by Vince Vasquez
Friday, October 30, 2009
This week, the San Diego City Council derailed the advancement of a key voter-approved program that could provide significant cost savings and efficiency reforms in city government. With an unprecedented budget crisis now bringing City Hall to its knees, a new strategy may be required to honor the will of the voters.
At issue is “managed competition,” the policy process that allows private contractors and government departments to openly bid and compete for the right to deliver public services. When competitive bidding is used, studies show that service quality improves, costs are lowered by 10 percent to 25 percent, and innovation is encouraged in the workplace. Competitive bidding also catalyzes healthy government reform; by introducing competitive forces into government agencies, municipalities undergo significant internal cost-cutting and management overhauls that they likely otherwise wouldn't.
Records show that the San Diego County government has saved tens of millions of dollars using managed competition since the 1990’s, so it’s no wonder that San Diego City voters overwhelmingly approved Proposition C in 2006 that opened up city services for competition. Unfortunately, after more than 1,000 days since its passage at the ballot box, competitive bidding has yet to occur, mired by legal errors and political setbacks that seem to have no end.
Early efforts to advance two key components of managed competition – an implementation ordinance and a comprehensive program guidebook – were effectively rescinded when a state labor relations board ruled in August 2008 that the City of San Diego had failed to follow its own impasse procedures, violated state law, and did not bargain in good faith with city labor unions. Now, after approximately 73 combined meetings with the City’s white-collar and blue-collar unions to negotiate a new program guidebook, Mayor Jerry Sanders declared a bargaining deadlock or “impasse” over seven contested provisions within the guidebook, and sought for the City Council’s approval of his “last, best, and final offer” to the unions on the matter. Ultimately, the Council voted 6-2 to reject the mayoral call for impasse, returning city negotiators back to the bargaining table with the two employee unions.
Many supporters of managed competition, including San Diego Councilmember Carl DeMaio, have been disappointed by the languishing attempts at program implementation. "The voters spoke and insisted that the city use this proven reform tool to eliminate inefficiencies and achieve taxpayer savings,” said DeMaio. “Not one city program – not even one single city position – has been reviewed using this cost-saving tool. Taxpayers should be outraged at the delay in the implementation of a reform they mandated at the ballot box and insist that city leaders begin implementing this reform in city government."
Unfortunately for the public, even after the guidebook ultimately receives the approval of the Council, much more time-intensive work lies ahead before city services can be put out to bid, including amending and re-approving an implementation ordinance, new preliminary statements of work, and pre-competition assessments. More delays will cost taxpayers dearly; a 2007 study found that an aggressive program implementation in San Diego could save taxpayers up to $200 million annually, a figure that is the size of the projected budget deficit the city will face in the next fiscal year. Patience has worn thin over the last three years, but a recent legal opinion on Proposition C may breathe new life into the prospects for competitive bidding in our city.
Earlier this month, the City Attorney released a controversial legal opinion that identified language within the 2006 ballot measure that gives broad authority to the Mayor to outsource city services, including the ability to bypass any need to solicit bids from city departments. Such a powerful policy tool, if used, could potentially speed up the timeline for bidding out city services, and could still provide the public with a competitive bidding process via multiple private contractors. Though outsourcing without city department bids would surely face greater political opposition than managed competition, a closer look at survey data finds that San Diego’s insistence on mandatory public-private competition is an anomaly among local governments that use privatization.
A survey of more than 1,200 city and county governments is taken every five years by the International City/County Management Association (ICMA) which examines the experiences of municipalities that consider using private contractors to provide public services. Comprehensive survey results find that of those local governments that do decide to choose private-sector alternatives, fewer are mandating public-private competition. In the last two decades, the number of local governments that allowed public departments to compete with the private sector in the bidding process has declined, from 33% in 1997 to 23% in 2007. Additional research by this author was able to identify only six large municipalities that have ever used managed competition (San Diego County, Atlanta, Chicago, Charlotte, Indianapolis, Phoenix), underscoring the ubiquity of municipal outsourcing programs that don’t require the participation of civic departments.
Public employees unions are sure to object to any consideration of outsourcing, but it’s important to note that state and local labor laws already provide for a number of economic safeguards for workers. The City Attorney’s memo outlined that City Hall cannot unilaterally shift public work to a private contractor, and it still must follow “ meet and confer” rules with affected public employee unions prior to any contracting decision being made. Additional contractual agreements can also be made with private contractors that develop fairness for both workers and taxpayers, including requiring job interviews to be held with affect city employees, and penalties for poor performance.
Should San Diego City Hall continue to press on with managed competition, it is likely to see the drama drag on for years, disenfranchising voters and the general public at a time of a severe budget crisis, which will only worsen with ballooning pension payments and maturing financial obligations. With 1,100 hours of labor negotiations already spent (and billed) discussing a blueprint for a program that may never see the light of day, local lawmakers should seriously re-evaluate the merits of staying the course.