I got a kick out of this article, and I really enjoyed reading the contract methods and processes that these towns went through in order to accomplish efficiency and privatization. There are a lot of great quotes in this one, and I figured I would share a few that jumped out at me.
The first is about the process in which the city of Sandy Springs moved to this privatized model and how it seems to be working really well for them.
As a fan of Ronald Reagan and the economist Friedrich Hayek, Mr. Porter came naturally to the notion that Sandy Springs could push “the model” to its nth degree. His philosophical inclinations were formed by a life spent in private enterprise, and cemented by a visit to Weston, Fla., a town that had begun as a series of gated communities.
Mr. Porter tells this and other stories in “Creating the New City of Sandy Springs,” a book that will leave readers with one indelible lesson: incorporating a city is dull. Super duper dull. The book is composed mostly of the codicils, requests for proposals and definitions of duties that were required to jolt Sandy Springs to life. Without a love of minutiae and a very long attention span, forget it. But this is intended as a blueprint, not a gripping narrative. Mr. Porter regards the success of Sandy Springs as a way out of the financial morass that has engulfed so many cities in the aftermath of the Great Recession.
“Many are on the verge of bankruptcy,” Mr. Porter says. “They have significant unfunded liabilities, like pensions and other benefits. It’s almost like a poison that a lot of people are unaware of, and this model could be an answer.”
There are a couple of things here that I recognized, that has some commonalities with today’s contingency contracting game in the war. That FOB’s in war zones are basically small cities, that are a public/private partnership in a few ways. FOB privatization is quite evident if you ever have a chance to work on one. From the KBR chow halls, to the Dyncorp auto shops or aircraft servicing, to CADG/IAP construction, to security performed by contractors on the perimeter and the various internal camps. The key offensive duties are performed by the military, but everything else is privatized.
Not only that, but this move to privatize as much as you can during wartime also reflects budgeting realities. A contractor does not have legacy costs like a soldier does. Things like a pension and other long term personal costs are things that add up over the life of that veteran, and you do not have to worry about that with contractors. To give you an example of how big the costs are, and how worried the pentagon is about these legacy costs, check this quote out from another article I found.
The Pentagon’s retirement benefits bill will only get larger after 2014, creating a major financial problem as annual military spending is slated to decline after a decade of war.
Yearly military retirement payments alone are expected to more than double by 2035, growing from $52.2 billion in 2011 to $116.9 billion, according to an estimate prepared by the Defense Business Board, which reports directly to the defense secretary.
More broadly, the Bipartisan Policy Center study further highlights what some call the military’s “people problem.”
“In 2017, the DOD plans to have 100,000 fewer troops, but still spend as much on personnel as today,” states the report.…Military officials said they have spent around $245 billion on personnel costs in 2010, more than a third of the $636 billion appropriated that year to the Defense Department. Some analysts put the actual number at more than $300 billion.
Pentagon officials are increasingly concerned about the growing costs, saying health care expenditures alone have swelled over the last decade by over $30 billion, from $19 billion to $50 billion annually.
James Jones, a former national security adviser to President Barack Obama and a retired Marine Corps general, told reporters last week that when any organization spends so much on its employees it has “big problems.”
I highlighted that last part, just to emphasize that what is happening in the military is what was happening to Sandy Springs, and this city made the jump to privatize just so they can stay in the black.
The other part that perked me up is the contracting method that the city uses. I liked their Miss America analogy. lol
Mr. McDonough, the Sandy Springs city manager, says the town has sidestepped such problems. The key, he explains, lay in the fine art of drafting contracts.
Initially, and for the first five and a half years of its life, Sandy Springs used just one company, CH2M Hill, based in Englewood, Colo., to handle every service it delivered. Mr. McDonough says CH2M saved the town millions compared with the cost of hiring a conventional public work force, but last year Sandy Springs sliced the work into pieces and solicited competitive bids.
When the competition was over, the town had spread duties to a handful of corporations and total annual outlays dropped by $7 million. (Representatives of CH2M, which still has a call-center contract, said at the time that they were “deeply disappointed” by the results, but wished the city well, according to a local news report.)
To dissuade companies from raising prices or reducing the quality of service, the town awarded contracts to a couple of losing bidders for every winner it hired. The contracts do not come with any pay or any work — unless the winning bidder that prevailed fails to deliver. It’s a bit like the Miss America pageant anointing the runner-up as the one who will fulfill the winner’s duties if, for some reason, Miss America cannot.
“In most cases, Miss America serves her whole term,” Mr. McDonough says, warming to the analogy. “But every once in a while something happens and they don’t have to run a whole new competition.”
I kept scratching my head here to see if this contracting method was derived from something being done in contingency contracting now, or if there is a different term for it. (feel free to say so in the comments)
The big one here is that the town found a way to navigate the principal-agent problem, and write up contracts that benefit both parties. That the city actually has a means of booting out the poor contractor and instantly go to the backup contractor, as opposed to going through the whole rebidding process again. Nice.
It is that mechanism that allows a city to exercise their right to demand good service, and punish for bad service without a major shock to the system. If only today’s contingency contracting for wars was set up to be more fluid like this. To be able to have standby contractors, ready to jump in if another contractor fails to deliver, and have a government contracting agency that actually fires poor contractors when they suck. That would be great, but I also realize that the size/scope/complexity of contingency contracting just doesn’t lend itself to easily do something like that. But still, there might be something we can learn from Sandy Springs…. –Matt
A Georgia Town Takes the People’s Business Private
By David Segal
June 23, 2012
If your image of a city hall involves a venerable building, some Roman pillars and lots of public employees, the version offered by this Atlanta suburb of 94,000 residents is a bit of a shocker.
The entire operation is housed in a generic, one-story industrial park, along with a restaurant and a gym. And though the place has a large staff, none are on the public payroll. O.K., seven are, including the city manager. But unless you chance into one of them, the people you meet here work for private companies through a variety of contracts.
Applying for a business license? Speak to a woman with Severn Trent, a multinational company based in Coventry, England. Want to build a new deck on your house? Chat with an employee of Collaborative Consulting, based in Burlington, Mass. Need a word with people who oversee trash collection? That would be the URS Corporation, based in San Francisco.
Even the city’s court, which is in session on this May afternoon, next to the revenue division, is handled by a private company, the Jacobs Engineering Group of Pasadena, Calif. The company’s staff is in charge of all administrative work, though the judge, Lawrence Young, is essentially a legal temp, paid a flat rate of $100 an hour.
“I think of it as being a baby judge,” says Mr. Young, who spends most of his time drafting trusts as a lawyer in a private practice, “because we don’t have to deal with the terrible things that you find in Superior Court.”
With public employee unions under attack in states like Wisconsin, and with cities across the country looking to trim budgets, behold a town built almost entirely on a series of public-private partnerships — a system that leaders around here refer to, simply, as “the model.”
Cities have dabbled for years with privatization, but few have taken the idea as far as Sandy Springs. Since the day it incorporated, Dec. 1, 2005, it has handed off to private enterprise just about every service that can be evaluated through metrics and inked into a contract.
To grasp how unusual this is, consider what Sandy Springs does not have. It does not have a fleet of vehicles for road repair, or a yard where the fleet is parked. It does not have long-term debt. It has no pension obligations. It does not have a city hall, for that matter, if your idea of a city hall is a building owned by the city. Sandy Springs rents.
The town does have a conventional police force and fire department, in part because the insurance premiums for a private company providing those services were deemed prohibitively high. But its 911 dispatch center is operated by a private company, iXP, with headquarters in Cranbury, N.J.
“When it comes to public safety, outsourcing has always been viewed with a kind of suspicion,” says Joseph Estey, who manages the Sandy Springs 911 service in a hushed gray room a few miles from city hall. “What I think really tipped the balance here is that they were outsourcing just about everything else.”
Does the Sandy Springs approach work? It does for Sandy Springs, says the city manager, John F. McDonough, who points not only to the town’s healthy balance sheet but also to high marks from residents on surveys about quality of life and quality of government services.
But that doesn’t mean “the model” can be easily exported — Sandy Springs has the built-in advantage that comes from wealth — or that its widespread adoption would enhance the commonweal. Critics contend that the town is a white-flight suburb that has essentially seceded from Fulton County, a 70-mile-long stretch that includes many poor and largely African-American areas, most of them in Atlanta and points south.
The prospect of more Sandy Springs-style incorporations concerns people like Evan McKenzie, author of “Privatopia: Homeowner Associations and the Rise of Residential Private Government.” He worries that rich enclaves may decide to become gated communities writ large, walling themselves off from areas that are economically distressed.
“You could get into a ‘two Americas’ scenario here,” he says. “If we allow the more affluent to institutionally isolate themselves, then the poor are supposed to do — what? They’re supposed to have all the poverty and all the social problems and deal with them?”
The champions of Sandy Springs counter that they still send plenty of tax dollars to the county and that race had nothing to do with the decision to incorporate. (The town’s minority population is now 30 percent and growing, they note.) Leaders here say they had simply grown tired of the municipal service offered by Fulton County.
“We make no apologies for being more affluent than other parts of the metro area,” says Eva Galambos, the mayor of Sandy Springs. And what does she make of the attitude of the town’s detractors? “Pure envy,” she says.
NOTHING about Sandy Springs hints that it is one of the country’s purest examples of a contract city. Even those city hall employees betray no sign that they work for a jumble of corporations. Drive around and you’ll see a nondescript upscale suburb, where the most notable features are traffic lights that seem to take five minutes to turn green. There is no downtown, or at least anything that looks like a main street. Instead, there are strip malls with plenty of usual-suspect franchises — although one strip mall, oddly enough, includes a small museum that tells the story of Anne Frank.
The town is home to offices of United Parcel Service, Hardee’s and other corporations, and it also serves as a bedroom community for Atlanta. Residents include Herman Cain, members of the Atlanta Braves and the Atlanta Falcons, and executives at Delta Air Lines, CNN and other companies. This is also home to the rapper and producer Akon, whose opulent tastes were featured in an episode of “Cribs” on MTV.
“A few years ago, I got a call from his head of security,” says Kenneth DeSimone, the deputy chief of police, who is giving a tour of the town one May afternoon. It turned out that somebody had stolen a pistol and a laptop from Akon’s home.
“He seemed really focused on the laptop and I was looking around this guy’s house thinking, ‘What is the big deal with this laptop? He can afford another one.’ Turns out, there was a bunch of new Lady Gaga demos on it. Worth millions.”
That crime was solved when an informant helped lead the police to some young people who, Mr. DeSimone said, had no idea whose home they had entered and what was stored on the computer.
The car driven by Mr. DeSimone says “Sandy Springs” on the side, which is one reason that this town can’t claim to be the most outsourced city in the United States. That distinction probably belongs to Maywood, Calif., eight miles southeast of Los Angeles, which in 2010 fired all but one employee, its city manager. Maywood is now operated, from top to bottom, through contracts. The police officers are members of the Los Angeles County Sheriff’s Department, paid a combined $3.5 million a year to patrol the streets, according to Felipe Aguirre, a council member.
But Maywood was pushed to extreme measures after it flirted with bankruptcy and lost insurance coverage for its public work force. Sandy Springs went the public-private partnership route by choice, and it evangelizes about its success.
Few have more zeal than Oliver W. Porter, a founding father and architect in chief.
With his gray beard and thick gray hair, Mr. Porter is a beatnik version of John Updike with a Southern drawl and a pipe. He is sitting one morning in a tiny room in his basement, which has a small desk, a chair and a psychiatrist’s couch. A parachute is spread out along the ceiling, like a canopy, and a mural of an ancient Roman landscape — Mr. Porter’s handiwork — adorns one wall.
This unassuming nook is where every element of Sandy Springs was conceived and designed. With the title of interim city manager, Mr. Porter drafted requests for proposals and fielded calls here, often from people who imagined him in charge of a small battalion of employees.
“One day a lady called and said: ‘Oh, Mr. Porter, I didn’t mean to interrupt you. May I speak to your staff?’ ” he recalls. Reliving the moment, he picks up the phone, puts it to one ear and then switches to the other.
“Staff speaking,” he told the caller, in a slightly deeper voice.
Mr. Porter, a retired AT&T engineer, was an advocate of the town when it was a hopeless cause, during the many years when Democrats blocked efforts to let a largely Republican and white suburb cleave itself from Fulton County. One Democratic legislator vowed that Sandy Springs would incorporate “when pigs fly,” a phrase that Mayor Galambos has since adopted as the name of her blog.
After an election in 2004, both houses of Georgia’s legislature were controlled by Republicans for the first time since Reconstruction.
“It was like a dog that’s been chasing a train for years and finally catches it,” Mr. Porter says. “The question was, What do I do with it now?”
As a fan of Ronald Reagan and the economist Friedrich Hayek, Mr. Porter came naturally to the notion that Sandy Springs could push “the model” to its nth degree. His philosophical inclinations were formed by a life spent in private enterprise, and cemented by a visit to Weston, Fla., a town that had begun as a series of gated communities.
Mr. Porter tells this and other stories in “Creating the New City of Sandy Springs,” a book that will leave readers with one indelible lesson: incorporating a city is dull. Superduper dull. The book is composed mostly of the codicils, requests for proposals and definitions of duties that were required to jolt Sandy Springs to life. Without a love of minutiae and a very long attention span, forget it. But this is intended as a blueprint, not a gripping narrative. Mr. Porter regards the success of Sandy Springs as a way out of the financial morass that has engulfed so many cities in the aftermath of the Great Recession.
“Many are on the verge of bankruptcy,” Mr. Porter says. “They have significant unfunded liabilities, like pensions and other benefits. It’s almost like a poison that a lot of people are unaware of, and this model could be an answer.”
HOVERING around the debate about privatization is a basic question: What is local government for? For years, one answer, at least implicitly, was “to provide steady jobs with good wages.” But that answer is losing its political tenability, says John D. Donahue of the John F. Kennedy School of Government at Harvard. “A lot of jobs in government are middle-class jobs that in the private sector are not middle-class jobs,” he says. “People aren’t willing to support conditions for public workers that they themselves no longer enjoy.”
In a way, what Sandy Springs and other newly incorporated towns have done harks back to a 19th-century notion of taxation, which was much less about cross-subsidies and much more about fee for service.
“It was normal from around 1830 through the end of the Civil War for cities to be run like businesses,” says Mr. McKenzie, the “Privatopia” author. “When people paid property taxes, it was to get something that benefited them directly — like butchers wanting a certain area cleaned up.”
Sandy Springs residents still send roughly $190 million a year to Fulton County through property taxes, about half of which goes to schools, including those in Sandy Springs. But by incorporating, the town gets to keep $90 million in taxes a year to spend as it pleases.
Has this financially hurt the rest of Fulton County? It has, says the county manager, Zachary Williams, who calculates that the incorporation of Sandy Springs, and neighboring towns that incorporated after it, cost the county about $38 million a year. Mr. Williams described the figure as “significant,” especially given the strains imposed by the economic downturn.
“I would bet that Atlanta is top five in the country in terms of foreclosures,” he says. “I think our vacancy rate is 14 to 18 percent.”
Some Georgia politicians outside Sandy Springs regard it and other breakaway towns as “the first shot in the battle to destroy Fulton County,” as State Senator Vincent Fort, a Democrat whose district includes part of Atlanta, put it.
“What you have is the northern section of the county,” he went on, “which is mostly white, seeking to leave the rest of Fulton County, and doing so with what I think are racially tinged arguments about the corruption and inefficiency of local government.”
Town leaders say race had nothing to do with it. Mayor Galambos said, “A 94 percent vote in favor of incorporation speaks to the broad community support for self-government and a desire to have local dollars remain local.”
BUT leave aside questions of fairness and race. Many cities that have dipped a toe or two into the privatization pool, and others that have plunged in, have had awful results. Recently, the company that has a contract to manage Chicago’s parking meters sent the city a series of bills, totaling nearly $50 million, to make up for revenue lost from people with disability parking placards and from street closings. Mayor Rahm Emanuel has refused to pay.
New York City’s comptroller released a report in late May that said that Hewlett-Packard, a major contractor in the city’s emergency dispatch service, was paid $113 million for work considered subpar.
In Maywood, Calif., going private has driven up the cost of running the town, says Mr. Aguirre, the council member, and the quality of municipal service has gone down.
“Let’s say a tree falls on a car,” Mr. Aguirre says. “Previously, we had an employee who would deal with it. Now, you have to make an appointment and they’ll come out when they can. They’re not our people to control any more.”
Mr. McDonough, the Sandy Springs city manager, says the town has sidestepped such problems. The key, he explains, lay in the fine art of drafting contracts.
Initially, and for the first five and a half years of its life, Sandy Springs used just one company, CH2M Hill, based in Englewood, Colo., to handle every service it delivered. Mr. McDonough says CH2M saved the town millions compared with the cost of hiring a conventional public work force, but last year Sandy Springs sliced the work into pieces and solicited competitive bids.
When the competition was over, the town had spread duties to a handful of corporations and total annual outlays dropped by $7 million. (Representatives of CH2M, which still has a call-center contract, said at the time that they were “deeply disappointed” by the results, but wished the city well, according to a local news report.)
To dissuade companies from raising prices or reducing the quality of service, the town awarded contracts to a couple of losing bidders for every winner it hired. The contracts do not come with any pay or any work — unless the winning bidder that prevailed fails to deliver. It’s a bit like the Miss America pageant anointing the runner-up as the one who will fulfill the winner’s duties if, for some reason, Miss America cannot.
“In most cases, Miss America serves her whole term,” Mr. McDonough says, warming to the analogy. “But every once in a while something happens and they don’t have to run a whole new competition.”
The privatized approach saves money, he continues, because corporations hire superior workers and give them better training. Work handled by 15 public employees can be done by 12 privately employed workers, he says: “It’s all about the caliber of employee and the customer focus that comes out of the private sector.”
During a tour of city hall, Mr. McDonough bumps into Kevin Walter, the deputy director of public works. Mr. Walker has good news. Currently, Sandy Springs pays for two people to operate two road maintenance trucks five days a week — in effect, 10 days of work every two weeks. Well, Mr. Walker has just figured out a way to reduce the number to nine days every two weeks, saving $50,000 a year.
Does Mr. Walker, or rather his company, URS, get to keep a portion of that $50,000?
“No,” Mr. Walker says. “But I get to keep my job. Our job is to run all these projects and programs very efficiently.”
And your contract?
“It is renewed every year,” Mr. Walker says.
“It can be renewed every year,” Mr. McDonough clarifies.
“It can be renewed every year,” says Mr. Walker, correcting himself.
Any anxiety that you will not be renewed?
“No,” Mr. Walker says. He quickly reconsiders. “A little bit,” he says. “Enough so that we do an excellent job. We know we can do an excellent job and we have faith in the city. And we know it would not be easy for them to change so we’d have to really mess up for them to change. But we’re not going to mess up.”
Story here.