The privatization of prisons to for-profit companies is a recent development in the privatization of corrections. Prison overcrowding and deteriorating prison conditions have encouraged governments to expand their prison capacity. In fact, since the birth of the privatization movement in the 1970s, there has been an increasing interest in the privatization of prisons. Since this time, Australia, England and even South Africa have sought private prison bids. However, the privately run prison industry remains small.

Privatization can take several different forms: the company can take over a previously public facility, the company can build a facility and lease it to the government, or the company can both build and operate an institution. In the United States, privatization typically refers to a process whereby the state continues to fund the full costs of incarceration but the private sector’s job consists of providing the management of both custody and programming (Harding, 1997).

McCrie (1993) states three factors that have enabled the privatization of correctional facilities to emerge as an acceptable operational concept: “the growing cost of incarceration; the failure of costly, extensive, and well-intentioned rehabilitative experiments; and the willingness of government and the public to consider privatization of incarcerations”(p.27).

The proponents of for-profit prisons cite many advantages of private prisons. Greenwood (as cited by Shichor, 1995) suggested that privatization is an advantage in that there are no incentives for governments that operate a facility to control costs or do things better. There are also reduced liability costs to government to cover insurance and legal fees for lawsuits filed against private prison staff. It has been suggested that because private companies have centralized headquarters they can provide better, cheaper services. There also tends to be more freedom in the purchase of goods and services (Tyler, 1996).

Private companies can provide administrative services for a lower cost without the duplication of personnel and equipment (Shichor, 1995). Logan and Rausch (as cited in Shichor, 1995) suggested that the private sector is competitively motivated and dedicated to providing a maximum amount of satisfaction to its customers and clients at a minimum cost. It is estimated that private institutions are 10 percent less costly per prisoner than public prisons (Hart, Shleifer, & Vishny, 1997).

Overcrowding can be reduced by increasing the incarceration capacity through building more facilities at a faster pace (Tyler, 1996; Shichor, 1995). As well, there tends to be greater flexibility and less bureaucracy, which means the private sector can adapt to change faster and respond to correctional needs (Shichor, 1995).