There are arguments both for and against outsourcing and privatization of prison facilities. Some say it allows prisons to be constructed and operated more efficiently and cost-effectively. Others say a supplier’s profit may interfere with inmates’ interests. One thing cannot be disputed: it makes government and private prisons compete. That, in turn, leads to accountability.
The Florida Correctional Privatization Commission is charged by the legislature with ensuring accountability for all outsourced corrections services in the State. Executive Director, Mark Hodges, says that “if we try to increase the efficiency of government by outsourcing, there is going to be some level of questioning on whether that is what we should do. And that in and of itself will generate a lot more scrutiny than you would otherwise have.”
Hodges believes Florida’s five private prison facilities are the most scrutinized. They are audited by the Department of Corrections, the Florida Correctional Privatization Commission, the American Correctional Association (ACA); and a branch of the Auditor General’s office comes in on a daily basis to determine whether outsourcing should continue. “You don’t see that level of eyes looking at the Department of Corrections facilities” he comments. “They look at themselves but not as much as they look at us. The outsourcing movement generates extra layers of scrutiny. It’s something different, and not everybody in government is comfortable with it.”
In the Florida Administrative Code, regarding rules on how correctional facilities should operate, there is no difference between private and public prisons. Although Florida does not require all prisons to be ACA accredited, the privatization commission requires accreditation be achieved and maintained for private prisons; thus, suppliers are required to meet a higher standard. “ACA accreditation takes place every two years,” says Hodges. “If the Department of Corrections were to fail, nobody would be moving the Department out of that facility. But if the private supplier were to fail re-accreditation, we’d be looking for another supplier. From that standpoint, the bar is substantially higher for private prisons.”
Analyzing Costs
Hodges agrees with privatization proponents that outsourcing requires some cost analysis and, thus, puts more light on costs, but he adds that he is not sure about what the true costs are. “Much of the time, the government can’t give you a per unit cost for something,” he explains. “In correctional facilities, the per diem cost may not be accurate. At times, the government has some creative cost approaches.” He cites a 1999 study by the Auditor General’s office as an example.
Comparing a private facility in South Bay with a hybrid (hypothetical) corrections facility, the study showed in excess of a 10% cost savings for the private facility and a savings of $9 million on its construction, compared to the Department’s facility. Hodges says the Department understaffed its hypothetical facility by between 75-125 employees in order to reduce its costs and be able to compete. So the Department’s supposed cost cited in the study doesn’t reflect its normal costs. “People reading that might get some idea of what a cost would be, but it’s not accurate,” claims Hodges. “And what that tells you when you look at the private facility’s cost savings is that it’s a lot more than 10%!” He believes the road to truer costs is paved with people expecting government leaders and agencies to be more accountable for what they do.
The Buck Stops Here
In a prison environment, even a food service or maintenance contract problem could easily cause a security problem. For that reason, Florida’s government agencies prefer one supplier to be in charge of managing all the outsourced processes for a facility. The supplier might subcontract with a healthcare provider or for an education component, but the government wants somebody to be held accountable for fixing problems.
There are those who say the odds of corruption increase in privatization because the level of scrutiny goes up and the stakes are higher. Again, Hodges compares the private and public environments: “If five inmates escape from a Department of Corrections facility, no one is going to shut the State facility down or fire the State. But if that happens at one of our private facilities, we very likely will fire the supplier. From that standpoint, the pressure is higher, the scrutiny is higher, and the chance of corruption is higher. But that’s only because the bar is so low at the State level. Even if they screw up at a facility, they are probably going to get more (not less) appropriations in the next budget cycle to take care of the problem. That is the reverse of what would happen in a private facility.”
Preliminary studies indicate that inmates at Florida’s private prisons have better than twice the chances of staying out as they do at State facilities. Given the success indicated by these statistics, along with substantial cost savings, does Hodges foresee an increase in privatization? “I would hope so,” he says. “I think it would make sense to continue to look toward privatization if we are looking to do it more efficiently. But the real success story here in Florida is more than the savings in the South Bay study. The real success is the fact that the State felt enough pressure to try to compete that they had to tank their true costs.” As long as there is accountability on the part of outsourcers, Hodges believes privatization will continue to put pressure on the States to do as good a job as they can.
Lessons from the Outsourcing Primer
- Privatization efforts for State-provided services invite scrutiny and accountability.
- Government cost analysis figures may be inaccurate and not a true benchmark for suppliers.
- To avoid finger pointing as to who needs to fix a problem, States prefer to have one supplier in charge and managing subcontracts (if any).
About the Author: Ben Trowbridge is an accomplished Outsourcing Consultant with extensive experience in outsourcing and managed services. As a former EY Partner and CEO of Alsbridge, he built successful practices in Transformational Outsourcing, Managed services provider, strategic sourcing, BPO, Cybersecurity Managed Services, and IT Outsourcing. Throughout his career, Ben has advised a broad range of clients on outsourcing and global business services strategy and transactions. As the current CEO of the Outsourcing Center, he provides invaluable insights and guidance to buyers and managed services executives. Contact him at [email protected].