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mix of private- and public-sector work and (b) states that used contracting had a slower growth of design costs than did states that did not use contracting.

Most important, cost is almost never the only reason for outsourcing; nor is it always the most important—a number of other factors have become key drivers of outsourcing. Council of State Governments data indicate that flexibility, access to personnel or skills not available in-house, increasing political support for outsourcing, and tapping of private-sector innovation are all important drivers of outsourcing.

Consider fixed staffing levels with changing project demands. Infrastructure development naturally ebbs and flows, but public employees, protected by civil service, remain at steady levels. The problem of having fluctuating workloads but steady staffing levels can be solved through outsourcing, using consultants as a resource pool that can adjust to address needs. A 1990 study by the Wisconsin Legislative Audit Bureau concluded that outsourcing was used primarily for two reasons: to provide expertise unavailable to in-house staff and to meet short-term, or “peak,” demand levels, for which the addition of permanent staff would be uneconomical. The National Cooperative Highway Research Program surveyed state transportation departments and found that half of the states are using consultants to accomplish 50 percent or more of preconstruction engineering and that the primary reason for contracting for design work is constraints on staff size, or the desire to avoid staffing peaks.

We conclude that in order to keep up with growing demand and changing environments, public-works agencies must employ additional cost-effective resources to ensure delivery of all necessary services, and that outsourcing is one method of achieving best value for each dollar invested.

The use of the private sector in the delivery of infrastructure is a vital component of economic development. In order to keep up with growing demand and changing environments, public-works agencies must employ additional cost-effective resources to ensure delivery of all necessary services. That means recognizing the value of private-sector involvement and capitalizing on opportunities for outsourcing.

We conclude that in order to keep up with growing demand and changing environments, public-works agencies must employ additional cost-effective resources to ensure delivery of all necessary services, and that outsourcing is one method of achieving best value for each dollar invested. Improvements in the cost accounting of state agencies through implementation of new accrual accounting standards—and further moves toward full-cost accounting—will help decision makers obtain a clearer picture of project costs. And we make four specific recommendations to policy makers:

  • 1.

    Recognize the rich and varied potential benefits of infrastructure outsourcing.

  • 2.

    Recognize the problems with cost comparisons.

  • 3.

    Recognize the rich variety of types of outsourcing and project delivery.

  • 4.

    Understand the importance of utilizing private-sector industries for delivery of public infrastructure.

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