What Happened?
Gov1 regularly provides update on privatization and outsourcing initiatives around the country. In this week’s edition, we offer one community’s perception of success, as well as two opinions that may have an impact in your municipality.
Garbage Collection Working in Toronto
As Gov1 reported back in August, privatized trash collection has begun in areas of Toronto, and—despite early hiccups—the service is improving and experience has been positive. More importantly, some of the initial problems are demonstrating to some that privatization actually works.
The local trash union, Local 416 of the Canadian Union of Public Employees, as been an outspoken critic of privatization, and even set up a “Waste Watchers” hotline and Web site to track the errors of outsourcing partner GFL Environmental.
But their criticism has actually help fuel support for GFL and the accountability model employed by the city.
First, according to reports, GFL agreed to a $150 per day fine for every truck that doesn’t finish its collection on time. Second, GFL is liable if they damage personal property during trash collection. And, most importantly, GFL can be held in breach of contact if it fails to meets its obligations.
So, unlike the union, GFL is actually accountable for their work, and has been overtly responsive to customer complaints.
Ensuring built-in incentives for outsourcing partners like GFL creates powerful motivator that will help ensure your third-parties are meeting agreed-upon standards.
Outsourcing of Parking Illegal in St. Louis
On June 1, 2009, the treasurer of St. Louis outsourced the city’s parking meter division to save money; according to reports, the treasurer was faced with raising fees or reducing expenses, and decided that outsourcing was a more viable solution.
It turns out that decision was illegal.
According to the order of a St. Louis judge, the issue relates to a city ordinance that clearly states “parking meter functions are to be performed by employees of the Parking Meter Division”; those employees are to be appointed by the treasurer and paid salaries set by city ordinance.
By outsourcing the division, the treasurer violated that ordinance. “Most of this ordinance is meaningless if the Treasurer can outsource the jobs described in it,” wrote the judge. “The Court concludes that the Treasurer’s outsourcing of the jobs of the Parking Meter Division violated state law and City ordinance.”
The judge did not deny the fact that the treasurer has the authority to enter into public-private partnerships; rather, the judge simply stated that outsourcing “cannot extend to entering into contracts that violate other provisions of state law.”
The lesson here? Make sure your local ordinances don’t require that certain jobs be performed by “employees” of specific departments; if they do, you may want to get those ordinances amended before entering privatization contracts.
Interestingly, the same week of the St. Louis decision, Hermosa Beach, Calif., decided to consider outsourcing parking duties as well.
League of Women Voters on Privatization
The League of Women Voters, an influential nonpartisan organization that encourages informed and active participation of citizens in government, recently adopted a position on privatization, which noted that some privatization can be beneficial to municipalities, provided the proper safeguards were in place.
The League avoided a holistic position that might endorse or reject privatization overall. Rather, it cautiously stated that some government provided services could be delivered more efficiently by private entities; however, privatization is not appropriate in all circumstances.” Specifically, the League stated privatization is not appropriate for services to preserve the common good, protect the nation, or “meet the needs of the most vulnerable members of society.”
The position was the result of a privatization study that compiled the recommendations of literally hundreds of local LWV chapters around the country. And though the position was somewhat obvious in that it called for thorough deliberation of outsourcing and transparency in the process, it did provide an interesting list of 11 criteria that should be considered during privatization deliberations:
- Transparency: On-going and timely communication with stakeholders and the public;
- Objectives: Statement of the circumstances as they exist and what is to be gained;
- Expectations: Definition of the quality, level and cost of service expected;
- Research: Assessment of the private market; whether there are providers to assure competitive pricing and delivery; (in some cases there may not be multiple providers if a service is so specialized. i.e. high tech, airports.)
- Analysis: Cost-benefit analyses evaluating short and long term costs of privatization, including the ongoing costs of contract administration and oversight;
- Impact: An understanding of the impact on customers, the broader community, environment and public employees;
- Competition: An open, competitive bidding process with clearly defined criteria to be used in selecting a contractor;
- Performance: A provision and process to ensure the services or assets will be returned to the government if a contractor fails to perform;
- Selection: A data-driven selection of private entities whose goals, purposes, and means are not incompatible with the public well-being;
- Negotiation: The careful negotiation and drafting of the controlling privatization contract; and
- Oversight: Adequate oversight and periodic performance monitoring of the privatized services by the government entity to ensure that the private entity is complying with all relevant laws and regulations, contract terms and conditions, and ethical standards, including public disclosure and comment.
Additional information can be found at the League’s privatization page.