When a private firm takes over operation of a government Fail or when it builds, owns, and manages a jail on contract for government, all costs – absolutely all costs – associated with the construction and operation of that facility must be taken into account by that firm in its bid to government for the right to have the job. Such costs include amortization of the capital costs of the building (i.e., annual depreciation charges); all labor costs, including employee pensions and other fringe benefits; the costs of medical and psychological staff when the contract calls for the presence of such staff; all food costs for prisoners' meals; and all costs associated with recreation, education, and other elements of a jail which are "customary'. It is not always the case – indeed it may seldom be the case – that all the costs listed above will be directly allocated to a local sheriffs budget for operation of a jail. Certainly the annual depreciation charge on the jail itself is not charged for the simple reason that governments do not take account of capital depreciation, despite the fact that physical capital uses scarce resources which wear out through use. Therefore soon loss of physical capacity is a true cost and, thereby, should be counted.

Full privatization of the type discussed in this report is till quite new. But not new is the fact that correctional administrators annually "farm out" numerous services related to the efficient operation of a corrections institution. This suggests, but does not prove, that private firms could do all aspects of corrections cheaper than government. To date the experiences of CCA in its operation of sense facilities in Tennessee, Florida, and Texas; the experience of U.S. Corrections Corporation in its operation of the Marion Correctional Facility in Kentucky: the experiences of CCA and Behavioral Systems Southwest in their construction and operation of secure facilities for the INS, strongly suggest that, indeed, the private sector can do the job for less. Given the serious nature of the problem, one would hope that all officials would pursue the data and theoretical literature which has already beer published to determine if, in fact, my assertion is valid. Professor Charles Logan has developed, and continues to develop, a bibliography of works in this area. To date, there are at least 400 such studies available. [49] In a word, no one need function in ignorance of this issue.

If, in fact, private firms can do the job for less, why are they able to do it? Because they have to do it for less, they have no choice in the matter. Their profit is the difference between what it costs them to deliver the service and the price the unit of government being served is willing to pay. Therefore all their attention has to be focused on product quality and security because a well-run jail is more secure and less likely to suffer breakdown from riots. Therefore, a well-run corrections facility is cheaper to operate. They have to focus on product rather than allow themselves to become bogged-down in bureaucratic procedure because time is money and it's their money that's being wasted when process takes precedence over product. They have to operate it for less because they operate on the basis of a time-specific contract which can be re-bid by other operators at some time in the future. If they fail to take account of their costs on a daily basis; if they run the facility in a way which causes inmates to file suits; if they fail to maintain adequate security; they will lose the contract and be eliminated from contract consideration by all other corrections jurisdictions in the country. For private firms, doing the job well and doing it for less than government – private firms are always going to be in competition with government in the corrections "market" – is everything. The truth is that not one of the things listed here need apply to government operation of a corrections facility. This is not to say that government operators are not dedicated people because they are. It's just to say that theirs is an entirely different 'market' environment from that in which private firms must operate.

It is not surprising that virtually all the principals currently operating for-profit private corrections companies are former state corrections officers (emphasis intended). These people have been trough the system and they know from long experience how bureaucratic focus on process takes away from attention to product outcome. (CCA has seven former state corrections officials on its staff and all its corrections facility directors are former government prison wardens. Buckingham Security of Pennsylvania was formed by a former Pennsylvania State prison warden.) As Mr. Gay Vick of CCA – who formally deigned prisons for the Commonwealth of Virginia – told me, the focus on process rather than product cost him six weeks to make one change in door design when he was working for Virginia; with CCA the same problem could be solved in six hours (his emphasis).

Private prison operators can build for less by using more innovative design and building technology without having to go through the long multi-agency contract-negotiation process which characterizes government construction. Moreover, knowing that design dictates staffing – i.e., labor costs – attention will be immediately given by private firms to the manner in which any given deign affects long-run costs. A design which aims at creating greater oversight and control capabilities for a single guard station (whether it be a design which broadens the open range of `sight control' from a single station or computerizes a locking system) will – for each guard station eliminate (compared to conventional design) over a twenty-four-hour day and seven day week – allow for five fewer guards and five fewer annual salaries, with no loss in internal security. As Samuel Brakel notes in his survey of the current literature on private sector prisons, "better facility design has already resulted in significant manpower savings and improvements in daily operational efficiency." [50]

To this point in the modern history of privatized corrections facilities, there is no question that the private sector is, so far, doing the job for less. But they do not do it for less because – in some magical sense – private prison designers and operators are better or smarter people than public sector prison designers and operators. In fact, they are largely the same people who at one time operated public corrections facilities. They do it for less because, when they enter the arena to submit a bid on a contract drawn up by government, they are forced – as argued above – to function in an environment totally different from that in which public sector prison designers and operators function.

Recall from above that virtually all the actors in the private, for-profit, corrections industry are former state corrections officials (emphasis intended). They a11 operated in the government sector and when operating in that sector they were required to operate according to rules and procedures which took no direct account of what it actually cost to do the job assigned. They all learned that bureaucratic procedures, in and of themselves, did nothing to enhance the quality of service they were required to give to both criminals and citizens. They learned, from first-hand experience, that bureaucratic procedures, whether in giant private firms such as General Motors Corporation or public "firms" such as county government, aim more at protecting those who operate systems than at those who "consume" the goods and services for which the entity was initially created to deliver. Thus they have moved from the public sector to the private sector to acquire the freedom to put into action all they know about how prisons should be operated without having the impediments of useless rules and regulations placed in their way.

A former Texas prison official, David Myers, oversaw CCA's operations of the Bay County, Florida, jail for the first 17 months of its operation. From the vantage point of a seasoned administrator, he told Randall Fitzgerald of the Readers' Digest, "The corrections officer was always at the bottom of the criminal justice system in government....Positions in jails and prisons were too often staffed with people who couldn't cut it in law-enforcement jobs, friends of the sheriff or superintendent .... But with us, the corrections officers are it, they're the top." [51] That is the environment a private firm has to create to run a jail efficiently and such environment, not magic, is the source of greater cost efficiency in private sector construction and management of corrections facilities.