Contracting for Performance: Restructuring the Private Prison Market

TABLE OF CONTENTS INTRODUCTION I. PRIVATIZATION OF PRISONS IN THE UNITED STATES A. Getting Tough on Crime: Determinate Sentencing and the Prison Bubble B. Market Concentration C. Looking Forward in the Industry II. REBALANCING COST SAVINGS AND QUALITY IMPROVEMENTS A. Cost Minimization and the Current Incentive Structure B. Criticism C. Insufficiency of Increased Input Measures D. Normative Concerns E. Restructuring the Market III. DEMYSTIFYING THE PRIVATE SECTOR'S INFLUENCE ON SENTENCING A. The Impact of Proincarceration Lobbying B. The Normatively Problematic Capacity to Influence Punishment IV. CONTRACTING FOR PERFORMANCE: REFORMULATING THE MARKET THROUGH CONTRACT A. The Advantages of Outcome-Oriented, Performance-Based Measurements B. Graduated Bonus System CONCLUSION INTRODUCTION Since the burgeoning of the private prison industry in the 1980s, the practice of contracting correctional services to private companies has received sharp criticism for incentivizing corporate advocacy of harsher crime policy and ensuring cost minimization at the expense of the prisoners' safety and capacity for rehabilitation. Many scholars have recoiled at the practice of privatizing the government's capacity to restrict the liberty of its citizens. (1) Yet in the literature's response to the wave of prison privatization that has characterized recent decades, these scholars have failed to offer substantive solutions beyond simply abolishing the practice. While discussing the premise of his recent book, That Used to Be Us, (2) Thomas Friedman observed that the incentives of contemporary politics are misaligned with the will of the people and eloquently captured the need for reform: "Move the cheese; move the mouse. Don't move the cheese; mouse doesn't move." (3) This blunt but sage observation reflects the economic axiom that "people respond to incentives" (4) that policy analysts and scholars of all hats too often overlook. (5) In the extensive literature on prison privatization, critics clearly recognize the perverse incentive structures the private prison industry creates but nevertheless fail to move the cheese, (6) instead proposing simply to kill the mouse. (7) This Note serves as an attempt to begin filling this gap in the literature by establishing a theoretical and practical framework for restructuring the private prison market and the incentives corrections companies face. Proponents of the abolition of privatization, (8) in their haste to oppose the practice, ignore the reality that the private sector, when confronted with the right incentives in a properly conceived market, has the unique potential to improve the rehabilitative capacity of the corrections system. Currently, the language of prison contracts defines the service provided as the provision of prison beds. (9) The concomitant incentive structure created promotes a focus on cost minimization of this service and serves as the foundation of the seemingly unavoidable challenges posed by prison privatization. The private prison market and the service provided by prison companies, however, need not be structured in such narrow terms. In order to reformulate the market and in turn the incentives created, contracting agencies should use performance-based measurements --such as comparative recidivism and employment rates--that would begin to redefine the market as that for rehabilitated prisoners and reformulate the operational philosophy of prison corporations. Although the contours of this system would initially be difficult to define, the ultimate impact of incentivizing cost-efficient rehabilitation and capturing the innovative capacity of the free market to respond to the nation's prison crisis would prove invaluable. Part I of this Note begins by providing context to the prison privatization debate. Parts II and III respectively continue by grouping the extensive criticism of prison privatization into two categorical deficiencies--the emphasis on cost minimization over quality improvements and the encroachment of the profit motive into sentencing policy and practice. …