HEADLINE: Fortune looks at Wackenhut prison operations
Much-beaten private-prison operator Wackenhut Corrections Corp. and its competitors are getting a little reprieve from Fortune magazine.
The stock of the West Palm Beach company has been suffering after high-profile troubles at some of its prisons and the meltdown of its largest competitor, the Corrections Corporation of America.
Private prisons can serve a genuine public purpose, says an opinion piece in the June 11 issue of Fortune. While the research is tentative, it indicates that a well-run private facility can operate better for less money than a poorly run public one. A 1998 study found that privatization typically brought cost savings of far less than 10 percent - but the savings do exist.
In addition, privatization can improve the management of the public sector. For example, the construction of Wackenhuts South Bay, Fla., facility cost 24 percent less than that of a comparable public prison, chiefly because Wackenhut built on a smaller, more accessible site. State officials will surely learn from that. And in order to measure the performance of private prisons, officials have had to devise accountability measures for all prisons, private and public. This has to be a good thing.
Interestingly, even through the worst of times, private prisons keep winning (and renewing) contracts: Their capacity has more than doubled since 1995. In addition, the stock prices of three of the four biggest companies have begun to recover - although all are down at least 60 percent from their peaks. And at the end of 2000 the government loosened the rules of contracting, a sign of acceptance that should make raising capital easier.