Privatization of Cessnock Correctional Centre - Case Study Example

Managerial Brief [Name] [Course] [Lecturer] [Date] Executive summary Government business enterprise plays vital roles within any given country economy. These business enterprises are considered to be legal entities owed by the government and they carry out various commercial activities on behalf of the government. There are certain legal forms that are used to govern such enterprises which are drawn and designed by the government. This study focuses on understanding what are government business enterprises using Australian Broadcasting Network as our case study. Further, key issues regarding how this company is run especially that it is being fully funded by the Australian government. In additions, other alternatives will be discussed and a rationale will be given followed by recommendation where reasons for changing the organization running from being government owed to that of public-private. Table of Contents Table of Contents 3 1.0 Introduction 4 2.0 Key issues within Cessnock Correction Centre 5 2.1 Management 5 2.2 Cessnock Corrective Centre is autonomous in theory 5 2.3 Mandatory detention is Australia 6 3.0 Potential Alternatives 6 4.0 Rational of choice 7 5.0 Recommendations 9 6.0 References 10 Privatization of Cessnock Correctional Centre 1.0 Introduction Government business enterprise plays a vital role in any given country economy. This is widely because of the fact that most of large companies within any country are mainly in the public sector. All significant sectors in a country such as telecommunication, fisheries, financial services and civil aviation are dominated by government businesses enterprise. Profits obtained from government business enterprises represent a substantial source of revenue for any given state. It is quite evidence that as the performance over government owed enterprises are constantly deteriorating, the question is arising whether these enterprises should be private-public Corporation, privatized or those that are outsourced. It is important that the government should provide financial support to such enterprises to avoid the various shortcomings witnessed in such companies (Compare Bel 2006). Cessnock Correctional Centre is both a minimum and maximum Australian prison located in New South Wales in Cessnock. The prison has a capacity of four hundred and sixty four. Cessnock Correctional Centre is the receiver prison for the Hunter and Newcastle region. The prison is managed by New South Wales Department of Corrective Services which is considered to be an agency of the government of NWS (GSL Australia 2007). This agency provides community based and custodial services which are key elements within criminal justice systems. It is considered to be a government business enterprise in that the structure of management within the prison reports to the attorney general and minister for justice. Cessnock Correction Centre is a good example of a government business enterprise whereby key issues regarding its key issues such as management, its autonomous nature and politics and criticism. 2.0 Key issues within Cessnock Correction Centre Being a government business enterprise Cessnock Correctional Centre, it is quite evidence that there are several key issues within the companies. These issues are usually known as characteristics that are found within such government business enterprises. 2.1 Management Based on management, the corporation operations are widely governed by a board of directors who are elected by government officials. The election of the company board directors has often emitted criticism due to political affiliation. It is evident that past appointments have widely been linked to political parties where five of the fourteen members are accused of having political affiliation (Compare Bel 2006). The government appointments have been faced with criticism where the appointments were controversial. It is from such criticism that the system of appointing board of directors to one that is established by panel. This implies that the minister for defense or the attorney general is supposed to only pick individuals who are shortlisted by the panel which later is justified by the parliament (Dagdeviren 2006). 2.2 Cessnock Corrective Centre is autonomous in theory Compare Bel (2006) assert that, it is observable that within Cessnock Corrective Centre the prison is widely known to be autonomy in theory. It is autonomy in practice because of various political interference of the organization operation. The government is in the forefront of making policies thus creating a strong competition from other privatized corrective centers (Dagdeviren 2006). The red-tapism practiced by the government has really affected the operations this prison. The Australian government seeks assistant from the civil servants even when the same civil servants are not to exercise effectively since they are not technical. Within the prison, there is evidence of slackness in their management especially due to grabbing within public service (Compare Bel 2006). 2.3 Mandatory detention is Australia The mandatory detention in Australia which is a concern for Australia Federal government is a key issue within Cessnock Corrective Centre. This is because of the numerous controversies as the mandatory detention people constantly seek for a certain political asylum. The implementation of this policy is one that has been due to political affiliation especially for major political parties (Compare Bel 2006). 3.0 Potential Alternatives Privatization refers to the transfer of ownership of a state or government owned enterprise to the private sector or non-profit making organization. It is a move that the government takes to respond to dissatisfaction in public operations of the enterprises and also to take advantage of the efficiencies of the private sector. Whereas employees of state companies lack incentives to motivate them in working efficiently, private workers are encouraged to work at higher levels of performance due to increased incentives. Employees in the public sector benefit from higher wages and other fridge benefits as compared to those in the private sector. On the other hand, the private sector demonstrates variety in terms of operation approaches hence increased productivity as opposed to the public sector which is rather conservative (Bruno and Perotti 2002). Public-private partnerships (PPPs) is a form of a private business or state service that is controlled, operated and funded through a partnership of a company in the private sector and the government. Although PPPs take many forms ranging from full privatization to simple commercialization, they are generally long-term agreements between the government and the private sector. The advantages of PPPs is that they distribute risk hence creating money value for the project, they have increased productivity due contribution of effective management from the private sector. In addition to this, they enhance competition in the industry hence improving innovation and investment. On the advantage, PPPs have the limitation of demanding high capital cost and high transaction costs. Outsourcing and contracting refers to a business strategy whereby an organization moves its processes, functions, decisions and activities to outside providers. This is achieved by acquiring contractual agreements with vendors concerning the company assets, management, production process and quality controls. According to Meehan (2011), the benefit of outsourcing is that allows the company to focus on its operations reduce its operational costs hence obtain a market advantage. However, outsourcing has several disadvantages such as compromise of the organization’s quality services, exposure to potential legal risk and increased lay-offs which imply elevation of unemployment rates. 4.0 Rational of choice Considering the increasing growth of inmates in Australian prisons, the best move for the government to take is to privatize its public prisons. Privatization refers to the process of transferring ownership, management, or activities of the public sector to the private sector. This kind of partnerships are accompanied by a set of conditions set by both parties and can either be partial or complete privatization. The driving force towards privatization of prisons is due to the ever growing problem of prison overcrowding and increased cost of maintaining them. Research has indicated that prisons under private management demonstrate higher levels of cost savings as compared to those operated by the government. Despite having many advantages, the issue of privatizing public prisons presents several challenges. Firstly, the public might not be ready to embrace the idea if the private sector taking over a task that was originally the responsibility of the government. Secondly, the government might not be in a position to sufficiently supervise, monitor and evaluate operations of the prisons. Thirdly, security of inmates might be compromised while in the hands of the private prisons. Therefore, the government has the task of considering and examining all aspects of the concept of privatization such that selection will be based on expertise and adequate experience. There are various kinds of privatization that the government can use and they include; Complete privatization: This will involve outright sale of the government prison to the private sector. There is complete transfer of responsibilities of ownership and assets to the private sector. This can occur using three different methods; sale of the government shares through the stock market, asset sale privatization and finally sale of shares to the public at very low prices. Privatization of operations: Under this kind of privatization, the Cessnock will hand over its operational and management responsibilities to the private prison. In this case, the private prison will use the government facility to generate its own revenue. Contracting out: Under this arrangement, the private sector is only required to provide specified services in the facilities and the government pays an agreed amount of money in return. These services include professional services like medical care, data processing services, consultancy services among others services. There are many potential benefits of privatizing Cessnock correctional center. To begin with, delegating some tasks will result to cost reduction of operations in the prison. Service providers in private sector tend to offer their services at reduced prices since they are not under restrictions that occur in the public sector. Secondly, there will be transfer of financial and operational risk from the government to the private sector. Thirdly, the management of Cessnock will benefit from revenues accrued from leasing out its public assets such as the prison buildings to the privates sector. Fourthly, Cessnock can be guaranteed of quality services from the private firm in terms of expertise, timelines and flexibility. 5.0 Recommendations In order to support a sustainable and successful privatization process, management of Cessnock must follow the following recommendations; i. The process should be made legal clear guidelines of tendering should be put in place and the public made aware of the process. ii. By seeking the assistance of experts, Cessnock should first determine the form of privatization that will fit best in the current situation of the facility. It could choose either complete or partial privatization. iii. Cessnock should also adequately evaluate the value of its assets prior to leasing or privatizing its facility. 6.0 References Bruno, B. and Perotti, E. 2002. “Machiavellian Privatization.” American Economic. Review 92: 240-258. Buxbaum, J and Ortiz I. 2009. Public sector decision making for public-private partnerships. Washington, D.C.: Transportation Research Board. Compare Bel, G.2006. "Retrospectives: The Coining of 'Privatization' and Germany's National Socialist Party". Journal of Economic Perspectives 20 (3): 187–1 Dagdeviren, A. 2006. "Revisiting privatization in the context of poverty alleviation" Journal of International Development, Vol. 18, 469–488 GSL (Australia)" 2007. Detention Services Contract. Archived from the original on 29 August 2007. Retrieved 23 October 2007. Meehan, C. 2011. Advantages and Disadvantages of Outsourcing. Retrieved on 3rd September 2011 from http://smallbusiness.chron.com/advantages-disadvantages-outsourcing-it-764.html Read More