The real cost of outsourcing public services

A new report details the real costs of outsourcing public services:

The call for outsourcing or contracting out of government services is often made through an appeal of cost savings to taxpayers. Since the Great Recession, state and local governments facing budget challenges are increasingly shifting the delivery of public services – from school bus drivers to accountants and trash haulers – to outside firms to save money. Yet the full extent of the social and economic consequences facing communities whose governments decide to outsource public services has not been examined.

Thankfully a new report released today, “The Decision to Contract Out: Understanding the Full Economic and Social Impacts,” shines a new light on these real costs. The study argues that governments should pursue broader analysis of contracting out, much like how cities and states have been requiring environmental impact studies ahead of major policymaking and financial decisions.

Report author, Daphne T. Greenwood, professor, Department of Economics, University of Colorado, explains that “there is a wealth of evidence that outsourcing public jobs often diminishes quality without substantial cost reduction.” But broader social and economic effects “are often forgotten when considering the cost effectiveness of a contract. Since local and state governments are major employers in many communities, their decisions about how to deliver services are important to economic development.”

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