Bring It BACK!

Privatized jobs return to the public sector as governments discover the flaws of contracting out.

By Clyde Weiss

INDEPENDENCE, IOWA

The fire that destroyed a large and aging gas-fired clothes dryer one September day in 1991 did more than shut down laundry operations at the Independence Mental Health Institute. The blaze gave management an incentive to contract out the work to a private company.

Today, however, laundry services at the 128-year-old psychiatric facility are once again being performed by state employees represented by AFSCME Local 2987 (Council 61). Lawn maintenance operations that had been contracted out a decade ago also have been brought back in-house.

Management has learned the hard way that dedicated public employees can — and do — perform their jobs better and for less money than contracted service providers, whose motivation is profit rather than pride. Mark Plein, head of housekeeping at the facility, who helped bring back the laundry jobs, puts it this way: "It’s all in the person doing the work. You’ve got to have good people, and I have good people."

Nevertheless, many government officials who wrongly think privatization can solve their problems often turn public-sector jobs over to for-profit operators, then close their eyes and learn — too late — that the work is not being performed as promised. A 1997 survey of U.S. cities and counties, conducted by the International City/County Management Association (ICMA), makes the point: While 90 percent of respondents said they had contracted out public services that were being performed in-house five years earlier, only 40 percent said they monitored contractors to ensure goals were met.

TIME IS MONEY. Without monitoring, public agencies have no way to gauge the success or failure of privatization. So why don’t many of them do it? Mildred Warner, assistant professor in the Department of City and Regional Planning at Cornell University, says the answer is simple: "Time is money, and the cost of monitoring contracts is very significant."

As Warner noted at a recent privatization conference sponsored by the Economic Policy Institute, one local government manager responding to the ICMA survey conceded that employees spent so much time monitoring the private contractor "that it wouldn’t be that much work just to do the job themselves." Many other public agency officials are learning the same lesson: 86 percent of governments responding to the survey brought back services they had contracted out.

"This reverse-privatization trend is not only real," said Warner, "it’s half the level of new contracting out. It seems that, instead of monitoring, they’re bringing the work back in."

REALLY FOR-PROFIT. After the 1991 dryer fire at the mental health institute, management refused to buy expensive new equipment. Instead, they hired City Laundering Company, a large for-profit firm that serviced northeast Iowa. Even so, the company refused to launder the personal clothing of the 150 residents or do any mending.

So five of the institute’s employees were retained to operate smaller, undamaged machines.

The contractor also found other ways to maximize its profits. As described in their April 2000 privatization study, Taking the High Road: Local Government Restructuring and the Quest for Quality, Warner and co-author Michael Ballard wrote that the institute’s management "paid for the laundry service based on the weight of each load. Yet the private contractor charged the facility based on the weight of the load when the laundry was wet, not dry, as the institute had expected."

PIE IN THE SKY. Costs skyrocketed, but services and quality plummeted. "The substantial savings promised by the private contractor were never realized," the Warner-Ballard study concluded. In 1997, Deb Bell, a 20-year employee at the institute and a member of Local 2987, saw an opportunity to recapture the work: "I asked my supervisor [Plein], ‘Why don’t we try to see if we can get the laundry back? Let’s see what it will take.’" The two crafted a proposal that management quickly accepted, despite the fact that it in-cluded buying new equipment, which the managers had been too short-sighted to do earlier.

Suddenly, Warner and Ballard wrote, management realized that the one-time new-equipment expense would be worth it over the long run, especially when coupled with the full services and reliable production provided by the union workers. The result: "Since bringing the service back [in 1997], service quality has improved tremendously," the authors declared.

Plein credits the work ethic of Bell and her colleagues. "They’re the ones doing the job."

"I’m proud of the fact we got the work back," says Bell. "With it all done here, the work is much more organized."

SAVINGS PLUS CONTROL. The institute contracted out grounds maintenance in 1990. When the work went out for bid again in 1998, members of AFSCME put together their own proposal, which was lower than 12 private service providers. At $65,000, the AFSCME bid was $15,000 less than that of the lowest competitor.

It wasn’t just the cost savings that prompted the institute to take back grounds maintenance. Management also realized that it could maintain greater control over the job, ensuring proper performance.

Clayton Ohrt, Local 2987’s steward and an "energy management technician" at the institute, says poorly trained and uncaring workers employed by the last private contractor couldn’t even mow the grass without causing harm. "The mowers were scraping up against the trees," he recalls. "Trees are going to die here for years because of the damage."

The contractor also refused to clean up debris after storms and remove dead trees because the work was not expli-citly spelled out in the contract. Ohrt spearheaded Local 2987’s "comeback" effort. He helped to develop a list of equipment and staffing needs, as well as a budget and such cost-saving suggestions as using engineering department workers to help with storm cleanup.

The contractor’s poor performance "was the main reason why the private contractor did not challenge AFSCME’s successful bid," Warner and Ballard wrote in their study. "If anything, the firm worried that the state would impose performance penalties for property damage they caused at the facility."

DOING IT RIGHT. Now, the institute’s grounds maintenance and laundry duties are being performed as they should have been all along, using AFSCME-represented employees who care about the services they are providing.

Council 61 Pres. and International Vice Pres. Jan Corderman says that the employer’s mistake common to both of the operations was concluding that contracting out is cheaper. Maybe so. But as managers of the Independence Mental Health Institute learned, cheaper doesn’t mean better.

"Our local was able to put together numbers for the employer and say, ‘Look, not only can we do it for less when you’re not paying for the profits of the contractor, we can do it better and more efficiently,’" says Corderman. "We have more at stake making government efficient than even the general public does, because if we don’t, our necks are on the chopping block."