Updated Cost Savings Research Findings
Arranged by Service Category

24. Motor Vehicle Maintenance

SOURCE

COMPARISON

FINDINGS

Campbell 1988

In-house vs. contract services.

Contractor costs are 1 °lo to 38°Io below municipal costs for equivalent or higher levels of service. In conversions to contracting, wage levels generally remain similar, but the number of operating and overhead employees is reduced because of greater productivity.

Pommerehne and Schneider 1985

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

Private costs were 50% lower than public costs for automobile motor maintenance repairs.

Stolzenberg and Berry 1985

Noncompetitive in-house vs. competitive contract vs. competitive in-house.

Competition resulted in lower costs through large reductions in personnel. Contracting saved approximately 17°Io. The lowest costs occurred where an in-house operator won competitive contracts. Costs averaged over 40°Io lower at these bases. Quality of maintenance was similar, but slightly better in government operations operating under competitive conditions. Higher government costs came from staffing for peak-load demand, higher government fringe benefits and difficulties in hiring and firing.

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

SOURCE

COMPARISON

FINDINGS

Lindsay 1975

In-house (VA) vs. contract.

Contract operated homes had 45% lower per day costs.

26. Parking

SOURCE

COMPARISON

FINDINGS

Caponiti and Booher 1986

In-house vs. contract parking meter and parking restrictions enforcement.

Contracting is less costly, primarily because of lower fringe benefits and greater flexibility in meeting

staffing requirements. Productivity (violations ticketed) improves as much as 10%, averaging 5%.

27. Parks and Recreation

SOURCE

COMPARISON

FINDINGS

Stevens 1984

In-house vs. contract park turf maintenance.

Contract service had 28% lower costs and equivalent quality of service.

Savas 1987

Government vs. privately constructed sports facilities.

Costs of privately constructed sports arenas averaged 31% less than those of public arenas.

Holmes 1985

In-house vs. contract recreation program.

Cost savings of 20% obtained by privatizing. Savings come from use of more volunteers and better use of employees.

Poole 1980

In-house vs. private facilities operations and programs.

Cost savings of 20% obtained by privatizing. Savings come from use of more volunteers and better use of employees.

Fixler and Poole 1987; Valente and Manchester 1984

In-house vs. contracted profit and nonprofit organizations.

Contracting allowed maintenance of quality recreation services. even though budgets were reduced under California's Proposition 13 by as much as 50%.

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

SOURCE

COMPARISON

FINDINGS

Valente and Manchester 1984

In-house vs. private competitive contractors.

Contractor performed higher quality data processing service with cost savings of 151%.

Stevens 1984

In-house versus private contractors.

No cost differences found after accounting for quality and other factors.

29. Police

SOURCE

COMPARISON

FINDINGS

Deacon 1979

In-house (local) vs. intergovernmental.

Intergovernmental contracting saved 42%.

Mehay 1979

In-house (local) vs. contract with county (Lakewood Plan).

Contract costs were lower due to fewer police officers per capita. However, contract cities experienced higher rates of violent and property crime. Net effects were probably negative for contract cities. Problem attributable to inability of contract cities to specify quality of service and monitor performance.

Mehay and Gonzalez 1985

In-house monopoly vs. in-house production with competition to serve additional jurisdictions.

Costs in counties that sell their police services to other jurisdictions are estimated to be 9% to 20°Io lower.

The authors conclude that competition encourages police departments to keep their costs down.

30. Postal Service

SOURCE

COMPARISON

FINDINGS

U.S. GAO 1982a

In-house vs. contracted routes.

Contracted delivery routes save up to 66% on delivery costs.

Hanke 1985a

In-house vs. contracted window service.

Contractors (retail stores with postal services) provided window service at 88°Io lower cost than USPS operated.

Savas 1987

In-house vs. private parcel delivery services.

Private firms have lower rates, faster delivery, lower losses from damage, better tracking systems, wider variety of services, and lower costs.

31. Printing

SOURCE

COMPARISON

FINDINGS

Pommerhehne and Schneider 1985

In-house vs. private in W. Germany.

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

32. Prisons

SOURCE

COMPARISON

FINDINGS

Grant and Bast 1987

In-house vs. private contract facilities and services.

Contractor prison construction costs are at least 45% lower than government averages. Service contracts for

prison operations are at least 35% below average per prisoner costs in recent cases.

33. Public Welfare

SOURCE

COMPARISON

FINDINGS

Poole 1980

In-house vs. private variety of welfare services.

Privately supplied programs operating under competitive bidding saved 20% to over 60%.

Hatry 1983, Wedel, Katz, and Weick 1979

In-house vs. private contracting for vocational rehabilitation, childrens' protective services, and programs for the elderly.

Competitive contracting efforts have often devolved into single source contracting with little evidence of efficiency gains. Nonprofit firms are the predominate suppliers.  Improved program characteristics are the primary objective of contracting, but no quantifiable quality information is available.

34. Railroads

SOURCE

COMPARISON

FINDINGS

Bennett and DiLorenzo 1983

In-house vs. private providers of equivalent tract repair.  Article is based on GAO studies.

Private railroads repaired ties, replaced track, and surfaced rails at least 70% more efficiently.

Caves and Christensen 1980

In-house (Canadian National) vs. private (Canadian Pacific) costs and productivity differences.

No current productivity differences. The public firm substantially increased its efficiency after competition increased in 1965.

35. Refuse Collection (Sanitation other than Sewage) also see Street Cleaning (Service Category 41).

SOURCE

COMPARISON

FINDINGS

Collins and Downes 1977

In-house vs. private contracting-out in St. Louis area.

No significant cost differences. Private firms lost density economies because several firms served the same areas.  Public suppliers had monopoly status.

Savas 1974, 1977a,b, 1980; Stevens and Savas 1978; Edwards and Stevens 1979

In-house vs. private monopoly franchise vs. private nonfranchise firms.

Public supply was 40% to 60°Io more expensive than private. Private monopoly price was only slightly 5% higher than price of private nonfranchised collectors.  Density economies offset otherwise higher costs.

Stevens 1984

In-house vs. competitive contract.

Cost savings of 22%, were found, controlling for quality.

Hirsch 1965

In-house (St. Louis City-County area) vs. private firms.

No significant cost differences.  Private competing suppliers lost density economies.

Kemper and Quigiey 1976

In-house vs. private monopoly contract vs. private nonfranchise vs. municipal firms in Connecticut.

Municipal collection costs were 14% to 43% higher, but private nonfranchise costs were 25% to 36% higher than municipal collection. Loss of density economies increased costs of nonfranchise suppliers.

Kitchen 1976

In-house vs. private firms in forty-eight Canadian cities.

Municipal suppliers were more costly than proprietary firms.

Petrovic and Jaffee 1977

In-house vs. private contracting in mid-western cities.

Cost of city collection was 15% higher than the price of private contract collectors.

Pier, Vernon, and Wicks 1974

In-house vs. private firms in Montana.

Municipal suppliers appear to be more efficient, not controlling, for quality and community characteristics.

Savas 1977a

In-house vs. private firms in Minneapolis.

No significant cost differences if suppliers compete through tight control of municipal costs imposed by legislature using private costs as a comparison.

Savas 1981

In-house and franchise contractors in a single district jurisdiction vs. contractors and in-house in a multi-district setting.

The average number of bids per area increases when cities are divided into small districts. Competitive bidding leads to lower costs for contractor service.  Cities that actively monitor municipal agencies using private sector contractor costs have. lower average costs. No benefits are obtained without these policies.

Spann 1977

In-house vs. private firms.  (Survey of literature.)

Public firms were 45% more costly.