Updated Cost Savings Research Findings
Arranged by Service Category

12. Forestry

SOURCE

COMPARISON

FINDINGS

Bundesregierung Deutschland 1976

In-house versus private in W. Germany.

Annual operating revenues 45 DM peer hectare higher in private forests (approximately $6 per acre).

Pfister 1976

In-house versus private in the state of Baden-Wurttemberg, Germany.

Labor input twice as high per unit of output in public as compared with private firms.

GENERAL MAINTENANCE OF PUBLIC BUILDINGS See Cleaning Services (Service Category 7) and Security Services (Service Category 37).

13. Health Services also see Nursing Homes (Service Category 25).

SOURCE

COMPARISON

FINDINGS

Schlesing, Dorwart, and Pulice 1986

In-house versus contract mental health services.

Nominally competitive-contracting procedures resulted in sole-source supply with little increase in efficiency.

Valente and Manchester 1984

In-house supply of substance abuse programs versus volunteer-based program.

Systematic volunteer program allowed service expansion with cost savings to the community.

14. Highways

SOURCE

COMPARISON

FINDINGS

Deacon 1979

In-house (local) versus intergovernmental provision of street repair.

Intergovernmental contracting saved 30%.

Stevens 1984

In-house versus contract provision of asphalt overlay and traffic light maintenance.

Contracting out was half as costly with equivalent quality. Contractors used more experienced staff and more equipment. Cost savings in traffic light maintenance average 36%.

15. Hospitals

SOURCE

COMPARISON

FINDINGS

Lindsay 1975

In-house Veterans Administration (VA) versus private.

VA hospitals have lower costs and lower quality.  Resource use is distorted towards outputs that are easily monitored by Congress. Actual costs per medically necessary hospital stay may be higher in VA hospitals after controlling for length of stay.

Robinson and Luft 1988

Investor-owned versus public hospitals using a sample of 5,490 hospitals.

Cost increases at public hospitals were 15% lower than those in investor-owned hospitals from 1982-1986 after controlling for various demand and cost factors.

Becker and Sloan 1985

Investor-owned versus non-federal government hospitals.

Government hospitals had no higher costs per admission.

Shortell and Hughes 1988

Investor-owned versus non-federal government versus nonprofit private hospitals.

No differences in quality, measured in death rates between different types of hospitals.

Register and Bruning 1987

Investor-owned versus thirty-six nonfederal state and local government owned and operated hospitals.

No significant efficiency differences between types after controlling for size and other factors that should affect efficiency.

Grannemann, Brown, and Pauly 1986

Investor-owned versus non-federal government hospitals using a national sample of short-term hospitals.

Investor-owned hospitals had 24% higher costs than nonfederal government hospitals.

Noether 1987

Investor-owned versus nonprofit hospitals including nonfederal government hospitals sampled from 223 metropolitan areas.

Investor-owned hospitals are significantly more efficient once tax payments are taken into consideration.

Lindsay 1976

In-house Veterans Administration versus private.

Cost per patient per day less in VA hospital, unadjusted for type of care and quality. Less "serious" cases and longer patient stays were observed in the VA facilities. The VA had a higher proportion of minority group professionals compared to proprietary hospitals.

Benton 1979

In-house vs. private home care.

Government had 43% lower cost. No controls for quality were made in the study.

Wilson and Jadlow 1978

In-house vs. private in 1,200 U.S. hospitals providing nuclear medicine services.

Proprietary hospitals more efficient than public.

Hatry 1983

In-house management vs. contract management.

Experience with contract management has varied.  Seven out of fifteen large California public hospitals signing new contracts with private management firms between 1973 and 1980 terminated the contracts.  The hospitals noted small savings, service problems, and the hospital's ability to learn and the duplicate the cost-saving management techniques of private contractors.

16. Housing and Community Development

SOURCE

COMPARISON

FINDINGS

Muth 1973

In-house vs. private construction costs in U.S. cities.

Public agencies 20% more costly per constant quality housing unit.

Rechnungshof Rheinland Pfalz 1972

In-house vs. private cost of supplying large public projects in W. Germany.

Public agencies 20% more costly than private contracting.

Schneider and Schuppener 1971

In-house vs. private construction in W. Germany.

Public firms significantly more expensive than suppliers.

Pommerehne and Schneider 1985

In-house vs. private costs in W. Germany.

Private costs were lower than public costs for commercial services generally, 17% for construction.

President's Commission on Privatization 1988

Publicly constructed vs. various privatization alternatives.

Public housing costs per unit over 20 years total $69,863 versus $27,892 to obtain private units through housing subsidies to individual need families.

Weicher 1980

Government-financed vs. private construction.

Government-financed construction 25% more costly.  Government management is also more costly.

17. Insurance Claims Processing

SOURCE

COMPARISON

FINDINGS

Hsiao 1978

In-house versus private.

Equivalent claims processing costs of private insurers were between 15% and 26% lower. Most of the differences were attributable to compensation and organizational differences. Some cost differences were attributable to efforts by public insurance programs to control medical costs generally.

18. Insurance Sales and Servicing

SOURCE

COMPARISON

FINDINGS

Finsinger 1981

In-house (5 firms) vs. private (77 firms) liability and life coverage in W. Germany.

Competition between public and private firms prompted equivalent efficiency.

Kennedy and Mehr 1977

In-house (Manitoba) vs. Private (Alberta).

Private insurance quality and service higher than those of the public insurance with equivalent costs.

19. Laundry Service

SOURCE

COMPARISON

FINDINGS

Pommerehne and Schneider 1985

In-house vs. private in W. Germany

Private costs were 46% lower than public costs for commercial services in laundry services.

20. Legal Services

SOURCE

COMPARISON

FINDINGS

Houlden and Balkin 1985

Ordered assigned counsel vs. contract counsel for indigents.

Contract counsel had at least 50% lower costs.  Contract counsel processed cases in half the time of assigned counsel. The authors note that since fees per hour are roughly equal, the primary difference is due to less attorney time per case under the contract system. This may imply a lower quality of service with contracts, but this does not affect the average jail term.

21. Libraries

SOURCE

COMPARISON

FINDINGS

White 1983

In-house libraries before and after federal aid.

After federal aid started in 1960s, productivity slowed as libraries added federally sponsored programs with lower marginal impact on output and fewer volunteers. Total factor productivity was at least 27% lower as a result.

22. Liquor Stores

SOURCE

COMPARISON

FINDINGS

Simon and Simon 1987

In-house versus private.

State stores have higher compensation rates, but higher sales per hour. If hours of operation (quality) are considered, private stores have lower costs.

23. Military Support Services

SOURCE

COMPARISON

FINDINGS

Bennett and DiLorenzo 1983

In-house vs. private providers of equivalent services.          

Average cost savings in base support services were 15%.

U.S. GAO 1985b

 

Precontract bids vs. post-contract costs for competitive Department of Defense contracts.

Most post-contract prices were in accord with bids.  Some unsatisfactory performance seen in 33% of the contracts. Personnel turnover and low staffing were main problems. Contract price increases due largely to contract changes and Davis-Bacon wage regulations.

U.S. GAO 1981a

In-house vs. contract.

Savings from both higher employee productivity and lower wages.

U.S. GAO 1985b

Contract bids vs. actual contract experience.

Contract costs increased over time in 95% of sample.  In 89%, increases were too small to eliminate the net savings from contracting. (Contracts were rebid in 35% of the cases due to failures of the initial contractor.) Main causes of the cost increases were general wage increases, rebidding of contracts, contract errors, or additional requirements not originally included.