If You've Got the Money, I've Got the Time: The Benefits of Incentive Contracts with Private Prisons

Governments increasingly rely on private prison companies to manage the daunting demands associated with their ever- increasing prison populations. The private prison industry provides governments at all levels (federal, state, and local) with an alternative to the costly and time-consuming construction of additional public facilities. Governments, however, have all too often adopted a flawed pricing strategy, paying private prison companies fixed per diem rates to house prisoners. This model both incentivized and tolerated poor conditions with greater emphasis placed on the industry's bottom line than benefits to the state, the prison population, or society as a whole.

This article asserts that governments should instead experiment with cost-reimbursement contracts and outcome-based incentives. Re-thinking contract types would encourage governments to engage in strategic, long-term thinking about their goals for prison, appreciating that a rehabilitative model can ultimately save the state money and generate other societal benefits. For example, cost-reimbursement contracts that integrate programs for mental health illnesses or drug and alcohol rehabilitation may ultimately result in a decrease of the next generation's prison population.