Updated Cost Savings Research Findings
Arranged by Service Category

1. Airline Operation and Airplane Maintenance

SOURCE

COMPARISON

FINDINGS

Savas 1987

In-house versus contract maintenance support for airforce bases.

Contract maintenance reduced costs by 13% while improving availability of parts and planes. Cost savings were primarily attributable to use of 25% fewer personnel by contractors.

Davies 1971, 1977

Australia/sole private airline versus its lone public counterpart.

Efficiency indices of private airline were 12% to 100% higher.

Domberger and Piggott 1986

Survey article dealing with many services.  Focus on Australian Airlines.

Concludes that private firms are generally more efficient, unless the public firms are faced with equivalent competition.

2. Airports

SOURCE

COMPARISON

FINDINGS

Auditor General of Canada, 1985

Tax-supported Canadian airport operations versus comparable U.S. airport authorities that must borrow in capital markets to finance their facilities.

Airports subject to capital market discipline are much more efficient.  Work-year requirements are 30% to 40% lower.  Canadian government workers have inflexible work assignments and procedures.  Canadian airports are overbuilt and neglect many commercial opportunities.  Fail to monitor trends in operating costs.  Overall savings rate is 40%.

Moore 1987

In-house versus contract air-traffic control.

Government pricing policies for landing rights and other airport services lead to inefficient congestion and inability to finance expansion of facilities.

Roth 1987

Government-managed versus private-managed airports.

Government pricing policies for landing rights and other airport services lead to inefficient congestion and inability to finance expansion of facilities.

3. All Services

SOURCE

COMPARISON

FINDINGS

Deacon 1979

In-house versus intergovernmental production of all services.

Intergovernmental contracting saved 14% relative to in-house production.

David 1987

In-house versus private contracted service

Surveyed local administrators reported that cost savings were achieved in 98% of contracting efforts.  The range of operating-cost savings was large: 10% reported more than 40% savings.  The weighted average cost saving was 19%.

Savas 1987

Los Angeles county in-house services versus contracted services from 1979 to 1984.

Cost of contracted services averaged 30% less than in-house services.

Moore 1987

In-house versus contract in Miranda, California.

Contracting has 30% lower costs.

4. Assessing Property Tax
(financial administration) also see Payroll and Data Processing (Service Category 28).

SOURCE

COMPARISON

FINDINGS

Stocker 1973

In-house versus private contractors in Ohio.

Private assessments provided 50% cost savings and were found to be more accurate.

5. Banks

SOURCE

COMPARISON

FINDINGS

Davies 1982

Australia/one public versus one private bank.

Sign and magnitude of all indices of productivity, responsiveness to risk, and profitability favor private banks.

6. Bus Service

SOURCE

COMPARISON

FINDINGS

Morlok and Moseley 1986

Municipal in-house agency versus competitive contracts.

Contract winners supplied services at 28% lower costs.

Morlok and Viton 1985

Municipal in-house agency versus contracts awarded in competitive bidding versus noncompetitive contracts.

Contract providers had cost 50% to 60% lower than municipal agencies they replaced.  Noncompetitive contracts were similar to municipal agency costs.

Oelert 1976

Municipal in-house versus private bus service in W. Germany

Public bus services have 160% higher costs per kilometer than private equivalents.

Walters 1987

Municipal in-house versus private bus service in various cities.

Private bus services typically charge similar prices, but have 50% to 65% lower costs.

Perry and Babitsky 1986

Private versus cost-plus contract versus municipal in-house versus regional in-house authority bus operators.

Private operators are significantly more efficient.  Cost-plus contractors and municipal bus lines are less efficient.  Inefficient private operators are sold to government.

Prommerehne and Schneider 1985

In-house versus private firms in W. Germany.

Private costs were 60% lower than public costs for commercial bus operations.

Talley and Anderson 1986

In-house motor bus versus contracted dial-a-ride service.

Substituting dial-a-ride for scheduled service decreased costs by reducing overtime and idle time and utilizing less costly vehicles.  It also reduced costs indirectly by encouraging competition with traditional services of the agency.

Teal, Guiliano, and Morlok 1986

In-house versus competitive contract operators.

Competitive contract operations provide cost savings from 10% to 50% (larger fleets).  Cost savings are due both to less overhead/greater productivity and lower wages.

Rice Center 1985

In-house versus contract express commuter services.

Contract operators have 30% to 60% lower costs.

7. Cleaning Services
(general maintenance of public buildings) also see Security Services (Service Category 37).

SOURCE

COMPARISON

FINDINGS

Bundesrechungshoff 1972

In-house versus private contracting of cleaning services in W. German post offices.

In-house service 40% to 60% more costly.

Hamburger Senat 1974, Fischer-Menshausen 1975

In-house versus private contracting out in W. German public buildings.

Public service 50% more costly than private alternative.

Kaiser 1977

In-house versus contract services in schools.

Contracting saved 13.4% of costs.

Pommerehne and Schneider 1985

In-house versus private sector costs of services in W. Germany.

Private costs were 33% lower than public costs for commercial cleaning services.

U.S. GAO 1981b

In-house staff versus GSA contractors versus private landlords.

Private window cleaning costs averaged 47% lower than GSA staff while contractor costs were 38% lower.  Higher costs die to higher wages as well as more workers.

Stevens 1984

In-house versus contract janitorial services.

Contract service had 42% lower costs even after accounting for quality, service levels, and economies of scale.

U.S. GAO 1982b, Fixler and Poole 1987

In-house versus contracted janitorial services in post offices.

Contracted janitorial services were 50% less costly than in-house services.

8. Day Care Centers

SOURCE

COMPARISON

FINDINGS

Bennett and DiLorenzo 1983

In-house versus private providers of equivalent services.  Article is based on GAO studies.

Private day care was found to be 45% less costly because of fewer teachers, lower wages, and fewer nonteaching staff.

9. Debt Collection

SOURCE

COMPARISON

FINDINGS

Bennett and DiLorenzo 1983

In-house versus private providers of equivalent services.

Private debt collection procedures were faster and 60% less costly.

Bennett and Johnson 1980

In-house versus privately contracted equivalent services.

Government 200% more costly per dollar of debt pursued.

10. Electric Utilities
(utilities) also see Busy Services and Water Utilities (Service Categories 6 and 43).

SOURCE

COMPARISON

FINDINGS

Bennett and DiLorenzo 1983

In-house federal agencies vs. private hydroelectric plants.

Private utility costs average 17% lower due primarily to federal overstaffing.

Hellman 1972

In-house versus electric utilities that compete versus regulated private monopolies.

Competition produced lower rates than regulation.  Government production produced the lowest rates due to tax exemption.

Meyer 1975

In-house versus private firms, sample of sixty to ninety U.S. utilities.

Slightly higher costs of private production.  Threat of competition improved cost efficiency somewhat.

Moore 1970

In-house versus private U.S. utilities.

Overcapitalization greater in public firms.  Total operating costs of public firms higher.

Primeaux 1975

In-house versus private U.S. utilities.

Municipal utilities facing competition have 11% lower cost on average.  Economics of scales offset X-inefficiency at big firms.

Spann 1977

In-house versus private firms in Texas and California.

Private firms, adjusted for scale, are as or more efficient in operation cost and investment.

Atkinson and Halvorsen 1986

U.S. public utilities.

Public Utilities are as efficient as private utilities.

Wallace and Junck 1970

In-house versus private firms by region of the U.S.

Operating costs 40% to 75% higher in public mode.  Investment is 40% higher (per kilowatt) in public mode.

Bellamy 1981

Monopoly vs. competing utilities.

Competing utilities had 20% lower prices.

FINANCIAL ADMINISTRATION See Assessment, Property Tax (Service Category 4), and Payroll and Data Processing (Service Category 28).

11. Fire Protection

SOURCE

COMPARISON

FINDINGS

Ahlbrandt 1973, 1974

Moore 1988

In-house (Seattle) versus private (Scottsdale, Arizona).

Municipal fire departments 39% to 88% higher per capita.

Hilke 1986

In-house versus varying degrees of use of volunteers in New York and Pennsylvania cities (not suburbs) with

populations between 10,000 and 50,000.

Use of volunteers reduced firefighting costs.  Cities in New York with all-volunteer departments had 62% lower costs per capita.  Pennsylvania all-volunteer cities saved an average of 79% per capita.  A 10% increase in use of volunteers provides a 2.8% decrease in costs.

Kristensen 1983

In-house versus major private provider in Denmark.

The principal private firm provided services at 65% lower costs.  Differences in costs due to economies of scale, lower input costs, and especially part-time reservists and lower X- inefficiencies.

McDavid and Butler 1984

In-house versus major private provider in Denmark.

Mixed fire departments average 33% lower costs than purely municipal departments.

Poole 1976, Smith 1983

Private versus contract fire fighting.

Switching to private contract fire fighting reduces costs by 20% to 50%.