The Privatization of Prisons

The Urban Lawyer, Vol 28, Issue 3. 1996

43 Pages Posted: 4 Apr 2015

See all articles by Martin E. Gold

Martin E. Gold

Sidley Austin LLP; Columbia University - Law School; Columbia University - Graduate School of Architecture, Planning and Preservation

Date Written: 1996


Drawing on the author's experience as a lawyer who has worked both in the public sector and in the private practice negotiating numerous contracts between the public and private sectors, this article examines the major arguments in favor of and against privatization by contract in general, focusing on the pros and cons as they relate to privatizing prisons. It draws on the author's experience representing the Commonwealth of Puerto Rico in its contracting for the design, development, and operation of three separate prison complexes, and the author's experience in representing lending institutions considering investments in private prison projects. We examine the unusual growth in the private corrections industry, the principal risks and issues involved in privatizing prisons (including proprietary concerns, liability and accountability issues, and comparative cost), the use of private prisons as economic development projects, and their use as a solution to a public corrections program in deplorable shape. The issues are a mix of political philosophy, law, and economics.

Finally, the author will suggest contractual solutions to some of the major problems raised in prison management agreements. Engendering competition is one of the goals for privatizations of all types. Competition can be maximized at the local level, and results improved by contracting with more than one private company within the same jurisdiction. The private operators will then compete with each other in the operation of their respective facilities, as well as with government operated prisons. Competition may be further enhanced by allowing the governmental corrections agency, or an organized subgroup thereof, to bid, along with private companies, for new prison contracts. As public servants they may not have had any incentive or flexibility to implement changes because they operated as part of a monopoly and because there was no personal reward. But when operating under a contract, instead of civil service employment rules, they should be capable of greater innovation and efficiency, using insights gained from years of experience on the job.

One of the most important factors, as to whether it makes sense in the first place to privatize or not, is the quality and quantity of firms in the private sector interested in competing for the contract. Puerto Rico was fortunate in having several good companies compete. Without good companies making good proposals it could be folly to privatize. The demand for the privatization of prisons (as is true with other fields), the growth of new companies and the winnowing out of weak ones, and increasing government experience in procurement and contracting should, in theory, produce better results over time. But concentration in a few firms can be a dark cloud that requires close watching.

Keywords: privatization, prisons, corrections, public-private contracts, competition, local government, government accountability, prison services, contracting out, prison staff

Suggested Citation

Gold, Martin E., The Privatization of Prisons (1996). The Urban Lawyer, Vol 28, Issue 3. 1996, Available at SSRN:

Martin E. Gold (Contact Author)

Sidley Austin LLP ( email )

787 Seventh Avenue
New York, NY 10019
United States

Columbia University - Law School ( email )

435 West 116th Street
New York, NY 10025
United States

Columbia University - Graduate School of Architecture, Planning and Preservation

New York, NY
United States

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