This blog post examines whether the private outsourcing system can increase the efficiency of public services while also meeting the public interest. It analyzes its advantages and limitations to explore effective operational strategies.
Governments plan and implement policies for the public good, supplying public services—tangible or intangible outputs. Public services play a vital role in maintaining societal well-being and order, ensuring all citizens receive a minimum standard of living. These characteristics can be explained through the concepts of excludability and rivalry. Excludability refers to the property that requires payment for use, while rivalry denotes the property that prevents others from using the service when one person does. The degree of these characteristics of exclusivity and rivalry determines the nature of the public service. For example, national defense or public safety have neither exclusivity nor rivalry, as multiple people can use them simultaneously without each user directly paying for the cost. Conversely, there are cases where exclusivity is absent, but rivalry arises because many people using it simultaneously causes inconvenience. A public library, which is free to use, is an example where high user numbers can lead to restrictions on browsing or borrowing books.
Historically, public services centered on providing social infrastructure with low levels of both rivalry and excludability. In such cases, the costs of service provision are primarily covered by public funds, including taxes. These public services form a crucial foundation for securing a nation’s economic and social stability and have contributed to improving citizens’ quality of life through essential infrastructure like roads, railways, electricity, and water supply. However, as social demand for individual-level public services, such as welfare, increases, the diversification and quantitative expansion of related public services are occurring. Particularly as society ages, demand for services like elderly welfare, healthcare management, and child protection is surging. This has led to an expansion of relevant government organizations and, in some cases, problems such as reduced expertise and efficiency in administrative tasks.
In such cases, the government can introduce a private outsourcing system to enhance service expertise without expanding the size of government organizations. Private outsourcing involves the government retaining decision-making authority over the service’s target audience or scope and responsibility for service management to maintain public interest, while delegating service production to private companies. This system not only shares the government’s workload to increase efficiency but also leverages private creativity and resources to provide higher-quality services.
Private outsourcing is primarily operated through several methods. The most common is competitive bidding. This involves selecting and contracting a service provider through competitive bidding among private companies that meet specific criteria. Management services for public facilities like parks fall under this category. In such cases, service production costs can be reduced compared to when the government directly provides public services, and the government’s financial burden can also be alleviated. Next is the licensing method. This involves the government issuing licenses to private companies that meet the required technical and facility standards for service provision. Examples include driver’s license examinations and industrial waste disposal services. This approach maintains the minimum required standard for public services while entrusting supply to private autonomy, achieving the effect of flexible adjustment between public service demand and supply. Additionally, there is the subsidy payment method. This involves providing financial support through subsidies to institutions requiring stable public service provision, such as privately operated community welfare centers. Each of these methods has its own advantages and disadvantages, and the government must select and operate the appropriate method according to the characteristics and purpose of each service.
However, since private contractors provide public services primarily focused on profitability, if they fail to generate sufficient revenue, the public services they deliver may fall short of expectations. Furthermore, the performance of public services provided through private contracting is often difficult to measure accurately. This is because public services, by their nature, require careful consideration of factors beyond efficiency, such as equity, fairness, and sustainability. If evaluation and improvement are not continuously implemented, the private outsourcing system may actually undermine the public interest. Therefore, when deciding to introduce a private outsourcing system, the nature of the service and the government’s management capabilities must be carefully reviewed and decided upon prudently. Furthermore, the government must strive to maintain the quality of public services and drive positive changes that citizens can tangibly feel through continuous communication and cooperation with private companies.
