First Kansas. Now Indiana. One by one, the pillars of conservative fundamentalism are failing real-world tests.
Under then-Governor Pence, Indiana negotiated a much-ballyhood 35-year “public-private partnership” with the Spanish firm Insolux Corsan to build and maintain a portion of Interstate 69, between Bloomington and Indianapolis. The project has dragged on and on, making trips between Bloomington and Indianapolis slow and treacherous. (I know this from personal experience; faculty of IU routinely make the trip between campuses, and I’ve done my share of cursing while in transit.)
The original contract called for a completion date of October, 2016; that date has been pushed back four times amid media reports suggesting that the state’s private partner was as slow in paying subcontractors as it was in building the highway. Now, it appears the contractor is going bankrupt. The Indianapolis Star reports that the state “intends to take control of the troubled I-69 project from Bloomington to Martinsville as the public-private partnership used to finance and build the highway crumbles.”
It is a GOP article of faith that the private sector is always more efficient and more competent than government, and that contracting out–privatization–saves money. In the uncongenial place called the real world, it seldom works out that way. The collapse–or “crumbling”–of this particular partnership joins a long line of failed privatization schemes, some scandalous and corrupt, many simply ineffective and expensive, that have ended up costing taxpayers more than if government had done the job.
This isn’t to say that contracting out is always a bad idea. As I’ve said repeatedly, the issue isn’t whether to work with the private sector, but when and how. Public officials need to carefully evaluate proposed contracting arrangements: is this something government routinely does, or an unusual task requiring specialized expertise that the agency doesn’t have? If the motive is saving money, how realistic is that? (After all, private entities have to pay taxes, and their bids will reflect that expense.) Does the contracting agency have the expertise needed to properly negotiate the contract and monitor the contractor? Have all the risks been weighed, and due diligence exercised?
Do the officials making the decision recognize that contracting with a third party won’t relieve the government agency of its ultimate responsibility to see that the project is properly completed or the service is properly rendered?
Are there situations where public-private partnerships are both appropriate and competently structured? Of course. The Brookings Institution recently reported on the success of the Copenhagen City and Port Development Corporation in revitalizing Copenhagen’s waterfront. I was particularly struck by this description of that effort:
The approach deploys an innovative institutional vehicle—a publicly owned, privately run corporation—to achieve the high-level management and value appreciation of assets more commonly found in the private sector while retaining development profits for public use.(emphasis mine)
Two elements of this particular partnership stand out: (1) it was formed to execute a lengthy, difficult and highly complex project requiring skills that few municipal governments have in-house; and (2) it distributed risk and reward in a way that ensured taxpayers would benefit financially from the project’s success.
In contrast, virtually every American contract I’ve seen has socialized the risk and privatized the reward; that is, taxpayers have assumed the risks of cost overruns, unanticipated problems and project failures, while the private contractors have reaped the lions’ share of the profits.(Trump’s infrastructure plan–to the extent it exists–would take that formula to new heights. Or lows…)
I69 and the Indianapolis parking meter fiasco are just two of the more recent examples of what happens when privatization is a mantra–a semi-religious belief–rather than one of several strategically deployed tools in the public toolbox.
Personal P.S. Thanks to all of you who posted good wishes for my husband’s surgery. All went well, and he’s home (with a very rakish temporary eye patch).