Research for Infrastructure

The debate continues as to whether use of the private sector really lowers cost. Some opponents say that outsourcing and privatizaiton actually increase costs, but experience argues the opposite. In this report, we survey selected recent initiatives on privatization, competition, and outsourcing in both government and nongovernment sectors. We draw from a variety of publications and reports by the Defense Science Board, the Commission on Roles and Missions, and the General Accounting Office, as well as CNA's prior work and the work of other research organizations.

Outsourcing is one way, although not the only way, to increase efficiency. Outsourcing, or more generally, competition (whether public or private) provides cost visibility - customers begin to see what they pay for goods and services. It also can provide alternative sources, enhance flexibility, introduce better business practices, and take advantage of emerging technologies and innovations. Outsourcing and competition are sometimes considered something new and untested, as experiments. In fact, they are not. The public sector has relied on the private sector for years. Although it is hard to write contacts for something as risky as developing and manufacturing a major weapon system, the Department of Defense (DOD) has done it repeatedly. DOD has outsourced successfully functions as complex as acquisition, and as straightforward as laundry services. This is not uncharted territory. The purpose of this paper is to take a first look at what outsourcing opportunities exist and what types of cost savings are possible. To glean some insights into implementation, we look at how one naval technical center has outsourced various functions. We consulted several databases to quantify good candidates.