Thoughts on Privatization Guidelines for Governments

December 19, 1995

" Thoughts on Privatization Guidelines for Governments "

Dan Taylor
IDSA
Dan@DanTaylor.com
www.DanTaylor.com Dan Taylor
1543 Bayview Avenue, # 407
Toronto, Ontario, Canada M4G 3B5
+1 416-925-1668 Telephone
Facsimile # upon request

Dan Taylor is an entrepreneur living in Toronto, Ontario, Canada. He is an industrial designer and technologist. His advice on e-commerce, the Internet, economic development, high technology, infrastructure, water and energy issues is actively sought by leaders in academia, business and government.

1) Recognize that the sale of public assets is different from any other act of government. It is necessary to tailor a process for each asset to be sold so as to maximize the financial return to the public, minimize potential liabilities to the public and concurrently build public confidence in the process.

2) The selling process should be swift, sure, open, fair, transparent and free of opportunities for influence or secret commissions. The process should be suitable for the particular to the item sold. The process should be set and executed by a privatization committee of knowledgeable persons nominated and agreed upon by all three political parties if possible, a committee comprised of the governing party and the Loyal Opposition may be acceptable as well. A negative vote of 20% of the tripartite nominating committee should veto any nomination to the privatization committee. Any process would be potentially open to judicial review.

3) Sale mechanisms could include:

initial public offerings to the market
sale via consolidation
bundling of assets and liabilities for package and silent auction - e.g. similar to an insurance company sale
competitive open auction bid - i.e. process of public tender or open out crying e.g. like tobacco
sell to the employees
sell to the clients or tenants
sale of franchise, operating/billing rights.

4) Process could include provision for reference to fairness opinions which would be subject to conflict of interest considerations.

5) Taxpayers, ratepayers and consumers should receive net benefit in the short and long terms.

6) The privatized service or function should be structured or positioned to improve via greater efficiency and reduced overheads. A positive climate for competition, technological innovation and resource conservation should flow from the sale.

7) In the case of natural monopolies, rather than selling the asset outright, serious consideration should be given to the privatization of the management and operations functions on a contractual basis with the ownership of the asset resting in the public trust. The contracted management and operations would be required to answer to a publicly elected Board / Secretariat (Members of Parliament) and in the event of poor performance could be removed and precluded, without the right of appeal, from re-bidding for the subsequent contract.

8) The liabilities and assets should be sold as a package i.e. take the bad with the good.

9) All proceeds from sales should be used for debt reduction.

10) Public monopolies and cartels ought not be replaced by private ones. Don’t sell the natural monopoly assets of monopolies - this does not preclude privatization of all or parts of their operation, repair and maintenance functions, on a performance based contract.

11) A clause must be included in the sale with the meaning, “at the discretion of the Crown, in the event the privatized enterprise fails to provide an adequate level of service, all assets revert to the crown”.