Discusses the nature of public services provided by governments and the pros and cons of private contracting, emphasizing that while private contracting can increase efficiency, it requires careful consideration and ongoing evaluation to ensure the public good.
Governments plan and carry out policies in the public interest and provide public services, which are tangible or intangible outputs. Public services play an important role in maintaining the well-being and order of society as a whole and ensuring that all citizens have a minimum standard of living. The nature of public services can be characterized by the concepts of exclusivity and contestability. Exclusivity refers to the property of being able to use a service only if you pay for it, and contention refers to the property of being able to use a service and not be able to use it. The degree of exclusivity and contestability determines the nature of a public service. For example, defense and public security are neither excludable nor contestable because they can be used by multiple people at once without the user paying directly. In contrast, some services are not excluding, but are contestable because it is inconvenient for many people to use them at once. An example of this is when a public library, which is free to use, becomes overcrowded and limits the number of books you can borrow or check out.
In the past, public services have centered on the provision of infrastructure, which is weakly contestable and exclusionary. In these cases, the costs of service provision are primarily covered by public funds, including taxes. These public services are an important basis for securing the economic and social stability of a country and have contributed to improving the quality of life of its citizens through essential infrastructure such as roads, railways, electricity, water, etc. However, as social demands for individual-level public services such as welfare have increased, related public services have been diversified and quantitatively expanded. In particular, as we enter an aging society, the demand for services such as elderly welfare, health care, and child protection is increasing rapidly, which has led to an increase in the number of government organizations and a decline in the professionalism and efficiency of administrative work.
In this case, the government can introduce a private contracting system that can strengthen the professionalism of services without expanding the size of the government organization. Private contracting means that the government retains the right to decide on the object or scope of the service and the responsibility for managing the service in order to maintain the public interest, but entrusts the production of the service to a private company. This system has the advantage of not only increasing efficiency by dividing government work, but also providing higher quality services by utilizing the creativity and resources of the private sector.
Private contracting works in a few different ways. The most common is competitive bidding. This is where the service producer is selected and contracted through competitive bidding among private companies that meet certain criteria. An example of this is the management of public facilities such as parks. In this case, the cost of production can be lower than if the government provided the service directly, and the government’s financial burden can be reduced. The next option is licensing. This is when the government issues a license to a private entity whose skills and facilities meet the criteria for providing a service. Examples include car driver’s license testing and industrial waste disposal services. In this case, the government maintains the minimum level of public services, but leaves the supply to the private sector, which allows the supply and demand of public services to be adjusted elastically. There is also the subsidization method, which provides financial support to organizations that need to provide stable public services, such as privately run general welfare centers. Each of these approaches has its own advantages and disadvantages, and governments should choose the one that best suits the nature and purpose of each service.
However, since private contractors provide public services centered on profitability, if they are not profitable, the public services they provide may not meet expectations. In addition, the performance of public service provision by private contractors is often difficult to measure accurately. By their very nature, public services are not only about efficiency, but also about equity, fairness, and sustainability. In the absence of continuous evaluation and improvement, private contracting can actually undermine the public interest. Therefore, when deciding to introduce a private contracting system, it is important to carefully examine the nature of the service and the government’s ability to manage it. In addition, the government should strive to maintain the quality of public services through continuous communication and cooperation with private companies to bring about positive changes that can be felt by the public.
