Research & Commentary: Contracting Out Prison Services

Published June 6, 2011

The cost of incarceration, rehabilitation, and security in state, local, and federal prisons has become a serious budget problem. Correctional facilities cannot fully be privatized because the courts, police, and others who put people there are inherently governmental, but the services can be contracted out. Today, private companies in the United States operate 264 correctional facilities, with a prisoner population of approximately 99,000 adult offenders.

The main benefits of prison privatization, according to its supporters, are reduced costs for taxpayers and improved results through increased efficiency and reductions in prison overcrowding. Contractors are capable of running prisons less expensively than the government can, without reducing the quality of service.

Critics of privatization argue the efficiency gains are minimal and the studies used by proponents as evidence overlook hidden costs and are not spread over multiple facilities and multiple years. They cite a 1996 U.S. Government Accountability Office report that found no evidence conclusively demonstrating efficiency gains from privatization.

According to a Texas Sunset Review Commission Agency Performance Review, private prisons in Texas achieved a contractually guaranteed 10 percent savings over the cost of a state-run facility, and when the additional tax revenue generated by the private prison was taken into account, the total savings rose to 14 percent. A similar report in Louisiana found private prisons have an 11 to 13 percent lower operating cost, fewer critical incidents with the prisoner population, and better overall discipline.

Privatization of prisons is a viable option to increase efficiency and lower costs, though it may not be a cure-all. The following articles examine prison privatization from several perspectives.

Prison Privatization: A Meta-Analysis of Cost Effectiveness and Quality of Confinement Indicators
This report from the Utah Criminal Justice Center is a meta-analysis of studies of head-to-head comparisons between identifiable privately managed and publicly managed prisons.

The Pros of Privately Housed Cons: New Evidence on the Cost Savings of Private Prisons
Research economist Matthew D. Mitchell presents an interstate econometric test of the relative efficiency of private-run versus government-run prisons.

Cost, Performance Studies Look at Prison Privatization
This article from the National Criminal Justice Reference Service discusses two cost and performance analyses of the same four prisons—one privately operated and three publicly operated—with different findings.

Weighing the Watchmen: Evaluating the Costs and Benefits of Outsourcing Correctional Services: Reviewing the Literature on Cost and Quality Comparisons—Part 2
This paper from the Reason Public Policy Institute examines the costs and benefits of outsourcing correctional services, the literature on the topic, and the efforts being undertaken in several states.

Contracting for Imprisonment in the Federal Prison System: Cost and Performance of the Privately Operated Taft Correctional Institution
This study, requested by Congress and prepared by Abt Associates, aims to provide an objective, empirical analysis of the cost and performance of privately operated facilities.

Corrections Privatization Generates Savings and Better Services
This article from the Wisconsin Policy Research Institute argues privatization of some prison operations could save money and provide better services for the Wisconsin prison system.

Competition in Corrections: Comparing Public and Private Sector Operations 
This report from CNA Associates examines the cost and performance difference between public and privately run prisons.

What to Do About the Prison Problem: The Pros and Cons of Privatized Prisons in Alabama
This report from the Alabama Policy Institute explores the potential costs and benefits of expanding prison capacity via private contracting in Alabama.

Can Maryland Benefit From Privatizing Some of Its Prison System?
This article from the Maryland Public Policy Institute examines the Maryland prison system, discussing whether privatization of parts of the prison system can solve some of the state’s problems.

Corrections 2.0: A Proposal to Create a Continuum of Care in Corrections through Public-Private Partnerships
This paper from the Reason Foundation outlines a concept designed to target recidivism and drive cost reduction via a bold, new approach: a continuum of care through public-private partnerships (PPPs).