Table 1

"Contracting for auxiliary and support services is the trend of the future. Privatization of these services will enable school districts to obtain the management services of companies whose primary expertise and focus is in these specific. areas. Thus, the quality of our schools in these areas should improve. This will also permit us as educators to focus our efforts in the areas of our expertise – educating the youth of our communities and state. "
– Superintendent James M. Gray, Ed.D. Norman (Okla.) Public Schools[9]

The cost of noninstructional activities such as administration, clerical support, maintenance, transportation, food services, and some capital outlay totals 42 percent of public school expenditures. In 1989-90, public schools spent over $78.4 billion for noninstructional services.[10]

Many school districts already make some use of contracting for support services. As fiscal constraints tighten, more districts can be expected to do so. A survey of school districts in Southern California found that the number-one reason for contracting out was cost-effectiveness, followed by the availability of specialized expertise.[11] School District Business Manager Billy H. Conn, of Tucson's Catalina Foothill School District, says:

My reasons for advocating private sector contracting are twofold. First, it is imperative that a school district remain as flexible as possible in responding to change. Secondly, the cost of support operations needs to be minimized whenever possible.[12]

In a 1987 poll, secondary school principals reported that their number one problem, cited by 83 percent of the respondents, was "Time taken by administrative detail."[13] These officials have been asked to do the impossible: to be proficient at a bewildering range of activities – from menu planning to bus route design – in which they have limited expertise.

Deciding whether to contract for a service or produce it in-house requires comparing the cost and quality associated with each approach, often termed a "make-or-buy" analysis (see Table 1). The make-or-buy analysis should include a thorough cost comparison beginning with an analysis of current in-house costs. Public entities frequently do not collect reliable information on the actual, fully allocated cost of in-house services. Education analyst Myron Lieberman documents over $30 billion in spending that is not included in the Department of Education's estimate of $210 billion in annual public school spending;[14] and public finance expert Lawrence Martin estimates that in-house costs are routinely underestimated by 30 percent.[15] Due to the subjective nature of cost accounting, it is essential that an objective cost analysis be performed by a disinterested party; guides are available to assist public officials in this task.[16]

In addition to the question of cost, service quality must be considered. Contractor quality is fostered through competition, for any contractor can be replaced by other providers if it performs poorly. To attract business and make a profit, providers must promote customer satisfaction by providing quality service in a cost-effective manner.

Privatization is not without administrative difficulties. Care should be taken to prepare thoughtfully written contracts to reduce the likelihood of problems. Structuring a privatization effort to assure fair treatment for current workers is also important. Guides to assist public officials with these implementation issues exist and should be consulted.[17]