Privatization is a term that may have different meanings to citizens, consumers of public services, state legislators, and public employees.

The most common form of privatization is when a government agency contracts with a private corporation or nonprofit agency through a formal contracting process to deliver or maintain a public service.

The two most stated reasons state by government agencies to privatize services are to save money and improve service delivery.

North Dakota United does not wish to be thought of as opposing privatization on the basis of a union attempting to retain state jobs, but urges cautious cost analysis and comparison of proposals to privatize state services.  Clearly, NDU also believes that proposals to privatize state services must be researched as to short and long term economic and social implications.

NDU believes that contracting state services may have significant long term costs and mask future administrative and legal problems that will outweigh any immediate short term savings.  We believe that the state should learn from the experience of other states that have attempted to contract state services and then discontinued those efforts.  Our Association understands that many state services could be provided by public employees, private corporations or non profit agencies, but the best long term interest for the state is to retain its core services with public employees.

Properly administering a contract is not a simple process.  Administrators have to be trained to develop specifications for a competitive bidding process or how to evaluate non competitive proposals.  Realistic cost analysis is essential so the contract administrator can determine if the bidder is underbidding his first bid in order to obtain a contract and the seek higher rates in subsequent years.  This may be a possibility in service contracts where there are few bidders and contracts may significantly increase after the initial award as well as the ethical dilemma of continuing to award the contract as there are no other bidders.

Monitoring contractor performance is an ongoing process and possibility of contractor default is a consideration for administrators.  As contracts become more complicated over time, provisions will need to be in place for rate changes and contractor protests, disputes and appeals.

Contracting for services does not relive the state of its responsibility to provide services.  As many potential state contracts involve federal funds for human services, due process provisions would still need to be in place for citizens receiving services.

NDU believes that in the long term, there will be significant administrative time and cost associated with provision of services through a privatization basis.

Economic impact to the working family and the community is also a consideration.  Replacing public employees with a contract does not mean that the same employees would be retained by the contractor or that those employees, if retained, would receive the same benefits.  Public employees are a part of the community that they live in and make loan payments, car payments, and pay taxes.  If public employees were replaced by a contractor chances are that less money would be returned to the community and this would be of greater impact in smaller communities which have a strong economic dependence on state employment.

Loss of medical benefits is a serious consideration.  Many public employees remain employed only for the medical benefit and potential loss could have disastrous effects on families who are in need of ongoing medial services.  This could become a serious problem for all employees, but more so for employees in rural areas where alternative employment is limited.

NDU believes that any privatization effort would result in higher unemployment benefit costs, higher food stamp cost, higher medical assistance cost and higher housing assistance cost.

North Dakota United believes that prior to any attempt to privatize state services a complete analysis be done as to real cost of contracting over time and social and economic impact to communities in the state.  We also believe that unless there is compelling evidence to support privatization, core services traditionally provided by the state should remain with the state. Further our organization believes that the State of North Dakota has an obligation to any worker ever displaced through a contract of his position to a private contractor or nonprofit agency.