Privatization of Higher Education Services: Propositional Pros and Cons

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The decline in and the lack of state and federal monies for public higher education institutions, combined with the limited amount of finances available from private sources such as foundations and individuals, is forcing many universities and colleges to consider and implement a strategy of privatization of services and curricula as a method of saving money (Goldstein, Kempner, & Rush, 1993). Privatization, or outsourcing of services, ranges from food services (Eddy, 1977) to health clinics and hospitals (Bernstein, 1995), and counseling services (Phillips, Halstead, and Carpenter, 1996). The curriculum is even involved in the sense that some universities and professors are marketing complete courses on CD ROMs while some universities and colleges are considering expanding distance education to the point of offering degrees on-line (Eddy & Buchanon, 1996). Although not exactly a new approach, contracting student affairs services is of such importance that administrators should consider more than just the bottom line. Privatization may save costs, but it has advantages and disadvantages (Drum, 1994). Are administrators aware of and considering some of the more critical aspects of both? This article explores, in the form of propositions, several of the important advantages and disadvantages that should be thoroughly examined prior to implementation of the privatization strategy.

Propositional Advantages of Privatization

University and college officials considering and implementing the privatization of activities on their campuses should weigh the following propositions:

Proposition 1. The contractor or provider will provide the product, service, or operation at a price that will result in clear and long term cost savings, other factors bearing consideration include convenience to students and quality of the service or product. Is cost savings the only bottom line? Proposition 2. The administration will deflect criticism toward a specific contractor or provider of services should it become necessary to increase revenues as a result of higher costs. Will university or college officials lose cognizance of or ignore cost increases and simply blame a contractor or provider?

Proposition 3. Management skills within the contractor's supervisory hierarchy as well as at the site where a particular service is activated will result in higher quality service. Is the management structure in the private sector likely to be of greater competence than that hired and working within higher education? A reason for this managerial gap, should such exist, may be that universities and colleges internal managers lack capital incentives to make their entity client-friendly.

Proposition 4: The financial resources of a contractor or provider are likely to be greater than those of the university.

Thus, in such a situation, it is likely that the contractor or provider can minimize price by maximizing orders or services - cost savings via volume purchasing. Yet again, is bottom line the sole criterion for judgment of productivity?

Proposition 5. The regulations, rules, and red tape (3 R's for bureaucracy) of state laws controlling expenditures of state monies inhibits the potential of higher education institutions to maximize their dollars. Such restrictions are not imposed on private businesses. State Coordinating Boards of Higher Education may be interfering, through the imposition to supplement state laws, to the point of complicating the process of operating an efficient and effective operation (Eddy, 1995).

Propositional Disadvantages

Just as there are assumed advantages to privatization there are numerous, some directly contrary to the advantages, disadvantages to privatization. The following propositions are offered:

Proposition 6. Will the expected cost savings - the primary argument for privatization to the institution still be passed on to students, in the form of higher costs, in the long run even though such costs are not passed on to the institution? …