Privatization, however, is not a recent phenomenon. 54)
Hence, privatization has been of perennial interest to Congress and likely will continue to be so. First, it enables policymakers who wish to improve the provision of a good or service to see that privatization is not an either/or proposition. Rather, privatization is a matter of degrees and there are myriad means, as this report explicates, through which the private sector may be brought into the process of the provision of a good or service. Different approaches to privatization of the components of an agency's provision of goods and service may provoke more or less controversy. Background: The Recent Political Salience of Privatization

The sources of the salience of privatization are manifold, but likely include privatization's rhetorically potent rationales, purported benefits, and political attractiveness. Collectively, though, these arguments amount to a criticism of the purported failures of "big government." Privatization is both a means and an end. The search for solutions has stimulated both the federal government and private firms to examine government activities, to develop proposals to transfer government functions to the private sector, and to make agencies operate more like the private sector. The federal government has contracted for goods since its founding. Prize Competitions

In recent years, federal agencies have held prize competitions. Privatization: Ramifications

		Behavior of the Entity

The difference between having a governmental entity and a private firm perform an activity is significant. Marketization: An Alternative to Privatization? Hence, this report uses the term "marketization" to refer to the redesign of a government agency in order to make it provide goods and services in the manner of a private firm . Conclusion

In the past two decades, privatization emerged on the federal policy agenda. This report defines privatization as the use of the private sector in the provision of a good or service, the components of which include financing, operations (supplying, production, delivery), and quality control . This definition, though imperfect, is useful insofar as it enables one to view privatization activities upon a spectrum; that is, an agency may more or less privatize its provision of goods and services, depending on how many of the components of the provision process have been moved to private sector providers. This report also differentiates privatization from marketization. Those uncomfortable with privatization may find marketization a more attractive option. Meanwhile, implicit in the debate about privatization lurks the old and nettlesome question—"Which activities are essential to the state and should remain directly accountable to the elected representatives of the people and which may be carried out by the private sector?"
During the past two decades, the privatization of federal agencies and activities has been much debated. That said, privatization—here defined as the use of the private sector in the provision of a good or service, the components of which include financing, operations (supplying, production, delivery), and quality control—is not a recent phenomenon. Since its founding in 1789, the federal government has used private firms to provide goods and services. Hence, privatization, in all its forms, which include contracting out, vouchers, and prize competitions, is of perennial interest to Congress.
This report is an introduction to privatization in the federal governmental context. It discusses the emergence of privatization on the federal policy agenda in the late 1970s and early 1980s. To some, privatization appeared as an answer to the purported failures of "big government." Privatization attracted political support due to its rhetorically persuasive rationales, purported benefits, and political attractiveness. However, privatization also has been controversial. Critics have complained that privatization is a form of union busting and that privatization can have unforeseen and undesirable consequences.
This report also supplies a typology of the various means through which federal agencies and activities have been privatized. The typology shows that privatization is not an either/or proposition. Rather, privatization, as this report's definition implies, is a matter of degree. Policymakers may transfer to the private sector one or more of the components of government provision of goods and services—however many they deem appropriate.
Next, the report explains the distinction between privatization and marketization, an alternative to privatization, which is "the structuring of a government agency so that it provides goods and services in the efficient manner of a private firm." Marketization retains an activity within the governmental sector; privatization moves the components of an activity to the private sector. This distinction is significant because entities within these differing sectors tend to behave differently. Private sector firms tend to be self-directing and profit-seeking; government agencies tend to be process-oriented and pursue the multiple and sometimes conflicting goals assigned to them by Congress and the President. Hence, policymakers who wish to improve an agency's efficiency or performance, but are leery of privatization, may find marketization an attractive option.
Finally, the report notes that, whenever policymakers consider privatizing a federal agency or activity, a fundamental issue arises—"Which activities are essential to the state and should remain directly accountable to the elected representatives of the people and which may be carried out by the private sector?" This question is complex and value-laden; no definitive answer exists. Thus, the decision to privatize is inherently controversial.
This report will not be updated.