Content area
Full Text
ABSTRACT. The purpose of this project was to compare the cost of transportation engineering design services provided by private contractors versus services provided by state transportation agency staff for the Louisiana Department of Transportation and Development (LaDOTD). Due to shrinking budgets, staff cuts, and a trend toward privatization, state transportation agencies now outsource the majority of the services they provide. The merits of doing so, however, have been difficult to discern for lack of "apples-to-apples" comparisons. For engineering design services, this problem is particularly acute due to the uniqueness of many projects (e.g., a bridge over the Mississippi river). A simulation approach was used in this study to make "apples-to-apples" comparisons for 39 design projects, 22 in-house projects and 17 consultant projects. For each in-house design project, the cost was estimated had the work been done by a consulting firm. Similarly, for each consultant design project, the cost was estimated had the work been done by in-house staff. The result of the study was that in-house design costs were cheaper by an average of 17 to 19 percent.
INTRODUCTION
Turning to private sector companies to provide goods and services to the public is commonplace. Although, a wide variety of services are contracted out, or privatized, the merits of doing so remains in dispute. In general, contracting out by governments generates interest in how the quality and the cost of the service or product are affected. While quality is understandably difficult to measure and compare, cost analysis is usually considered to be a straightforward process. The costs are what they are, it would seem. For a variety of reasons, however, that is not the case either. Certainly the price paid to contractors is known; but the costs to contract and to monitor the contractor are hidden. Moreover, most government accounting systems are not designed to provide product or service costs. Rather, the accounting system's main purpose is to keep track of line item budgets to ensure that the government stays within budget. So neither the full cost of public sector or private sector provision is readily known. If a government stops providing the service when it contracts out, the situation is complicated further. That is the case for State transportation agencies that commonly use consultant...