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Corporate Corrections? Frequently Asked Questions About Prison Privatization

Geoffrey Segal
November 1, 2002


Table of Contents



Do Private Prisons Save Money?

This is usually the first question asked, though the issue of quality is no less important. As you can see from Table 1, there are 23 reputable studies, performed either by a university or government entity, comparing the cost of government run and private prisons. This research supports a conservative estimate that private facilities operate at about 10 to 15 percent lower cost than do government facilities. These lower costs are reflected in the amount governments must pay to house their inmates in private facilities, especially in the very competitive business of contract bedspace.

Table 1

Comparative Studies of Private
Facility Operational Cost Savings
Study
Estimated Savings
Hamilton County, Tennessee, 1989
5%
Urban Institute: KY and MA, 1989
0%
Sellers Study, 1989
63%
Texas Sunset Advisory, 1991
14%
Florida Corrections Commission, 1993
8-10%
California Community Corrections, 1993
0%
Australia, 1993
23%
Australia, 1994
11-28%
Kentucky DOC, 1994
9%
NIC: Florida, 1995
0%
Texas, 1995
21%
Tennessee Fiscal Review Committee, 1995
0%
Tennessee and Louisiana, 1996
0 to 2%
Louisiana, 1996
14% to 16%
Wisconsin Task Force, 1996
11-14%
UK, 1996
13-22%
UK, 1996
11-17%
Kentucky, 1996-97
12%
Washington (TN. and LA.), 1996
0-2%
Kentucky DOC, 1996-1997
12%
Arizona DOC, 1997
17%
University of Cincinnati, 1999 (per inmate/day)
$0 to $2.45
Delaware County Pennsylvania, 1999
14-16%
Florida OPPAGA, 2000
3.5-10.6%
Arizona DOC, 2000
12.23%


What Kind of Quality Corrections do Private Prisons Offer?

There is clear evidence that private facilities provide at least the level of service that government run facilities do. This is based on a wide range of quality comparison measures:

  1. Quality Comparison Studies: There are six reputable independent studies examining the quality of private adult correctional services in the US and the UK. Every one of the studies found quality in the private prisons to be at least as high as in government prisons. Overall, the research supports a pattern of high quality services in private facilities.
  2. American Correctional Association Accreditation: Independent accreditation by the ACA is designed to show a facility meets nationally accepted standards for quality of operation, management, and maintenance. ACA accreditation is frequently used by the courts as proof of improvements towards ending of court orders. There are currently 5,000 government and privately managed detention facilities located around the U.S., with only 532 accredited by the American Corrections Association (ACA), 465 are public, 67 are private. Thus, no more than 10 percent of government correction facilities have been accredited, whereas 44 percent of private facilities have been accredited (see Table 2).


    Figure 1: Facilities with ACA Accreditation

    Private Facilities


    Government Facilities
  3. Contract Terminations: Since the first modern private prison opened in 1985 there have been only a handful of contract terminations. Virtually every contract up for renewal has been renewed. In the few cases of contract termination that have occurred, competition in the industry has assured that public officials were quickly able to hire a new firm to replace the old.
  4. Court Orders and Prisoner Litigation: No privately operated prison has ever been placed under a court order for problems with conditions. In fact, several states have had tremendous success in getting facilities out from under court orders by contracting with a private firm to run it, and making meeting the court imposed standards a term of the contract.


Are private prisons ethical?

Some people are concerned that "prisons for profit" are ethically inappropriate; they believe that a firm with a financial motive should not be put in control of prisoners' lives. But to an inmate who has had his freedom taken away, it makes little difference who guards his cell, a government or a private employee. Contracting with a private firm to run a prison does not relieve government officials of the ethical and legal responsibility to ensure proper treatment. They may achieve this with a properly run correctional department or through a well-written and well-monitored contract with a private firm. And, as the evidence indicates, the private operating firm can often ensure better treatment.



Is it legal to put prisoners in private prisons?

Federal, state, and local officials have all recognized the need for legal authority to delegate correctional responsibilities to nongovernmental entities. It is possible to define imprisonment as a uniquely governmental function that cannot be delegated. However, this interpretation is rare. The responsibility for sentencing individuals to be confined is certainly a purely governmental function, but the mechanics of holding someone in confinement are not.

At the federal level, this is recognized in the language of 18 U.S.C. Sec. 4082(b), which remands all federal offenders to confinement in "any available, suitable, and appropriate institution or facility, whether maintained by the Federal Government or otherwise." The Bureau of Prisons has interpreted this to mean there is authority to contract with private prisons.

State and local governments deal with the legal authority to contract for correctional services in their own ways. The 25 states that currently have a private prison in operation or under construction obviously have assured legal authority to do so, as have a number of states that do not yet have a private facility. One very common method state and local governments use to assure legal authority is to pass enabling legislation. Others seek a determination by the state attorney general that there is no law forbidding contracts for private prisons.



Can private correctional officers use deadly force? What about riots?

If private firms are managing prisons of every security level, then use of deadly force is bound to come up. Common law allows private citizens to use deadly force in self-defense, defense of another, or to prevent the escape of a felon. Presumably, Supreme Court limitations on use of deadly force by police would apply to civilians as well: it is justified only if it is necessary to prevent escape and there is probable cause to believe the felon poses a significant threat of death or serious injury to someone. Contract terms or state legislation often prescribe more specific guidelines on use of force.

There are concerns about private prisons' ability to bring to bear the force or manpower to quell a riot. There have been only a few riots in private prisons, and most were dealt with appropriately. But in at least one infamous case, at an INS facility in Elizabeth, New Jersey, the private operator was unable to cope with an uprising; local authorities moved in, and the contract was terminated. Since then, public authorities have been more careful to assure that contracts require private prisons to maintain enough personnel, with sufficient training, to manage disturbances. Ultimately, though, both government and private prisons rely on help from outside law enforcement to quell large riots. The difference is that private prisons may be asked to defray some or all of the costs of such aid.



How can we be sure private prisons do not violate prisoners' rights?

Critics of private prisons legitimately wonder who will watch the watchmen. The government remains responsible for ensuring that prisoners' rights are protected even if they send them to a private prison. Exploiting or abusing prisoners can occur in both government and private prisons. We hear terrible stories all too frequently: of "gladiator" fights between inmates orchestrated by correctional officers, sexual assaults by correctional officers, and other individual and systematic abuses. Our goal should be to prevent this in any institutional setting.

Arguably, abuse and violations of rights should be easier to prevent in private prisons than in government prisons. Due process is not only implicit in the law of the land; it is usually explicit in private prison contracts. Prisoners have more legal options against private prison officials than against government officials. Private prisons are monitored by state inspectors, and the state is liable for abuses committed by employees of the private firm, so they have an incentive to monitor their conduct. Government correctional departments police themselves, with obvious conflict of interest.

In addition, private prisons offer public officials two powerful tools to ensure good conduct. First, a well-written, performance-based contract will reward the private firm for providing the kind of care public officials require. Tying compensation to measurable outcomes in public safety and prisoner treatment puts the private operating firm in the business of serving the public interest. Second, private firms find that mistreating inmates only creates resentment and hostility, which makes managing the prison more difficult and costly. They find that a softer touch can make long-run management more effective, such as in Florida, where private prisons' management style has led to much lower levels of violence than in the state-run prisons. A number of studies have shown similar comparisons in other states.



How can public officials control private prisons?

Contracts with private prisons give public officials a great deal of control. Elected officials control government prisons through budgets, legislative requirements, and their power to appoint heads of correctional departments. With a private prison, public officials have these same tools of control, and more. The contract process lets them control the price paid for services and determine who is going to run the prison. And legislation regarding correctional polices can be applied to private prisons as well. In addition, contracts provide for termination for failure to perform, while no such measure can be used with a government prison. Finally, contracts with private prisons introduce an additional level of accountability through the monitoring process. Government corrections departments are largely self-policing, while private prisons are continuously monitored by an outside agency to assure compliance with the law and the terms of the contract.

Of course, this implies a greater responsibility on the part of public officials. If they enter into incomplete contracts, fail to monitor compliance, or allow contracts to become noncompetitive, then a private firm may take advantage. The history of private prisons is not without blemishes, and failure by public officials to practice due diligence can create problems. However, experience clearly shows that well-written contracts, proper monitoring, and a competitive industry can ensure successful public-private partnerships—where both sides get what they want from the relationship.



Do private correctional officers receive lower-quality training than government correctional officers?

This is usually not the case. Many states require by law or in contracts that all staff be trained to the same level as government staff. Moreover, most contracts now stipulate adherence to ACA standards, which include training standards more stringent than those of many correctional departments. Many private firms set very high training standards. The largest firm in the industry requires 160 hours of training for its correctional officers, while the ACA standard requires only 120 hours. Other firms have established innovative training programs in partnership with state universities, as well as specialized team training for disturbance control and other emergencies. Evidence from the United Kingdom paints a similar picture. There, private firms must train their staff to the government's training syllabus, and private prison staff measure up very well to government staff.



What if a private prison has a strike, goes bankrupt, or fails to meet contract terms?

Some public officials may ask what their recourse would be if a private firm operating their jail or prison suddenly stopped operating due to a strike or bankruptcy. They may also ask how they could fire a firm for failure to perform. Who would run the prison in such circumstances? Once again, the key to protecting the public interest lies in the terms of the contract.

In more than 10 years of modern private prison operations, there has never been a strike at a private facility. Strikes do not occur at government prisons either, but correctional officers' unions do engage in "job actions." In every state save Hawaii, it is illegal for correctional officers to strike. It seems likely that those laws would apply to private correctional officers as well as government ones, with the government asserting a right to step in as it did with air traffic controllers. In any event, contracts should ensure that the firm is financially liable for costs incurred by the government if private correctional officers do strike.

Bankruptcy is another event that has not occurred with a private prison operator. Should it happen, the law allows officials to require sufficient notice from the private operating firm and to terminate the contract. Contract clauses to deal with bankruptcy contingencies are standard, with private operators required to have insurance or a performance bond. And in the event of a bankruptcy, a competing firm can take over fairly easily, likely needing only management staff—most correctional officers are hired locally and will probably be happy to hire on to the new firm rather than look for a new career.

Competition will protect the public from problems if a contract has to be terminated for cause. For one thing, competition puts tremendous pressure on firms not to violate the terms of their contracts in the first place. A breached contract would mean great difficulty getting any future contracts. Also, competition ensures that there are a number of firms waiting in the wings to step in and take over if asked. If a private firm can design, build, and open a facility in just 90 days (see p. X), then one can take over an existing facility on much shorter notice.



Will private prisons seek to increase incarceration and to keep inmates in prison longer?

Critics of private prisons raise the specter of an evil "prison-industrial complex," lobbying for "tough on crime" laws and creating more prisoners with longer sentences and little chance of parole.

There is little evidence of this kind of lobbying. Do private garbage collectors lobby against recycling? Do day-care centers lobby against birth control? In fact, unions representing government prison correctional officers give vastly larger sums to politicians than do private prison operating companies. In California alone, correctional officers gave $1 million to Pete Wilson when he ran for governor in 1990, and another $500,000 to his 1994 reelection campaign. In contrast, the two largest private prison firms' total political contributions nationwide in 1995- 96 was less than $150,000.

It is unlikely that private prison firms are going to sway policy in favor of greater incarceration when such polices are obviously already very popular with the general population. Moreover, prisons these days are so crowded that the private operating firms almost always find their prisons full as it is.

This is not to say that private firms are not capable of the kind of lobbying critics fear. In the past, large industries have used their influence to sway the political process against the public interest. But the private prison industry is not large. It manages only 3 to 4 percent of the nation's prison population.

Concerns about private firms acting to prevent inmates from getting parole are equally unfounded. For one thing, revoking "good time" is a punishment used in only about 10 percent of cases. The government retains control of parole decisions and the authority to take away good time, which accrues automatically unless revoked by proper authorities. It is true that the authorities have to rely to some extent on the information provided by the prison regarding an inmate's behavior. However, competent monitoring and inspections, as well as the threat of inmate lawsuits, minimize any temptation by private firms to abuse their power. Denying earned time would create costly hostility between inmates and staff, and for little gain: there are usually more inmates entering the system.

Meanwhile, there are ways to mitigate the potential problem before it begins. One method is for contracts to move toward a performance basis, basing a firm's payments on performance measures and not just on keeping a full house. We also must recognize that even if we decide as a society to put more effort into dealing with criminals by means other than incarceration, there will continue to be a need for some prisons, and the private sector can run them well and at lower cost.



Will there be access to information for the public with private prisons?

Watchdog groups, family members, and others are sometimes concerned about access to information about conduct within private prisons. Of course, this is not a problem unique to private operations. Recent scandals regarding the FBI crime lab and IRS file tampering show that abuse of information can occur in government agencies as well. Private prisons must disclose any information not of a proprietary nature if they are operating on government contract, and proprietary information is of little public interest. Again, contract terms can specify conditions for inspections or audits by outside groups or state agencies to ensure that relevant information is freely available to the public. Likewise, rules regarding policy for visits with prisoners can be specified in the contract. Victoria, Australia, after experiencing problems with public access and information in private prisons, is experimenting with new techniques to improve matters, including establishing an Official Visit Program, an ombudsman, and strong er freedom-of-information rules.



How are private prisons regulated?

The contract provides the primary regulatory oversight of private prisons. It can stipulate conditions on crowding, handling escapes, prisoner complaints, incidents, and so on. Moreover, performance in private prisons is monitored by an outside party; the same cannot be said for government prisons.

T. Don Hutto, a former corrections commissioner in two states and now an executive for a private prison company, observes: "As a director of corrections, I did a better job of monitoring and evaluating private-sector contracts than I did of monitoring and evaluating my own operations. Through the contracting process, government can be more objective about the goals it wants to reach."

In addition, some states have recently passed legislation requiring private prisons to inform local officials about prisoners brought in from other jurisdictions, to notify them of escapes, and to compensate local law enforcement agencies for the cost of recapturing escapees.



What prevents a private prison from making "lowball" initial bids and then raising prices later?

Good contracting practices and competition can easily prevent this kind of problem. The government has little incentive to give in to price increases that are not specified in the contract—especially when there are plenty of other firms willing to take over for the original price. The more competitive the market, the more recourse the government has in contract terms. It is incumbent upon public officials to look after the public interest by crafting contracts that provide incentives to lower costs, rather than raise them.



Have private prisons been "skimming the cream"—taking only low-security and less-expensive inmates?

Private prisons do not just hold minimum-security prisoners. There are currently three maximum-security, 16 all-level, and 53 medium-security private facilities, as well as many minimum-security private facilities. They are not just taking the easy inmates.

For example, contracts typically do not allow private firms to refuse to take sick prisoners. But the higher costs of ill inmates are passed on to the public in the form of reduced savings. Older inmates are also more expensive to care for, and the private prison industry is developing a niche specialty providing facilities just for elderly inmates. They charge more than for younger inmates but still cost considerably less than keeping the older inmates in government prisons. Similarly, in 1997 Mississippi awarded the nation's first contract for a private firm to run a mental-health correctional facility.



Is prison privatization unfair to government correctional employees?

Contracting with private prisons has not led to large-scale firing of government employees. Despite this fact, correctional employees' unions are the most vocal and organized opponents of privatization. Since they are usually well-organized, well-funded, and quite vocal, it is difficult for policy makers to put their concerns in perspective.

There are two reasons why the unions' concerns should not dominate the policy debate. First, while we can all sympathize with workers who do not want to lose their jobs, correctional policy should be aimed at providing the appropriate prisons and programs with as few taxpayer dollars as possible. This has to take precedence over the desire of government employees to keep their jobs.

When public servants put their own interests ahead of the public interest, bad policy can result. Government correctional officers have threatened to burn down prisons if they are privatized, and the Corrections and Criminal Justice Coalition, a group speaking for government correctional officers nationwide, is advocating that federal funds be denied to correctional departments pursuing privatization projects.

This leads us to the second point—there should not be such hostility. Privatization need not mean layoffs. On average, privatization leads to only 7 percent of employees being laid off. [See Figure 2] A number of techniques have been developed as part of privatization programs for managing the transition of displaced government employees in as fair a way as possible. These include: requiring contractors to hire displaced workers (but not requiring them to replace workers who resign), offering early retirement, and shifting workers to other vacancies within the system.

Neither should privatization mean a dramatic loss of benefits. In fact, it can mean an increase. Employees should look at their own retirement plans and compare them to private plans before they decide. A typical government retirement plan deducts 3 to 5 percent of the employee's earnings each year to pay into a pension plan, requires 10 years of employment in order to vest, and pays $3,000 to $7,000 a year in benefits after age 55 (or from the date of retirement if the employee serves 25 years or more).

The typical retirement plan of a private prison firm is an employee stock ownership plan (ESOP) in which employees may buy as many shares in the company as they want to each year, and the company will match them. The shares are immediately owned by the employees, who may sell or reinvest the shares as they choose. There is no wait to vest, so employees who retire early or move to other careers get all of their accrued benefits, regardless of length of employment. Suppose an employee invested 5 percent of each paycheck in the ESOP and at the end of each year sold some of the stock and rolled it into a medium-risk mutual fund. Assuming an average annual return on the stock and the mutual fund of 15 percent, after just 10 years of employment, the employee would be able to draw about $3,200 a year from age 55 to age 72. After 25 years of employment, the employee would have an income of $38,538 a year from age 55 to age 72.



Other Resources

» Reason's Corrections and Prisons Research and Commentary

» Private Prisons, Charles Logan

» "Privatization of Corrections: Defining the Issues," Ira P. Robbins, Vanderbilt Law Review, vol. 40, no. 4 (1987): 813- 28.



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