The Review of Economics and Statistics Vol. 83 No. 1 2001
Reducing Government Spending with Privatization Competitions: A Study of the Department of Defense Experience
Abstract
In a privatization competition, private contractors bid against an in-house team to perform a governmental function that is currently performed by the in-house team. The Department of Defense initiated 3,500 privatization competitions from 1978 to 1994, generating estimated annual savings of $1.46 billion. We estimate a reduced-form model of the savings from these competitions that takes into account the premature cancellation of some competitions and the censoring of the in-house bid at current cost. The Department of Defense maintains a list of candidates for future privatization competitions. Using our model, we forecast annual savings of $5.74 billion if privatization competitions were completed for all functions on this list.
- DOI
- 10.1162/003465301750160081
- Volume
- 83
- Issue
- 1
- Pages
- 108-117
- Language
- en
- Sources
- openalex crossref