Barrington’s Refuse Collection: Is Privatization the Answer?
The town of Barrington was faced with the immediate replacement cost of two refuse vehicles (refuse included both household waste and recyclables). The town manager thought this was the time to consider privatization of refuse collection services, which would mean the termination of eight long-time employees of the Department of Public Works (DPW). Bids were accepted and the low bid of $828,000 per year was weighed against future cost estimates to maintain refuse collection within the town DPW. Also considered was the impact on the town employees. The Town Manager presented his position along with a summary of cost projections and savings. The DPW Union presented its position and the residents weighed in at several Town Council meetings. The town had to answer the question – would contracting with a private vendor save residents money while maintaining a high level of service?
In completing this assignment, students should be able to complete the following:
1. Compare the costs and benefits of two mutually exclusive cost saving proposals.
2. Evaluate alternative proposals using standard discounted cash flow methods.
3. Identify key cost drivers and develop a sensitivity analysis when comparing mutually exclusive alternatives for addressing the issue or outsourcing.
4. Summarize significant nonfinancial advantages and disadvantages of alternatives.
5. Identify the impact of an outsourcing decision on key stakeholders.
6. Develop and defend a strategic recommendation among mutually exclusive alternatives.