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CHAPTER 4
MAKING BETTER PRIVATIZATION DECISIONS
If you are going to spend three hours chopping wood, spend the first hour sharpening your axe.
- Abraham Lincoln
The importance of careful deliberation and planning when deciding whether to privatize a function cannot be overstated. The time and energy invested in this task-which involves not only weighing one's options, but also planning how to reduce resistance and build support for your decision-will be repaid many fold. If the decision is to privatize, writing the request for proposals will be easier; the bidding process will go more smoothly; less time will be spent defending your decision; contract monitoring and management will be improved; and, most importantly, you will have a much better chance of getting the results you want. If you decide not to privatize, your decision will be quite defensible; you will be able to demonstrate to critics that the program or function is working as well as possible under the circumstances-or that the Title IV-D agency has the capacity to correct any problems; and you will be spared the further effort, expense, and controversy involved in converting to a privately operated system.
Step 1: Focus on Outcomes
The philosopher Kierkegaard observed, "Life can only be understood
backwards; but it must be lived forwards." The same logic applies to
privatization decision making: we can only know whether a decision to privatize
was a good one after we see the results. The chances of seeing positive
results, however, are greatly improved if right from the beginning we identify
the outcomes we want to see from the child support enforcement program,
and then make sure that every decision along the way moves us further in
that direction.
Therefore, the first step in deciding whether to privatize a service
or group of services is to review the intended outcomes of the child support
program in light of the agency's strategic plan. Two types of outcomes should
be considered: customer outcomes and system outcomes (Campbell,
1994). The first set of outcomes relates to the goal of improving or changing
the lives of the service customers-for example, getting non-custodial parents
to make regular payments to support their children. The other set of outcomes
is associated with improving the service delivery system itself-for example,
reducing the amount of time and effort needed to obtain a support order.
In human services, the main outcomes of interest are changes in people's
lives-the changes that should occur if a program works as intended. These
may include changes in behavior, knowledge, attitudes, skills, abilities,
and circumstances. Because it is often difficult or impractical to measure
such outcomes directly, proxy measures are commonly used to indicate whether
desired results are achieved. For instance, a goal of secondary education
is to help students become proficient in mathematics. Math scores on the
SAT are one indicator of whether this outcome has been achieved. People
frequently confuse outcomes with their measures however. As a result, some
educators may believe their mission is to improve students' SAT scores,
which can be accomplished by "teaching to the test" and producing
good test takers. While this approach can boost a school's academic ranking,
it may not help students gain all the computational skills needed to do
well in college or function in the workplace-the real outcomes of interest.
When looking at customer outcomes for a child support enforcement program,
it is important to first identify the service customers-mainly the custodial
and non-custodial parents and their children-and then specify the changes
that should occur in their lives if the program works as intended. Some
of the customer outcomes that might be expected from a local child support
enforcement program are discussed below. Later, in Chapter 7, we discuss
the means for measuring these customer outcomes, such as tracking the amount
of child support collected or the rate of paternity establishment.
Main Outcomes to Be Achieved
At the highest level, the desired customer outcomes of a child support
enforcement program are:
- Non-custodial parents who contribute to the support of their
children by making regular support payments and/or by providing medical
support-and who are actively involved in their children's lives in other
ways as well.
- Custodial parents or guardians who can better provide for the
needs of their children as a result of the support received from non-custodial
parents.
- Dependent children who receive regular, uninterrupted financial
and medical support until they reach the age of majority.
When a child support program is privatized, wholly or in part, the ultimate
purpose is to help more parents and children achieve these outcomes. Each
part of the program should contribute toward this end.
Intermediate Outcomes from Service Components
Child support enforcement is a multistep process in which the lives of its customers change-sometimes dramatically, sometimes subtly-at each step. Figure 4-1 shows the five main components of a local child support enforcement program. Each component is a process that produces specific customer-related outcomes. The changes that occur as a result of a particular component are sometimes called "intermediate outcomes." Each successive change moves the customers closer to achieving the desired outcomes of the overall program.
Briefly described, the components and their associated outcomes are as
follows:
Conduct Intake/Locate. This component encompasses activities aimed at obtaining accurate information about or from non-custodial parents and client families so that the initial support petition can be completed, non-custodial parents located, and a hearing scheduled for both parents. The outcomes of this activity are:
(1) new clients for whom child support enforcement services will be provided, and
(2) identified, located non-custodial parents.
Establish Obligation. This component includes such activities as conducting the hearing, establishing paternity, obtaining a consent decree, and issuing a support order. The outcomes of this process are:
(1) clients for whom the legally binding right to financial and/or medical support from a non-custodial parent has been established, and
(2) non-custodial parents who have been confirmed to be the biological and/or legal parents of clients' children and who have been obligated by a legally enforceable order to provide child support and medical support.
Monitor and Enforce Cases. This component includes all the activities needed to initiate support payments and maintain support once it has begun. These activities include monitoring payment records, reviewing and updating case information, responding to inquiries from custodial and non-custodial parents, and taking appropriate enforcement actions when parents become delinquent in their payments. The outcomes from this process are:
(1) clients for whom required enforcement actions are taken in a timeframe that ensures the continuity and correctness of their payments, and
(2) non-custodial parents to whom required services are extended and against whom enforcement actions are taken in a timeframe consistent with their legal rights and conducive to a cooperative attitude towards child support.
Collect Payments. This process involves a variety of activities by which child support is collected from the obligated parent. These include regular payments by the individual; wage withholding; interception of tax refunds, lottery winnings, and unemployment benefits; and obtaining payments from parents in other states. The outcome of this process is non-custodial parents who make regularly scheduled support payments voluntarily or through wage withholding, asset attachment, or other involuntary means.
Disburse Payments. In this component, steps are taken to ensure that collected payments are disbursed properly: to the custodial parent directly for non-welfare cases; to the state if the child is receiving public assistance; or to another state if the obligated parent is a state resident and the family is elsewhere. The outcome of this component is client families receiving uninterrupted financial and medical support.
While the primary purpose of the Title IV-D agency is to deliver services
that produce the types of customer outcomes just described, much work goes
on behind the scenes to ensure that services are delivered smoothly, effectively,
and efficiently. The agency engages in a number of other activities including
planning, organizing and reorganizing the delivery system, orienting and
training staff, retooling and upgrading automated systems, coordinating
with other agencies, and developing new resources and services. Another
significant activity is the hiring and oversight of private contractors
to assist in these activities and in the direct delivery of child support
enforcement services.
Each of these activities is intended to alter and improve the child support
enforcement system in some way. While specific outcomes can be identified
for each change, the overall outcomes that should result from these changes
fall into four major categories:
- Cost effectiveness. Many system changes are implemented to reduce
costs. For instance, privatization of the payment processing function in
Massachusetts was initiated to reduce the cost-per-payment processed. Most
cost saving initiatives in child support enforcement are aimed at reducing
the overall agency cost per dollar of child support collected.
- Efficiency. Most initiatives are intended to make operations
more efficient. The outcomes to be achieved include faster case processing,
more complete and accurate information in case records, and fewer errors
in handling receipts and disbursements.
- Coordination. Because child support enforcement involves so
many different partners, some initiatives aim to improve the working relationship
among partner agencies. Desired outcomes include improved information flow
among agencies, greater coordination of policies and operations, elimination
of bottlenecks in client flow, and fewer cases that "fall between
the cracks."
- Customer satisfaction. Ultimately, if the child support system
is working effectively and efficiently, is well coordinated, and staff
are courteous and respectful, customers should be pleased with the services
they receive or, at least, feel that they have been treated fairly. Outcomes
include increased expressions of customer satisfaction and fewer complaints.
With these customer and system outcomes in mind, it is then time to move to the next step in the process: determining whether some outcomes might be improved through privatization.
Step 2: Identify the Candidates for Privatization
Inge Fryklund, a management professor at Northwestern University and
former head of the Chicago parking bureau, observes:
When government is thinking about outsourcing [i.e., contracting out] some function-garbage collection, janitorial services-it is almost invariably because there is a problem. It is tempting to jump straight from problem to privatization, but the temptation should be resisted. Government should take the time to solve the problem, rather than simply outsourcing it. Most of the financial and political disasters in privatization that I see around the country were easily preventable and come from failure to think through the privatization decision. (Fryklund, 1995)
The examples of decision making in child support enforcement presented
earlier provided several instances in which Title IV-D agencies privatized
services without fully considering the alternatives. This is not an uncommon
occurrence. The pressure to privatize can arise quickly and stem from many
sources: caseload growth, added responsibilities, staffing limits, noticeably
poor performance by a local unit, failure to meet state and federal audit
standards, loss of a contract agency as the local service provider, new
legislative mandates to privatize, and so on. However, unless these pressures
are so intense and immediate that they cannot be resisted, the Title IV-D
agency should delay rushing into privatization until a careful analysis
has been completed to determine if this is a reasonable solution to the
problem.
Fryklund recommends a systematic approach (presented here with some modifications)
for identifying candidates for privatization and thinking through the privatization
decision:
Focus on the goals of the organization-be clear about what you want to accomplish.
When faced with a problem situation or a mandate to add a new service, the first question should not be "How can we privatize (or avoid privatizing)?" but "How does this affect our strategic plan and our ability to meet our objectives?" Think of privatization as just another option that may-or may not-help you meet your customer and service goals. Further analysis will determine whether, under the circumstances, it is the best option. In the private sector, this is known as "following the business plan."
Identify all the reasons for considering privatization.
Pull together caseload statistics, program performance and outcome data, audit reports, cost data, and customer satisfaction/complaint information. Share this with program managers and staff, as well as with representatives from partner organizations. Get their opinions on what's right and wrong with the program. Discuss how impending changes might affect program performance. This gets problems out in the open and ensures that people won't be working at cross purposes trying to solve different problems. It also highlights prime areas that are candidates for privatization.
This process can be conducted by the Title IV-D agency or by a management consultant. In Nebraska, for example, a management study found that poor performance in Douglas County (Omaha) was due to a severely fragmented child support system. The state and county each had responsibility for portions of the caseload, but resources were not apportioned according to service demands. The study recommended two courses of action: either consolidate services under one of these entities, or contract out the entire program. When neither the state nor the county offered to assume full responsibility, the program was privatized.
Ask whether the function in question should be performed at all.
Fryklund offers this example: If a city has a problem warehousing office supplies, the solution may not be reorganizing the warehouse or outsourcing its management but closing the warehouse and obtaining just-in-time delivery from vendors. Although it is unlikely that a Title IV-D agency would be performing an unnecessary customer service, it still might be expending scarce resources on a supportive function, such as warehousing furniture and equipment, that could be eliminated. Similarly, the agency might provide an ancillary service, such as job placement referrals for non-custodial parents, which duplicates services offered elsewhere and could be dropped.
Decide if there is anything uniquely governmental about a function.
A uniquely governmental function, such as setting policy, is not a candidate for privatization. On the other hand, a large number of entries in the telephone Yellow Pages for a particular service is a sign that it is not uniquely governmental and may be safely contracted out. Sometimes a government agency has performed a duty for so long that it is just assumed to be a public function. In the Maryland example, the legislature was convinced not to privatize client legal representation even though this function is routinely contracted out in other states.
Analyze the operation from the customer's perspective.
If there is a problem with current operations, find out what is going so wrong that people are frustrated and talking about privatization. Flow-charting at this stage reveals duplication, bottlenecks, gaps in service, and unclear lines of authority. Examine, for instance, the service components in the previous Figure 4-1. What are all the steps involved in moving customers through each one of these components? How many other agencies or departments are involved? Find out how long it usually takes to complete each step in the process. Combine this with information on customer complaints to pinpoint where the system is breaking down.
If a new service is to be added or if the program is to be expanded by using outside contractors to meet increased demands, flow-charting can help reveal the potential impact of the change on customers. Will it, for example, speed service delivery and/or increase the amount of money collected on behalf of children? Are there potential problems in coordinating services or providers?
This type of analysis is useful not only for identifying areas that might be privatized, but also for eliminating privatization as the preferred option. For example, one management study of a local child support enforcement system found a severe bottleneck in the clerk of court's office. Paperwork going back and forth between the child support agency and the court would sometimes disappear for months. The solution was not privatization, but a combination of process re-engineering and reallocation of public resources.
Consider not doing anything-examine the possible consequences.
What would happen if no significant changes are made at this time? Some problems might disappear on their own, while others would only get worse. Use a five-year planning horizon to anticipate the possible consequences of inaction. In this analysis, consider the other impending changes that will soon affect the way the Title IV-D agency does business and that could either eliminate or exacerbate the current problem. These changes might include full implementation of automated systems, population shifts, and compliance with federal mandates such as the requirement for centralized distribution of payments. Consider also the potential impact of welfare reform on service demand-upward or downward-due to time limits on welfare benefits or initiatives such as new hire reporting.
Consider whether there is a more efficient way to perform the function in-house.
Sketch out an alternative structure and estimate the fully allocated costs of a reorganized operation. Flow charts developed when troubleshooting earlier can provide a starting point for the redesign. Unions and front-line workers usually have good ideas about how to reorganize or re-engineer the service process based on their direct experience with customers. Use quality circles or other forms of labor-management collaboration to study operations and suggest solutions. Consider ways to automate functions, reduce paperwork, improve flow, and make the service system faster and more convenient for customers.
Conduct a market analysis to determine if there are qualified companies to perform the service.
As discussed earlier, one of the prerequisites for successful contracting is an adequate number of qualified suppliers (Savas, 1987). The Title IV-D agency should use several sources of information to conduct a market analysis: business publications, state and federal labor statistics, agency advisory group members from the private sector, the chamber of commerce, and professional and trade associations. In addition, the agency should use its network of contacts with other child support agencies and the federal Office of Child Support Enforcement to learn more about privatization efforts elsewhere. Exhibit 4-1 lists issues that agencies may want to consider in a market analysis.
MARKET ANALYSIS
In its Guidelines for Public/Private Competition, the City of
New York (1994) recommends that agencies consider the following issues:
Marketplace Competitiveness
Do many firms provide this service and are they accessible in your area?
Is there a single firm or group of firms holding a disproportionate share of the market?
Are there barriers to the entry of new firms in that industry?
Is there price competition among firms?
Are there other factors that would affect market competition?
Service Quality
What is the quality of service? Are there significant differences among providers?
Does service provision tend to be customized or standard throughout the industry?
Does the agency have special needs that are different from other users?
What is the condition of the labor market for this industry?
Experience and Reliability
How long have private firms been providing these services?
What size and type of caseloads have they served?
How frequently do firms in this industry go out of business and why?
Interestingly, very few child support directors interviewed during the
preparation of this guide cited cost savings as a primary reason for their
agencies' decisions to privatize services. When mentioned at all, cost was
usually far down the list, way below caseload pressures, operational problems,
compliance issues, and political pressure. Some directors said they assumed
all along that privatization would be more expensive but felt compelled
to go that way because of all the other pressures. These findings stand
in sharp contrast to privatization decision making in other areas of government
where cost savings is often the main objective.
Despite the apparent low level of pressure on Title IV-D agencies to
economize by contracting out services, a thorough analysis of the cost of
privatizing should be conducted as part of the decision-making process.
The long-term cost implications to the agency-and to the taxpayer-are too
important to gloss over in a rush to solve immediate problems. Based on
privatization experiences in other areas of government, particularly at
the local level, the following cost comparison steps are recommended:
Determine the fully allocated costs of the current activity and use this information to calculate the average cost of outcomes.
It is impossible to determine whether privatization saves money if you
have no idea what the current activity costs. Identify all direct, indirect,
and capital costs for the child support service you are considering privatizing.
Include in the analysis the costs of current contracts with private companies
that provide some portion of this service (e.g., genetic screening, process
serving, etc.), as well as the costs of related contracts or reimbursement
agreements with other government agencies (sheriff's office, clerk of courts,
district attorney, local social service agency, etc.). See Exhibit 4-2 for
a list of cost categories and their definitions.
Once the fully allocated cost is computed, use it to calculate the unit
cost for the outcome of interest. For instance, when looking at the overall
cost effectiveness of a local child support office, divide its fully allocated
costs for a year by the total amount of child support it collected during
the same period. The result is the office's average cost per dollar collected.
COST CATEGORIES
- Operating/Direct Costs - Includes salaries and wages, travel, non-capital equipment, supplies and other expenses charged directly to the program. When calculating cost of current or re-engineered (non-privatized) program, also includes the costs of current contracts with private companies for other program-related services (genetic screening, process serving, etc.).
- Indirect Costs - Includes fringe benefits, payroll taxes, facility
costs (rent, utilities, etc.), and the program's share of office-wide overhead
expenses (administration, personnel, accounting and budgeting, etc.).
- Capital Outlay - Includes the costs of capital assets such as
equipment and buildings (amortized over the useful life of the asset).
- Cooperative Agreements - Includes the costs of contracts or
reimbursement agreements with other government entities (sheriff's office,
clerk of courts, district attorney, local social service agency, etc.)
that are involved in providing this service.
- Start-Up Costs - One-time costs that include personnel recruitment,
staff training, operation systems development, and project design costs.
Costs to be amortized over the life of the project.
- Conversion Costs - Cost of converting from public to private
service delivery. Includes costs of market analysis, competitive procurement
and contract development, recruiting and training contract management staff,
and developing new systems to monitor contractors. May also include costs
attributable to employee displacement: unemployment liability, continued
health coverage, benefits buyouts, and retraining. Costs should be amortized
over the life of the project.
- Incidental Costs - Includes contractor's liability/arbitration
costs, insurance, audit costs, and interest charges. Comparable costs for
in-house work generally included in agency's overhead calculation.
- Contract Administration - Includes salaries and wages, benefits,
supplies, travel, equipment, facilities, data processing, etc., needed
to monitor and administer the contract and pay the contractor.
- Contract Support - Includes the value of any facilities, equipment,
or other support provided by the agency to the contractor's operation.
- Contractor Profit - The return received by the private firm
after meeting all expenses.
- Sale of Surplus Property - If converting from public to private
delivery enables the agency to sell assets formerly used for in-house operations,
these one-time revenues are subtracted from the costs of privatizing. Revenues
should be amortized over the life of the contract.
Adapted from Guidelines for Pubic/Private Competition (New York City, 1994)
In reviewing the costs of current contracts with private firms and public
entities, try to determine the unit cost of outcomes or outputs from these
contracts as well. What is the average cost to the Title IV-D program for
each summons successfully served or each blood test given? For each arrest
warrant served by the police? For each document processed by the clerk of
court? For each case adjudicated by the DA? The results of such analyses
might be surprising. For instance, the management study for the anonymous
city cited in the previous chapter found that the child support agency had
engaged for years in contracts with the police department and district attorney
that yielded very low returns for the dollars invested. The consultant recommended
that these functions be considered for privatization as well.
Estimate the fully allocated costs for the reorganized operation.
In estimating these costs, use the same cost categories as before, adjusted
to reflect the proposed changes in the operation. For example, staff costs
may go down because a function is automated, but capital outlays could increase
due to the new equipment required. Also, be sure to include the start-up
costs of the reorganization itself.
Calculate the cost-per-unit of outcome or output as before. However,
if the proposed changes are likely to boost productivity-for example, increasing
the amount of child support collected or the number of paternities established-project
what these new levels will be. Use the projected levels when making the
cost-per-unit calculations.
Obtain rough cost estimates for a specified level of service from potential contractors.
Several potential contractors identified through the market analysis
should be asked to provide non-binding, bottom-line estimates of how much
they would charge to perform the child support function of interest. This
is usually called a request for quotations (RFQ). Their quotations should
include (but not break out) all direct, indirect, capital, and incidental
costs associated with providing the service, as well as their estimated
profit. In addition, they should include any one-time start-up costs to
be borne by the contractor.
In order to obtain realistic quotations, the RFQ must be fairly detailed
in describing the function to be performed, the level of service to be delivered
(number of customers served, type of cases, required standards of quality,
etc.), and the expected outcomes to be achieved. To make the comparison
process easier later on, the required level of productivity should be the
same as expected from the re-engineered process. The RFQ must also indicate
the anticipated contract length. This "project period" must be
sufficient to ensure that a contractor can both recoup start-up expenses
and realize a profit. Much more will be said about gauging contract length
in the chapter on writing the request for proposals.
In preparing the RFQ, remember that the more clearly you describe what
you want, the more likely you are to get accurate estimates you can actually
use to make decisions. Vague, poorly thought out RFQs cause respondents
to guess what the agency wants, which results in considerable variation
in the quotes received. One company, for example, might assume the public
agency will provide certain facilities or equipment while another does not.
It is often a good idea to ask firms to list their assumptions when submitting
a quote. Poor-quality RFQs also open the door to low balling, the practice
of submitting ridiculously low estimates in an effort to wrest programs
away from the public sector.
Finally, the Title IV-D agency should use a formal RFQ process to obtain
estimates from private firms only if it is truly and seriously considering
the privatization option. Private firms will work hard to prepare a quotation
because they want to compete for the job. But they do not want to prepare
cost estimates if the agency is merely testing the waters or going through
the motions of looking for a contractor to satisfy some higher up. Accurate
quotes-particularly for complex tasks such as full-service privatization-require
a significant investment of resources by potential contractors. Several
contractors in the focus groups we conducted complained that they were burned
more than once by responding to RFQs for work an agency had no intention
of contracting out.
An alternative to the RFQ process is to contact colleagues in other Title
IV-D agencies that have privatized the function of interest and ask what
they are paying for the service. This information may have been gathered
already as part of the market analysis. These estimates should only be used
as a very rough guide, however, because needs and conditions can vary so
much across agencies.
Compare the relative costs of the current process, the re-engineered process, and the contracting alternatives.
This comparison will indicate whether it is potentially cost-effective to either contract out a service or improve it through reorganization and re-engineering. In making the comparison, use the same timeframe or project period for all three options. Collections contracts, for example, are typically let for three years. Table 4-1 is a cost comparison chart that shows the costs to be included for each option.
COST COMPARISON CHART
| Cost Category | Standard |
Re-engineered |
Contracted |
| 1. Operating/Direct Costs | A |
A |
C |
| 2. Indirect Costs | A |
A |
C |
| 3. Capital Outlay | A |
A |
C |
| 4. Cooperative Agreements | A |
A |
A |
| 5. Start-Up Costs | A |
A & C | |
| 6. Conversion Costs | A | ||
| 7. Incidental Costs | C | ||
| 8. Contract Administration | A | ||
| 9. Contract Support | A | ||
| 10. Contractor Profit | C | ||
| 11. Sale of Property | <A> | ||
| 12. TOTAL COST | |||
| Unit Cost Calculation | |||
| 13. Level of Production | |||
| 14. Cost per Unit of Outcome (12. divided by 13.) |
|||
A - Title IV-D Agency Costs
<A> - One-time Revenue for Title IV-D Agency
C - Contractor Costs (Included in contract)
For the "standard in-house" option, use
the current cost figures as a baseline to project the total allocated costs
for the project period. Also estimate the level of productivity for the
in-house operation during this period, factoring in any changes that will
occur whether or not the operation is re-engineered or privatized. Impending
changes that might boost performance include completion of systems automation
and new initiatives such as driver's license revocation, central case registry,
and new hire reporting. Dividing total costs by the estimated level of production
will yield a unit cost per outcome that can be compared to the other options.
Overall cost estimates for the privatized option
should include not only the quoted contract price, but all start-up and
conversion costs to be borne by the Title IV-D agency, as well as the future
costs of monitoring and administering the contract. Some of these costs
can be offset if the agency sells off equipment or facilities as a result
of privatization. It is the total of the contractor and agency costs that
should be divided by the level of productivity to determine the per-unit
outcome cost.
The crucial data for making comparisons are the
estimates for the "re-engineered in-house" option. Through reorganization
and process re-engineering an agency can almost always lower its operating
costs and/or increase productivity. Having the cost estimate for the re-engineered
process in hand helps the agency obtain the best possible price from a contractor.
Here's how: Assume that the cost per child support dollar collected by a
private contractor is estimated to be 22 cents (including both contractor
and agency costs). This appears to be a bargain if the agency projects that,
operating in its standard way, it would cost 26 cents per dollar to collect
child support. However, the privatization option might not look as good
if the agency discovers that it can reduce costs on its own to 20 cents
per dollar through re-engineering. The re-engineering cost estimates can
be used to set an upper limit on the amount of taxpayer money the agency
is willing to spend for privatized services.
Examine the relative advantages and obstacles to contracting out and reorganiza-tion. Use this information along with cost data to decide which option to pursue.
Advantages and constraints of the competing methods
should only be considered after the overall cost analysis is complete.
In this way thinking is not limited only to those options permitted under
existing union contracts or legislation. If the potential of a particular
option to reduce costs and improve service quality is high, taxpayers can
make an informed decision about whether to change obstructing laws and contracts.
A complete analysis of the various options can
lead to one of the following decisions:
1. Continue providing child support enforcement services as before. This decision is defensible if the analysis indicates that the program is already providing good service at a reasonable price, if the costs of change are too high for the anticipated gains in productivity, or if the organizational, political, or regulatory obstacles to change are insurmountable.
2. Reorganize and re-engineer services to improve quality and reduce costs. This decision is usually made when the analysis shows that it is possible to re-engineer services, the potential increases in productivity and/or reductions in cost make it worthwhile to modify the system, and the privatization alternative is too expensive or politically unacceptable.
3. Privatize some or all child support services by contracting out. If the organization is performing poorly or overwhelmed by demand and it is impossible to reorganize and re-engineer-due, for instance, to union contracts, personnel rules, non-negotiable arrangements with partnering agencies, staff ceilings, or other impediments-then the decision to privatize is perfectly defensible. Elected leaders, public managers and employees, unions, partnering organizations, and the news media should be helped to understand how and why the decision was made. They also should be informed of the potential positive impacts of privatization on costs and service quality.
Sometimes the decision to privatize will hinge on private firms having specialized skills or equipment the public sector just can't duplicate. This is most apparent in areas such as information technology and data processing, where government procurement rules generally guarantee that publicly owned equipment will be a generation or more behind the private sector's (Fryklund, 1995). Also, when time is of the essence-such as when a new child support initiative must be staffed quickly-privatization may be the only viable option because the private sector hiring process is usually much faster.
4. Initiate public-private competition and prepare to solicit bids from both sectors. This decision makes sense if the analysis shows that there is no clear advantage to either privatizing or re-engineering, but that both options offer substantial advantages over the current system. Sometimes it is a compromise decision designed to appease all political factions. When this decision is made, the ground rules for competition must be carefully established so that neither sector has an unfair advantage.
5. Quit providing certain supportive or ancillary functions altogether. This decision can be made in conjunction with any of the other decisions. If the analysis of the child support enforcement program shows that certain functions currently funded under Title IV-D don't need to be performed by the child support agency or its partners, it may be reasonable to just stop doing them. Why, for example, should a child support agency or its contractor provide a job search or parent mediation service that duplicates what is already available to its customers elsewhere? Why should it warehouse supplies or print forms that could be ordered as needed? Unless there is a demonstrated reason for continuing to perform such functions, they should be considered for elimination.
If either the third or fourth option is selected-both of which allow private firms to compete to provide services-the next steps in the decision process involve allaying the concerns of public employees and building needed support for the decision.
