Regarding the April 30 Metro article “Metro chief looks at Boston system’s financial strategies”:
Projected savings from privatization efforts have historically been overpromised and underdelivered. When then-Massachusetts Gov. Bill Weld privatized highway maintenance in the early 1990s touting millions of dollars in savings, the House Post Audit and Oversight Bureau published “Privatization Savings: Where’s the Beef?” disputing the claim. Years later, experts from the Economic Policy Institute found no evidence that contracting out highway maintenance saved any money or improved service.
Methods for estimating cost savings are highly political. Do they include fully or partially allocated costs, measure short-term or long-term effects, or selectively include transaction costs such as contract oversight? The few successful outsourcing cases generally involve non-core responsibilities of government and result in far lower savings than projected (and sometimes even cost the taxpayers more).
Boston’s privately operated commuter rail service cannot be touted as a poster child for privatization; more than $7 million in penalties were recently waived and $66 million added to the contract out of fear that the contracted company would bolt. John Donohue, in “The Privatization Decision: Public Ends, Private Means,” said it best: “Unless we are luckier or more careful than we are likely to be, political pressures will tend to retain for the public sector functions where privatization would make sense, and to privatize tasks that would be better left to government.”
Jeffrey Laurence Rosenblum, Cambridge, Mass.