BY THE TIME HE GOT TO PHOENIX, CHUCK WALBRIDGE HAD DISCOVERED THE PITFALLS, AS WELL AS THE PROMISE, OF PRIVATIZATION.
Chuck Walbridge and Ron Jensen both see themselves as solid businessmen. There is a certain irony in this perception: Although both may be solid, Jensen is not a businessman at all, but a government bureaucrat.
That hasn't kept him from competing with Walbridge, however. Last year, for example, the two bid on the same contract, with Walbridge coming up the winner. Jensen has vowed that it won't happen again."We will be analyzing every cost to see where we might have gone wrong," he says. Walbridge, for his part, admits that Jensen is a tough competitor, as well as a good sport. He points proudly to a letter he received recently from Jensen's organization, congratulating Walbridge's people on the way in which they had started up their operation.
As it happens, that letter was more than the sportsmanlike gesture of a gracious loser, for Jensen is director of the Public Works Department of Phoenix -- a city that regularly invites private companies to bid against its own agencies on various contracts. It was such a contract, the one for garbage collection, that was awarded in the summer of 1983 to Walbridge's company, National Serv-All Inc. of Fort Wayne, Ind. Even though Jensen's department lost out on that particular bid, it still monitors the quality of National Serv-All's work.
Garbage collection is a distinctly unglamorous business, and Chuck Walbridge brings to it no glitzy, high-tech wrinkle. Nor is he much interested in public policy or great social experiments except as they might affect his business. And yet he is involved in a small but intriguing aspect of what is, by any measure, a big idea.
The idea is called privatization, a word that refers to the private delivery of public services -- specifically, to the transfer of those services from public to private control. Lately, that has become an increasingly popular thing to do. Thus, several states will soon have private minimum-security prisons. In California, there is a private post office. In Arizona and Georgia, some communities are served wholly or in part by private fire departments. On the federal level, the Army and Air Force Exchange Service recently contracted with Burger King Corp. to supply food at some of its bases. And, in September 1983, the President's Private Sector Survey on Cost Control, better known as the Grace Commission, issued its "Report on Privatization," outlining $28.4 billion in savings that the federal government might achieve by privatizing various services.
For all this recent activity, the concept behind privatization is not as new as it may seem. U.S. government administrations have long vacillated between providing services themselves and contracting them out. During the early 1800s, for example, privately operated bridges, tollroads, fire departments, and street lights were commonplace. Subsequently, gross abuses by both private contractors and public officials led to an outcry that caused governments to start providing the services themselves. Now the wheel has turned full circle, and privatization is seen as a solution to the problem of governmental bloat -- a way for governments to provide improved public services and reduce expenditures at the same time.
As widely accepted as that view may be nowadays, it remains largely untested at the federal level and in most of the newer arenas of privatization. Garbage collection, however, is one service that many local governments have been contracting out for years, and it provides a broad sample of experience in privatization.
E. S. Savas is more familiar with that experience than most people. He became interested in garbage collection about 15 years ago, when he was first deputy city administrator to New York Mayor John Lindsay. At that time, he did a study of garbage collection in two contiguous neighborhoods. One neigborhood was in Queens and was serviced by the city; the other was in Nassau County and was serviced by a private contractor. Savas found that the private contractor in Nassau County was collecting garbage three times a week, while the city sanitation department collected garbage from Queens only twice a week. Moreover, the private contractor picked up the garbage from each resident's backyard; in Queens, residents had to take their garbage to the curb. Despite the inferior service, garbage collection in Queens was costing $207 per household per year. Nassau residents, on the other hand, were paying a mere $72 per household per year -- about a third as much as their Queens neighbors.
Savas drew the obvious conclusion, and suggested that the city try contracting out garbage collection, whereupon he became embroiled in a rancorous debate that drew national attention in the early 1970s. The debate concerned the relative merits of private versus public delivery of services, and Savas found himself pitted against an entrenched constituency of government workers at all levels. He lost.
Subsequently, however, he went on to participate in a massive, four-year study of the issue. The study, funded by the National Science Foundation, looked at solidwaste collection in 2,200 U.S. cities, and found that municipal services generally cost from 29% to 37% more than privately delivered services. Moreover, those numbers didn't reflect the fact that private contractors pay taxes, while municipal sanitation departments do not. Taking taxes into account, Savas figured that municipal garbage collection generally costs 71% more than would private garbage collection.
Although challenged by many in the public sector, such statistics have encouraged a wide range of municipalities to contract out garbage collection to private vendors both large and small. The way governments have gone about that process, however, varies widely from place to place, and that variation has created pitfalls as well as opportunities for private garbage-collection companies -- as Chuck Walbridge discovered en route to Phoenix.
