Among those who partner with private companies, 82% partner with a private company for environmental services, more than any other service (according to a December 2015 Washington University in St. Louis Survey on Private-Public Partnerships at the Local Level).
Here are four reasons why:
- Cost
- Quality
- Efficiency
- Risk Mitigation
WHY MUNICIPALITIES PRIVATIZE ENVIRONMENTAL SERVICES?
There are four main reasons why local governments turn to the private sector.
1. Cost Savings
As the ability of governments to finance public services through taxes and other revenues becomes more and more challenging, local governments often consider outsourcing services like environmental services to the private sector. Through privatization, local governments have proven they can reduce operating expenses and save on capital investments allowing budgets to become more predictable and freeing up funds for other uses. How?
- Private companies have competitive pressures to minimize costs while maintaining high levels of service
- Private companies can spread cost investment and environmental compliance across many areas, contracts, and facilities
- Private companies can control or leverage disposal site rates as well as regional or national pricing discounts (economies of scale)
2. Quality of Service
By introducing competition and freeing operations from bureaucratic restrictions, private companies are able to offer quality service equal to if not better than the public sector. Residents and businesses enjoy more consistent sweeping services, customer service, better technologies, range of solutions and online tools to improve the customer experience.
3. Management Efficiency
Competition gives private companies greater incentives and flexibility to:
- Use incentive plans for workers and managers to obtain high performance levels
- Hire and train a qualified workforce
- Use smaller, highly trained work crews
- Keep absentee levels low
4. Risk Mitigation
Risk transfer is a key component of public-private partnerships. Utilizing the appropriate risk transfer, public partners extract long-term value for money by totally transferring the risks associated with operational, financial and regulatory exposures to the private partner.
