Social Service Privatization: Expansion Poses Challenges in Ensuring
Accountability for Program Results (Letter Report, 10/20/97,
GAO/HEHS-98-6).
Even though governments have for decades privatized a broad range of
government social services, interest in privatization has been renewed
because of its potential as a means of coping with limited public
resources. Moreover, recent changes in federal welfare legislation have
focused on privatizing, or contracting out, social services in
particular. Four social programs affected by this legislation--child
care, child welfare, child support enforcement, and new block grants to
assist needy families--constitute a large share of the nation's welfare
system. Debate has focused on whether privatization improves services
and boosts efficiency and on what the appropriate role of the federal
government should be. Yet little is known about the extent and the
policy implications of privatizing these social services. This report
addresses the following three questions: (1) What is the recent history
of efforts by state and local governments to privatize federally funded
social services? (2) What are the key issues surrounding privatization
of state and local social services? (3) What are the federal policy
implications of privatizing state and local social services? GAO
summarized this report in testimony before Congress; see: Child Support
Enforcement Privatization: Challenges in Ensuring Accountability for
Program Results, by Mark V. Nadel, Associate Director for Income
Security Issues, before the Subcommittee on Human Resources and
Intergovernmental Relations, House Committee on Government Reform and
Oversight. GAO/T-HEHS-98-22.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: HEHS-98-6
TITLE: Social Service Privatization: Expansion Poses Challenges in
Ensuring Accountability for Program Results
DATE: 10/20/97
SUBJECT: Privatization
Cost control
Federal/state relations
State-administered programs
Children
Welfare benefits
Public assistance programs
Child support payments
Service contracts
Contract monitoring
IDENTIFIER: Aid to Families with Dependent Children Program
Child Care and Development Block Grant
AFDC
Job Opportunities and Basic Skills Training Program
HHS Temporary Assistance for Needy Families Program
JOBS Program
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Cover
================================================================ COVER
Report to the Chairman, Subcommittee on Human Resources, Committee on
Government Reform and Oversight, House of Representatives
October 1997
SOCIAL SERVICE PRIVATIZATION -
EXPANSION POSES CHALLENGES IN
ENSURING ACCOUNTABILITY FOR
PROGRAM RESULTS
GAO/HEHS-98-6
Social Service Privatization
(106615)
Abbreviations
=============================================================== ABBREV
AFDC - Aid to Families With Dependent Children
CCDBG - Child Care Development Block Grant
GAIN - Greater Avenues for Independence
HHS - Department of Health and Human Services
JOBS - Job Opportunities and Basic Skills Training Program
TANF - Temporary Assistance for Needy Families
Letter
=============================================================== LETTER
B-276630
October 20, 1997
The Honorable Christopher Shays
Chairman, Subcommittee on Human Resources and
Intergovernmental Relations
Committee on Government Reform and Oversight
House of Representatives
Dear Mr. Chairman:
Political leaders and program managers are responding to calls for
improved service delivery and reduced costs by rethinking the role
government plays in providing services. Even though governments have
for decades privatized a broad range of government social services,
interest has been renewed in privatization as a means of coping with
constraints on public resources. Moreover, recent changes in federal
welfare legislation have focused attention on privatizing, or
contracting out, social services, in particular. Four social
programs affected by this legislation--child care, child welfare,
child support enforcement, and new block grants to assist needy
families--constitute a large share of the nation's welfare system.
Together these programs serve millions of children and families, and
in 1996, the federal government provided states with about $20
billion to administer them and to provide a diverse array of
services. Debate has focused on whether privatization improves
services and increases efficiency and on what the appropriate role of
the federal government is. Yet little is known about the extent and
policy implications of privatizing these social services.
This report, which responds to your request that we examine issues
related to social service privatization, focuses on the following
three key questions: (1) What is the recent history of state and
local government efforts to privatize federally funded social
services? (2) What are the key issues surrounding state and local
privatized social services? (3) What are the federal policy
implications of state and local social service privatization? To
answer these questions, we reviewed and synthesized selected studies
and articles on social service privatization. In addition, we
interviewed state and local officials in five states that have gained
some experience in the privatization of social services (California,
Massachusetts, Texas, Virginia, and Wisconsin), as well as officials
from the Department of Health and Human Services (HHS), national
associations and advocacy groups, unions, and contractors. We
focused on the four social service programs mentioned above. HHS
establishes policies and oversees state administration of all four
programs. Appendix I contains a more complete discussion of our
scope and methodology.
RESULTS IN BRIEF
------------------------------------------------------------ Letter :1
Since 1990, more than half of the state and local governments we
contacted have increased their contracting for services, as indicated
by the number and type of services privatized and the percentage of
social service budgets paid to private contractors. The Council of
State Governments corroborated this trend in a 1993 national study
that reported that almost 80 percent of the state social service
departments surveyed had expanded privatization of social services in
the preceding 5 years. Moreover, many experts we consulted expect
privatization to expand further. Our own research found that the
recent increases in privatization were most often prompted by
political leaders and top program managers, who were responding to an
increasing demand for public services and a belief that contractors
can provide higher-quality services more cost-effectively than can
public agencies. In attempts to provide more cost-effective
services, for example, more states are contracting out larger
portions of their child support enforcement programs. In addition,
state and local governments are turning to contractors to provide
some services and support activities in which they lack experience or
technical expertise, such as large management information systems or
systems to pay program benefits electronically.
State and local governments face several key challenges as they plan
and implement strategies to privatize their social services. First
is the challenge to obtain sufficient competition to realize the
benefits of privatization. While there is some disagreement among
experts, some believe that the unique nature of social services may
limit the number of contractors able or willing to compete. The
results of the few studies that examine this question are
inconclusive. Most state and local program officials we contacted
reported that they were satisfied with the number of qualified
bidders in their state or locality. However, some of these officials
expressed concern about an insufficient number of qualified bidders
in rural areas or in contracts requiring highly skilled staff.
Second, state and local governments often have little experience in
developing contracts that specify program results in sufficient
detail to effectively hold contractors accountable. Third and
finally, it can be particularly difficult for states to monitor
performance in some social service programs, whether provided
directly by the government or through a contract. Weaknesses in
monitoring contractor performance make it difficult to ensure that
all intended beneficiaries have access to services and to determine
whether private providers achieve desired program goals and avoid
unintended negative consequences.
Increased privatization raises questions about how HHS will fulfill
its obligation to ensure that broad program goals are achieved.
Assessing program results presents a significant challenge throughout
the government, yet it is an important component of an effective
system for holding service providers accountable. The difficulties
the states have in monitoring privatized social services focus
attention on the need to improve accountability for results. Some of
the state and local officials we interviewed believe that, to help
ensure that privatized social services are effective, HHS should
clarify its program goals and develop performance measures states can
use to monitor and evaluate contractor efforts. The Government
Performance and Results Act of 1993 requires federal agencies like
HHS to focus their efforts on achieving better program results.
While focusing on results can be complex and challenging for any
organization, HHS' practice of holding states accountable primarily
for compliance with statutes and regulations may make the transition
particularly difficult. However, promising approaches are available
within HHS in moving to a program results orientation, such as some
recent efforts by the federal Office of Child Support Enforcement.
BACKGROUND
------------------------------------------------------------ Letter :2
The four social service programs included in our review--child care,
child welfare services, child support enforcement, and the Temporary
Assistance for Needy Families (TANF) block grant--provide a broad
range of services and benefits for children and families. While each
program is administered by HHS' Administration for Children and
Families, primary responsibility for operating these programs rests
with state governments. Within many states, local governments
operate social service programs with considerable autonomy. The
major goals, services, and federal funding for the four programs are
described below.
CHILD CARE
---------------------------------------------------------- Letter :2.1
Federally funded child care services consist primarily of subsidized
care for children of low-income families while their parents are
working, seeking work, or attending training or education. Other
subsidized child care activities include providing information,
referrals, and counseling to help families locate and select child
care programs and training for child care providers. State child
care agencies can provide child care directly, arrange for care with
providers through contracts or vouchers, provide cash or vouchers in
advance to families, reimburse families, or use other arrangements.
Two settings for which states pay for care are
-- family day care, under which care is provided for a small group
of children in the caregiver's home, and
-- center care, under which establishments care for a group of
children in a nonresidential setting, such as nonprofit centers
sponsored by schools or religious organizations and for-profit
centers that may be independent or members of a chain.
The primary federal child care subsidy program is the Child Care
Development Block Grant (CCDBG).\1 In fiscal year 1996, about $2
billion was distributed to states to assist low-income families
obtain child care so they could work or attend training or education.
Under CCDBG, states are not required to provide state funds to match
federal funding.
--------------------
\1 The Personal Responsibility and Work Opportunity Reconciliation
Act of 1996 expanded the CCDBG to include child care services that
were previously authorized under title IV-A of the Social Security
Act and the Omnibus Budget Reconciliation Act of 1990. These
services include Aid to Families With Dependent Children (AFDC) Child
Care, Transitional Child Care for former AFDC recipients, and At-Risk
Child Care for low-income working families.
CHILD WELFARE SERVICES
---------------------------------------------------------- Letter :2.2
Child welfare services aim to (1) improve the conditions of children
and their families and (2) improve--or provide substitutes
for--functions that parents have difficulty performing. Whether
administered by a state or county government, the child welfare
system is generally composed of the following service components:
-- child protective services that entail responding to and
investigating reports of child abuse and neglect, identifying
services for the family, and determining whether to remove a
child from the family's home;
-- family preservation and family support services that are
designed to strengthen and support families who are at risk of
abusing or neglecting their children or losing their children to
foster care and that include family counseling, respite care for
parents and caregivers, and services to improve parenting skills
and support child development;
-- foster care services that provide food and housing to meet the
physical needs of children who are removed from their homes and
placed with a foster family or in a group home or residential
care facility until their family can be reunited, the child is
adopted, or some other permanent placement is arranged;
-- adoption services that include recruiting potential adoptive
parents, placing children in adoptive homes, providing financial
assistance to adoptive parents to assist in the support of
special needs children, and initiating proceedings to relinquish
or terminate parental rights for the care and custody of their
children; and
-- independent living services that are activities for older foster
children--generally age 16 and older--to help them make the
transition from foster care to living independently.
Almost all states are also operating or developing an automated
foster care and adoption data collection system. Federal funding for
child welfare services totaled about $4 billion in fiscal year 1996.
Nearly 75 percent of these funds were for foster care services.\2
Depending on the source, the federal match of states' program costs
can range from 50 to 78 percent.
--------------------
\2 Primary federal funding sources for child welfare services are
from the following titles of the Social Security Act: title IV-B,
Part 1 Child Welfare Services; title IV-B, part 2 Family Preservation
and Family Support Services; title IV-E Foster Care; title IV-E
Adoption Assistance; and title IV-E Independent Living.
CHILD SUPPORT ENFORCEMENT
---------------------------------------------------------- Letter :2.3
The child support enforcement program enforces parental child support
obligations by locating noncustodial parents, establishing paternity
and child support orders, and collecting support payments. These
services, established under title IV-D of the Social Security Act,
are available to both welfare and nonwelfare families. In addition,
states are operating or developing automated management information
systems to help locate noncustodial parents and monitor child support
cases. The federal government pays two-thirds of the states' costs
to administer the child support enforcement program. The states can
also receive incentive funds based on the cost-effectiveness of child
support enforcement agencies in making collections. In 1996, federal
funding for program administration and incentives totaled almost $3
billion.
TANF BLOCK GRANT
---------------------------------------------------------- Letter :2.4
The Personal Responsibility and Work Opportunity Reconciliation Act
of 1996 made major changes to the nation's welfare system. In place
of AFDC and the Job Opportunities and Basic Skills Training (JOBS)
programs, the 1996 law created a block grant for states, or TANF,
that has more stringent requirements than AFDC for welfare parents to
obtain jobs in return for their benefits.\3 In 1996, the federal
government spent about $11 billion on AFDC benefit payments, and JOBS
provided almost $1 billion to help families on welfare obtain
education, training, and work experience to become self-sufficient.
TANF provides states flexibility in, among other things, providing
assistance to needy families and promoting job preparation and work.
Federal spending through the TANF block grant is currently funded at
$16.4 billion per year. States are not required to match federal
funds but must maintain specified historic levels of state spending
on behalf of families eligible for TANF.
--------------------
\3 The TANF block grant also replaced AFDC Administration and the
Emergency Assistance Program. The latter provided emergency aid to
families to avoid destitution of a child or to provide living
arrangements in a home for the child.
SOCIAL SERVICE PRIVATIZATION
HAS EXPANDED IN RECENT YEARS
------------------------------------------------------------ Letter :3
The federal, state, and local governments have for decades privatized
a broad range of government activities in both nonsocial and social
service programs. This trend is continuing. Since 1990, more than
half of the state and local governments we contacted have increased
their contracting for services, as indicated by the number and type
of services privatized and the percentage of social service budgets
paid to private contractors. Spurred by political leaders and top
program managers, states and localities privatized social services in
an attempt to reduce program costs and improve services by using the
technology and management flexibility they believe private
contractors offer. In addition, studies we examined and federal,
state, and local government officials we interviewed expect
privatization to increase with the enactment of recent federal
welfare legislation and anticipated managed care initiatives in child
welfare. State and local officials also anticipated increased
contracting for services in the child care and child support
enforcement programs.
PRIVATIZATION IS NOT A NEW
TOOL
---------------------------------------------------------- Letter :3.1
Privatization is commonly defined as any process aimed at shifting
functions and responsibilities, in whole or in part, from the
government to the private sector. Privatization can take various
forms, including divestiture, contracting out, vouchers, and
public-private partnerships. Most common is contracting, which
typically entails efforts to obtain competition among private bidders
to perform government activities. With contracting, the government
remains the financier and is responsible for managing and setting
policies on the type and quality of services to be provided.
Depending on the program, government agencies can contract with other
government entities--often through cooperative agreements--and with
for-profit and nonprofit agencies.
Using a variety of strategies, the federal, state, and local
governments have for decades relied on private entities to provide a
wide range of services and program activities. Programs as diverse
as corrections, transportation, health services, and information
resource management have been privatized to varying degrees. As all
levels of government attempt to meet existing or growing workloads
with fewer resources, privatization has more frequently been
considered a viable means of service delivery.
Child care, child welfare, child support enforcement, and
welfare-to-work programs have long used contractors to provide
certain services. For example, most states and local governments
have relied on an existing network of private day care centers to
provide certain child care services. Foster care services in child
welfare have also traditionally been provided by private providers.
Finally, state and local governments have also generally relied on
contractors to provide certain automated data processing and related
support activities.
STATE AND LOCAL GOVERNMENTS
INCREASE SOCIAL SERVICE
PRIVATIZATION
---------------------------------------------------------- Letter :3.2
In addition to state and local governments' past use of contractors
in social services, a national study has reported recent growth in
state privatization of these programs. In its 1993 national study,
the Council of State Governments reported that almost 80 percent of
the state social service departments surveyed in the study indicated
they had expanded their use of privatization of social services in
the preceding 5 years.\4 The council's study reported that child care
services and several child welfare services, such as adoption, foster
care, and independent living support services, were among the
services in which privatization increased the most.
During our review, we found that privatization of social services has
generally continued to expand, despite certain challenges confronting
state and local governments seeking to privatize services, as
discussed below. Representatives of several national associations
told us that state and local social service privatization has
increased throughout the country in the last several years, as
indicated by the percentage of state and local social service budgets
paid to contractors.\5 Among the state and local governments we
contacted, most officials said the percentage of program budgets paid
to contractors has increased since 1990.
While the percentage of funds paid to private contractors has
generally increased in the states and programs we selected, we found
that the proportion of state and local social service budgets paid to
private contractors varies widely among the programs we reviewed.
According to local program officials, for example, the Los Angeles
County child support enforcement program spent less than 5 percent of
its $100 million program budget on contracted services in 1996. In
comparison, program officials said the child care component of San
Francisco's Greater Avenues for Independence (GAIN) program spent all
its program funds, or $2.1 million, on privatized services in 1996.\6
State and local government officials we interviewed generally said
that, in addition to the increased and varied portion of program
budgets spent on privatized services, the number of functions
performed by private contractors has increased since 1990. In
Virginia, for example, officials said that the state has recently
begun to contract out case management and assessment functions in its
welfare-to-work program, a function previously performed by
government employees. State and local governments have also recently
begun to privatize a broad array of child support enforcement
services. While it is not uncommon for states to contract out
certain child support enforcement activities, in 1996 we reported
that 15 states had begun to privatize all the activities of selected
child support enforcement offices in an effort to improve performance
and handle growing caseloads.\7
For most of the state and local governments we interviewed,
privatized social services are now provided by nonprofit
organizations, especially in child welfare. However, most of the
state and local officials we contacted indicated that they also
contract with for-profit organizations to deliver social services.
The state and local officials we interviewed told us that among their
programs the proportion of the budget for private contractors that is
spent on for-profit organizations varied, ranging from as low as zero
for child welfare to as high as 100 percent for child support
enforcement. Within each program, the proportion of funds paid to
for-profit organizations has remained about the same since 1990.
--------------------
\4 The Council of State Governments is a national association
representing a range of state government professions, including
budget, financial management, and program personnel. See also K. S.
Chi, "Privatization in State Government: Trends and Options,"
prepared for the 55th training conference of the American Society for
Public Administration, Kansas City, Missouri, July 1994. While this
study reports growth in social service privatization based on
self-reported information from state and local government officials,
no national data on the actual dollar volume of social service
privatization are available in this study or in any of the other
studies we reviewed.
\5 We obtained perspectives on trends in social service privatization
from the National Association of Counties, National Conference of
State Legislatures, and the National Governors' Association, among
others.
\6 The GAIN program is California's version of the former federal
JOBS program.
\7 Child Support Enforcement: Early Results on Comparability of
Privatized and Public Offices (GAO/HEHS-97-4, Dec. 16, 1996).
STATES AND LOCALITIES
PRIVATIZE FOR VARIOUS
REASONS
---------------------------------------------------------- Letter :3.3
A variety of reasons have prompted states and localities to contract
out social services. The growth in privatization has most often been
prompted by strong support from top government officials, an
increasing demand for public services, and the belief that private
contractors are able to provide higher-quality services more
cost-effectively because of their management flexibility. In
addition, state and local governments have chosen to contract out to
compensate for the lack of government expertise in certain service
areas, such as in the development of automated information systems.
The following examples highlight common privatization scenarios:
-- Several local child support offices in Virginia each contracted
with a for-profit organization to provide a full range of
program services such as locating absent parents, establishing
paternity and support orders, and collecting support payments.
The local offices undertook these contracts to improve program
effectiveness and efficiency.
-- Some California counties privatized job training and placement
services in their GAIN program as a way to meet new
state-legislated program requirements or avoid hiring additional
government employees.
-- Some state and local governments have expanded already
privatized services in programs such as child care to respond to
a greater public demand for services.
-- Texas contracts to provide food stamp and other benefits
electronically to use the technical expertise of private
providers.
PRIVATIZATION EXPANSION IS
EXPECTED TO CONTINUE
---------------------------------------------------------- Letter :3.4
State and local government officials and other experts told us they
expect the growth of privatization to continue. Increasingly, future
trends in privatization may incorporate additional functions
traditionally performed by state and local governments. For example,
as a result of the recent welfare legislation, state and local
governments now have greater flexibility in deciding how welfare
programs will be administered, including an expanded authority that
allows them to use private contractors to determine eligibility, an
activity that has traditionally been conducted by government
employees. Additionally, the Congress has shown greater interest in
broadening the range of government activities that could be
privatized in other social service programs. Such activities include
eligibility and enrollment determination functions in the Medicaid
and Food Stamps programs. The Clinton administration has opposed
these proposals to expand privatization, stating that the
certification of eligibility for benefits and related operations,
such as verification of income and other eligibility factors, should
remain public functions.
In addition to the changes anticipated from the welfare legislation
and more recent legislative proposals, state and local officials
anticipate that privatization will continue to increase in the three
other social service programs we examined. In child welfare
services, according to a 1997 Child Welfare League of America survey,
31 states are planning or implementing certain management functions
or use of managed care approaches to apply some combination of
managed care principles--currently used in physical and behavioral
health services--in the management, financing, and delivery of child
welfare services. These principles include contracting to meet all
the needs of a specific group of clients for a set fee rather than
being paid for each service they provide. Also, in child care
programs, states are increasingly privatizing the management of their
voucher systems. In these cases, contractors manage the system that
provides vouchers or cash certificates to families who purchase child
care services from authorized providers. Finally, in child support
enforcement, state program officials expect that more states will
begin to contract out the full range of child support services.
PRIVATIZED SOCIAL SERVICES
DECREASED IN CERTAIN
LOCATIONS
---------------------------------------------------------- Letter :3.5
In two California counties we contacted, county officials, after
initially contracting out for certain services, decided to
discontinue the practice and now have those services performed by
county employees. Los Angeles County, for example, had contracted
with a for-profit organization to perform the case management
function in its GAIN program; however, following a change in the
composition of the county's board of supervisors, the board opposed
privatizing these functions. Program officials did not renew the
contract. In San Bernardino County's GAIN program, a portion of the
job search services was initially contracted out because the county
did not itself have the capacity to provide all such services when
the program was first implemented. Once the county hired and trained
the necessary public workers, the contractor's services were no
longer needed and the contract was terminated. In both these cases,
local program officials were satisfied with the contractors'
performance.
COMPETITION, CONTRACT
DEVELOPMENT, AND MONITORING
ISSUES COULD UNDERMINE
PRIVATIZATION GOALS
------------------------------------------------------------ Letter :4
Federal, state, and local government officials, union
representatives, national associations, advocacy groups, contractors,
and other experts in social service privatization identified several
challenges that state and local governments most often encountered
when they privatized social services. These challenges include
obtaining a sufficient number of qualified bidders, developing
sufficiently detailed contract specifications, and implementing
effective methods of monitoring contractor performance. The
challenges may make it difficult for state and local governments to
reduce program costs and improve services. State and local
government officials we contacted reported mixed results from their
past and present efforts to privatize social services. However, few
empirical studies compare the program costs and quality of publicly
and privately provided services, and the few studies that do make
such comparisons report mixed results overall.
COMPETITIVE MARKET FOR
SOCIAL SERVICES IS SOMETIMES
INSUFFICIENT
---------------------------------------------------------- Letter :4.1
Competition has long been held as a principle central to the
efficient and effective working of businesses in a free-market
economy. In a competitive market, multiple parties attempt to secure
the business of a customer by offering the most favorable terms.
Competition in relation to government activities can occur when
private sector organizations compete among themselves or public
sector organizations compete with the private sector to conduct
public sector business. In either case, competition for government
business attempts to bring the same advantages of a competitive
market economy--lower prices and higher-quality goods or services--to
the public sector.
Competitive markets can help governments reduce program costs and
improve service quality. In many cases, the benefits from
competition have been established for nonsocial service programs,
such as trash collection, traffic enforcement, and other functions
intended to maintain or improve a government's infrastructure. State
and local governments that have contracted out public works programs
competitively have documented cost savings, improved service
delivery, or gained customer satisfaction.\8 By contracting out, for
example, the city of Indianapolis has already accrued cost savings
and estimated that it would save a total of $65 million, or 42
percent, in its wastewater treatment operations between 1994 and
1998. The city also reported that the quality of the water it
treated improved. In addition, New York State estimated that it
saved $3 million annually by contracting out certain economic
development and housing loan functions.
However, not all experts agree whether it is possible to achieve the
same results with privatization of social service programs. Some
experts believe that competition among social service providers can
indeed reduce program costs and improve services for children and
families since, in their view, private firms inherently deliver
higher-quality services at lower costs than public firms. In
contrast, other experts hold that social services are significantly
different from services such as trash collection or grounds
maintenance--so different, in fact, that one cannot assume that
competition will be sufficient to increase effectiveness or reduce
costs. Several factors make it difficult to establish and maintain
competitive markets with contractors that can respond to the diverse
and challenging needs of children and families. These factors
include the lack of a large number of social service providers with
sufficiently skilled labor, the high cost of entry into the social
services field, and the need for continuity of care, particularly in
services involving residential placement or long-term therapy. Some
experts believe that these constraints reduce the likelihood of
achieving the benefits anticipated from social service
privatization.\9 Appendix II contains a more detailed comparison of
characteristics associated with privatizing social services and
nonsocial services.
Many state and local program officials we contacted reported that
they were satisfied with the number of qualified bidders in their
state or locality. However, some of these officials expressed
concern about the insufficient number of qualified bidders,
especially in rural areas and when the contracted service calls for
higher-skilled labor. For example, in certain less-urban locations,
officials found only one or two contractors with the requisite skills
and expertise to provide needed services. In Wisconsin, some county
child welfare officials told us that their less-populous locations
made them dependent on a single off-site contractor to provide needed
services. As a result, program officials believed, the contractor
was less responsive to local service needs than locally based public
providers usually are. Similarly, officials in Virginia's
welfare-to-work program said rural areas of the state have
less-competitive markets for services, thereby minimizing benefits
from contracting by raising contractor costs to levels higher than
they would be in a more competitive market.
State and local officials also encountered situations with few
qualified bidders when they contracted for activities that required
higher-skilled labor. In Texas, only one contractor bid to provide
electronic benefit transfer services for recipients of cash
assistance and other benefits, and the bid exceeded anticipated cost
estimates. Faced with only one bidder, the state had to rebid the
contract and cap the funds it was willing to pay. Although state and
local program officials reported instances of insufficient qualified
bidders, we found few empirical studies of social service programs
that examine the link between the level of competition and costs, or
service quality, and these studies taken together were inconclusive.
Given the uncertainties of the market, several state and local
governments can use creative approaches to augment the competitive
environment in order to reduce program costs and improve services.
For example, under "managed competition" a government agency may
prepare a work proposal and submit a bid to compete with private
bidders. The government may award the contract to the bidding agency
or to a private bidder. In Wisconsin, counties are competing against
nongovernment providers to provide welfare-to-work services in the
state's Wisconsin Works program.
Some state and local governments have configured their service
delivery system to encourage ongoing competition between private and
public providers. In some cases, a jurisdiction awards a contract to
a private provider to serve part of its caseload and allows its
public agency to continue to serve the rest. The competition
fostered between public and private providers can lead to improved
services, as in both the Orange County and San Bernardino County GAIN
programs. In these counties, program officials concluded that when
public agencies provide services side-by-side with private providers,
both government personnel and private sector personnel were motivated
to improve their performance. In Orange County, GAIN program job
placements increased by 54 percent in 1995 when both the public
agency and a private provider provided job placements to different
groups of clients, compared with 1994, when only the public agency
provided job placement services to all clients.
While many state and local government officials advocate
privatization, others believe that it is possible, through better
management, to reduce the costs and improve the quality of services
delivered by programs that government employees administer. Internal
management techniques include basing performance on results,
consolidating and coordinating human services, and reforming
management systems. For example, the Oregon Option, a partnership
between the federal government and the state, aims to, among other
things, improve the delivery of social services by forging
partnerships among all levels of government for the purpose of
focusing on measurable results.
--------------------
\8 Privatization: Lessons Learned by State and Local Governments
(GAO/GGD-97-48, Mar. 14, 1997). Estimated cost savings and other
results are as reported by the governments. We did not independently
verify these results.
\9 This section was based on information from J. I. Nelson, "Social
Welfare and the Market Economy," Social Science Quarterly (Dec.
1992); J. O'Looney, "Beyond Privatization and Service Integration:
Organizational Models for Service Delivery," Social Service Review
(Dec. 1993); and S. R. Smith and M. Lipsky, "Privatization of
Human Services: A Critique," Nonprofits for Hire: The Welfare State
in the Age of Contracting (1994).
OFFICIALS CITED CHALLENGES
IN DEVELOPING AND MONITORING
CONTRACTS
---------------------------------------------------------- Letter :4.2
Successful contracting requires devoting adequate attention and
resources to contract development and monitoring. Even when
contractors provide services, the government entity remains
responsible for the use of the public resources and the quality of
the services provided. Governments that privatize social services
must oversee the contracts to fully protect the public interest.
One of the most important, and often most difficult, tasks in
privatizing government activities is writing clear contracts with
specific goals against which contractors can be held accountable.
Although some program officials told us that they had an ample number
of staff who were experienced with these tasks, others said that they
had an insufficient number of staff with the requisite skills to
prepare and negotiate contracts. When contract requirements are
vague, both the government and contractor are left uncertain as to
what the contractor is expected to achieve.
MONITORING FOR RESULTS IS
DIFFICULT
---------------------------------------------------------- Letter :4.3
Contract monitoring should assess the contractor's compliance with
statutes, regulations, and the terms of the agreement, as well as
evaluate the contractor's performance in delivering services,
achieving desired program goals, and avoiding unintended negative
results. In this and previous reviews of privatization efforts, we
found that monitoring contractors' performance was the weakest link
in the privatization process.\10
Increasingly, governments at all levels are trying to hold agencies
accountable for results, amid pressures to demonstrate improved
performance while cutting costs. Privatization magnifies the
importance of focusing on program results, because contractor
employees, unlike government employees, are not directly accountable
to the public. However, monitoring the effectiveness of social
service programs, whether provided by the government or through a
contract, poses special challenges because program performance is
often difficult to measure.
State and local governments have found it difficult to establish a
framework for identifying the desired results of social service
programs and to move beyond a summary of a program's activities to
distinguish desired outcomes or results of those activities, such as
the better well-being of children and families or the community at
large. For example, a case worker can be held accountable for making
a visit, following up with telephone calls, and performing other
appropriate tasks; however, it is not as easy to know whether the
worker's judgment was sound and the intervention ultimately
effective.\11
Without a framework for specifying program results, several state and
local officials said that contracts for privatized social services
tend to focus more on the day-to-day operations of the program than
on service quality. For example, officials in San Francisco's child
care program told us that their contracts were often written in a way
that measured outputs rather than results, using specifications such
as the number of clients served, amount of payments disbursed, and
the total number of hours for which child care was provided. In
addition, monitoring efforts focused on compliance with the numbers
specified in the contracts for outputs rather than on service
quality. These practices make it difficult to hold contractors
accountable for achieving program results, such as providing children
with a safe and nurturing environment so that they can grow and their
parents can work.
Reliable and complete cost data on government activities are also
needed to assess a contractor's overall performance and any realized
cost savings. However, data on costs of publicly provided services
are not always adequate or available to provide a sound basis for
comparing publicly and privately provided services. In some cases,
preprivatization costs may not be discernible for a comparable public
entity, or the number of cases available may be insufficient to
compare public and privatized offices' performance. In other cases,
the privatized service may not have been provided by the public
agency.
To address many of the difficulties in monitoring contractor
performance, government social service agencies are in the early
stages of identifying and measuring desired results. For example,
California's state child care agency is developing a desired-results
evaluation system that will enable state workers to more effectively
monitor the results of contractors' performance. Many agencies may
need years to develop a sound set of performance measures, since the
process is iterative and contract management systems may need
updating to establish clear performance standards and develop
cost-effective monitoring systems. In the child support enforcement
program, for example, performance measures developed jointly by HHS
and the states provide the context for each state to assess the
progress contractors make toward establishing paternities, obtaining
support orders, and collecting support payments. Developing the
agreed-upon program goals and performance measures was a 3-year
process.
--------------------
\10 Privatization: Lessons Learned by State and Local Governments
(GAO/GGD-97-48, Mar. 14, 1997).
\11 S. R. Smith and M. Lipsky, Nonprofits for Hire: The Welfare
State in the Age of Contracting (Cambridge, Mass.: Harvard
University Press, 1994).
VIEWS DIFFER ON WHETHER
PRIVATIZED SERVICES WILL
PROTECT RECIPIENT RIGHTS
---------------------------------------------------------- Letter :4.4
Some experts in social service privatization have expressed concern
that contractors, especially when motivated by profit-making goals
and priorities, may be less inclined to provide equal access to
services for all eligible beneficiaries. These experts believe that
contractors may first provide services to clients who are easiest to
serve, a practice commonly referred to as "creaming," leaving the
more difficult cases to the government to serve or leaving them
unserved.
Among the organizations we contacted--federal, state, and local
governments, unions, public interest and advocacy groups, and
contractors--we found differing views on whether all eligible
individuals have the same access to privatized services as they had
when such services were publicly provided. Generally, federal,
state, and local government officials whom we interviewed were as
confident in contractors as they were in the government to grant
equal access to services for all eligible citizens. For example, an
official in Wisconsin said that after privatization of some county
welfare-to-work services, she saw no decline in client access to
services. In contrast, representatives from advocacy groups and
unions were less confident that contractors would provide equal
access to services for all eligible citizens than the government
would. We found no conclusive research that evaluated whether
privatization affects access to services.
Various groups have also raised concerns about recent changes that
permit contractors to perform program activities that government
employees traditionally conduct. Advocacy groups, unions, and some
HHS officials expressed concern about privatizing activities that
have traditionally been viewed as governmental, such as determining
eligibility for program benefits or services, sanctioning
beneficiaries for noncompliance with program requirements, and
conducting investigations of child abuse and neglect for purposes of
providing child protective services. Under federal and state
requirements, certain activities in most of the programs we studied
were to be performed only by government employees.\12 Under TANF,
however, contractors can determine program eligibility. Several
union representatives and contractors told us that they believe
certain functions, including policy-making responsibilities and
eligibility determinations, often based on confidential information
provided by the service recipient and requiring the judgment of the
case worker, should always be provided by government employees.
--------------------
\12 These activities, often described as "discretionary," include
decisions or actions that may affect the level of benefits or
services received by a beneficiary or that may be carried out in
accordance with a government's authority to investigate and resolve
reported instances of noncompliance with applicable statutes and
regulations.
STRATEGIES TO PROTECT
RECIPIENT RIGHTS HAVE BEEN
IDENTIFIED BUT ARE DIFFICULT
TO IMPLEMENT
---------------------------------------------------------- Letter :4.5
Officials from several of the organizations we interviewed believe
that equal access to services and other recipient rights can be
protected by making several practices an integral part of social
service privatization. Two contractor representatives said that
carefully crafted contract language could help ensure that contracted
services remain as accessible as publicly provided services. Other
officials told us that remedies for dispute resolution should be
provided to help beneficiaries resolve claims against contractors.
Another suggested practice would require government agencies to
approve contractor recommendations or decisions regarding clients in
areas traditionally under government jurisdiction. In the Los
Angeles County GAIN program, for example, county officials had to
approve contractor recommendations to sanction certain clients for
noncompliance with program requirements before those sanctions could
be applied.
While these options may provide certain protections, they may be
difficult to implement. The limited experiences of state and local
governments in writing and monitoring contracts with clearly
specified results could lead to difficulties in determining which
clients are eligible for services and in determining whether or not
these clients received them. In addition, advocacy groups and unions
said some remedies for dispute resolution might be difficult to
implement because contractors do not always give beneficiaries the
information they need to resolve their claims. Finally, others noted
that any additional government review of contractor decisions can be
costly and can reduce contractor flexibility.
STATE AND LOCAL GOVERNMENTS
REPORT MIXED RESULTS IN
PRIVATIZING SOCIAL SERVICES
---------------------------------------------------------- Letter :4.6
While numerous experts believe that contracted social services can
reduce costs and improve service quality, a limited number of studies
and evaluations reveal mixed results, as illustrated by the following
examples:
-- Our previous report on privatization of child support
enforcement services found that privatized child support offices
performed as well as or, in some instances, better than public
programs in locating noncustodial parents, establishing
paternity and support orders, and collecting support owed. The
relative cost-effectiveness of the privatized versus public
offices varied among the four sites examined.\13 Two privatized
offices were more cost-effective, one was as cost-effective, and
one was less cost-effective.\14
-- A California evaluation of two contracts in Orange County's GAIN
employment and training program found that the one contract for
orientation services resulted in good service quality and less
cost than when performed by county employees. The other
contract for a portion of case management services had more
mixed results; the contractor did not perform as well as county
staff on some measures but was comparable on others. For
example, county workers placed participants in jobs at a higher
rate and did so more cost-effectively than private workers. Yet
client satisfaction with contractor- and county-provided
services was comparable.\15
-- A comparison of public and private service delivery in Milwaukee
County, Wisconsin, found that the cost of foster care services
was higher when provided by private agencies than when provided
by county staff. Further, the private agencies did not improve
the quality of services when measured by the time it took to
place a child in a permanent home or by whether the child
remained in that home.\16
-- State governments have contracted to upgrade automated data
systems in the child support enforcement program. Since 1980,
states have spent a combined $2.6 billion on automated
systems--with $2 billion of the total being federally funded.
As we reported earlier, these systems appear to have improved
caseworker productivity by helping track court actions relating
to paternity and support orders and amounts of collections and
distributions.\17 According to HHS, almost $11 billion in child
support payments were collected in 1995--80 percent higher than
in 1990. While it is too early to judge the potential of fully
operational automated systems, at least 10 states are now
discovering that their new systems will cost more to operate
once they have been completed. One state estimated that its new
system, once operational, would cost three to five times more
than the old system and former operating costs could be exceeded
by as much as $7 million annually.
Potential savings from privatizing social services can be offset by
various factors, such as the costs associated with contractor
start-up and government monitoring. While direct costs attributable
to service delivery may be reduced, state and local agencies may
incur additional costs for transition, contract management, and the
monitoring of their privatization efforts. Despite the lack of
empirical evidence, most state and local government officials told us
they were satisfied with the quality of privatized services. Some
officials said that efficiencies were realized as a result of
contractors' expertise and management flexibility. In many cases,
public agencies established collaborative relationships with private
providers that helped them be more responsive to beneficiaries.
Still other officials, however, said they saw no significant benefits
resulting from privatization because outcomes for children and
families were the same as when the government provided the service.
For example, Milwaukee's privatization of foster care services had
not improved the proportion of children who remained in permanent
homes, a specified goal of the program.
--------------------
\13 Cost-effectiveness was defined as the ratio of each office's
administrative costs to collections, expressed as the cost to collect
$1.
\14 Child Support Enforcement: Early Results on Comparability of
Privatized and Public Offices (GAO/HEHS-97-4, Dec. 16, 1996).
\15 County of Orange Social Services Agency, "Evaluation of Contracts
to Privatize GAIN Services" (Dec. 1995).
\16 F. Emspak, R. Zullo, and S. Rose, "Privatizing Foster Care
Services in Milwaukee County: An Analysis and Comparison of Public
and Private Delivery Systems," prepared for The Institute for
Wisconsin's Future (not dated).
\17 Child Support Enforcement: Strong Leadership Required to
Maximize Benefits of Automated Systems (GAO/AIMD-97-72, June 30,
1997).
HHS' OVERSIGHT OF STATES AND
LOCALITIES MAY NEED TO CHANGE
IN A NEW ENVIRONMENT
------------------------------------------------------------ Letter :5
The increase in privatization combined with the difficulties states
are having in developing methods to monitor program results raise
questions about how HHS can ensure that broad program goals are
achieved. It will be challenging for HHS to develop and implement
approaches to help states assess results of federally funded programs
and track them over time so that state and local governments are
better prepared to hold contractors accountable for the services they
provide. Currently, monitoring program results poses a challenge
throughout the government.
Some state and local government officials whom we interviewed
believed they should pay greater attention to program results, given
the increased use of private contractors. Several officials
mentioned that HHS could help the states and localities develop
methods of assessing program results by clarifying program goals,
providing more responsive technical assistance, and sharing best
practices. The fact that officials in most of the states we
contacted said they currently do not have methods in place to assess
program results suggests that unless HHS provides states with this
help, it will have difficulty assessing the effectiveness of social
service programs nationally.
HHS' current focus on compliance with statutes and regulations poses
a challenge in monitoring the effectiveness of state programs and in
identifying the effects of privatization on these programs. HHS
carries out its oversight function largely through audits conducted
by the Office of the Inspector General, program staff, and other HHS
auditors. HHS officials told us that the department has focused its
auditing of the states on compliance with federal statutes and
regulations more than other areas of focus, such as results achieved
or client satisfaction. For example, HHS may conduct a compliance
audit to verify that state programs spent federal money in ways that
are permitted by federal regulations.
The Government Performance and Results Act of 1993 may provide an
impetus for HHS to place a greater emphasis on monitoring the
effectiveness of state programs. Under this act, federal agencies
are required to develop a framework for reorienting program managers
toward achieving better program results. As a federal agency, HHS
must refocus from compliance to developing and implementing methods
to assess social service program results. However, this transition
will not be easy, given the challenge that government agencies face
when attempting to orient their priorities toward achieving better
program results and the difficulty inherent in defining goals and
measuring results for social service programs.
Some agencies within HHS have made progress in including the
assessment and tracking of program results within their oversight
focus. For example, within HHS, the Office of Child Support
Enforcement has recently increased its emphasis on program results by
establishing, in conjunction with the states, a strategic plan and a
set of performance measures for assessing progress toward achieving
national program goals.\18 Child support enforcement auditors have
also recently begun to assess the accuracy of state-reported data on
program results. These initiatives may serve as models for HHS as it
attempts to enhance accountability for results in social service
programs supported with federal funds.
--------------------
\18 Child Support Enforcement: Reorienting Management Toward
Achieving Better Program Results (GAO/HEHS/GGD-97-14, Oct. 25, 1996)
describes how the federal Office of Child Support Enforcement worked
with the states to establish a framework for improving program
management.
CONCLUSIONS
------------------------------------------------------------ Letter :6
Our work suggests that privatization of social services has not only
grown but is likely to continue to grow. Under the right conditions,
contracting for social services may result in improved services and
cost savings. Social service privatization is likely to work best at
the state and local levels when competition is sufficient, contracts
are effectively developed and monitored by government officials, and
program results are assessed and tracked over time.
The observed increase in social service privatization highlights the
need for state and local governments to specify desired program
results and monitor contracts effectively. At the same time, the
federal government, through the Government Performance and Results
Act of 1993, is focusing on achieving better program results. These
concurrent developments should facilitate more effective privatized
social services. More specifically, HHS in responding to its
Government Performance and Results Act requirement could help states
find better ways to manage contracts for results. This could, in
turn, help state and local governments ensure that they are holding
contractors accountable for the results they are expected to achieve,
thus optimizing their gains from privatization.
AGENCY COMMENTS AND OUR
EVALUATION
------------------------------------------------------------ Letter :7
We provided draft copies of this report to HHS, the five states we
selected for review, and other knowledgeable experts in social
service privatization. HHS did not provide comments within the
allotted 30-day comment period. We received comments from
California, Texas, and Virginia. These states generally concurred
with our findings and conclusions. Specifically, officials from
Texas and Virginia agreed that developing clear performance measures
and monitoring contractor performance present special challenges
requiring greater priority and improvement. These states also
support a stronger federal-state partnership to help them address
these special challenges. Comments received from other acknowledged
experts in social service privatization also concurred with the
report and cited the need to increase competition, develop effective
contracts, and monitor contractor performance, thereby increasing the
likelihood that state and local governments would achieve intended
results sought through social service privatization. The comments we
received did not require substantive or technical changes to the
report.
---------------------------------------------------------- Letter :7.1
As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days
from the date of this letter. At that time, we will send copies of
this report to the Secretary of HHS and HHS' Assistant Secretary for
Children and Families. We will also make copies available to others
on request.
If you or your staff have any questions about this report, please
contact Kay E. Brown, Assistant Director, or Mark E. Ward, Senior
Evaluator, at (202) 512-7215. Other major contributors to this
report are Gregory Curtis, Joel I. Grossman, Karen E. Lyons, and
Sylvia L. Shanks.
Sincerely yours,
Jane L. Ross
Director, Income Security Issues
SCOPE AND METHODOLOGY
=========================================================== Appendix I
To meet the objectives of this study, we reviewed and synthesized
studies and published articles on social service privatization by
conducting a literature review and synthesis of articles, studies,
and other documents selected from economic, social science, and
business bibliographic files. We also considered articles and
studies recommended by other organizations. As a result of these
efforts, we selected 14 articles or studies on social service
privatization in the United States. These articles are listed in the
bibliography.
We chose the four programs included in our study because they
constitute an increasingly important component of the nation's
welfare system in terms of both the diversity of services they
provide and the magnitude of federal funding used to support state
program administration. To select states for study, we reviewed GAO
reports and other studies of privatization, concluding that we would
interview state and local government officials in California,
Massachusetts, Texas, Virginia, and Wisconsin regarding their
respective child care, child welfare, child support enforcement, and
family assistance programs supported by TANF. We selected these
states to learn how state and local governments have implemented
privatized services among the four social service programs we
included in our review. We chose these states also because we were
aware that they had some experience in the privatization of social
services and we could thus examine a mix of state- and
county-administered social service programs. To broaden our coverage
of the diverse views on privatization, we also interviewed officials
of HHS, national associations and advocacy groups, unions, and
contractors. During our interviews, we obtained and reviewed agency
documents.
For our interviews, we used semistructured guides containing both
closed and open-ended questions to obtain information on the extent
of recent social service privatization, type of program functions
being privatized, issues leading to the decision to privatize, issues
in implementation of social service privatization, degree and type of
monitoring and evaluation conducted, and federal policy implications
stemming from social service privatization. We conducted 36
interviews in total concerning the four social service programs we
studied.
In conducting our interviews, we asked the interviewees to respond
from the perspective that seemed to us most consistent with their
knowledge base and area of primary interest. For example, we asked
state program officials to respond from the perspective of their
entire state, whereas we asked local officials to base their
responses solely on their experiences in their own locality.
Similarly, we asked officials in HHS, national associations and
advocacy groups, unions, and contractors to provide a national
perspective on key issues surrounding privatization in each of the
four social service programs. The interview responses that we report
on reflect the views of only the officials we interviewed.
The following information lists the federal, state, and local
government, union, advocacy group, national association, and
contractor contacts we made. The number of interviews conducted with
representatives of each organization appears in parentheses.
FEDERAL GOVERNMENT
------------------------------------------------------- Appendix I:0.1
Department of Health and Human Services, Administration for Children
and Families (6)
STATE AND LOCAL GOVERNMENTS
------------------------------------------------------- Appendix I:0.2
CALIFORNIA
----------------------------------------------------- Appendix I:0.2.1
Department of Education (1)
Department of Social Services (3)
Los Angeles County
Department of Public Social Services, Employment Program Bureau (1);
District Attorney's Office, Bureau of Family Support Operations (1)
San Bernardino County
Jobs and Employment Services Department (1)
San Francisco City and County
Department of Human Services, Employment and Training Services (1);
Department of Human Services, Family and Children's Services Division
(1)
Santa Clara County
Social Service Agency, Family and Children Services Division (1)
MASSACHUSETTS
----------------------------------------------------- Appendix I:0.2.2
Department of Social Services (1)
Department of Transitional Assistance (1)
VIRGINIA
----------------------------------------------------- Appendix I:0.2.3
Department of Social Services (2)
TEXAS
----------------------------------------------------- Appendix I:0.2.4
Department of Human Services (1)
Department of Protective and Regulatory Services (1)
State Attorney General's Office (1)
WISCONSIN
----------------------------------------------------- Appendix I:0.2.5
Department of Health and Family Services (1)
Department of Workforce Development (1)
Dodge County
Department of Human Services (1)
Saulk County
Department of Child Services (1)
UNIONS (1)
------------------------------------------------------- Appendix I:0.3
American Federation of Labor, Council of Industrial Organizations
American Federation of State, County, and Municipal Employees
American Federation of Teachers
Communication Workers of America
Service Employees International Union
ADVOCACY GROUPS
------------------------------------------------------- Appendix I:0.4
American Public Welfare Association (1)
Center for Law and Social Policy (1)
Child Welfare League of America (1)
NATIONAL ASSOCIATIONS
------------------------------------------------------- Appendix I:0.5
National Association of Counties (1)
National Conference of State Legislatures (1)
National Governors Association (1)
CONTRACTORS
------------------------------------------------------- Appendix I:0.6
Maximus, Government Operations Division (1)
Lockheed Martin IMS (1)
We conducted our study between October 1996 and July 1997 in
accordance with generally accepted government auditing standards.
CHARACTERISTICS ASSOCIATED WITH
PRIVATIZATION OF NONSOCIAL AND
SOCIAL SERVICES
========================================================== Appendix II
Nonsocial services Social services
---------------------------- ----------------------------
Reasons for privatizing
----------------------------------------------------------
To reduce costs and improve Same as nonsocial services
services
Often prompted by political Same as nonsocial services
leaders and top managers
Private sector viewed as Same as nonsocial services
having expertise, management
flexibility, and
technological resources
Service delivery
----------------------------------------------------------
Performance of repetitive Services require special
tasks or development of a skills to meet the long-
tangible asset, such as term needs of beneficiaries
building maintenance or
street repair
Market competition
----------------------------------------------------------
Presence of providers in the Limited number of qualified
market results from demand bidders, cost of entry into
for services the field is high, and
continuity of care may be
desired
Consumers of public goods Clients often do not possess
and services, such as public market knowledge to judge
works and park maintenance, price and quality of
provide feedback to help services
ensure that high-quality,
low-cost providers are
selected
Consumers receive goods or Clients often must
services with few, if any, participate as a condition
conditions of receiving financial
benefits
Access to services
----------------------------------------------------------
Public goods are generally Consequences of unequal
not means-tested access to services can be
severe because these
programs provide a safety
net for the protection and
well-being of beneficiaries
Contract development, management, and monitoring
----------------------------------------------------------
Work requirements can be Tasks are often complex and
more easily specified uncertain; work requirements
may be more difficult to
specify clearly
Quantitative outputs can be Long-term program results
clearly specified and more more difficult to specify
easily monitored than long- and monitor
term results
Performance monitoring Performance monitoring is
focuses on tangible tasks or difficult to do
outputs
Performance is more easily Performance is difficult to
measured because tasks tend measure because most
to be more standardized and services cannot be judged on
quantifiable the basis of client
outcomes; treatment
approaches cannot be
standardized, nor can the
appropriateness of workers'
decisions be effectively
assessed
----------------------------------------------------------
Note: This table compares the characteristics that many believe are
associated with privatizing nonsocial services and social services
along several key dimensions--reasons for privatizing, service
delivery, market competition, access to services, and contract
development, management, and monitoring. The comparisons are based
on the results of our literature review and synthesis and interviews
with HHS, state and local government officials, union
representatives, national associations, advocacy groups, and
contractors.
BIBLIOGRAPHY
=========================================================== Appendix 0
Chi, K.S. "Privatization in State Government: Trends and Options."
Prepared for the 55th National Training Conference of the American
Society for Public Administration, Kansas City, Missouri, July 23-27,
1994.
Donahue, J.D. "Organizational Form and Function." The Privatization
Decision: Public Ends, Private Means. New York: Basic Books, 1989.
Pp. 37-56.
Drucker, P.F. "The Sickness of Government." The Age of
Discontinuity: Guidelines to Changing Our Society. New York:
Harper and Row, 1969. Pp. 212-42.
Eggers, W.D., and R. Ng. Social and Health Service Privatization:
A Survey of County and State Governments, Policy Study 168. Los
Angeles, Calif.: Reason Foundation, Oct. 1993. Pp. 1-18.
Gronbjerg, K.A., T.H. Chen, and M.A. Stagner. "Child Welfare
Contracting: Market Forces and Leverage." Social Service Review
(Dec. 1995), pp. 583-613.
Leaman, L.M., and others. Evaluation of Contracts to Privatize GAIN
Services, County of Orange, Social Services Agency, December 1995.
Matusiewicz, D.E. "Privatizing Child Support Enforcement in El Paso
County." Commentator, Vol. 6, No. 32 (Sept.-Oct. 1995), p. 16.
Miranda, R. "Privatization and the Budget-Maximizing Bureaucrat."
Public Productivity and Management Review, Vol. 17, No. 4 (summer
1994), pp. 355-69.
Nelson, J.I. "Social Welfare and the Market Economy." Social Science
Quarterly, Vol. 73, No. 4 (Dec. 1992), pp. 815-28.
O'Looney, J. "Beyond Privatization and Service Integration:
Organizational Models for Service Delivery." Social Service Review
(Dec. 1993), pp. 501-34.
Smith, S.R., and M. Lipsky. "Privatization of Human Services: A
Critique." Nonprofits for Hire: The Welfare State in the Age of
Contracting. Cambridge, Mass.: Harvard University Press, 1994. Pp.
188-205.
Smith, S.R., and D.A. Stone. "The Unexpected Consequences of
Privatization," Remaking the Welfare State: Retrenchment and Social
Policy in America and Europe, Michael K. Brown (ed.). Philadelphia,
Pa.: Temple University Press, 1988. Pp. 232-52.
VanCleave, R.W. "Privatization: A Partner in the Integrated
Process." Commentator, Vol. 6, No. 32 (Sept.-Oct. 1995), pp.
14-17.
Weld, W.F., and others. An Action Agenda to Redesign State
Government. Washington, D.C.: National Governors' Association,
1993. pp. 42-63.
RELATED GAO PRODUCTS
The Results Act: Observations on the Department of Health and Human
Services' April 1997 Draft Strategic Plan (GAO/HEHS-97-173R, July 11,
1997).
Child Support Enforcement: Strong Leadership Required to Maximize
Benefits of Automated Systems (GAO/AIMD-97-72, June 30, 1997).
Privatization and Competition: Comments on S. 314, the Freedom From
Government Competition Act (GAO/T-GGD-97-134, June 18, 1997).
The Government Performance and Results Act: 1997 Governmentwide
Implementation Will Be Uneven (GAO/GGD-97-109, June 2, 1997).
Managing for Results: Analytic Challenges in Measuring Performance
(GAO/HEHS/GGD-97-138, May 30, 1997).
Welfare Reform: Three States' Approaches Show Promise of Increasing
Work Participation (GAO/HEHS-97-80, May 30, 1997).
Welfare Reform: Implications of Increased Work Participation for
Child Care (GAO/HEHS-97-75, May 29, 1997).
Foster Care: State Efforts to Improve the Permanency Planning
Process Show Some Promise (GAO-HEHS-97-73, May 7, 1997).
Privatization: Lessons Learned by State and Local Governments
(GAO/GGD-97-48, Mar. 14, 1997).
Child Welfare: States' Progress in Implementing Family Preservation
and Support Activities (GAO/HEHS-97-34, Feb. 18, 1997).
Child Support Enforcement: Early Results on Comparability of
Privatized and Public Offices (GAO/HEHS-97-4, Dec. 16, 1996).
Child Support Enforcement: Reorienting Management Toward Achieving
Better Program Results (GAO/HEHS/GGD-97-14, Oct. 25, 1996).
Executive Guide: Effectively Implementing the Government Performance
and Results Act (GAO/GGD-96-118, June 1996).
District of Columbia: City and State Privatization Initiatives and
Impediments (GAO/GGD-95-194, June 28, 1995).
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