In the business world, competition is a good thing. Competition drives entrepreneurs and service providers to innovate the products and services they offer and work to make their offerings more appealing to consumers than their competitors'.
When the government is the sole provider of a service, there is no impetus to consistently innovate or serve the consumer — resident under the government's jurisdiction — better than he was being served before. Competition pushes service providers to lower their operating costs, which can mean the savings are passed onto consumers. Greater efficiency cuts down operating costs, which in turn benefits consumers by serving them promptly.
When a public service is privatized, it can become immune to political influence. This is because instead of having companies and special interest groups vie for favor from the government office in charge of the service by making strategic campaign contributions and providing vocal support, the private provider is focused on profit.
That doesn't mean there's no chance for corruption, though. In some ways, privately operated public services have a greater corruption risk than services provided by the government. By providing public services more efficiently and at a lower cost by privatizing them, governments can lower the taxes they impose on residents. In some cases, privatizing a public service like a prison can create job opportunities for residents in an area, increasing the quality of life for them and strengthening the local economy.
One important disadvantage to recognize is the opportunities for bribery and corruption that come with privatization.
A number of surveys have indicated that public officials believed service quality was better after privatization. In a survey of 89 municipalities conducted in , for example, 63 percent of public officials responding reported better services as a result of contracting out. If competitive bidding is instituted for a service, service quality can improve even if the service is retained in-house. The reason is simple: competition induces in-house and private service providers to provide quality services in order to keep complaints down and keep the contract.
Service quality is not assured, however, by privatization. Contracts must be well-designed with performance standards that create incentives for high quality service. Furthermore, diligent monitoring of the contractor's performance through customer surveys and on-site inspections must also be performed by government in its oversight role.
Private management can significantly lower operating costs through the use of more flexible personnel practices, job categories, streamlined operating procedures, and simplified procurement. Private ownership can stimulate innovation. Competition forces private firms to develop innovative, efficient methods for providing goods and services in order to keep costs down and keep contracts.
These incentives, for the most part, do not exist in the public sector. Privatization allows state officials to spend less time managing personnel and maintaining equipment, thus allowing more time to see that essential services are efficiently delivered. Privatization is one tool to make bureaucracies smaller and more manageable. The services offered are generally average as there is no comparison and no threat of losing the race. However, when an exacting industry goes to the private sector, the private owners are expected to set a bar for the value they are estimated to convey.
They work hard and try to give in their best else they are at risk of losing the task assigned to them and suffering a huge loss. This ensures better service to the customers and has been one of the major reasons for privatization.
Better Customer Support — Besides getting good service from the private sector employees, the consumers also get good client support. The government employees are least interested in completing their tasks on time.
Consumers need to call up over visit their offices numerous times in order to get their tasks done. However, this is not the case with the industries that have been owned privately. This is another cause why privatization was measured.
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