"Outsource Everybody?"

The New York Times apparently thinks that outsourcing all city services in times of financial stress is such a great innovation that it merits page one treatment. The case in point: Maywood, Calif., where city officials last month fired every city employee and outsourced their work. According to the Times, many Maywood residents seem delighted, hence the headline: "A City Outsources Everything. Sky Doesn’t Fall."

The article describes Maywood as city that was abysmally managed for so long - its police department was especially singled out as a source of financial, legal, and political problems - that city officials claimed it faced bankruptcy unless drastic measures were taken. After reading the article, the first solution that came to my mind was to fire the city council that was responsible for the mess. But, of course, council members did not choose to fire themselves. Instead, after Maywood lost its liability insurance on June 30, city officials abruptly fired all city employees.

The lack of planning inherent in this move stunned many (even if not the Times reporter). The L.A. County Sheriff’s Department (LASD), which was forced to pick up the slack for the fired police force, found itself scrambling to provide adequate resources to the community. "We never had to take over a city in just a few days," said the head of the LASD's contracting division, Lt. Russell Hill. "We always had months to figure it out."

The Times notes that, despite the mass firings, there has been remarkable continuity in Maywood city services, due to the long experience of LASD in policing communities within its jurisdiction, and to the fact that many city workers are still on the job - albeit as employees of private companies, paid at substantially reduced wages and benefits to provide the same services as always.

This is the privatization/outsourcing model the Times has chosen to promote.

You'd never know it from this article, but privatizing public services is a serious issue, with serious implications. It's an approach to government that has been tried and studied in many different countries and contexts over many, many years (think Blackwater...). So what has been learned? The research shows the results to be mixed, at best.

Indeed, a recent paper noted that a trend toward more contracting out of public services two decades ago had quickly reversed itself: "In the 1990s, local governments experimented with more contracting as a response to the reinventing government adage to 'steer, not row' and to introduce more competition and flexibility into local government service delivery systems... [I]n the 1992–1997 period, new contracting out was 18 percent of all service delivery and contracting back in only 11 percent. By the 1997–2002 period, these ratios reversed, and new contracting out dropped to 12 percent while contracting back in rose to 18 percent."

Why had these local governments decided to bring previously contracted work back in house? The researcher worked with the International City/County Management Association to survey city governments about their decision to reverse privatize: "The primary reason... - cited by nearly 73 percent of governments responding to the survey - was problems with service quality. The next most common reason was lack of cost savings, cited by 51 percent of responding governments; almost 36 percent reported that internal government efficiency had improved. Problems with monitoring were listed by just over 20 percent of governments, and problems with contract specifications were listed by slightly over 15 percent." In other words, a pragmatic response to poor contractor performance was the primary reason that privatization failed to take hold.

In the Public Interest, a resource center "on privatization and responsible contracting” explains the situation this way: “Research shows that when municipal services are contracted out, costs can actually increase while service quality suffers. Sometimes these cost increases are experienced as contract cost overruns. Other times a city may fail to take into account 'hidden costs' such as the administrative costs of seeking proposals, evaluating bids and monitoring the work."  Furthermore, "The companies that provide these services must make a profit, so cutting corners on the quality of a service is a common way for the company to lower its own costs and retain more revenue. As the experiences from communities around the country show, privatization of municipal services has risks that require very careful consideration."

In the Times article, Maywood officials claim they don't want to be a model for other communities. Nevertheless, their experiment is being closely watched by other municipalities facing severe revenue shortfalls (see here, for example).

And, as it turns out, this isn’t Maywood's first stab at privatizing. As the Times piece points out, "Maywood has dabbled in contracting before, and it has run awry in some instances. Skeptics cited the example of two handball courts in a Maywood park. City officials said it cost an outsized sum - hundreds of thousands of dollars - for a contractor to build three concrete walls."

Given these facts, didn't it occur to the Times that the problem in Maywood lay not with city workers, but with the city council? Or that the solution, perhaps, lay not in privatization but a recall election? In any case, one hopes that The New York Times coverage of this very difficult issue will be more serious in future.