AFSCME Council 62 and the City of Indianapolis, Indiana

Background

When Steven Goldsmith ran for Mayor of Indianapolis in 1992, he did so on a platform of large-scale privatization. He vowed to cut the size of the city government by 25% in his first year, without touching police or fire. However, after his election the Mayor's early privatization efforts gave way to a system of public-private competition, where city workers compete against private companies for contracts to deliver city services. These include not only services delivered by city employees, but also work performed by private contractors and new business. The AFSCME-represented workforce, employed primarily in "blue collar" job titles, has been quite successful in these competitions, due to improved efficiency gained from employee involvement in redesigning work processes and development of detailed gainsharing programs.

Starting with street repair work, front-line employees have been deeply involved in the process of formulating bids for work that is put up for competition. Teams of workers and managers have examined work methods and cost structures to find efficiencies that have allowed them to submit the least expensive bid in the vast majority of cases. Street repair, trash pickup, and fleet maintenance are the most often-cited examples, though labor-management cooperation has taken place for other services as well. While the relationship between the union and the mayor has not been without conflict, the inclusion of city employees in competitive bidding has had several positive outcomes. First, the program has led to millions of dollars of savings. Second, although the city as a whole has downsized considerably, not one unionized worker has been laid off or positions lost. Third, some work that had been previously contracted out has been brought back in-house. And finally, in some cases the city has attracted work that is purchased by community organizations, other governments, and local utilities.

Structure

There are several stages in the competitive bidding process. First, after discussion with the union, the city makes the decision to put work out for bid. A request-for-proposal (RFP) is issued and bid packages are made available to all potential bidders as well as the union. To ensure worker participation in the process, the city provides continuing training to managers and union members involved in the competitive process. Such training includes activity-based costing, an accounting method that helps bid teams spot inefficiencies and gives workers the knowledge needed to find ways of reducing costs and the freedom to completely redesign work processes.

Next, the Project Coordinator (management) and Local Union President appoint bid team members who review the bid document and perform a site inspection. The team determines the number of employees and hours needed to perform the work, as well as equipment and materials requirements. The team works together to make the bid as low as is reasonably possible, and to complete the written bid package to be submitted with all other bids. All bids are opened together and are announced at a public meeting. The program now includes a gainsharing component for teams that beat their proposal prices. Gainsharing bonuses have always been given in addition to contractually negotiated wage increases and city workers have averaged combined adjustments of about 6% per year for the last five years. Also included is a moratorium on bidding in areas where city employees have demonstrated constant superiority in submitting winning bids. The moratorium list is reviewed annually.

Accomplishments

Street repair: this was one of the first areas in which city employees participated in competitive bidding. The employees examined Department of Transportation cost data and found that they were carrying 32 supervisors for 94 workers, excessive overhead that made it impossible to be cost competitive. In response, the administration laid off 18 supervisors, allowing the workers to downsize their repair crews by putting a union worker ìteam leaderî in charge. The workers also found efficiencies in new work methods and the use of better tools. On their first bid, the city workers won decisively, reducing the cityís cost of repairing potholes by 25 percent. On top of that, the actual cost beat the proposal price by a healthy margin. Since that time, city workers have won about 80 percent of all bids where they competed. Productivity has improved and the workers have received incentive pay averaging more than $900 in 1996.

Trash pickup: In 1994, the competitive process was introduced to solid waste. The county's 25 districts were reduced to 11, with 10 being put up for bid (the city retained one district so that it would always have the capacity to collect trash). To prevent monopolization, no single bidder was allowed to win more than three districts. City workers won all three districts they bid on, producing $15 million in savings over five years by redesigning routes, establishing transfer systems, and making other changes. They have routinely outperformed their annual bid amounts, realizing gainsharing bonuses averaging between $700 to $1,200 per year.

Fleet maintenance: In 1994, Indianapolis Fleet Services (IFS) beat three of the largest private vehicle maintenance firms in a competition for the fleet services contract. In order to be competitive, IFS made significant changes in the organization of work. Self-managed work teams were formed, giving mechanics more control over their work. Middle management was cut, allowing IFS to reduce its workforce while improving quality. Turnaround time for repairs decreased and billable hours per mechanic soared. A gainsharing agreement provides an incentive for IFS employees to generate additional savings as budgetary savings are split between 70-30 between the city and employees. The bonus, averaging about $2,000 per employee in 1997, is paid in addition to annual raises negotiated in the city/union contract. Overall, IFS has been tremendously successful, and has acquired such a strong reputation that they are now winning bids to service vehicles for customers outside city government, which has further increased the employees incentive pay and allowed IFS to add a second shift.

Recognition

Council 62 and the City of Indianapolis won the 1995 Innovations in American Government award sponsored by Harvard University and the Ford Foundation. They were the only joint union-management awardee