Privatization of Welfare Services: A Review of the Literature. Research Needs Met by MPR/ASPE Case Studies


As state and local agencies increasingly contract out services traditionally provided by the public sector, issues arise concerning what should be privatized and how to do it most effectively. Research on the privatization of welfare services is still in its infancy. However, ongoing research is important, especially given the recent, rapid changes in the welfare system and the increasing prevalence of privatization. Our review of the literature identified the need for three broad types of research in the privatization of welfare services that can be met by the six MPR/ASPE case studies.(1)

  1. Information on the Relative Quality and Cost Effectiveness of Privatized Welfare Services. No careful study has been conducted on the quality or cost effectiveness of welfare privatization. While the case studies will not be able to quantify the quality or cost effectiveness, we will report the perceptions of TANF agency staff and other stakeholders on the success of privatization.
  2. Information on How Best to Implement Privatization. Research shows that the effectiveness of privatization depends critically on the nature of the market and the extent of competition, on the level of political and operational support, and the effectiveness of the design of contracts and of the accountability processes. Information is needed on how welfare agencies should plan and implement the privatization process. By describing the experiences and lessons learned of six TANF agencies that have privatized case-management services, the six case studies will address this need.
  3. More Information on the Privatization of Case Management. Most of the research has focused on the privatization of TANF employment and support services, and little has been conducted on privatization of case management, mainly because it is rarer and has occurred more recently. However, the issues surrounding privatization of case-management services might differ from those surrounding the privatization of other services. For example, it might be more difficult to define appropriate contract goals or to monitor the quality of case-management services. Contracting out broad case management requires a specialized set of performance incentives. By focusing on TANF case management, the case studies will address this need.


1.  A need also exists to develop a national picture of the extent of privatization of TANF services. A forthcoming GAO report will address this need.


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