Privatization and UPS, FedEx delays

Published on Sunday, 29 December 2013 20:28 - Written by

Did you get your packages in time for Christmas? Many people didn’t — UPS and Federal Express experienced some delays. Those delays are now being used by opponents of privatization to show why private isn’t always better.

Those opponents are at least partially right. In fact, privatization isn’t always even possible (think of big road projects and national defense). But the general principle holds true: In delivering goods and services, a private company motivated by profit to increase efficiency and service almost always provides those better than a public sector entity.

“United Parcel Service, the Georgia-based company that is the go-to package delivery option for millions of Americans, fell short — far short — of meeting holiday expectations this year,” wrote Susan Milligan for U.S. News. “Apparently overwhelmed by the delivery demands of the season, UPS failed to get packages to customers in time to put them under the holiday tree.”

Excuses of high volume aren’t acceptable, Milligan said.

“But there’s another issue here, and that is the public/private bias,” she wrote. “Why is Amazon using UPS instead of the U.S. Postal Service? There seems to be a persistent idea that a private entity is always better or more efficient than a public one.”

That’s not always true, of course. But in many cases, it is.

Let’s look at how the private sector responded to the delays, and how a similar public sector entity responds.

“Neither UPS nor FedEx have said exactly how many customers were impacted by the holiday delays, but they’ve brought in extra people and they’ve rented extra trucks to deliver a late Christmas to a lot of angry customers,” CBS News reports. “UPS now promises to refund shipping costs to some customers who didn’t get their Christmas packages on time.”

There’s another entity that experienced greater-than-expected volume this holiday season: Healthcare.gov, the Obamacare website.

“Officials launched healthcare.gov despite a warning from a top cybersecurity official that it wasn’t ready, the House Oversight and Government Reform Committee revealed Friday,” the Washington Examiner reported last week. “CMS administrator Marilyn Tavenner signed the paperwork authorizing the website to launch despite the failure of the agency to conduct thorough security testing.”

But here’s the thing: When confronted with the epic failure of the website launch, the Department of Health and Human Services and the Obama administration sought to lower expectations. Deadlines were extended (so that Americans wouldn’t be punished for failing to sign up for insurance through a non-working website), apologies were made, and “fixers” were brought in.

But those steps weren’t restorative. When healthcare.gov failed, the administration merely sought to make things right. No question about that. But when UPS and FedEx failed, they sought to make it right for their customers.

See the difference?

The private sector responds to the needs (and complaints) of its customers — because, as Adam Smith tells us, it’s in the self-interest of business to do. Public sector entities don’t share this motivation.

Delays many of us experienced this Christmas were not an argument against privatization.