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A Primer on Private Sector Success in Managing Prisons

in American


oday, federal, state and local governments

•	 Industry founded in 1983 with Corrections Cor-

face intense fiscal challenges. Budgets

poration of America’s relationship with the Bureau

must become smarter, and political lead-

of Immigration and Customs Enforcement

ers are examining innovative approaches for long-

•	 Approximately 14% of Federal inmates are in

term cost control. A proven strategy is the use of

private prisons

public-private partnerships to deliver a few key gov-

•	 Approximately 6% of State inmates are in pri-

ernment services. Corrections is a prime example

vate prisons

- the construction and operation of prisons, jails and
detention centers.

meeting A Growing Need

“There is considerable evidence that private
prisons actually improve quality and cut
costs …Privatization can offer increased
innovation, access to expertise, improve
quality and enhanced accountability.”

Geoffrey Segal

Director of Government Reform,
Reason Public Policy Institute (RPPI), January 2002

An estimated 2.2 million individuals are incarcerated
in our country today and rates of inmate population growth continue to rise annually. More than 14
percent of all federally sentenced offenders and approximately 6 percent of state prisoners are currently
managed by privately-operated corrections management companies - and those figures are growing.
Today, more than 100,000 inmates are housed at approximately 150 privately-operated facilities across

Over the past 20 years, prisons operated by the private sector have become an increasingly important
component of America’s correctional system. When
the first contract was awarded in the early 1980s,
private prisons were viewed as a radical experiment.
Now, federal, state and local correctional agencies
routinely partner with the private sector to build
and manage correctional facilities.

the United States. More than 30 states, the District of
Columbia, all three federal corrections agencies (the
Federal Bureau of Prisons, the U.S. Marshals Service
and the Bureau of Immigration and Customs Enforcement), along with dozens of local county agencies
now partner with private management companies.

Numerous states — including Alaska, Colorado, Hawaii, Idaho, Mississippi, Montana, New Mexico, Oklahoma, Tennessee, Wisconsin, Wyoming and Vermont
— house between 20 to nearly 50% of their inmates
in private facilities. Texas has the largest overall privatization program with more than 40 facilities capable

correctional officers and policy makers who believe

Privatization Results in
Slower Growth of Public
Corrections Expenditures

prisons managed by the private sector in partner-

•	 From 1999-2001, states with public-private

ship with local government play a beneficial role in

partnership experienced lower growth in their

the correctional system.

public corrections system costs. Privatization us-

A growing body of independent research stretch“The empirical evidence is consistent with
economic theory, which predicts that with
privatization, costs will fall and quality
(however defined) may rise.” *

Harvard Law Review
May 2002

ing back over a decade lends support to legislators,

age resulted in reduced growth in daily costs for

of handling nearly 30,000 inmates.
A review of the most up-to-date studies focusing on

the public corrections system by 8.9%, about
4.45% per each budget year.

Even more important, the presence of competition

Today, with the majority of states facing severe bud-

cost, quality and safety suggests that private prisons

in a traditionally government-operated service has

get shortfalls, and the Federal Bureau of Prisons ex-

measure up extremely well to government facilities.

changed the landscape of corrections significantly.

periencing rapid growth in inmate populations and

While results vary from state to state, private pris-

The healthy partnership that is growing between

construction needs, competitive sourcing is seen as

ons consistently have been found to deliver levels

public and private corrections is enhancing the

an attractive complement to government-run cor-

of quality and safety that equal or exceed govern-

quality of services, keeping operational costs in

rectional operations.

ment-run facilities at a significant cost savings.

check and raising the overall levels of standards for
the United States corrections industry.

But like other innovative approaches to providing

By generating significant savings both in the con-

raise valid questions. Do these public-private part-

struction phase and during ongoing operations,

nerships really work? How well do private prisons

How Does Public-Private
Partnership Fit Into an
Overall Corrections

private prisons allow their government partners

measure up against government-run facilities? Are

Studies suggest that competition from private

to dedicate scarce resources to other pressing pri-

private prisons safe?

prisons benefits government-run facilities as well.

public services, prison privatization has critics who

orities, including health care, education and public
works projects.

Benefits of public-private partnerships
•	 Enhanced quality of services
•	 Operational costs contained more efficiently
•	 Increased levels of standards and accountability

Savings Through
Public /Private
Average Non-Privatized State
Annual Corrections Expenditures
Potential Savings on Public
Costs from the Private Sector’s
Lower Operating Costs

A study by Vanderbilt University professors found

•	 In 2001, the average Department of Corrections

Corrections systems that develop long-

the use of privatization by state corrections depart-

expenditures in states without private prisoners

term strategies that include public-

ments resulted in lowering the rate of growth in

were approximately $455 million. If the “aver-

private partnerships have achieved

those states’ public corrections operating expendi-

age” state were to introduce public-private part-

effective results, representing significant

tures. Among the study’s findings:

nership, potential savings for one year could be

savings to taxpayers.

approximately $20 million in the public system’s
operating costs alone. Additional savings would

come from the private sector’s contracted lower

prison construction and management.  The article

operational costs (numerous studies estimate

asserts,  “Throughout the nation and the world, vig-

private management contracts average 5 to more

orous competition among public and private firms

A Governor’s

than 20% lower than public operating costs).

is used to reduce the high cost of incarceration,

As Colorado Governor Bill Owens states

Of those studies, 22 found that private prisons gen-

while maintaining the high quality of service local

in a CCA annual report, “Privatization

erate significant budget savings. The most rigorous

communities expect.” The report also contends that,

of government services introduces

of these reports found savings generally fell in the

“Through competitive contracting for detention ser-

competition to public sector areas that

range of 11-17%. (RPPI, January 2002)

vices, the government can take full advantage of the

were once immune from such initiatives.

competitive pressures inherent in the free market.”

This competition makes governmental

The 2001 Corrections Yearbook suggests these esti-

(Washington Policy Center, “Private Prisons: A Sen-

agencies operate in a more cost-

mates may be modest. Its latest report indicates that

sible Solution”, 2001)

conscious fashion and challenges

the average daily cost of housing an inmate in state

public officials to look at new ways of

and federal prisons was $61.04 compared to $43.62
in private prisons - a savings of nearly 29%.

• 	 Evidence suggests that the greater the percentage of privatization, the lower the rate of growth in
costs per public prisoner. From 1999-2001, states
with no privatization had an 18.9% growth in
daily costs for public prisoners. In stark comparison, states with more than 20% of privatization experienced only 5.9% growth. States with less than

The Reason Public Policy Institute (RPPI), examined

5% of prison privatization experienced a 12.5%

A report by the Wisconsin Policy Research Institute

doing business.” Colorado presently has

growth in public corrections expenditures. (James

indicates that Wisconsin’s substantial use of out-

about 15% of their inmates in privately-

Blumstein/Mark Cohen Report, “The Interrelationship

of-state private prisons since 1998 has saved the

operated facilities. Governor Owens

Between Public and Private Prisons,” April 2003)

State significant dollars and recommends that state

has suggested a 70/30 ratio of public

leaders should expand Wisconsin’s use of corrections

to private as optimal for the long-term

privatization.  The report gives options to Wiscon-

corrections strategy for the state.

In the early 1990s, the State of Tennessee compared
costs at private and government prisons. During
the comparison period, costs at government prisons declined by 4% -- a testament to the benefits
of competition. (Douglas McDonald, et al., “Private
Prisons in the United States: An Assessment of Current
Practice, 1998)
A research report by the Washington Policy Center
concludes that one solution for the nation’s correctional challenges is competitive contracting for

sin policymakers to consider including authorizing
privatization with provisions for guaranteed sav-

ing a Wisconsin private prison and privatizing other

Do Privately Operated
Prisons Really Save Money?

prison services. (Wisconsin Policy Research Institute,

A series of studies conducted by corrections agen-

“Corrections Privatization Generates Savings and Bet-

cies, think tanks and academic professionals con-

ter Services”, February 2003)

firm that private prisons produce substantial cost

ings, selling prison assets to private firms, authoriz-

savings, both in the initial construction phase and
on an ongoing operational basis.

28 studies that compared cost data for private prisons to government-run facilities in different states.


Public vs. Private Sector Cost
Public Sector Cost

Private Sector Cost

Report from the States…
•	 A series of Arizona studies compared a 444bed private prison to 15 government-run prisons
and found cost savings of between 11-17 percent.
(Charles W. Thomas, Arizona Joint Legislative
Committee, August 1997; “Public-Private Prison
Comparison,” Arizona Department of Corrections,
October 2000)

savings as high as 23 percent. (Texas Criminal Jus-

Why Are Prisons Operated
by the Private Sector More
Cost Effective?

tice Policy Council studies, 1991-2001)

First, private firms are free from time-consuming

•	 A report by the Texas Criminal Justice Policy
Council found that private prisons produced cost

The Immigration and Naturalization Service had

quent overtime expenditures.” Moreover, “... private

estimated a construction time of 30 months and a

firms are free from many bureaucratic purchasing

cost of $26,000 per bed. (RPPI, January 2002)

rules and can often buy supplies at lower cost than
the government.” (Harvard Law Review, May 2002)

and costly government procurement rules that

“The experiences of Texas,  Louisiana and

•	 The Michigan Department of Corrections es-

often delay construction. While governments typi-

New Mexico demonstrate that private

According to an analysis by the U.S. Department

timates that a private youth correctional facility

cally require 36-60 months to build a prison, private

prisons are a good  alternative for states

of Justice, private prison operators also are able to

saves between $2.5 million to $6.9 million annually

firms can complete the work in about half the time,

seeking to reduce cost and improve quality

generate savings because their labor costs are lower

based on comparisons with similar state-run facili-

generating significant savings on construction

in  their corrections services.”  

than labor costs in public prisons.  While many pri-

ties (Michigan Privatization Report, Winter 2003).

costs. One private firm set what must be a record by

Washington Policy Center

building and opening a 100-bed juvenile correction

vate corrections companies offer competitive wages,
their benefit levels may be lower.  According to the

facility in less than 90 days. (Cathy Lazere, “Privatiz-

Wisconsin Policy Research Institute the State of Wis-

The State of New Mexico partners with the

ing Prisons,” CFO: The Magazine for Senior Financial

consin, in the case of correctional officers, pays 44.3

private sector for approximately 45% of

Executives, February 1997)

the state’s inmate population. In a study of
New Mexico’s corrections expenses by the
Albuquerque Journal (May 23, 2002), the
newspaper found that the average daily
cost/inmate in the state’s 5 private-run
prisons was $52.08 compared to $91.53
in 5 state-run facilities. While there may
be service factors that contribute to this
difference, the private facilities are saving
the state over $40 million per year on the
4,471 inmates housed in these private

Report from the States…
•	 In Delaware County, PA, a group of private
firms built a prison in two years less than it took
government authorities to build a similar facility

Second, private prisons apply innovative construc-

cents in benefit costs for every dollar paid in salary.

tion techniques and modern correctional technol-

A private operator’s benefit levels for correctional of-

ogy that ensure not only a safe environment, but

ficers may typically run up to 30 cents for every sal-

also reduce costs. These design efficiencies allow

ary dollar, figures that are more in line with business

private prisons to reduce administrative expenses

applications. Savings generated from these various

and operating budgets.

cost efficiencies result in lower contracted per diems
by the private sector.

in a neighboring county - at a cost savings of 40

In addition, private prisons are also not subject to

percent ($56 million vs. $93 million). As a result,

government civil service requirements that often

Delaware County is saving an additional $1.5 mil-

hinder efficient personnel management. As a Har-

lion every year in lower debt costs. (Paul Kengor,

vard Law Review article put it, “Because they are

Allegheny Institute Report No. 99-09, 1999)

not bound by civil service rules in managing their

Are Costs Lower at Private
Prisons Because They
Operate Only Lower
Security Facilities?

personnel, private prisons use roughly one-third

Some critics of contracting corrections responsibili-

the administrative personnel of government prisons

ties to the private sector have argued that the pri-

and use incentives to reduce sick time and conse-

vate sector has had success because it has primarily

•	 A 350-bed facility was completed in Houston,
TX in 5 1/2 months at a cost of $14,000 per bed.

dealt with minimum security inmates -- those who

the secure housing of 45,669 inmates in prisons with

compared to only 10% of government-run prisons.

order. No privately run prison has ever been placed

present management with the least problems.

medium security levels or higher and 23,238 inmates

Nearly 85% of facilities operated by CCA are ACA

under court order for problems with conditions.

CCA vs. Public Sector
Security Level

in prisons with minimum/medium security or lower.

accredited. (American Correctional Association, Com-

Public Sector

amines security levels at public and private sector

This focus on operational excellence is one of the

repeat a crime upon their release and are re-incar-

corrections facilities. The chart includes comparisons

main reasons why, according to a 1998 report by

cerated. Both public and private sector corrections

between CCA (the largest private provider of correc-

the Council of State Governments, over 18 percent

agencies strive to reduce recidivism rates by offering

tions) and the public sector.

of state agencies cited high quality service as a ra-

programming for inmates to change behaviors.










The rate of re-incarceration can be another indicator
of quality. More than 50% of all sentenced inmates

tionale for contracting for private prisons. (RPPI,


Data taken from the 2001 Corrections Yearbook ex-




mission on Accreditation for Corrections, 2001)

Do Private Prisons
Sacrifice Quality for
Lower Costs?
No, in fact, there is strong evidence that private prisons outperform government-run facilities on a wide


variety of quality measures.
Of 18 quality studies analyzed by Reason Public Pol-

Actually, private prisons have experience with correctional facilities of all sizes and security levels. Private firms have built and operated jails, prisons and
detention centers that house inmates ranging from
minimum to maximum-security levels. They currently
manage juvenile and adult facilities and institutions
that serve both male and female inmate populations.
The 2001 Corrections Yearbook reported that as of
January 1, 2001, the private sector was responsible for

According to research by Lonn Lanza-Kaduce and

January 2002)

Scott Maggard of the Center for Studies in CriminolSeveral states have turned to private

ogy and Law of the University of Florida, recidivism

prisons to lift court orders, imposing the

rates for private prisons in Florida were nearly 14%

meeting of court-mandated standards as

lower than government-run prisons. To help reduce

a condition of the contract.

recidivism rates and return inmates to productive

Reason Public Policy Institute
January 2002

icy Institute, all but two found that private prisons

lives, CCA and other private firms have developed effective, targeted programs in the areas of education,
vocational training, religion, counseling and sub-

perform as well or better than government prisons.

In addition to independent quality studies and ACA

stance abuse. Several of these programs - such as

(RPPI, January 2002) These findings are confirmed

accreditation, there are other ways to compare how

CCA’s LifeLine, an intensive, long-term therapeutic

by other data.

private prisons perform next to government-run fa-

community substance abuse treatment program -

cilities. One method is to review the history of court

have become models for other corrections facilities.

The American Correctional Association has established rigorous accreditation standards - 450 separate criteria that measure quality of management,
operation and maintenance. As of 2001, some 45%
of private prisons won accreditation by the ACA

orders and litigation directing correctional authorities
to improve their facilities. In 2001, according to RPPI,
13 states had their entire corrections departments

Are Privately Managed
Prisons Safe?

under court order to relieve unsatisfactory conditions

Yes, privately managed prisons have strong records

and 15 states had at least one facility under court

of safety.  Operating safe prisons, jails and detention

centers is the foremost goal of any corrections system

 Report from the States…

– public or private.  Private corrections managers

•	 Researchers from Louisiana State University

have stringent contractual obligations that promote

comparing public and private prisons found that

safe environments, including staffing patterns and

private facilities “reported fewer critical incidents,

training mandates for all correctional officers.  Inter-

provided safer work environments for employees

nal and external audits are routinely conducted, and

and safer living environments for inmates, and

private operators who follow American Correctional

had proportionally more inmates complete basic

Association standards must adhere to strict opera-

education, literacy, and vocational training cours-

tional guidelines that promote safety and security.

es.” (Harvard Law Review, May 2002)

Private operators are held to an extremely high standard of accountability.  These private companies are at
continual risk of losing their management contracts or
facing financial penalties if they do not meet perfor-

•	 A study for the Arizona Department of Corrections found that private prisons demonstrated
superior performance in public safety issues. (Arizona Department of Corrections, 1997)

mance expectations of their customers.  These rigorous standards improve operational security levels.  Although data comparing safety issues at private and
government-run prisons is less widely available than
cost and quality data, private firms have overall performed well.  
In fact, CCA’s escape rate in adult prisons is significantly
lower than the average rate for the public sector.
From 1999 to 2001, the escape rate in adult public
sector prisons was 5.51 per 10,000 inmates.*  From
2003 to 2005, CCA experienced only a 0.10 escape
rate per 10,000 inmates.  

The Increasing Call for
Competitive Sourcing
Over the past two decades, more than half of all states,
all federal and numerous local agencies, legislators
and governors have concluded that private providers
can play an integral role in their corrections systems.
The best research available shows that public-private partnerships lead to better-run and more efficient correctional systems overall.
The U.S. government and nationally-recognized organizations are making stronger cases every day for com-

petitive sourcing by state, federal and local agencies.

ful spending added during the boom years.***

•	 At the federal level, President George Bush has

•	 Another nationally known institute has recog-

voiced that agencies should be required to compete

nized that when government begins to embrace

out a certain percentage of commercial functions

competition, government employees’ services be-

each year. He has called on federal agencies to com-

come much more competitively-priced themselves.

pete at least ten percent of these positions in 2003.

A commentary gives the example that the Office of

The White House expects savings from competitive

Management and Budget asked private printers if

sourcing to range between 20 and 30 percent.*

they could beat the Government Printing Office’s
quote for printing the 2004 federal budget. The GPO

•	 At the state level, a recent national report that
offers ten strategies for cutting state budget deficits recommends applying antitrust to government
by introducing competition in service delivery. The
report notes that not only will private vendors pro-

cuts its price 23 percent ($108,370) and kept the
work. The commentary also references that charter
schools in Philadelphia have implemented benchmarking systems that the public school system is
now working to emulate in similar fashion.****

duce savings through innovation, advanced technology and a commitment to customer service but

Public-private partnership works in all areas of gov-

also competition will challenge public employees

ernment. Corrections, with a 20-year track record in

to find ways to enhance efficiency. Another of the

competitive sourcing, may simply be the best indus-

report’s recommendations is to turn capital assets

try example this nation has that partnership does

into financial assets by selling or leasing govern-

indeed lower costs and improve quality.

ment assets and enterprises.**
•	 Similarly, a significant conclusion in a report
by a national think tank stated that states should
explore opportunities to save money by privatizing
state services, thus turning current budget problems
into opportunities to weed out excessive and waste-

*The President’s Management Agenda, Office of Management
and Budget, Fiscal Year 2002
** Show Me the Money: Budget-Cutting Strategies for CashStrapped States, The American Legislative Exchange Council
and The Manhattan Institute for Policy Research, July 2002
*** States Face Fiscal Crunch after 1990s Spending Surge, CATO
Institute Briefing Papers, February 2003
****Privatization Watch, Reason Public Policy Institute, Feb.

Resource Reference Guide

Listed below are a number of recent studies and reports
that CCA has recognized as offering useful information
about public-private partnerships, specifically in corrections, but also in general government services as well. If
you would like to obtain copies of these findings, a CCA
representative is happy to assist .

The list follows this format:

Title of research

Date of publication
Where to obtain a copy

“The Interrelationship Between Public and Private
Prisons: Does the Existence of Prisoners Under Private
Management Affect the Rate of Growth in Expenditures
on Prisoners Under Public Management”
James Blumstein and Mark Cohen
April 2003

“The Pros of Privately-Housed Cons: New Evidence on
the Cost Savings of Private Prisons”
Rio Grande Foundation
April 2003

“Mangos to Mangos: Comparing the Operational Costs
of Juvenile and Adult Correctional Programs in Texas”
Criminal Justice Policy Council, prepared for the 78th Texas
Legislature, 2003
First Quarter 2003

“Lock in Savings with Prison Privatization”

Michigan Privatization Report; Published by the Mackinac
Center for Public Policy
Winter 2003

“Corrections Privatization Generates Savings and Better
Wisconsin Interest Publication; Published by the Wisconsin
Policy Research Institute, Inc.
Winter 2003

“States Face Fiscal Crunch after 1990s Spending Surge”
(conclusion, page 14)
CATO Institute Briefing Papers
February 12, 2003
CCA representative

“Rational Justice Policy: Findings and Recommendations (A Report to the Oklahoma State Senate)”
Oklahoma Alliance for Public Policy Research, Inc.
February, 2003

“Privatization Watch – ‘Commentary: Is There A Trend
Reason Public Policy Institute
February 2003

“Private Prisons and the Public Interest: Improving
Quality and Reducing Cost through Competition”
Washington Policy Center
February 2003

“Privatizing Iowa’s Prisons”

Public Interest Institute
January 2003

“Mississippi Department of Corrections’ FY 2002 Cost
Per Inmate Day” Report #443
Mississippi Peer Review Report
December 17, 2002

“Show Me The Money” (pages 6-8)

American Legislative Exchange Council and The Manhattan
July 2002 and

“Developments in the Law – The Law of Prisons”
Harvard Law Review
May 2002
CCA representative

“Weighing the Watchmen: Evaluating the Costs and
Benefits of Outsourcing Correctional Services”
Reason Public Policy Institute
January 2002

“Private Prisons: A Sensible Solution”

Washington Policy Center
August 2001

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