Reassessing Privatization Strategies 25 Years Later: Revisiting Perry and Babitsky's Comparative Performance Study of Urban Bus Transit Services

• Author: Olga Smirnova,Suzanne Leland
• Published date: 01 September 2009
• Date: 01 September 2009
• DOI: http://doi.org/10.1111/j.1540-6210.2009.02035.x

Reassessing Privatization Strategies 25 Years Later 855

Tough Public

Policy Choices

Confronting

America

When assessing contracting

out or privatization gains in

the area of local government

transportation, factors such as the

mode of transportation provided,

population density, and type of

government may be the most

inf‌l uential factors in determining

the ef‌f‌i ciency and ef‌f ectiveness

of a transit agency regardless of

whether the service is contracted

out or kept in house.

Privatization appeals to citizen and politician desires for

more cost-ef‌f ective methods of service delivery. For this

reason, it is important for public administrators to know

when gains can be made by contracting out or privatizing

services and when it is better to keep service provision

in house.  is article assesses the viability of contracting

out and privatization of transit services. Following up

on the 1986 work of James Perry and Timlynn Babitsky,

which used data from the early 1980s, the authors revisit

whether certain service delivery arrangements are more

ef‌f‌i cient and ef‌f ective than others in the provision of

transit services. Twenty-f‌i ve years later, they f‌i nd results

similar to those of Perry and Babitsky’s original study.

Neither the type of government nor whether an agency

contracts out has much impact on the ef‌f‌i ciency and

performance of urban bus services.  e main dif‌f erence

between the two studies is that private transit agencies are

no longer more ef‌f‌i cient or ef‌f ective than public providers.

Over the past 23 years since Perry and

Babitsky published their study “Com-

parative Performance in Urban Bus Transit:

Assessing Privatization Strategies” (1986) in Public

Administration Review, the privatization debate has

endured, and still remains a central issue in the f‌i eld

of public administration.1 As long as citizens continue

to desire better-quality services

at a lower cost, privatization

and contracting out will remain

on policy makers’ agendas.

Privatization usually means

increasing the role of the private

sector in the production and

distribution of public goods.

Contracting out is one form of

privatization that allows govern-

ments to establish service stand-

ards, but it gives companies the

freedom to choose how they

wish to produce the good (Perry

and Babitsky 1986).  e public

sector contracts with both the

private and nonprof‌i t sectors

for just about everything these days, from information

technology to prisons to foster care.

Over time, we would expect public managers to learn

from past behavior and become smarter contractors.

 at is, they learn under what circumstances con-

tracting out, or even complete privatization, is more

ef‌f‌i cient and ef‌f ective than public provision.  erefore,

we would expect that when privatization is more

cost-ef‌f ective than providing services in house, some

governments may choose privatization. As the privatiza-

tion movement in local government services continues

to evolve, we would expect service delivery arrange-

ments to be maximized for greater ef‌f‌i ciency and

ef‌f ectiveness. We would also expect that if privatization

and contracting out result in market competition that

improves the ef‌f‌i ciency and ef‌f ectiveness of service

delivery, more and more local governments will adopt

these innovations. After all, local governments, in some

sense, serve as “laboratories of democracy.”

However, this presumes that local governments

have accurate information over time about whether

contracting out or privatization maximizes ef‌f‌i ciency

and ef‌f ectiveness.  is requires a cost–benef‌i t analysis

to see whether such gains are actually realized over

time. If, in fact, contracting out

and privatization are not more

cost-ef‌f ective than in-house

provision, then it is critical that

public decision makers under-

stand that gains are not going

to be realized by privatizing a

particular service (Carver 1989).

When assessing contracting

out or privatization gains in

the area of local government

transportation, factors such

as the mode of transportation

provided, population den-

sity, and type of government

may be the most inf‌l uential

Reassessing Privatization Strategies 25 Years Later: Revisiting

Perry and Babitsky’s Comparative Performance Study of

Urban Bus Transit Services

Suzanne Leland

University of North Carolina at Charlotte

Olga Smirnova

East Carolina University

Suzanne Leland is an associate

professor of political science at the

University of North Carolina at Charlotte,

where she teaches courses on state

and local politics, urban politics, and

intergovernmental relations. She has

published related articles in the

Municipal

Finance Journal

and the

Journal of Public

Transportation.

She is also the editor of

Case Studies of City–County Consolidation:

Reshaping the Local Government Landscape

with Kurt Thurmaier.

E-mail: smleland@uncc.edu

Olga Smirnova is an assistant professor

of political science at East Carolina

University. Her research interests include

public transportation performance, eff‌i ciency

and effectiveness analysis, policy analysis,

migration, special-purpose governments,

public transit, and annexation. Her disserta-

tion topic is “Does Government Structure

Really Matter? A Comparison of Eff‌i ciency

and Effectiveness of Special Purpose versus

General Purpose Government Transit

Operations.” She has published related

articles in the

Municipal Finance Journal

and

the

Journal of Public Transportation.

E-mail: smimovao@ecu.edu