NCJ Number
119964
Date Published
1989
Length
7 pages
Annotation
The methodology used in Hamilton County, Tennessee, to compare the actual costs of public and private operation of a prison facility overcomes the problem of hidden costs and indicates that contracting out management of the 350-bed minimum-to-maximum-security Hamilton County Penal Farm to Corrections Corporation of American (CCA) has generated annual savings of between 5 and 15 percent.
Abstract
Generally, government correctional cost reports rely on a single facility or agency budget. The hidden costs such as capital, finance, opportunity, employment benefits, unemployment, external administrative overhead, external oversight, legal service, general liability, property insurance, staff training, transportation, food, interagency personnel, and treatment or program omitted from these budgets can amount to one-third the value of those that are included. However, while correctional officials may not be able to identify costs paid by another agency, a county auditor can. In Hamilton County, the auditor used actual expenditures and projected what the county would spend to take the prison back in later years by assuming that staffing would be the same as the contractor's, that prison employee salaries would increase at the same rate as other county employees, that nonsalary expenses would rise at the rate of inflation, and that the county would not have incurred any extraordinary expenses. Some cost items would be charged to other agency budgets; these were prorated conservatively to calculate what proportions of other budgets to attribute to the prison. After estimating costs under county management, total prison and related costs under contracting is calculated on a per diem basis, adding in the salary of the superintendent, other costs paid directly by the county, and other indirect costs. Conservative estimates show that contracting saved the county at least 3.8 percent the first year, 3.0 percent the second year, and 8.1 percent the third year. The Hamilton County Commission also considered some unquantifiable costs and benefits when deciding to renew the contract: the contractor's liability insurance; contractor improvements including staff training, computer records management, and an inmate classification system; new physical improvement; and gained expertise in correctional officials. 2 tables, 8 notes.