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INFRASTRUCTURE OUTSOURCING

Part 2

Trends

R esponsibility for elements of our infrastructure is spread across so many state and local governments—and agencies within those governments—that it is difficult to determine precisely the extent of outsourcing’s role. However, surveys of state and local governments, recent outsourcing- enabling legislation, and the observations of industry and government officials all give an indication of how

prevalent outsourcing has become in infrastructure projects.

To begin with, outsourcing trends in the United States are rooted in an international context. Countries throughout the world are using outsourcing to develop infrastructure. In the United Kingdom, more than 250 projects have been completed or are under way under the Private Finance Initiative, which outsources to private firms the financing and delivery of a broad range of public projects.16 The World Bank argues that in less-developed countries, the solution to poor service delivery, waste, and mispricing of infrastructure facilities is greater private investment in facility development and operation, and it reports that in 1997 $40 billion in private capital was invested in developing nations’ infrastructure.17

A. State Governments

In the United States, a 1998 survey by the Council of State Governments (CSG) asked state agencies about past and future privatization and the use of outsourcing, including outsourcing design, engineering,

construction, and maintenance of facilities.18

Not all agencies responded, and all states have historically

outsourced many aspects of infrastructure projects, so the results are only a baseline, but they include:

State Administration and General-services Agencies:

  • Twenty-two states report outsourcing architectural, building-construction, or facility-maintenance functions;

  • Seventy-seven percent of outsourcing agencies say that their use of outsourcing increased in the 1990s (none decreased);

  • Sixty-nine percent say it will increase in the 2000s (none expect a decrease); and

  • Cost savings, flexibility (versus red tape), and lack of agency personnel and expertise are the dominant reasons for increased outsourcing.

16

Arthur Andersen and Enterprise LSE, Value for Money Drivers in the Private Finance Initiative (United Kindom: Treasury Taskforce, 2000).

17

“Private Goes Public,” The Banker, October 1, 1999, p. 33.

18

Keon Chi and Cindy Jasper, Private Practices: A Review of Privatization in State Government (Lexington, Ky.: Council of State Governments, 1998).

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