when opponents of privatization are raising hell about large-scale outsourcing.

"We cannot look to the corporate sector for democratic values," Rep. Dennis Kucinich, D-Ohio, said during a passionate tirade at a House hearing on outsourcing last month. "I see government employees as an extension of democratic values."

GAO project manager Donald L. Bumgardner, one of the pocket guide's authors, says many federal managers share Kucinich's sentiments.

"Privatization is a very nasty word at the federal level," Bumgardner says, adding that federal officials charged with preparing agencies for A-76 public-private competitions win few popularity contests. "The person doing the A-76 study might as well get a sickle and a robe."

Whether privatization is the Grim Reaper of federal programs or the angel of efficiency, more and more agencies are facing the prospect of privatizing some of their operations. At the Defense Department for example, Secretary William Cohen has announced that 150,000 to 200,000 civilian jobs will be on the line over the next five years as DoD components compete with private sector companies for Defense contracts.

According to GAO's 20-page guide, "Questions State and Local Decisionmakers Used When Considering Privatization Options" (GAO/GGD-98-87), the devil is in privatization's details. In developing a set of questions privatization planners should ask themselves, GAO gleaned six common components of privatization efforts in Georgia, Massachusetts, Michigan, New York, Virginia and the city of Indianapolis:

1. A political leader must champion privatization. Indianapolis Mayor Stephen Goldsmith pushed public-private competitions in his city, leading to $240 million in savings. In all five states GAO reviewed, governors pushed privatization (In Virginia, the legislature worked closely with the governor). Bumgardner said DoD's Cohen is one of the few privatization champions on the federal level. Except for NASA Administrator Daniel Goldin and Energy Department leaders, "we haven't had a champion on the civilian side," Bumgardner said.
2. Privatization efforts need a structure. Not every program lends itself to outsourcing, GAO said. To avoid haphazard privatization, five of the state and local governments set up privatization commissions to decide which operations could be done by the private sector. Massachusetts required its cabinet secretaries to oversee privatization programs. "Governments found that privatization can take various forms, such as contracting out and asset sales, and that implementation strategies and analyses need to be tailored to the project or situation," GAO said.
3. Legislative and resource changes may be needed. Governments must look at the statutory and regulatory barriers to privatization, GAO said. For example, Georgia reformed its civil service and reduced its agencies' budgets to show managers and employees that the state was serious about privatization.
4. Cost data must be reliable. When agencies fail to count their costs, the results of privatization are hard to measure, GAO said. Indianapolis used activity-based costing to figure out its program costs. Agencies must weigh the time and cost required to improve accounting systems against the importance of reliable cost data, GAO said.
5. Leaders need to plan workforce strategies. Agencies should plan transition programs for helping government workers make the jump into the private sector. Training programs, early retirement and buyout options, and union involvement are all strategies agencies can use, GAO said.
6. Contractor oversight skills must be improved. The more an agency relies on contractors, the more sophisticated the agency's oversight and monitoring programs must be, GAO said. The six state and local governments trained their contract officers, teaching them and developing new skills for overseeing complex operations.

   This week GAO also released a five-page pocket guide on performance measurement, which is available on the GAO Web site in PDF format: "Performance Measurement and Evaluation: Definitions and Relationships" (GAO/GGD-98-26). GAO's privatization guide is also available in PDF Format here.