In addition to passing broad enabling legislation for privatization and eliminating existing legislative barriers, state policymakers should consider adopting more sweeping legislation to spur increased competition and privatization. One option proposed by the American Legislative Exchange Council (ALEC), an association of state legislators, is to allow and encourage private firms to make unsolicited bids to provide some state services in a more cost effective manner.[14] Government agencies would be required to initiate a "make or buy" analysis when presented with a "petition of interest" by a private firm proposing to provide a public service. The petition would include: the private firm's cost of providing the service; financial information about the firm; and a description of the firm's technical capability of providing the service.

The government entity would then have 90 days to certify or deny the petition of interest. If the petition is certified, the government unit would conduct a make or buy analysis and open up the bidding process by issuing a Request for Proposals (RFP) or Invitation to Bid (ITB) to interested parties.[15]

The petition-of-interest process would not only speed the privatization process, but also encourage tremendous innovation and competition in public service delivery. The threat of competition with private firms would force in-house units to cut costs, increase efficiency and serve their customers better. Bills have been proposed, but not passed, in Arizona, Colorado, and Nevada to introduce a petition-of-interest process into state service delivery.


State legislation requiring local governments to competitively bid out the delivery of some services offers another way to spur competition in public service delivery. Competitive contracting has been mandated in one form or another in the state of Colorado, the United Kingdom, New Zealand, Denmark, Norway, Sweden, and Finland.[16] Mandatory competitive contracting legislation could be modeled after the 1988 British Local Government Act, which requires local governments to competitively contract for six local services: food services, grounds/ building maintenance, janitorial, refuse collection, street sweeping and vehicle maintenance. Local government units are allowed to compete for the contract.

Several detailed studies have documented cost savings resulting from the Local Government Act. Cost savings have averaged 22 percent for local governments that have contracted out refuse collection and 34 percent for hospital cleaning. Even when the services have been retained in-house, cost savings have occur-red. Competition from the private sector has forced in-house units to cut costs and become more efficient. In-house units that won contract bids were able to cut costs by 17 percent for refuse collection and 22 percent for hospital cleaning.[17] There were no declines in quality of service reported.

If enacted by the states, such programs could have similarly profound results. A Reason Foundation study of California found that requiring cities and counties to competitively contract for emergency medical services, street lighting, street repairs and maintenance, parks and recreation, public transit, and solid waste disposal, could save California state government $874.9 million. Such sizable local government savings would allow the state to cut back on state aid to municipalities without local government service reductions.[18]