Indianapolis Case Study

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Category: Business and Industry

Date Submitted: 09/22/2010 03:13 PM

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1. Should the Government perform a cost analysis before privatizing Government services?

Government should be measured the same way every other enterprise would be measured by its performance and results.

When Goldsmith took over as Mayor there was a deficit of $20M and he was unhappy the way in which the Government was conducting business. He was considering to handover the portion of services to private contractors where it was not profitable for the government to execute such activities. The mayor believed that market forces and competition would ultimately serve citizens better than the government monopoly.

There was a budget deficit for 1.75 Billion USD for Capital funds and the city had to incur the recurring maintenance expenses on top of this.

If the Government had to serve the public, the officials of the City of Indianapolis first need to know the cost of providing such service to the public.

There should be a cost with which the cost of privatization should be compared in order to determine if privatization would be attractive.

Without doing a cost analysis it will not be possible to compare the cost which the private sector is offering for the same kind of service the Government is currently offering.

The government should also analyze if there is an alternative delivery system that can provide the same service at less cost and at a greater value. This will enable the government to study the cause-and-effect relationship between spending and results.

Thus it is absolutely necessary for the government to perform a cost analysis before deciding on privatization.

2. Comment on the ABC model developed by the project team. What are its particular strengths and weakness.

Mitch Roob Head of department of Transportation, made a right decision by consulting KPMG and implementing the ABC model for the Transportation Division. Through the implementation of this model each municipal officers were able to identify the weakness they...