Local Government Contracting Service

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WHERE ARE WE

ON

LOCAL GOVERNMENT

SERVICE CONTRACTING?

GILBERT

.

SIEGEL

UniversityfSouthern alifornia

Because

ontracting

ut

has been

key

lternative

y

which

ities, ounties,

nd

special

districts

ave

attempted

o

cope

with heir

roblems

f

diminishedevenue

coupled

with

nrelenting

emands or ervices nd for heir

mprovement,nd

be-

cause ontracting

s an

ncreasingly

sed

lternative

y

ocal

governments,

ontinuous

monitoring

f theory,ractice,

ndresultsn service

ontractings worthwhilend,

therefore,

orth

iscussing.

hisarticle ndeavorso

recapitulate

elevant

iterature

onthe ubject nder hreemajor ubtopics:

he nvironmentf ervice

ontracting,

he

process

f

ontracting,

nd valuativeesearch.

hese

opics apture

he

rincipal

ub-

jects

nthe

iterature

nderwhich

he omain f ervice

ontractingppears

obe oc-

curring.

he context

iterature

xpresses

hy

ocal

governments

re

resorting

o

this

alternative

or ervice

elivery

nd he xtentf his

ction. he

process

f

ontracting

is important

ecause

t

describes ractices

ecessary

or uccess.

inally,

scan

ofre-

search

indings

hould

rovide uidance

bout unctionalreas

n which uccess

nd

failure

might

esult,

ther

hings eing

qual,

uch

s the nvironmental

nd

process

factors.With

he

xception

f

evaluative

esearch,

oth

mpirical

nd

nonempirical

sources re

cited.

We

are

nterested

n

contracting

ut

for ervices

y

ocal

urisdic-

tions. hus,

nitiativesf he tate ndfederalovernmentsre utsidef he cope, s

arevarious ther

ervice

rovision

nd

production

lternativesuch s

vouchers,

ran-

chises,

olunteers,

nddivestiture.

TheEnvironmentf

ervice

ontracting

THE

EXTENT

OF

CONTRACTING

IN LOCAL GOVERNMENTS

For a

variety

f reasons

to

be

discussed),

ervice

ontracting

as

become

fre-

quentlyhosen echniqueuringhe inal ecade f his entury.iranda ndAnder-

sen

1994,pp.

28-29)

omment

hat ome ervices

ppear

obe more uitable han

th-

ers

for

contracting, sing for-profit

nd

nonprofit

ontractors,

ased

on an

Public

ProductivityManagement eview,

ol.22 No.

3,

March 999 365-388

C

1999

Sage

Publications,

nc.

365

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3/25

366

PPMR March 999

International

ity

Management

ssociation

ICMA) survey

eporting,504

city/

county

uestionnaire

esponses:

Local governments

eport

he

reatest

se ofnonprofits

n

the

eliveryfhealthndhu-

man ervices

nd ultural

nd rts

rograms....

ome 1%

ofmunicipalities

nd oun-

ties eport

sing

ontractsor ultural

nd

rts

rogram

perations,

nd

37%

report

us-

ing]

ontracts

or

museum

perations....

Local

governments

remore

ikely

ousefor-profit

rganizations

odeliver

most

ub-

lic works/transportation

ervices,ublic

tilities,

ublic

afety,arks

nd ecreation,

nd

support

unctions.

n 1992,

or xample, 4%

ofmunicipalities

nd ounties

eport[ed]

contracts

ith

or-profit

irms

or

ommercial

olidwaste isposal....

More han

alf

(54%)

of governmentsurveyed

urrently

ontract

ith.

.

for-profitirm[s]

or

ay

care....

Contractsith or-profitirms avebeendecreasingince 982for axbill nddata

processing,

perhaps

ttributableo]

he ower ost

f

nformationrocessing.

pp. 8-29)

Table

1

recapitulates

ajor

hanges

hat ave

ccurred

nthe

number

f ities

nd

counties eporting

ontracting

f service

unctions

etween he CMA's

1982 and

1992 urveys.

ote he

ignificanthanges

n various

unctional

reas.

WHY

CONTRACT?

The

reasons

or

ontracting

obeyond

ost

avings,

lthough

ouche

Ross

1987,

p.5) andMirandandAndersen1994,p.26) show ost avingsobethe op dvan-

tage

f

ontracting

ut.

Other

ignificant

easons

romhe ouche

oss

survey,

n

de-

scending

rder

f

mportance,

ere

olving

abor

roblems,

haring

isk,

btaining

higher

uality

ervice, roviding

ervices

not otherwise

vailable,

xperiencing

shorter

mplementation

ime,

nd

olving

ocal

political

roblems.

ther

bservers

have

noted

he

following

dditional

easons

or

ontracting:

ontractors

rovide

greater

xpertise

nd

have

more dvanced

quipment

Ammons

Hill,

1995;

Cigler,

1990);

contractors

re

better

ble to

maximize

conomies

f

scale,

especially

n

capital-intensive

ervices

Hirsch,

964;

Honadle,

984;Stein,

990;Stigler,

962);

contractorsllow voidancef tart-upostsHonadle, 984); nd f ompetitiveid-

ding

s

used,

hen

rofit-maximizing

irmsre

more

ost-effective

nd

ess

wasteful

than

overnment

gencies

Savas,

1987).

Ferris nd

Graddy1986)

suggest

hat on-

tracting

s

appropriate

hen here

s a

need or

ervice

onsistency

ith ther

urisdic-

tions

nd/or

hen here re

governmental

ostreduction

ncentive

olicies

n exis-

tence,

nd

Kelley 1984)

states

hat

he

nability

o maintain

age parity

ith

he

private

ector

n

a

volatile

abormarket

ncourages

overnments

o contract or

services.

PROBLEMS

WITH CONTRACTING

First

re ome

ontextual

ssues

hat an nhibitontracting

fforts.

ccording

o

Kelley 1984),

the

viability

f

contracting

epends

o

a

great

xtent

n the

nviron-

mental

ircumstances

f he

urisdiction.

he

ge

of

he

ommunity,

or

xample,ro-

vides

n

ndication

f

he

egree

o

whichnformal

ractices

ave

eveloped

hat

may

obscure nderstanding

f

omponent

asks

n he

roduction

f

utputse.g.,

nformal




4/25

Siegel/

LOCAL

GOVERNMENT

SERVICE

CONTRACTING

367

Table

1.

Percentage fChange of

10% or More

n

Number f Cities nd

Counties

Reporting se of

Private nd

Nonprofit

ontracting

etween

982

and 1992

ntemational ity

Management

Association

urveys

Service

Percentage

Public

works/transportation

Commercialolid

waste ollection

14

Snowplowing/sanding

10

Parkingot/garageperation

15

Bus transit

ystem

peration/maintenance

22

Airport

peration

19

Disposal

of

ludge

19

Disposal

of

hazardous

materials

38

Publicutilities

Electric tilityperation

nd

management

58

Utility eter

eading

20

Health

ndhuman ervices

Insect/rodentontrol

15

Day

care

facilityperation

22

Childwelfare

rograms

-10

Operationnd

management

f

hospitals

61

Publichealth

rograms

-19

Drug/alcoholreatment

rograms

10

Operation

fhomeless helters

59

Parks

nd

recreation

Operation

f convention

enters/auditoriums

14

Arts

rograms

Operation

f

cultural

nd

rts

rograms

48

Operation

f museums

39

Support

unctions

Fleet

management

nd

vehiclemaintenance

Heavy quipment

29

Emergencyehicles

30

All other ehicles

27

Tax

bill

processing

-18

Dataprocessing -15

Sources.

982

data

N

=

1,780):

nternational

ity

Management

ssociation

1982,

p. 3);

1992

data

N

=

1,504):

Miranda nd

Andersen

1994,

Table

3/5).

arrangements

hereby

aulers

emove

arge

tems rom

nside

houserather

han

fromhe idewalk

nly).

he

xample,

n

urn,

anresultn

hidden osts

f

ervice

ro-

ductionhat renot onsideredn

developing

stimates

f he

resent

ost

f

ervices.

It

s less

ikely

hat ewer

ommunitiesillhave

deviated rom

olicies

nd

proce-

dures o he

xtent

hat

lder neshave. he

form

f

government

an

make

difference

in

he

egree

o

which

ost

avings

might

ccrue rom

ontracting.

n

his

esearch,

i-

randa 1994) foundhat otal ndcommon unctionxpendituresndtotal mploy-

ment rereduced

y

contracting

ut n

council-manager

ities.

y

contrast,

n

cities

under he

mayor-council

ystem,ontracting

oes

not

roduce

hese esults.

ity

man-

ager

entral

udgetary

ontrols

thought

o account or his

ifference.

hus,

weak

managerial

ontrolf he ervice

rovision

rocess

an

resultn n

environmenthere

savings

nd

mprovements

ight

ot ccur.




5/25

368

PPMR March 999

Legal

restrictions

n contractingften

re ssociated

ith he xistence

f trong

municipal

mployee nions.

heseunions eny hat

rivate

ector ontractingro-

duces mportantenefits;rgue hatmunicipalmployees,fproperly anaged,an

achieve

he ame

esults;

nd

oppose

he oss ofmembers'obs Halachmi

Holzer,

1993).

A commonegal equirement

s that

ontractorsaywages

quivalentothose

in he ublic

ector. his,

f ourse,ften ill itiate

otential

ontractoravings. ri-

vate

ector roviders

ften ay ower

wages ndprovideewer

enefits.

hesevari-

ances

with

ity ractices

ay

e

the

basisofcontractconomiceasibility.

overn-

ment nions

ften

epresent

potent olitical

orce apable f nfluencing

lected

officials

ndblocking

erviceontracting.

here he nions

o

not ave

ominant

ev-

erage

with

oliticians

r

trongublic

upport,ometimes

he

hreatf ontracting

s

sufficient

or

management

ogain

oncessionsuch s changes

nwork ules o llow

greater

roduction

fficiencyHatry,988).

However,

nder ollective argaining,

most

tates ave uled

hat ither

he ecision o subcontract

overnment

ervices r

the

ffectsf

thedecision

s a

mandatoryubject

or ollective

argaining

ecause

each

has

mpacts

n

employee orking

onditions

Sauter,988).

Next

re

disadvantages

f

ontracting

escribedn

the

iterature.

tarr

1988)cau-

tions

hat

imple ublic-private

omparisons

f ervices

erformed

ften

re

mislead-

ing:

Public

nd

private

chools, ospitals,

nd

ocial ervices

arely

ave he ame

kinds

f

tudents,atients,

r lients....

Any imple

omparison

f

osts,ncome,

nd

productivity

uts

he ublicector

rganizations

t nunfair

isadvantagepp.6-7).

Althoughoodresultsancome romompetition,f heres not ompetitiveid-

ding,

hen

t s

argued

hat

private onopoly

anbe

worse han

governmental

ne

(Kelley,

984).

ole

source ontractors

ight

e able

ohold

he

ity ostage

o

price

raising,specially

here

major apital

xpenditures

re nvolved

uch s

where he

city

as

iquidated

ts

efuse

ollectionleet

Miranda,994).

imitation

n he

umber

of

viable

idders

n

the nvironment

n

general

s a

dangerous

ut ot ncommonb-

struction

o

uccessful

ontractingICMA,

1989;

Kettl, 993a;Mercer,

983).

A

lim-

ited

ool

of

potential

uppliers

nmarkets

empts

idders

o eek

higher rices,

nd t

the

ostcontract

tage,

t

empts

hem

o

opportunistically

emand

hanges

n

greed-

on ontractermsecausehe ontractorannot eeasily eplacedGlobermanVining,

1996).

Contracting

ut f

function

ight

esult

n ossof

xpertise

ndknow-howo

he

local

government

Halachmi

Holzer, 993;

Wisniewski,992).

Also,

workforce

productivityight

iminish

erely

ecause

f

he

ecision o ontractut function.

For

xample,

immins

1986)

foundhat

ollowing

decision

o

ontract,

ffectedm-

ployees

eganusing

ccrued

eave

for

ob

searches nd

using gency

acilities

or

copying

esumes

nd

makingong-distance

hone

alls on

ob

searches.

lthough

there

ill

be

few

inancial

onsequences

or

he

urisdiction

f

displaced

workersre

absorbedy he ontractorrcaneasily ind ayingositionsnthe ocality,f hese

conditions

o

not

revail,

hen here

might

e

economic

epercussions

uch

s

public

assistancexpenditures

nd eduction

f

otal

pending

ower

n he

ommunityPra-

ger

&

Desai,

1996).

Government

ontrolver

uality

nddistribution

f

utputs ight

be

eopardized

s well

Ferris

Graddy,986;

Miranda, 994).




6/25

Siegel

/

LOCAL GOVERNMENT

SERVICE

CONTRACTING

369

Local urisdictions

ometimes

ttempt

o

vade

ccountabilityy

ontracting.el-

ley 1984)

argues

hat ltimate

esponsibility

annot e

removed.

ttemptedvasion

of esponsibility,owever,as he ffectfdiminishingitizenccessby emovinge-

cisions rom

he

public

ealm

where

pen

discussion

reates

pportunitiesor

riti-

cism

nd

mutual

ersuasion

Starr, 987).

Once ervice

rovision,

s

policymaking,

s

separated

rom

roduction

ycontract,

ome

policymay

be

determined

y

the

pro-

vider ather

han

y

the

ontractingovernment

fficial

Brudney,

987).Contract

price ften oes

not

ake nto ccount he ostof

monitoring

he

ontract

Miranda,

1994).

Local

governments

o not o a

goodjob

f

providingversight

f

ontractorsn

any

ase

Dilger,Moffett,

Struyk,997;Donahue,

989;

Kettl, 993a;

Miranda

Andersen,994;

Savas, 1987).

Contracting ay esultn a lesseningfpublicwill ndwelfareonsiderationss

emphasis

s

placed

n

the

ntegrity

f

he ontractnstead f

on

public

ccountability

(Bailey,

987;

Halachmi

Holzer, 993).

As

examples,

he

ffectsf

ontracting

ay

be

especially eavy

n

minority

mployment

ecause

f

minorities'

eliance n

public

jobs

(Kohn,1986;

Starr, 987;

Suggs,

1986);

contractors

ight

end

o

service

nly

easy

and

profitable

ustomers

creaming )

hile he

unprofitable

nd

difficulto

serve re

neglectedBarnekov

Raffel,

990);

and

private

ector

roviders

ight

promote

nequities

n

distributionuch s

denying

ervices o

thosewho

cannot

ay

(Miranda,

994). Furthermore,

f

distributional

oals

are

mportant

e.g.,

targeting

benefits

o

minority

r ow-income

roups),

hen

ontract

pecification

ftens

diffi-

cult

Ferris

Graddy,986).

Contracting

ut lso creates isks

Kettl, 993b)

o the

ntegrity

f

public

ervice

delivery;

ome of these

re

corruption

otentialAmerican

ederation

f

State,

County,

nd

Municipal

mployees, 987),

onflicts

f

nterest,

ervice

isruptiono-

tential hen ontractorso

not

erform

ell,

reation

f

nflexibility

nd

management

problems

e.g.,

nability

f

refuse ollectors

o convert

quipment

o

snowplowing),

loss of

mportant

ources

f

nformation

y

government,

nd

data

haring

hat

might

give

n

advantage

o

some

participants

ver

thers

Halachmi

Holzer, 993).

The

Contracting

rocess

DEFINING

ERVICES

TO

BE

CONTRACTED

Donahue

1989)

describeshe est

andidate unctionss those or

which

here

re

clear

objectives

ndthe

ervices re

tangible

ndcan

be

easily pecified,

easured,

and

monitored.

rager1994)

argues

hat o

uccessfully

ontract,

he

ublicurisdic-

tion

hould e

able to take

dvantage

f

conomies

f

cale

and

cope

of

work

when

contractors

annot.

ervices

hat an

be

provided

hrough

ompetitiverrangements

canyield he enefitsf dualyardstickogauge ervicetrengthndweaknessSavas,

1977a,

1977b, 981).

f he

municipality

ompetes

ith

ontractors,

hent

retains

a-

pacity

nd

xpertise

n

he

unction

nd llows he

urisdiction

o

ntervenef

contrac-

torfails o meet

equirementsFerris

&

Graddy,

986;

Halachmi&

Holzer,

1993;

Hatry, 983; Savas,

1981, 1987). Competitive

ervice

rrangements

ased

on

geo-

graphical

reashave

been

uccessful

Osborne

Gaebler,

992).




7/25


8/25

Siegel LOCALGOVERNMENTERVICE ONTRACTING 371

Table . ProgramsndPolicies oMinimizeotentialisplacementffects

Internalrograms

nd

rocedures

*Jobnrichment,ithay ncreases,orhose orkersho emain

*

mplementwo-tieredalarychemes,iringart-timeorkerst lower ate ohandleome f

theworkhats tobecontracted

*

Transfer

mployees

o ther

overnmentobs

*

Preferentialreatment

n

hiring

ithin

ublicgencies

*

Retain isplacedorkersnd ransferhemo therositions/departments

*

Establishlacementrogramso dentifynd ecureobs

within

ublicgencies

*

Extendetirement

ndhealthenefits

overage

or

isplaced

orkers

*

Offerarlyetirement

nd/or

pecial

everance

ay ackagesodisplacedorkers

Selective/strategicse

f

privateerviceelivery

*Privatizenly ew r xpandedervices

*

Matchhe ate fprivatizationo he

ate

f

normal

ttrition

*

nstitute

freeze

n

xternal

iring

nd bsorb

isplaced

orkers

Private

ectorontract

pecifications

*

Require

ontractorso fferirst

ight

f

efusal

o

displaced

orkers

*

Require

ontractorso

upholdqual mploymentpportunity/affirmative

ction

olicies

*

Requireontractors

ohire

isplaced

orkersith

age

nd enefit

ackagesomparableo hose

in he

ublic

ector

(see

also Ferris

Graddy, 986;Fisk,Kiesling, Muller, 978;Meyer

&

Morgan,

1979; Savas, 1987).

ESTABLISH

PERFORMANCE STANDARDS

Two of

Hatry'smportantriteria,uality

nd

effectiveness,

an be

implemented

througherformance

tandards.

deally, esign

fmeasuresre

preceded y nalyzing

goalsderiving

romtatutes

nd

historic

ractices,iscussing

esired

utputs

ndout-

comes

with

major

ustomers

n and

out

of

government,riting strategiclan,

nd

drawing

n

nput-outputap

of

the

rganization.

ut

minimum

equirement

nce

tasks avebeen dentifiedstoobtaingreementetweenolicymakingnd perating

levels ndperhaps

ther

takeholders,

uch s

citizens,

n

appropriatendicatorsf

program

nd

performanceHakes,1997,p. 10).

As

pointed

ut

by

Parks

1984),

citi-

zens often ave

ubjective

deas aboutwhat

s

high erformance.

Indicatorsuch s clearance

ates, ropertyecoveryates,

ndcrime ates re n-

dicative

f a

portion

f what itizens

ope

heir

olice ccomplish

ut reacknowl-

edged

oreflect

nly

small

ortion

f

he

olice

ask. itizens

may mploy

dditional

indicators

uch

s

rapidity

f

response

o ervice

equests

s well s

demeanornd c-

tions

t crime cenes

Parks, 984,p. 119).

Usually,

everalndicatorsre

required.

rofessionalnd rade ssociationsome-

times

ave

developed

tandards

hat

may

be

helpful uides.

he

Governmentalc-

counting

tandards

oardhas

published

number

f

service fforts

nd

ccomplish-

ments

tandards

or ifferentocal

government

unctions

Burnsby Herhold, 990;

Carpenter, uchola,

&

Waller, 992;

Drebin&

Bannon, 992; Hatry Fountain,

1989;Hatry,ountain,ullivan, Kremer,990;Parry,harp, reeland, Wallace,




9/25

372

PPMR

March

999

1982;

Rubin,

991;

Wallace,

990).

Hatry

nd

hiscolleagues

ublished

number

f

documents

arlier

hrough

heUrban

nstitute

see,

for

xample,

atry

t

al.,

1977).

Standardsillbe usefulnpreparingequests

or roposals

nd

ontract

erformance

specifications,

nd hey

ill

be anessential

asis

of

performance

onitoring.

PERFORMANCE

MONITORING

AND REPORTING

SYSTEMS

Thepurpose

fperformance

onitoring

s to

provide

nformation

n service

ual-

ity

ndprogram

esultsWholey

Hatry,

992).

Usually,

here

s no attempt

o

esti-

mate

he

xtent

o

whichhe

program

aused

bserved utcomesWholey

Hatry,

1992).

Outcomes

ayndicate

o hemanager

hat

he

ituation

hould

e

examined

o

determine

ppropriate

ctions.

erformance

onitoring

ystems

hould

e used

to

compareurrenterformanceoprior erformancer ocomparectual esultso ar-

geted

erformance

evels.

Rehfuss

1989,

p.

91) developed

list

f

monitoring

ypes.

Reports

an

be checked

or ccuracy

nd eviewed

or imeliness

s

well

s the

egree

to

which

ontract

equirements

re

being

met.

cheduled

nd

nscheduled

eriodic

n-

spections

an

be made.

Harvey

1992)

adds

hat

uch

nspections

an

bemade

spe-

cially

f

ervice

elivery

s t s

happening.

itizen

omplaints

nd heir

esolution

an

be

reviewed.

urveys

an

be used

o

review

verall

itizen

atisfaction.inally,

er-

formance

tandards

re

pplied

o

data

gathered

s

described y

Wholey

nd

Hatry

(1992).

Asidefromeficienciesn nitial valuationf ervice eliverylternatives,ost

local governments

o

not

do a

good

ob

of

monitoring

nd analyzing

or ossible

change

n

service elivery

r

delivery

odes.

Miranda

ndAndersen's

992

CMA

surveyMiranda

Andersen,

994)

revealed

hatmore

han alf

freporting

ities

and

ounties

o

not

valuate

ervice elivery

t ll.When

erviceelivery

s

evaluated,

cost

nd

ompliance

ith

elivery

tandards

re hemost

mportant

actors

ddressed.

More

han

alf

f he

ocal

urisdictions

valuate

itizenatisfaction.

iranda

nd

An-

dersen

1994)

tated

hat

nalysis

f

data/records

nd

ield

bservations

ere

widely

cited y

n

undisclosed

umber

f

governments

p.

34).

A more ecenturvey

Dilger

et l.,1997)ofAmerica'sargestities howedhat ew idnotmonitor,ithmost e-

viewing

ustomeromplaints

nd

formal

nspection

esults.

Evaluative

esearch

Evaluative

esearch

tudies

f

ontracting

ervices

n ocal

governments

re

atego-

rized

y

general

ield nd

ummarized

n he

Appendix.

t hould e

notedhat

indings

from

his

esearch

re ontroversial,

ven

deologically

o.

For

xample,

nereviewer

of

his rticle

eferred

o

he

mpressive

ains

eported

or

ontractingy

hese

tudies

as

overblown

nd

unsubstantiated

nd

just

iased

baloney

rom

eople

deologi-

cally

disposed

o tout

rivatization.

Thefollowing

re

ome

generalizations

istilled

rom

hese tudies

ncluding

he

general

ields

nwhich

hey

re

isted

n-the

ppendix.

ost

f hese

re

not

epetitive

of

he

wisdom

ecapitulated

n

previous

ections.

itations

rom

he

Appendix

re

not

repeated

ndmay

be

referredounder

he

ubjects

n

parentheses.




10/25

Siegel

/

LOCAL GOVERNMENT SERVICE CONTRACTING 373

*

In some evenue-producingnterprises,overnmentsre

o

subject oeconomicnterest

group ressures

hat

ow

pricing

f

ervices nd

nability

o

financemprovementsrom

operatingevenues esult

airports,ransit).

* Governmentsrequentlyonfronthe ilemma fpoliticalhoice etween nacceptabil-

ity fcontractorervice

uality

nd

nability

o afford

igh-qualityn-house ervices n

these

ields

day

care,

human

ervices).

*

Becauseof he otential

or

olitical

nfluence

hat an ead

todefeat f

purpose,tproba-

bly s

betteror

rivate

ector ontractors

o

perform

ome ervices

debt ollection, os-

pitals, ransit).

*

The poor uality

f

precontracting

esearch

ygovernmentsitiates heworth f deci-

sions n

contractingeducation,

uman

ervices,multipleervices).

*

Competition,egardless

f

he conomicector f he ervice

rovider,

s

a

major

actor

inreducing

nd

ontrolling

osts f ervices. he

nverse,

ackof

competition,

esults

n

inefficiencyndhigh osts electricervices,olidwaste ollection).

*

Capital-intensive

ervices

end o

be more

xpensive

n

government

han n

the

private

sector or

variety

f reasons

electric ervices, ousing onstruction,ublicworks,

wastewater

reatment,ater upply, ransit).

*

Governments

eed

o

onsider

mploying

he

ractices

f

many ontractors,

hich

make

contractervices

ess

costly

ndmore

fficient,

s alternativeso

contracting.onfront-

ing

n-house

estednterests

nthese

measures

hould e

no

more

ifficulthan

he eci-

sion o ontract

fire

rotection,ultipleervices,ducation,

olidwaste

ollection,ub-

lic

works).

*

Contracting

illnot

mprove

ervice

elivery

hen

heres

unwillingness

f

government

to pay

for lientswho

re

difficult

o serve

human ervices).

* Contractingannot e cost-effectivehen heresa limitedoolofpotentialuppliers,

when oals and standards

re difficulto

define,

nd/or

hen

echnologies

reuncer-

tain.

he nverse f

his

eads o

uccessful

ontractinghuman ervices,janitorial

erv-

ices,motor

ehicle

maintenance,ayroll

nddata

processing,ublicworks,

olid

waste

collection).

*

There

s

evidence hat

overnment

ervice

erformance

as

notbeen

mproved y

con-

tractinghuman

ervices, ropertyssessment).

*

Among

he

ractices

f ontractorshat esult

n

monetaryavings

ver

n-house

roduc-

tion

f

ervicess that f

paying

ower

ompensation

nd

providing

ess

generous

ene-

fits.

Negative

xternalities

ay

esult uch s

unemployment,

elfare

ependency,

nd

reduction

n

iving

tandardsf ow-income

ersonsmultipleervices,

motor

ehicle

maintenance,ublicworks, ransit).

Conclusions:essons earned rom

Contracting

It

is clear

that

he

ncidence

of

contracting

s

increasing

n

local

governments nd

that ocal

officials

enerally

re satisfiedwith

doing

t.

Most

of

their

oals

in

contract-

ing apparently

re

being

realized.

However,

there

s

a

nagging

concern

expressed

about

contractors

ho

do

not

perform

s

expected

or are otherwise

ot

up

to

standards.

One source

of

this

disappointment

eems to result rom

nadequateprecontracting

e-

search ndefiningndcostingwork nd ndeveloping he ontrol ystem rior o seek-

ing

bids

from

otential

ontractors.

recontracting

ork an include a number

f ac-

tivities, erhapsbeginning

with

mprovement

f n-house

dministrative

nd

delivery

systems.

Administrative

ystems

uch as

thosefor

ost

accounting, llocating

nterde-

partmental

ervice

charges,

nd

development

f service

efforts

nd

accomplishments

standards

will

greatly

facilitate

management

f both

contracted nd

noncontracted




11/25

374 PPMR March

999

services.

ven

fthe

ervice

s

to

be

contracted,

ationalizingts mprovement

ill

clarify

he rocess.

Justbout ny ervice anbecontracted,ut ogically,ome rebetterandidates

than

thers.

he conventional

isdom tates hatwinnersre

ikely

o be those erv-

ices with

lear bjectives

or he

rovision

f

angible

ervices

hat

an be measured

and

monitored.

n

fact,

he esearch

vidence eviewedemonstrateshat ontracting

improvesfficiency,

mproves

ffectiveness,r

resultsncost avings

nthe ields

f

debt ollection,

lectric

ervices,

ire

rotection,

ousing

onstruction,arks,ayroll

and

data

processing,

ublicworks,

ecreation,

olidwaste ollection,ransit, aste-

water reatment,

ater

upply,

ndmultipleervices.

ontracting

asbeen esseffec-

tive

r

neffective

n the ields fhuman ervices

nd

property

ssessment.

Competition

nd

voidance

f ole ource

ontracting

ppear

obe

underlying

un-

damentals

f

uccessful

ontracting.

he ector f

uppliers

rwhether

ompetition

s

provided

y

he

n-house

orkforces not

articularly

elevant.ontractingor ighly

complex asks

or

which here

s a

paucity

f

ualified

iddersometimesanbe

facili-

tated

y

breaking

own

process

nto ubsets

orwhich

eparate

ontractors

ay

e

found.

What s

t

hat

makes contractor

uccessful?an

themethodsr

ystems

e

cop-

ied,perhaps

ven

precluding

heneed o contract?

he success fthese

ontractors

might

tem

romttributes

uch

s levels f abor orce

ompensation,

se of

apital-

intensiverocesses,

nd

greater

uthority

nd

responsibility

f

upervisors.

opying

thesemethods ightequireonsortingith therrganizations,ublic rprivate,o

be able

to

mimic ontractor

ize,

apitalization,

ndfreedomf ction

oachieve he

benefits.

n

any

ase,

f he

urisdiction

s confronted

ith he ituation

f

having

o

contract

ith

nly

ne

upplier,

hen he lternatives

f

duplicating

ontractor

ttrib-

utes nd

oining

onsortia

ecome ealistic.

Finally,

n

he ategory

f

general

isdombout

ow odo

contracting

uccessfully

are he

ollowing

deas:

*

The

cost

ofcontract onitoring

nd

upervision

requently

s overlooked.

t

should e

added ocontractorroposals.

*

Survey

esearch

ndicates

hat

mosturisdictions

o notmonitor

ontractors

xtensively.

*

Attention

hould e

given

o

the

esign

f

optimal

monitoringequirements.

*

An

aspect

f he ecision

ocontract

hould e

alertnesso

potential

egative

xternali-

ties.

hese

might

e

mpacts

n

the

ocal

conomy,

ther

overnments

r

functions,ov-

ernmental

olicies,

r ertain

ocietal

roups.

lso

n

this

ategory

s

mitigation

f on-

tracting

mpacts

n

n

xisting

orkforce.

numberf deas

were escribed

n

Table

2.

*

In

planning

o

ontract,

ttention

ust e directedo

he etentionffunctional

xpertise

by

he

ontractingovernment.

bviously,

he

bility

o

upervise

ontractors

s

very

e-

pendent

n this

xpertise.




12/25

Siegel/

LOCAL

GOVERNMENT

SERVICE

CONTRACTING

375

Appendix

Summary

f

Evaluative

esearch

n Local

Government

Service ontracting:escriptions/ConclusionsyFunctionr Subject

Airports

Government

ricing

olicies

or anding

ights

ndotherirport

ervices

ead to

nefficient

congestion

nd

nability

o finance

xpansion

f

facilitiesRoth,

987).

Day

Care

Centers

Private

ay

care

was

found

o

be

45%

less

costly

ue to fewer eachers,

owerwages,

nd

fewer onteachingtaffBennett Di Lorenzo,

983).

Debt

Collection

Private

ebt

ollectionrocedures

ere asternd

0%

esscostly han

n-house

overnment

services.

overnment

as

200%

more

ostly er

dollar ursued

Bennett

Di Lorenzo,

.983;

Bennett

Johnson,981).

Education

Students

ttendingublic

igh

chools

idnot

erform

s well sstudents

nnonpublic

pri-

marily

atholic)

igh

chools

n

terms f cademic chievement.esearch asbeen riticized

fornot

controlling

or

pre-high

chool

chievement,

mportant

mong

election

riteria

f

Catholic igh

chools

Alexander

Pallas,

1983;

Coleman,

offer,

Kilgore,

981;

Levin,

1987).

Costs

f

public

chools

remasked

y

n

accounting

ystem

hat mits apital

xpenditures

(Lieberman,

989).

Private

chools

o notnecessarily

o a

betterjob

han ublic

chools

ecause he ole

f

vol-

unteer elp

s not ountedJames

Levin,

983).

Electricervices

In communities

here here

as

competition,

osts

were educed y

bout

1

N%,egardless

of

whether

he

ervice

rovider

as

government

r

a

private

oncern

Primeaux,

977).

Competition

roduced

ower

ates han

id

regulation

n a

comparison

f n-house overn-

ment

roduction

ersus lectric

tilities

hat

ompete

ersus

egulated

rivate

onopolies.

ov-

ernment

roduction

esulted

n the owest

ates ue to

tax

xemption

Hellman,

972).

Municipal

tilities

hat

ace

ompetition

ave

11%

ower osts. conomies

f caleoffset

-

efficiency

t

big

firms

Primeaux,

975,

ited

n

Hilke,

992).

Comparisons

f

Texas nd

California

ublic

municipal

nd

private

lectric

tilities

howed

private

irms,

djusted

or

cale,

o

be as efficient

r

more

fficient

n

operating

osts

nd nvest-

ment

han n-house

municipal

roducers

Spann,

977).

Municipal

tility

lectric

enerating

osts

were ound

o

be

40%

to75%

higher,

nd

nvest-

ment osts

were ound

o

be

40%

higher

er

ilowatt

our,

han

hose

f

private

irms

Wallace

&

Junck,

970).




13/25

376

PPMRMarch

999

FireProtection

The ost f ire ervice

rovision

er ouseholdnScottsdale,

rizona, yRural/Metro

on-

tract ire rotectionervicewas bout nehalf hat or quivalentrotectionnthe hreeities

served ygovernment

ire

epartments.

herewas

no

ignificant

ifferencenquality

Institute

ofLocalSelf-Government,

977, ited

n Poole

&

Fixler,

987).

A

private

irm

rovided

ire

rotection

ervicest 65% lower

osts han ida government

service

n

a Denmarktudy.

ifferencesncostswere ue

to

economies

fscale, ower

nput

costs,

nd

specially

se

of

part-time

eservistsnd ower -efficienciesKristensen,

983).

Switching

rom

municipal

o

private

ontract

ire

rotection

educed osts

y20%

to 50%

(Poole,1976;

Smith, 983;

both ited

n

Hilke,

992).

In

a

comparisonf

Seattle,

Washington,n-house

municipalire ervice

with cottsdale,

Arizona,

ontractervices,

he

municipal

epartment

as found obe 39% to 88% highern

costs er apitaAhlbrandt,973,1974;Moore, 988).

Hospitals

No

evidence

as

found hat

ontractingut

hemanagementf

public ospitals

n number

ofCalifornia

ounties

ad chieved

ost

avings.

owever,twas found

hat he rivate

irms

were

etterhan overnmental

anagement

t securingevenuesShonick

Roemer,983,

cited

n

Hatry,

988).

Housing

In-houseity

onstruction

ostswere ound

obe

20%

more ostly er onstantuality

ous-

ing

unit han

rivate

irmsn U.S.

cities

Muth,

973,

ited n

Hilke, 992).

Human Services

A

studyf

llprivatizedhild

are

ervicesnNorth arolina

oundhat osts ecreasedfter

privatization;

n

average,

ervice

uality

uffered,

s

evidenced

y

ower taff

er

hild

atios,

largerroups,

arger enters,

ess

equipment,

nd

ower

aregiver

alaries.

uality

aried e-

tween

or-profit

nd

nonprofitroviders.

onprofits

ad creamed

ffhe east

xpensive

li-

ents ndeventuallyervedmore ffluentlients,esultingn ower peratingostsper hild

(Kamerman

Kahn, 989).

A national

eview

f

privatization

n four ocial

ervices-mental

ealth,ong-term

are,

youth

mployment

nd

raining,

nd hildwelfare-concluded

hat here

s

ittle

upport

or

he

conclusion

hat

ontracting

educes osts.

roblems

oundnclude

ominance

f

field

y

few

large

endors,overnment

upport

or

nlyow-quality

ervices,

nd ack

of

upport

or hose

most xpensive

o

serve

Gurin,

989).

An

attempt

y

southern

lorida o

privatize

tsmental ealth

ervices

uring

992-1993

failed ue to

employeepposition

ndfaltered

ainly

n

potential

oss of

a

generous

enefit

package y

employees

o be transferred

o

private

endors

Becker,

ilverstein,

Chaykin,

1995).

Contracting

f ubstance

buse

rograms

y

North arolina

ounties

idnot esult

n

com-

petitiony

vendors

ue

to

underfunding

nd

understaffing

fthe

ublic urchasing

unction,

which esulted

n

reliance

n

trust

nd

ong-standing

elationships

etween

urchasing

fficials

and

private

ervice

gencies

n

makingontracting

ecisions

Smith

Sayth, 996).




14/25

Siegel/

LOCAL

GOVERNMENT SERVICE CONTRACTING 377

Attemptedrivatization

f mental ealth

ervices

y

a

state

overnmentegeneratednto

complex egotiations

etween

he tate

nd

private onopolies,ltimatelyesulting

n

higher

costs nd ower

uality

f ervices

Schlesinger,orwart, Pulice, 986).

These

ervices ften

are

performedy

ocal

governments,

ence he elevance f his

tate ase.

A case

study

f

Dane

County,Wisconsin,

evealed

nadequacies

f

countymanagementf

its

ontracted-out

uman ervices

rogram

ue o ow

ompetitionmong ontractors,ifficulty

in

definingoals

because f

mpreciseness

fdesired

utcomes

nd

uncertaintyf echnologies,

difficulty

n

monitoringerformance

ecause f

nadequate oaldefinition;nadequateutoma-

tion

ervices,

nd

poor ccountability

ecause ontractorsere ble

to nfluenceolitical ffi-

cials

Kettl, 993a).

Privatelyupplied rogramsperatingnder ompetitiveidding aved20% to ess than

60%

over

n-house

upplied

welfareervices

Stevens, 984b).

In-house ersus ompetitivelyontractedrivateervices or ocational ehabilitation,hild

protectiveervices,

nd

programs

or he

lderly

ften evolvednto

ingle-sourceontracting,

with ittle vidence

f

efficiencyains.Nonprofit

irms

repredominantuppliers.mproved

programharacteristics

ere he

rimarybjectives

or

ontracting,

utno

quantifiableuality

information

s available

Hatry, 983;Wedel,Katz,

&

Weick, 980)

Greater

pecificity

n

human ervice

rogramequirementsmplied

more

ontracting

ut

(Chackerian Imershein,984).

Janitorial

ervices

Contract

anitorial

ervices ad

42%

lower

osts,

ven fter

ccounting

or

uality,ervice

levels,

ndeconomies f scale

Stevens, 984a,1984b).

MotorVehicle

Maintenance

Contractor

osts

were1%

to 38% below n-house

municipal

osts or

quivalent

r

higher

levels

f ervice.

Wage

evelswere

imilar,

ut henumbers

f

operating

ndoverhead

mploy-

ees

were

ess due to

greater roductivityCampbell, 988).

Multiple

ervices

Eightmunicipalervices f various itiesnmetropolitanos Angeleswere omparedn

private

ersus

ublic

ervice

elivery

riteriaf

fficiency

nd

ffectiveness.n

average, ith

service

evel, cale,

ndenvironmental

onditions

eld

onstant, unicipal

ervices

rovided

weremore

ostly

han

hose

rovided

nder ontract. o

significant

ifference

merged

hen

service ffectiveness

as examined.

ifferences

ere

ccounted

or

mong

ontractors

ho

tended

ouse

younger

nd

ess

tenured

orkers,

horeceivedhorteracation

eaves,

nd

who

had ower bsentee

ates.

ontractors

ere ess abor ntensivend

had

more irect

ontrol

ver

labor

force nd

equipmentBerenyi

&

Stevens, 988).

This researchwas criticized

y

Wisniewski

1992)

because

egression

esults

ndicatedhat

nvironmental

onditions ere ot

examined or

efuse

ollection.

AsurveyfNorth arolinaounties evealed hatconomic nd perationalssues redomi-

nated

mong

easons

iven

or

ontractingi.e.,

hat

ontracting

ould esult

n

cost

avings,

he

provision

f

special quipment

nd skilled

ersonnel,

ndthe

pportunity

o

mprove

ervice

quality)

ut hat

olicy uestions elating

o

ccountability

ater ecame

mportant

s

experience

with

he ontractor

as

gained.

ther

actors

uch s

monitoring

ifficultiesnd

ontractoreli-

ability roblems

lso

ensued

Cigler, 990).




15/25

378 PPMR

March 999

Basedon n nalysis f

1982 nd1984

CMA data, ontractinguthad statistically

ignifi-

cant

nd

negativempact

n

spending

n

both ears.

10% ncreasencontractingedto

4%

decrease

n

expenditures.

he same

was

found or

ercentagef functionsontracted.

hese

findings eremoreikely o occur ncouncil-managerities han nmayor-councilystems

(Miranda, 994;Stein,

990).

Based

ona

sample f500 U.S. cities rom

CMA data, twasconcludedhat s external

ro-

duction

s usedmore

xtensively,ity xpenditures

nd

mployment

ecrease. owever, ega-

tive

ontracting

lasticities

uggest

hat

merely

ncreasinghe se of

xternalroductionsnot

likely, n average,

oresolve

city's

inancial

ifficultiesFerris,

988).

A

survey

f100

f

America'smost

opulous

ities

evealedhat

mostwere

atisfied ith ri-

vatization;

hat

rivatization

as carried

ut

mainly

o

reduce osts nd

mproveervice;

nd

that ost

avings

ere stimatedobe more han

0%

n

public

works/transportation,

ore

han

16% n

public afety,

ore han 7%

n

healthndhuman

ervices,

ore han

6%

n

parksnd

recreation,ndmore han 6% nsupportunctions. ost espondentshoughthatity om-

pensation

as somewhatetter

r

considerably

etter.

ostusedmore

han

ne

technique

o

monitor

ontractors-mostly

ustomer

omplaints

nd

nspections.

mong

essons

earned

from

ontracting

ere heneed omake ertainhat

ity equests

or

roposals

ere

horough

and asily nderstood,concern

hetherow

biddersre

ctuallyapable

f

performingo tan-

dards,

nd

he

eed

or

ffectivevaluation

nd

monitoring

f

ontractors

Dilger

t

l.,1997).

A 1979

urvey

f ocalofficialshowed hat

2% felt hat

uality

f ervices

ontractedut

was favorable

Osborne Gaebler, 992, .

89).

A

survey

howed he

ollowingdvantages

o

ontractingin

descendingrder fpercentage

of

response):

ost

avings,

haringisk, igherualityervice,

roviding

ervices ot

therwise

available,

horter

mplementationime,

nd

solving

ocal

political roblemsTouche

Ross,

1987, . 5).

Cost

f ontracted

ervices

veraged

0% ess

han

n-houseervicesn

Los

Angeles

ounty

from 979

o

1984

Savas, 1987).

Contracting

ost was 30% less

than

n-house ervices

n

La

Mirada,

alifornia

Moore,

1987).

A

study

f

minority

orkers

isplaced yprivatization

howed hat

lthough

orkers

ere

hired

y

ontractors

n

bout he

ame

roportion

s

they

adbeen

y

ity epartments,

he

ri-

vate

mployers

ffered

ower

wages

nd enefitshan id he

municipal

genciesSuggs, 986).

Based

on an

analysis

f 1982 CMA

surveyata,

t

was found

hat ervice ata

weremore

successful

t

explaining

ector

hoice n

contractingprivate,ublic,

r

nonprofit)

han

was a

producer

hoicemodel. he

service-specific

odel ncluded

abor

ntensity,

cale

economies,

need

for

tandardization,egree

f

collectiveness,onstituencyreference

or

onprofitro-

duction

nhealthndhuman

ervices,

nd

he

reexistence

f

nonprofit

roducers.

he

producer

choicemodel

was

posited

s both

he

egree

owhich ontrol ust e

relinquished

o

chieve

f-

ficiencyains

nd he

willingness

f

he

ocal

government

o onsiderhis rade-off

smaller

nd

largerommunities,

ommunities

ith

ost-reducingncentives,ealthy

nd

poor

ommuni-

ties,

nd

hosewithow

proportions

f nionized

ublic mployees)Ferris Graddy,986).

More

han

0 studies

ere

urveyed

hat xamined

he

ost

ffectiveness

f

private roduc-

tion

f

public

ervices. total

f 19

differentervices

ere xamined

ncludingtilities,

efuse

collection, ospitals,

nd

housing.

fthese

tudies,

0

found

rivate

roduction

o

be

cheaper

than

ublic roduction,

found

ublic roduction

obe

cheaper,

nd found o

significant

if-

ference.

twas

noted

hat

ost ifferences

iminish

s

competition

n

he

ublic

ervicencreases

(Borcherding,

ommerehne,Schneider,982).




16/25

SiegelLOCALGOVERNMENT

ERVICE ONTRACTING 379

Parks

Contract

erviceor

ark

urf aintenance

as28% owerncost nd

quivalent

n

quality

n

comparison ithn-house ervice Stevens, 984b).

Payroll nd

Data

Processing

In comparison

ith n-house ervice, ompetitivelyelected

ontractorserformedigher

quality

ata

processing

ervice

with ost

avings

f

15%

Valente

Manchester,

984).

No costdifferences

ere ound fterccounting

or

uality

nd

other actors

etweenn-

house ervice

nd

private

ontractors

Stevens, 984b).

Property ssessment

Private

gency

ssessments

rovided

0% cost

avings

nd

were

ound

o

be more ccurate

(Stocker, 973).

Following

court ecision

nMassachusetts

hat

equired

ll

property

o

be reappraised

ou-

tinely,

most ommunities

omplied

hrough

ontractors.

fter

ontrolling

or

differencesn

populations,

twas found hat owns

hat

erformed

eevaluationsn-housepent 9% essthan

towns

hat

ontracted

ut.No

data

on

qualitative

ifferencesere

presentedCarver,

989).

Controlling

or everal ifferences

n

Michiganmunicipalities,

t

was found hat

ssessment

costs

f

contracting

istricts ere essthan alf he osts f

noncontractingistricts.owever,

contracting

as found

o

have

negative

mpact

n assessment

erformance,

hichwas 10%

lower han hemean evelfor ll districtsLowery, 982).

Public

Works

A

total f 10southernalifornia

ities

with

ublic-providedublic

works

ervices nd

10

with

rivate-provided

ervices

were

ompared.

ontractor

rovision

as found

o be 22%

to

30%

less

expensive

han

ublic roduction.

ower

ost

abor

ractices

ccounted

or

ontractor

results-fewer

acation

nd eave

days

for

quivalent ay,

se

of

east

ualified

ersonnelble

to

performasks,

se of

part-time

abor

when

ppropriate,

anager esponsibility

or

vailabil-

ity

f

abor nd

equipment,

uthorizedirst-line

upervisors

o hire nd

fire,

nd

use of ess

labor-intensiveroduction eansStevens, 984a,1984b).

Contract

ities ad43%

lower

treet

leaning

osts han

id n-houseervices fter

ccount-

ing

for

uality

nd

other actors

Stevens,984b).

Contracting

ut

f

sphalt verlay

as

half s

costly

s n-house

roduction,

ith

quivalent

quality.

ontractorssed

more

xperienced

taffnd

more

quipment.

ost

avings

n

traffic

light

maintenance

veraged

6% over

n-house

ervices

Stevens,

984b).

Costs

of

privately

onstructed

ports

renas

veraged

1%

less

than hose f

publicly

on-

structed

renas

Savas,

1987,

ited n

Hilke, 992).

Recreation

In

contrast

o n-house

ervices,

ontracting

llowedmaintenance

f

uality

ecreation

erv-

ices,

ven

hough

udgets

ere educed

y

s much s 50% under alifornia's

roposition

3

(Fixler

&

Poole,

1987).




17/25

380 PPMR

March 999

Security

ervices

Private

ecurity

ervices

aved 0% or

more vern-house

ecurityuardsHanke,

985).

SolidWaste olection

Nine

tudies onductedver

decade

ndicate

hatmunicipal

ollectionosts re

bout 5%

higher

han

hose

f

ontract

ollection, ithout

oweringf ervice

uality,s reported

y 0%

ofhousehold

urvey espondents

Savas, 1987).

Five ities

sing ompetitive

ervice

roviderscity

nd

ontractors)

ere

valuatednmul-

tiple

riteria.ne

city

bandoned

ontracting

ue o

need o

replace quipment.

ll

cities

nd

contractors

xperienced

ncreases

n

ost

er

ousehold

etween 981 nd

1993;

wo

f

four

it-

ies had

ignificantly

ower

ncreases,

nd

third

as within

.9%

of he

ontractor's

ncrease.

On costper on, atawere navailableor necity, hereas wo f the therhree ities ad

lower ncreasedosts nd nehaddecreased

osts.On

households

er ay,

ata

were

vailable

for

nly

wo

ities;

ouseholdserved

y ity

orces

ncreased

ignificantly

none

ity

nd

hose

served

y

ontractors

ncreased

ignificantly

n

another.

ull

datawere

vailable

or wo

ities

on

tons er erson-day;ignificant

ncreases ere

hown or

ity orces

none

ity

nd

for

on-

tractors

n he ther. he

bases

f

ompetition

ere

ot

ntirelyqual

due o

differentials

nfac-

tors uch s

populationensity,

ousehold

ize,

errain,

ot

ize,

raffic

ongestion,

nd

distance

to

disposal

ite.Wisniewski

1992)

criticized

he

riginal

avas

1981)

study

or

hese

actors

(Ammons

Hill,1995;

Di

Piazza,1986).

Because fTeamstersnion

esistance,

lack

f

ompetitionmong

uppliers,

nd

perhaps

the ole forganizedrime,he ost avings xpected henNewYork itywitchedothe ri-

vatization

f

ommercial

efuse avenot

materialized

Bailey,

987).

The

Minneapolis-St.

aul,Minnesota,xperience

ith

rivatization

f

solidwaste ollec-

tionwas

ompared

o hat fNorth

ork,

ntario. he

benefits

rom

ompetition

id

notmateri-

alize

n

North ork ver

5-year

eriod,

ith

ity

orces

roviding

ervices

hat ere

8% ess

expensive

han

ontractor-provided

ervices

Bureau

f

Municipal

esearch, 981;McDavid,

1985).

Residential

olid

waste ollection as

compared

or ll

arger anadian ities

xcept ue-

bec. t wasfound hat xclusive

ublic

ollection

as41% more

xpensive

han

rivate

ollec-

tion nd hatmixed

ublic-privateystems

ere

.5%

more

xpensive

han

rivate

ollection

when roductionnd nvironmentalariables ere ontrolled.rivaterewswere 5%more

productive

er

erson

han

ublic

rews

nd

were 0%

more

roductive

er

erson

han

ublic

crews

n

mixed

ettings.

ifferencesn

salaries id

not

xplainfficiency

ifferences.arious

data

had o

be

estimatedue

toomissions

rom

uestionnaire

esponsesMcDavid,

985).

Before nd fter ase studies or

woCanadian

itieswere

resented

or

erformance

e-

tween 981 nd 1983.

ForWest

Vancouver,

ritish

olumbia,ublic

ollection

n

1981was

19% more

xpensive

er

householdhan

was

private

ollectionhe

ollowing

ear

ndwas

9%

more

xpensive

han nit ollectionosts

n

1983.

ons

er erson

er ay

ncreased

y

1%

be-

tween 981

nd

1982

nd

by

29%

between 981 nd 1983.

For

Richmond,

ritish

olumbia,

public

ollection

n 1982was

66% more

xpensive

han

rivate

ollection

n

1983. rivaterews

were 5% more roductiveer ersonn1983 han ublic rewswere nprior ear. pdatede-

sults

or

987

were imilarn

magnitude

McDavid, 985;

McDavid

&

Schick, 987).

A

study

ound o

apparent ajor

ifferencesetween

ublic

nd

private

osts f

esidential

refuseollection

Hirsch,965,

ited

n

Bennett

Johnson,

981).Average

ost

per erson

f

trash

ollection

n

Monmouth

ounty,

ew

Jersey,

as 70%

higher

hen

erviceswere

ro-

vided

ygovernment

Spann, 977).




18/25

Siegel

LOCAL

GOVERNMENT

ERVICE

ONTRACTING

381

In

a

Connecticuttudy,t

was

oncluded

hat

efuse

ollection

osts

ppeared o

vary

withhe

type

f

conomic

nvironmentnwhich

ollection

as

provided.

rivate

ollection

ppeared

o

be

about 0% more

xpensive

han

municipal

ollection,

hich n

turn

ppeared o

be about

25% more xpensivehan ontractollectionKemper Quigley, 976,cited nBennett

Johnson,

981).

Market

ollection f

garbage

was

found

ocost

from 6%

to

48% less

than

ontract

ollec-

tion

Stevens,

978,

ited

n

Bennett

Johnson,

981).

BennettndJohnson

1981,

pp.

44-45)

attributedhe

isparitiesn

the

precedingour

ita-

tions o differencesn

accountingractices

f

municipalities.

No

significantost

differences

ere

ound or

rivate

irms

ver

n-house

ollectionnthe

St.

Louis,

Missouri,

rea.

Private

irmsost

density

conomies

ecause

everal

irms

ervedhe

same reas.

Public

uppliers

ad

monopoly

tatus

Collins&

Downes, 977).

In-house

ersus

rivate

monopolyranchise

ersus

rivate

onfranchiseirms

ere

om-

pared. ublic upplywas 40% to 60%more xpensivehan rivateupply.rivate

monopoly

pricewas

only

lightly

5%) higher han he

price fprivate

onfranchise

ollectors.

ensity

economies ffset

therwise

igher

osts

Edwards

Stevens,979,

ited

n

Hilke,

992;

Savas,

1974,

1977a,

1977b,

980;

Stevens

Savas,

1978).

Controlling

or

uality,

here

ere ost

avings

f22% for

competitive

ontract

ersusn-

house

ervice

Stevens,

984b).

Municipal

uppliers

ere

more

ostly

han

roprietary

irms

n

48

Canadian

ities

Kitchen,

1976).

Costof

city

ollection as

15%

higher

han he

price

f

private

ontract

ollectorsn

mid-

westernities

Petrovic

Jaffee,

977,

ited n

Hilke,

992).

Municipaluppliers

n

Montana

ppeared

obe

more

fficienthan

rivate

irms,

ot

ontrol-

lingfor

uality

nd

community

haracteristics

Pier,

Vernon,

Wicks,

974).

No

significant

ost ifferences

ere ound

etween

n-house

nd

privateirmsn

Minneapo-

lis,

Minnesota,

f

uppliers

ompeted

hrough

ight

ontrolf

municipal

osts

y

he

egislature,

using rivate

osts s a

comparison

Savas,

1977a).

In-housend

franchise

ontractors

n

single-district

urisdiction

ere

ompared

o

ontrac-

tors nd

n-house ervice n a

multidistrict

etting.

he

average

umber

f bids

per

rea n-

creased

when

ities re

divided nto mall

districts.

ompetitive

idding

ed

to ower

osts or

contractor

ervice.

ities

hat

ctively

monitored

unicipal

gencies

sing rivate

ontractor

costs ad ower

verage

osts.

No benefitsere btained ithouthese oliciesSavas,1981).

Transit

In a

study

f

595 transit

gencies,

t

was

found

hat

rivatelywned

nd

operated

ystems

weremore

fficient

nd

generated

ore

evenue

han

ublicly

wned nd

perated

ystems.ri-

vately

managed

ublic

ystems

ere

o more

fficient

r

ffective.ne

qualificationf

he

e-

sults fthe

tudy

was

that

he

rivate

rganizationsere

ubsidized

ystems

ocated

redomi-

nantly

n the

NewYork-New

ersey

rea

Perry

Babitsky,

986).

An

nternational

omparison

f

publicly

nd

privately

wned

nd

operated

ompanies

ndi-

cates hat

rivate

perators

rebetween

0%

and 5% ess

costly

han

ublic

uses.

Differences

for

New

York

ity

were

much

maller,

hichwas

attributedo xtensive

nionization

nd

regu-

lation. n some

ases,

ost

ccounting

atawere

nadequate

ndhad

tobe

estimated

Walters,

1987).

In

NewYork

tate,

comparison

f

Westchester

ounty's

rivatelyperated

ystem

16

bus

companies)

ith

Nassau

County'sublic

us

uthority

ndicatedhat he

atter

osts 8%

more

than he ormer

Savas,

1987).




19/25

382

PPMR March

999

A total f

13 studies ere ummarizedhatwere

onductedver 20-year eriod

n com-

parativeerformance

f ransitrganizational

orms. f hese tudies,foundhat rivate

wn-

ership

s

more

fficient

han

ublic wnership,

arrived

t

he pposite

onclusion,nd uncov-

erednodifferences.hesestudies lso foundhatmunicipal overnmentsend o be more

efficient

han

pecial

uthorities.

his s attributedo imitationsn measurement

fmunicipal

overhead

osts

atherhan oreal

fficiency

ifferences

Anderson,

983;

Barnum Gleason,

1979;

Perry,984;Perry Babitsky,

986;Pucher, 982).

A

total

f

75 chool istricts

ere

tudied,

fwhich

44

provided

ransportationolely

with

district-owneduses,

9 used

private

ontractors

xclusively,

nd82 usedboth istrict-owned

andcontractor-owned

uses.Controllingor arious ifferences,

omparisonshowed

ublic

ownership

obe 12%more

ostly

han

rivate

wnership

n the riterionfcost

per

mile. or

districtshat perated

nly ublic

r

privateystems,

he ifference

as

10%greaterncost er

mile or istrict-onlyperated

ystems

ver hat or

rivately

peratednes. he ame

ost om-

parisonsor he ublic artfjointystemsas16.5%morexpensiveortheubliclyperated

part

fthe oint ystemsMcGuire

Van

Cott, 984).

A

studyrgued

hat he ost f

privatelyrovided

ransit

f ll

standardypes

s cheaper han

public rovision

ynoting

hat

verage

perating

osts er

ehiclemilen heUnited tates

ad-

justed

or nflation)

ncreased

y

2.25

imes he 950 ost etween 950

nd1980.

Most

ransit

systems

ere rivatelyperated

t he

eginning

f his

eriod,

ut t ts nd

nearly

ll

hadbeen

taken ver ypublic

uthorities.

lso,

he esultsfvarioustudies

n

heUnited

tates, ustra-

lia,

nd

heUnited

ingdom

howed hat

rivate

arrierosts re bout

0%

ofpublic osts. he

results

re the amefor rivate

irmshat

ave aken verpublic

ransitervicesMorlok

Moseley,

986;

Morlok

Veton, 985;

both ited

n

Hilke, 992).

The ffects

f

apital

rants

rom

overnments

uringhe 960-1975 eriodwere

tudied.t

wasfoundhat

evenue

assengers

ecreased

pproximately

%,frequency

ecreased 3%,real

price ecreased

0.7%, perator's age

ate ncreased 4.7%,

nd ost

per us-hour

ncreased

28%. All

types

f

public

wnership

ithout

ubsidy

xceptmanagement

ontractsere ssoci-

ated

withower

eal

verage

ares han

egulatedrivate

ares. ontract

anagement

ompanies

charge

ares

lightlyigher

han he

rivateevel,

nd

municipally

wned

ystems

nd ransit

authoritiesharge

he

owest

ares

Anderson,

983).

Evaluationy

contract

ervice

upplier

ATE

Management

nd

ervices) ompared

ublic

costs

o their

rivate

osts

f

transporting

choolchildren

n

Anchorage,

laska. t was

found

that nchorage's

osts or

ontractchool us ervice

as

ignificantly

ower han he ost f ts

own

istrict-providedervice,

ith o

pparent

ifference

n

reliability

r

afetyATE

Manage-

ment nd

Services,

985,

ited

n Poole&

Fixler, 987).

Contracted

dial-a-ride ervice ubstitutedor

cheduledus ervice ecreasedosts

y

e-

ducing

vertime

nd

dle ime

nd

by

using

ess

costly

ehicles.

t lso reduced osts

ndirectly

by

ncouragingompetition

ith

raditionalervicesf he

gencyTalley

Anderson,986).

Competitive

ontract

perationsrovided

ost

avings

rom 0% to50% because f

arger

fleets,

ess

overhead,reater

roductivity,

nd ower

wages Teal,

Guiliano,

Morlok, 986,

cited n

Hilke, 992).

Contract

xpress

ommuter

ervices

ad

30% to

60% ower osts

han id n-houseervices

(RiceCenterorUrbanMobilityesearch, 985,

ited

n

Hilke, 992).

Wastewater

Treatment

Contractor-built

nd

operated

reatmentacilities

veraged

0%

to50%

ess

hann-house-

built nd

operated

acilitiesue

o

horter

onstruction

ags

nd ower onstruction

osts. om-

petition

lso reduced

perating

osts

0%

to

50%

Hanke,

985).




20/25

Siegel/LOCAL GOVERNMENT SERVICE CONTRACTING 383

Contractorastewaterervicewas

20%

to

50%

less costly ecause ederallyinanced roj-

ects nvolve

higher

onstruction

nd design osts Davis-BaconAct) Moore, 1988; Savas,

1987).

Water

Supply

In-house ersus rivateuppliers

ere

omparednvolving

12

organizations.herewas

a

detailed ase study

f wo irmshat

witchedype f wnership.ublic uppliers ere 0% less

productive.

ublic

irms

oing rivate

ad

25%

ncrease

n

output er mployee.

rivate irms

going ublic

had n

output er mployee

ecrease

f40%

(Crain

&

Zardkoohi, 978, ited

n

Hilke,1992).

No costdifferencesere ound fterontrollingor ther ost actorsetweenn-housend

private ater ompaniesFeigenbaum Teeples, 982, itednSavas, 1987).

A

comparison

f n-house

nd

privateuppliers

ound

ublicmodes

o

be 20%

more

xpen-

sive

fter

djusting

or

nput rices Mann

&

Mikesell, 976,

ited

n

Hilke, 992).

In-house ersus rivateuppliersonsistingf 143firms

n

ix tateswere ompared. osts

were15% higher

or

ublic

irms

Morgan, 977,

ited

n

Hilke, 992).

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Does

pri

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