20 Costs Questions

Pricing a prison isn’t like pricing a can of soda, or even a car. Prisons are complex institutions with multiple measures. In most cases, studies are undertaken in advance to itemize operational costs and community impact. In New Hampshire, where no such studies were undertaken, the questions need to be asked in the context of contract negotiations. Crucial questions include:

Where do alleged cost savings come from?

1. Do the cost comparisons compare apples to apples – similar facilities with similar populations? Are they comparing minimum security to medium security? Young healthy inmates to ailing, geriatric inmates? Learn more about costs here

2. Does the baseline cost include a fair share of the overhead cost of central administration? Or only the operational costs inside the facility?

3. How is the comparison made; how often; by whom?

Who pays for new, hidden or unexpected costs?

4. Who pays for the local police time spent on the compound during a riot or searching for escapees after an escape?

5. Who pays for time the local prosecutor spends prosecuting crimes committed on the inside?

6. Who pays the cost of defending lawsuits that name public actors as a result of alleged contractor failures or procurement problems?

7. Does the contractor have a limit on liability? To what risk is the public exposed if the contractor reaches liability limits?

8. What will be the local impact on water, sewer, infrastructure, or insurance rates? Who pays for additional costs? What if they aren’t identified until after the contract is signed and costs accrue?

9. How might privatizing specific functions affect other ones? The mere presence of outside actors on the inside of a secure facility may affect the safety, security and smooth operation of the facility.

  • In 2007, the Michigan Department of Corrections found that when outside food service staff were used, at least one additional state corrections officer needed to be assigned during operations – even though the time shows up as state costs not vendor costs.

10. Does privatization of prisons lead to inefficiencies elsewhere?

  • If other agencies collaborate with corrections to increase the volume and reduce the price for functions such as billing or pharmaceutical procurement, then privatizing the function in corrections might increase the price overall.
  • Reducing the prison population might not reduce the administrative costs at headquarters.

What about transitional costs?

Changing from one system to another raises immediate transitional costs.

11. Does the cost calculus include paying accrued leave to staff who lose jobs?

  • In Florida, lawmakers did not discover until far into the process that personnel turnover costs might reach $25 million.

12. Does the calculus include public subsidies paid to displaced workers? Unemployment benefits? Health care subsidies if the new job in a private prison pays low enough that the employee’s kids now qualify?

13. Have costs associated with moving equipment or data from the office presently performing the service to the contractor been accounted for? Items like medical records and institutional histories require sensitive archival transitions.

Contract Management Costs

Privatization doesn’t mean writing a check and washing your hands. Contracted systems still require management to start, monitor and maintain.

14. What about the cost of the entire bidding process: holding hearings, performing studies, drafting the request for proposals, and selecting the bidder? In a truly competitive process, many of these costs will need to be incurred again at time of renewal.

15. Who covers the cost of enforcement and monitoring, as well as documenting and publishing results? For functions like prisons and prison services, enforcement likely includes unscheduled visits on evenings and weekends.

16. How much is the cost of public staff collaboration with private vendors: answering questions, training contractor staff, ensuring continuity?

Community Costs

Prisons play a role in the economy of many communities. When facilities are privatized or closed, the impact on residents and small businesses must be assessed.

17. How many jobs are lost in the community compared to jobs created in the community?

18. What is the type and quality of jobs lost compared to jobs gained: full time versus part time or temporary; with or without benefits?

19. What happens to traffic, sewerage, water and watershed? What if new costs are incurred in the community as a result of the private prison or private prison operations? Who pays? What if they were not studied or foreseen in advance? What if estimates were wrong?

20. What’s the impact on the public pension system? Do retirement payments for retired workers assume contributions by current workers? If staff move from the public system to a private prison, will it create a shortfall? How will it be made up?

Examining these cost, potential costs and problems leads to one clear conclusion: private prisons aren’t worth the trouble.

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