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An Olympic-Sized Privatization Fiasco

On a day when I should be happily blogging about our brand-new report on Massachusetts’ progress on solar energy, I just can’t help but rubberneck at the wreckage of the privatized security scheme at the London Olympic Games.

For those of you not following along at home, the London Olympic organizing committee decided to outsource security for the Games to G4S, one of the world’s largest private security firms. Last week, with pre-Olympic events already underway, the firm told officials that it would fall well short of providing the number of trained staff it promised in its contract. Olympic organizers have had to scramble to plug the gaps by calling in the military and enlisting local police officers.

The damages are mounting. Military members have had to cancel leave and localities give up cops who would otherwise be on patrol. G4S has seen its reputation tarnished and will lose tens of millions of dollars on the contract. And the British may still be on the hook for paying an $89 million “management fee” to G4S for a project that has been obviously mismanaged. One shudders to think of the repercussions should something go terribly wrong with security at the Games.

The London Olympic security debacle serves as a good reminder of the dangers of privatizing public services. As we cautioned in our 2011 report on high-speed rail privatization, privatization doesn’t make sense – and can be downright dangerous – when the project being privatized is “too big to fail,” there is not adequate government oversight to ensure that the terms of the contract are fulfilled, and there are not clear lines of accountability. All of these seem to be the case in the G4S debacle.

Undoubtedly, there are situations in which private firms can deliver public services more cheaply or more effectively than the public sector. But the situation in London reminds us that such private actors are not more efficient or effective as a general rule. The question of whether to contract out a particular service is one that should not be based on ideology, but on whether privatization delivers real value to the public, both in the short and long term.