Organizing prisons through public-private partnerships: a cross country investigation.
| Autor | Cabral, Sandro |
| Cargo | Report |
Introduction
In the last twenty years, several governments throughout the world have introduced reforms as a means to leverage investments in public services through the private sector (Estache, 2006). The water (Chong, Huet, Saussier, & Steiner, 2006), electricity (Glachant & Finon, 2003), roads (Athias & Saussier, 2007), telecommunications (Levy & Spiller, 1994) and also even more human and less infrastructure sectors such as health care (Albreht & Klazinga, 2009) and social security (Cronqvist & Thaler, 2004) have been analyzed. However, little is known about the public and private governance of criminal justice services, such as prisons (Cabral & Azevedo, 2008). Researchers seldom focus their studies on the correctional sector, probably because the process of obtaining relevant information is not an easy task: non-consolidated data and confidentiality are factors that often disturb and frequently impede the execution of research in this sector (Dilulio, 1996). Because of this, the issues related to prison performance remain a kind of black-box when compared to other public service utilities.
Notwithstanding, prisons are often used as an example to illustrate theoretical models concerned with the proper scope of government (Bennett & Iossa, 2006; Hart, 2003; Hart, Shleifer, & Vishny, 1997). This type of public service implies several tasks that can be split between public and private authorities and that may differ depending on the kind of prisoners. In addition, the management of prison services is quite complex due to the diversity of such tasks. In fact, in order to prevent escapes, riots, and so on, prison managers must provide prisoners with food as well as healthcare, judicial and reentry services, all of which require the coordination of different institutions and organizations. Of course, this interaction is not conflict free; the tensions that may arise between these stakeholders can create inefficient arrangements. For this reason, prisons constitute a good theoretical example and an interesting empirical case to study.
In this paper, we propose some partial results of the Public-Private Partnerships (PPP) in prison services of three countries, based on previous empirical literature as well as information we collected: Brazil, France, and the United States (U.S.). In the present paper, PPP refers to different modes of private participation (privatizations, concessions and outsourcing) in the provision of public utilities.
These three countries are especially interesting because of the variation in the degree of private involvement in prison service in each country. In some states of the U.S., full privatization may take place, whereas the participation of private operators in prisons services in Brazil and France is limited. Compared to Brazil, the role of private companies in France is even narrower, with fewer delegated functions. The three countries also differ in their criminal policies. The U.S. locks up a higher proportion of citizens that are not a danger to society than do Brazil and France. This is reflected in the incarceration rates. The U.S. has the highest incarceration rate in the world with 754 inmates per 100.000 inhabitants; Brazil and France have respectively 200 and 96 inmates per 100.000 inhabitants (Cour des Comptes, 2006; Departamento Penitenciario Nacional, 2008; Sabol, West, & Cooper, 2009)(1).
Interestingly, the results of each country's public-private agreements do not correspond to the theoretical predictions focusing on property right distribution (Hart et al., 1997). In Brazil, we observed that public-private agreements have resulted in cost reductions and an increase in the quality of services provided, while in France, empirical findings suggest an increase in both cost and quality. In the U.S., we observed reductions in both cost and quality. We suggest that several contractual and extra-contractual dimensions may explain these results.
We believe our paper is a contribution to the literature because our analysis has made it possible to partially fill the empirical gap in knowledge of prison administration. In addition, we believe our analysis enables the assessment of the extent to which empirical facts are connected to the theoretical developments concerning PPP, suggesting that the main driving factors for efficient arrangements do not depend only on property rights distribution but also on the incentives resulting from other factors such as decision and revenue rights distribution and institutions.
We divide the paper as follows. The next section considers how property rights could have an impact on efficiency. We discuss the cost versus quality trade-off in the private provision of public services (Hart et al., 1997). We also briefly consider other dimensions that may also influence performances of prison services. Following some methodological considerations, we present the cases of PPP in prisons in the three countries, showing the main results obtained and the peculiarities of the sector. Further, we discuss why the empirical results differ from one country to another. We demonstrate that the main driving factors do not rely on one particular element--like property rights themselves--but on how elements such as decision rights, revenue rights and property rights are combined and aligned, giving rise to a coherent governance structure. We argue that the effect of private participation is dependent on this proper alignment. This may explain why private participation in prison services has very different results in each location.
Prison Governance Structures and Efficiency
PPP and the impact of property rights
Public-Private Partnerships (PPP) is a general term to designate the cooperative arrangements between public and private sector actors (Hodge & Greve, 2007). The expression PPP includes the Project Finance Initiative Model (PFI), which is largely disseminated in the United Kingdom and Australia. Under PFI-type, the government specifies the output but the private actors retain the residual control rights regarding the service's delivery (Bennet & Iossa, 2010). In this sense, the PPP concept is more comprehensive, covering several other modes of private participation (privatization, concessions, outsourcing, institutional cooperation for joint production, and public policy networks) in the provision of public utilities (Chong et al., 2006; Guasch, Laffont, & Straub, 2008; Hodge & Greve, 2007).
In a time of fiscal constraints, governments have used PPP in order to supply services that had been previously provided publicly. However, although private participation may have been seen as a solution to avoid public and market failures, results vary according to the sector in which PPP were implemented, raising questions concerned with the efficiency of PPP (Hodge & Greve, 2007).
Several theoretical approaches may be useful to study the different dimensions of PPP and their impacts on costs and managerial innovations that might lead to productive efficiency in prison services. One obvious and important dimension to consider is the distribution of property rights. One of the most prominent contributions to an understanding of the public versus private dilemma is the seminal paper of Hart, Shleifer and Vishny (1997), which focuses on the comparison between public and private participation in the provision of prison services. The authors adopted an incomplete contract view, where the private operator's residual control rights would reduce production costs at the expense of the quality of the services provided. In order to improve quality, the private operator must incur both the costs of quality provision and the costs of influencing the government to accept changes (the government must agree to pay for improvements through a Nash bargaining process). Consequently, the private operators have incentives to under-provide quality and to over-reduce costs (Hart et al., 1997). Therefore, a public mode of provision is preferred when the adverse effects of cost reductions have a significant impact on quality levels or where there is limited room for quality innovations by private actors. The impact of the distribution of property rights is linked to the incompleteness of contractual agreements between the government and the private operators, which generate residual rights of control over the assets (Hart, 2003). Since it would be very difficult to contractually delineate certain tasks, such as the use of force to be employed by the private operator or the exact capabilities of the workers, Hart et al. (1997), are skeptical about privately run prisons because of the important adverse effect reduced cost strategies have on quality (i.e. under-skilled workers would lead to a higher rate of escapes).
Hart (2003) completes the Hart et al. (1997), picture by considering the question of bundling (i.e. one single contract for building and operating) in prisons when a PPP is concerned. He concludes that unbundled modes of contracting (two contracts: one for building and another for operating the prison) are suitable if the quality of the construction can be well-specified ex-ante. However, PPP would be recommended when the quality of the service can be well defined. In this case, private companies would not constrain their building costs as this might have repercussions for the normal operations of the correctional facility in the future. In the particular case of prisons, it is very difficult to specify the service requirement in the contract; therefore, the author concludes that services should be carried out under the unbundling regime. In the same vein, Bennett and Iossa (2006) posit that public-private agreements can be desirable in situations in which potential innovations may result in cost-reductions. On the other hand, PPP can lead to malignant effects. In the presence of opportunistic behavior, either from governments or from private firms...
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