The next step is to design appropriate implementation procedures.

For contracting out, a standard set of procedures has evolved over the years. Some of these are listed in Figure 8.

Figure 8

Contracting Implementation Checklist

ü      Notifying public employees and citizens.

ü      Drafting the Request for Proposal (RFP) of Invitation to Bid (ITB).

ü Writing performance bids for the private contractors and government agencies.

ü Pre-bid conferences.

ü Feedback from vendors.

ü Setting up and conducting the bidding process.

ü Setting up dispute-resolution techniques between the government and the private sector.

ü Setting up the contract monitoring process.  Monitoring techniques should include: periodic inspections; citizen questionnaires and complaints; cost-benefit analysis; and performance standards.


Most unsuccessful experiences with privatization result directly from government mistakes in implementing and monitoring privatization. These mistakes can be avoided. A substantial body of literature exists that outlines how to contract out services and avoid frequent mistakes. Numerous "how-to" books and guides written by privatization experts, for instance, provide step-by-step instructions for implementing contracting out on a day-to-day basis.[20] A number of state governments, such as Colorado and Oregon, have also published comprehensive guidelines for contracting out.[21] These reference sources should be obtained and distributed to state officials involved in the privatization process.

A few standard, but important, guidelines emerge from these sources[22]

  • Contracts should be competitively bid, whenever possible, in an open, public environment with periodic rebidding to assure continued competition;

  • Performance standards should be clearly stated and agreed upon in advance;

  • Careful attention should be paid to ensuring that current government service costs and the full workload required, for the job are not underestimated;

  • Widely publicize bid awards and maintain a record of the search for contractors; and

  • Make on-site inspections of contracted service, monitor all complaints, survey citizens about quality of service, and compel contractors to provide periodic reports.


The financial mechanisms that will be used for the sale or long-term lease of government assets must be determined in this phase. This requires extensive financial and legal analysis and frequent interaction and direct negotiation with private investors. Possible financial mechanisms include: direct sales; long-ten-n leases; leasebacks; and asset swaps.

Other financial and legal issues to be thoroughly analyzed regarding sales and leases include:[23]

  • Terms of the agreement;

  • Debt/equity ratio of the facility;

  • Security package for debt; and

  • Availability of tax exempt vs. taxable debt.