To expand on something I wrote as a comment, one of the things I hate about wizard privatisation schemes and especially “total outsourcing” or whatever is as follows. The FSTA deal for the RAF’s new jet tankers is especially awful and exemplary.
Here’s the idea. Rather than buy the aeroplanes and do the job, we’ll buy “what we need” – a guarantee of however-many flying hours and tonnes of offloaded fuel where required. This will be awesome, because the availability is guaranteed. At the same time, the PFI contractors get to (supposedly) charter out the planes when not needed, which makes them money. This pays some of the costs and therefore it’s meant to be cheaper.
Guarantee, you say? What guarantee? What are these planes that never ever break down? Why can’t the RAF just buy some of them? Well, of course, they will break down but there’s a contract that says Airtanker will give the MOD a refund if they miss a slot. What good the refund is if you crash in the sea is left as an exercise to the reader. Obviously, they won’t just accept it, they’ll argue bitterly and sue everyone, and if Airtanker can’t airtank, does anyone imagine that the Treasury solicitor will find any money there in receivership?
You’ve seen this story, you’ve lived it – it’s Railtrack. Everything was ponies because contracts. It didn’t work, it cost more to litigate the disputes than it cost to build actual trains, and when it fucked up, there was no money to pay out the compo. It’s the Treasury’s attachment to the myth of immaculate compensation that’s doing the work here. As Bob Dylan sang, they say everything can be replaced…
And this thing is costing £14bn for 11 planes, that sell for vastly less to the airlines. Well, say the PFI panjandrums, that does include every sheet of toilet paper used by the ground engineers, and all the fuel. But this is precisely the problem. How confident are you that their cost accounting is honest? You can’t really control it. How do you audit the price of jet fuel 20 years hence? There’s a reason why the Americans have the phrase, to sell someone a bill of goods.
Closer to home, think of one of those guys in the Tottenham Court Road flogging computers. If you take the pricier option, of course, I’ll throw in a bag and some USB sticks and an airbomb and that neat little fart-robot. The margin is on that stuff. If you take it you’re a sucker. It’s a similar process to the one I described here. Ryanair works by disaggregating its price, Airtanker and friends by aggregating it, but the point is the same – moving economic activity from the domain of competition and of legibility into that of monopoly and of mystery.
Both have the effect of destroying information and therefore efficiency. This is why taking railway maintenance back in-house saved money at Network Rail.
Update: I forgot to include this. US healthcare is basically completely think-of-a-number, nothing has a single price.