Outsourcing is a strategy of many municipalities to provide high-quality public services at low cost. The underlying theory is that by having a service provided by a third-party provider, the city can benefit from the provider’s expertise and economies of scale. The result will be comparable or better quality services that the municipality itself could provide at a lower cost to taxpayers, while still generating a profit for the seller. Unfortunately, theory and reality sometimes diverge. This note explains why this can happen and what to do about it.
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