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INFRASTRUCTURE OUTSOURCING: - page 38 / 46

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2. Recognize the problems with cost comparisons. One disconcerting feature that emerges from studies of cost savings from outsourcing in infrastructure is the range of findings they exhibit. Until current changes in government accounting systems are fully implemented, differences between government and private-sector accounting will remain large. Decision makers should recognize that these accounting differences mean that cost comparisons are, at best, educated estimates and should not base decisions on small differences. Be sure that comparisons include “overhead,” or “indirect,” costs—a valid comparison of public and private costs must count the costs of central administration, buildings, insurance, recruitment, training, and fringe benefits. Even more important, it must count the cost of capital. These calculations, routine in private businesses, are by no means the norm in public activity. Finally, do not make the common mistake of neglecting differences

in quality, reliability, risk, and other factors that affect best value.

In evaluating costs, be mindful of the limitations of the existing literature, evaluate specific needs, develop a full-cost analysis of in-house costs, and evaluate both cost and other benefits of outsourcing. In other words, move away from a narrow focus on cost comparisons and start evaluating the best-value options.

Finally, do not make the common mistake of neglecting differences in quality, reliability, risk, and other factors that affect best value.

3. Recognize the rich variety of types of outsourcing and project delivery. Outsourcing can be simple contracting for design, construction, or other elements of an infrastructure project, or it can be complex partnerships and even joint ventures. Design-bid-build, design-build, design-build-operate, and build-operate- transfer are just a few of the many methods of project delivery. Choosing among the rich variety of types of outsourcing and project delivery can let government officials customize the public-private partnership to meet their particular needs. Evaluate all of the options available, decide which are most likely to meet specific

goals, and work with the private partners to create the right structure to achieve those goals.

4. Understand the importance of utilizing private-sector industries for delivery of public infrastructure. An important element of economic prosperity and viability is adequate infrastructure. Transportation networks, schools, and parks all require financial and personnel resources to complete design, engineering, construction, and maintenance activities. Currently, a massive backlog of highway, school, water, and sewer projects plagues most of the nation. Public agencies can ill afford to turn their backs on the ability of the private sector to help meet project demands and manage project costs.

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