The Private Sector Role in Corrections

May 14, 2018 by

In March, Texas Public Policy Foundation hosted a discussion on the role the private sector can play in the corrections system.

Marc Levin, Vice President of Criminal Justice for TPPF’s “Right on Crime” project, moderated the discussion. One of the project’s stated goals is “to move the criminal justice system from one that grows when it fails, to one that rewards results.”

The panel began by describing the system as it used to be, before the private sector entered into corrections. Under the old model, occupancy guarantees existed for certain prisons, as well as per diems. That system resulted in higher levels of incarceration, which, particularly during the crime wave of the 1980s and 90s, was widely cheered. The paradigm paid a certain amount for how many people were incarcerated without regard to outcomes.

Now, it was observed, we’re seeing growing interest in limiting funding for corrections to demonstrably successful models that improve metrics like recidivism rates and how many ex-inmates receive occupational licenses or vocational degrees.

The flexibility for corrections facilities to innovate came up as an area in which Texas has room to improve. According to one panelist, Texas private prison contracts can drill down into minutiae such as specific door and lock mechanisms, making innovation difficult.

One concern over the use of private prisons is the idea that profit incentives lead to more incarceration, but that doesn’t appear to be the case. Many states don’t use private prisons and the research doesn’t show privatization is a primary driver of incarceration rates.

Currently, private prisons operate in 29 states, while the Bureau of Prisons on the federal level relies on private prisons and private immigration detention centers.

Starting in the 1980s, the privatization trend began when three-fourths of states were under a court order by a federal judge to reduce prison populations in their states. Many were overcrowded, inhumane, and unhygienic, and had rampant problems with sexual assaults, riots and escapes. Some believed they could do better.

In Tennessee, the Corrections Corporation of America offered to take over the state prison system in a 99-year lease worth approximately $250 million. The state rejected the offer, but people took notice. In 1985, a Chicago Tribune story reported on the Tennessee offer, noting there was considerable disagreement as to whether the CCA lobbyists were “cavalry coming to the rescue or profiteers coming to exploit.”

Since the 1980s we’ve seen privatization successes in areas like transportation, water, higher education, and many more. The principles that helped change these stagnant systems could be applied to corrections, though some view certain areas as inherently governmental in nature. Experimenting with the introduction of private sector incentive systems into corrections offered the hope of better outcomes at lower costs that comes with competition.

Known to privatization experts is the Yellow Pages test. As put by a former mayor of Indianapolis:

“If the city Yellow Pages show that several firms now provide services that the city is also providing, then competition is possible. The presence of private service providers also indicates that the market has established performance standards that can be written into contracts.”

So, is incarceration inherently a governmental function? There’s nothing inherently governmental about running a facility or a group of them, and they already exist. Within that system are innumerable subservices that would benefit from private sourcing, like food, transportation, and health necessities.

The truth is that we’re in a struggle to parse how comfortable we are letting the private sector do more in the delivery of government services. There’s nothing unique about experiencing growing pains in the private corrections space.

The initial role of private corrections systems seemed to simply seek to replicate what the government was doing. The first contracts spelled that out, and a review of early prison contracts revealed a tendency to micromanage down to the level of what boots guards would wear.

From a government procurement perspective, that might be what you know. But is that how far we want to go with our pursuit of better corrections outcomes? To simply replicate what the government was doing, or to make room for innovation?

In Texas, if we don’t need a prison because of declines in the population, we can close them by contract, rather than having a government entity worried about losing full-time employees and funding. Additionally, private prisons can be sued, while public prisons enjoy sovereign immunity.

Meanwhile, at the federal level the private prison industry is not subject to Freedom of Information Act requests. Instead, the public must make requests through the Department of Justice or Bureau of Prisons. At the state level, due to advocacy and litigation, Texas is a state where it’s easier to get records, but still primarily via litigation. In most of the country, the industry isn’t subject to open records requests.

But are those problems within the private prison system itself? One panelist argued that it’s the client’s problem. Requests should go to an agency who should procure the information requested from its vendors (the private prisons). In other words, access to information isn’t a problem of the private sector, it’s a problem of government.

Accountability is a significant aspect that raises questions by opponents of private prisons. We can start by asking who audits government prisons. The answer is the government. Watchmen watching themselves presents conflict of interest issues. This may help to explain why private prisons receive more scrutiny than their public counterparts. You don’t hear as much about lapses at public prisons, and private prisons don’t get to grade themselves.

The dialogue fleshed out five layers of accountability in the private corrections system:

  1. The contract itself sets out the conditions and terms and defines how things will operate. If the government does a bad job of specifying requirements, things can go badly. However, if a governmental entity has thought through how to operationalize performance measures and tie those to incentives to deliver (and penalties for failure), such a dynamic changes the incentive game entirely. Additionally, many contracts require third-party accreditation.
  2. Contract monitors can take the form of state workers in the private facility, as if they were manning operations themselves. Through this role, the government is present to look for problems and contract deficiencies. Of course, all of this depends on the quality of that oversight, but when mistakes are made, accountability demands that private operators’ feet are held to the fire.
  3. Policy makers and executive agencies are also charged with contract and operations oversight. Legislative committees meet regularly and should stay apprised of performance.
  4. Business and financial incentives drive much of what companies do. If you have a track record of bad operations and review, your chances of a subsequent contract or renewal are diminished. Companies often have robust systems ensuring contracting compliance running parallel to similar efforts by the government.
  5. Accountability to shareholders and creditors is another incentive pathway to ensure positive outcomes. You’re going to have a difficult time attracting shareholders and credit if your model consistently demonstrates failure.


Lastly, the panel addressed reentry, noting that wardens in Great Britain are responsible for a person’s supervision and services after release, and are held accountable for recidivism.

Private companies are now entering the reentry space, and there have been issues with supervision. Some believe that it’s impractical to charge an entity with outcomes here because so much of an inmate’s results are outside of anyone else’s control.

There are difficulties managing drug abuse, mental health issues, and even crimes of economic necessity, but there’s broad agreement that accountability needs to come from somewhere. Texas, with the help of the Second Chance Act passed in 2008, along with a host of drug and mental health treatment programs, has improved in this area.

Still, there remains a related role to be played in providing inmates the services they need and holding corrections facilities accountable for their role in recidivism. In Pennsylvania, the Department of Corrections cancelled contracts with halfway houses because recidivism was too high. They then rewrote the contracts to demand better outcomes and saw improvement.

What they didn’t do was micromanage. They simply said “get better or no contract,” and started tracking recidivism at different facilities. Utilizing the same performance-based contracting led to improvements in correctional mental health, as well. The result has been double-digit drops in recidivism for two straight years.

Ideas put into practice in Florida include a “continuum of care concept.” This includes transition case counselors and post-release case managers, along with a post-release plan for community resources, social programs, and treatments. The result there was a 25-percent reduction in recidivism.

Unfortunately, not everything that can be tried, is being tried. Many policymakers and elected officials are risk averse and don’t want to be responsible for initial failures. However, they do like private actors taking risks, as they often do in the marketplace. The key is to let them innovate, and not browbeat them when something doesn’t work.

When that happens, the answer is to do a postmortem, then innovate, innovate, innovate.


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