Private Provision of Public Infrastructure: An Organizational Analysis of the Next Privatization Frontier

Abstract

Constrained by severe, ongoing fiscal pressures and sensitive to concerns over bureaucratic inefficiency, policy-makers in a number of countries are re-evaluating both the goals and instruments of the modern state. In doing so, some have endorsed the need for government 'reinvention,' a term that is admittedly susceptible of a broad range of meanings, but which nonetheless contemplates a significant shift away from reliance on governmental provision of goods and services in favour of provision by the for-profit and third sectors.' Although not uncontroversial, the claim is that, in comparison with governmental supply systems, both forprofit and third sector modes of delivery offer a superior means for organizing productive activity because of the greater incentives that exist within these organizations for lower-cost, innovative production. Although the claim has been made in a number of different policy contexts, we focus on its salience in the context of government's role in supplying traditional physical infrastructure projects such as roads and highways, bridges, dams, water and sewage systems, and airports.