DRAFT
Privatization Discussion Paper
Privatization is a term that may
have different meanings to citizens, consumers of public services,
state legislators, and public employees.
The most common form of
privatization is when a government agency contracts with a private
corporation or non profit agency through a formal contracting process
to deliver or maintain a public service.
The two most stated reasons state
by government agencies to privatize services are to save money and
improve service delivery.
The North Dakota Public Employees
Association does not wish to be thought of as opposing privatization
on the basis of a union attempting to retain state jobs, but urges
cautious cost analysis and comparison of proposals to privatize state
services. Clearly, the North Dakota Public Employees Association also
believes that proposals to privatize state services must be researched
as to short and long term economic and social implications.
The North Dakota Public Employees
Association believes that contracting state services may have
significant long term costs and mask future administrative and legal
problems that will outweigh any immediate short term savings. The
North Dakota Public Employees Association believes that the state
should learn from the experience of other states that have attempted
to contract state services and then discontinued those efforts. The
North Dakota Public Employees Association understands that many state
services could be provided by public employees, private corporations
or non profit agencies, but the best long term interest for the state
is to retain its core services with public employees.
Properly administering a contract
is not a simple process. Administrators have to be trained to develop
specifications for a competitive bidding process or how to evaluate
non competitive proposals. Realistic cost analysis is essential so
the contract administrator can determine if the bidder is underbidding
his first bid in order to obtain a contract and the seek higher rates
in subsequent years. This may be a possibility in service contracts
where there are few bidders and contracts may significantly increase
after the initial award as well as the ethical dilemma of continuing
to award the contract as there are no other bidders.
Monitoring contractor performance
is an ongoing process and possibility of contractor default is a
consideration for administrators. As contracts become more
complicated over time, provisions will need to be in place for rate
changes and contractor protests, disputes and appeals.
Contracting for services does not
relive the state of its responsibility to provide services. As many
potential state contracts involve federal funds for human services,
due process provisions would still need to be in place for citizens
receiving services.
The North Dakota Public Employees
Association believes that in the long term, there will be significant
administrative time and cost associated with provision of services
through a privatization basis.
Economic impact to the working
family and the community is also a consideration. Replacing public
employees with a contract does not mean that the same employees would
be retained by the contractor or that those employees, if retained,
would receive the same benefits. Public employees are a part of the
community that they live in and make loan payments, car payments, and
pay taxes. If public employees were replaced by a contractor chances
are that less money would be returned to the community and this would
be of greater impact in smaller communities which have a strong
economic dependence on state employment.
Loss of medical benefits is a
serious consideration. Many public employees remain employed only for
the medical benefit and potential loss could have disastrous effects
on families who are in need of ongoing medial services. This could
become a serious problem for all employees, but more so for employees
in rural areas where alternative employment is limited.
The North Dakota Public Employees
Association believes that any privatization effort would result in
higher unemployment benefit costs, higher food stamp cost, higher
medical assistance cost and higher housing assistance cost.
The North Dakota Public Employees
Association believes that prior to any attempt to privatize state
services a complete analysis be done as to real cost of contracting
over time and social and economic impact to communities in the state.
The North Dakota public Employees Association also believes that
unless there is compelling evidence to support privatization, core
services traditionally provided by the state should remain with the
state. Further the North Dakota Public Employees Association believes
that the State of North Dakota has an obligation to any worker ever
displaced through a contract of his position to a private contractor
or non profit agency.
