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This Week’s Outsourcing Scan 03-31-14

Update: Upcoming Outsourcing Issues. March 31, 2014

1) National/Nebraska: Last Wednesday, Gov. Heineman signed the Transparency in Government Procurement Act into law. It requires the state to create an annual report that includes the number and value of domestic and foreign contracts awarded, with the first one due September 1, 2015, and subsequent reports due every September 1. As of July 1 new contracts must supply the necessary information to comply with the law. [Text]

2) National: The Nation’s Michelle Chen reports on research finding that outsourcing of public services to for profit corporations increases income inequality. Chen writes that “much of the underlying social cost falls on workers. While some may see their jobs eliminated altogether, outsourcing is also in many cases linked to higher turnover and economic instability. These social disruptions then aggravate the very budget problems contracting is supposed to solve: tax bases crumble, leading to disinvestment from institutions like schools, hospitals and public transit.” [Interview with Daphne Greenwood, author of a new study on the economic impact of outsourcing]

3) National: The EPA is considering outsourcing compliance monitoring to outside third parties. “‘EPA is thinking about ways to privatize some compliance monitoring,’ one legal source says, which could lighten the agency’s workload in conducting inspections and other ‘boots on the ground’ approaches. It is unclear whether such approaches would require use of completely independent third parties, or whether companies could themselves conduct the compliance monitoring, that source adds. (…) ‘You would need to think really hard about how it would work,’ the environmentalist says, adding that it is unclear how third party compliance monitoring would differ from the self auditing policy.” [Sub required]

4) National: Investment firms buy a chunk of debt from the troubled Indiana Toll Road, once touted as a model of road privatization, for around 60 cents on the dollar. The toll road “has struggled over the past few years with lower-than-expected traffic and a $5.8 billion debt load. The road is operated by units of Ferrovial and Macquarie Group, which were granted a 75-year lease in 2006 by the state of Indiana. The toll road hired restructuring advisers last year and is considering filing for bankruptcy protection, according to people familiar with the matter. It is facing a debt payment in June.” [Sub required]

5) National: There will be a “thought leaders camp“ on education reform in Lake Placid from May 4-6, featuring NY Gov. Cuomo and Joe Williams, executive director of Education Reform Now. Diane Ravitch quips, “I wish I were a thought leader in education, but apparently my thoughts don’t lead in the right direction (e.g., handing public money over to privately managed schools with no transparency or accountability, smashing unions, demoralizing teachers, eliminating pensions, making test scores the goal of education, firing teachers who can’t raise test scores higher and higher every year, stuff like that, which these days makes you a thought leader).”

6) National: Diane Ravitch is interviewed by Bill Moyers on how public education “is becoming big business as bankers, hedge fund managers and private equity investors are entering what they consider to be an ‘emerging market.’” Ravitch “says the privatization of public education has to stop.” [Video]

7) National: In a Salon interview, Micah Uetricht looks at the politics of race and labor strategy in contesting the “ugly civil rights scam” of charter school boosters. “The charter school union—ACTS it’s called in Chicago—is interesting because they very explicitly say that they do not want to see the spread of further charter schools in Chicago or anywhere else, that they see the spread of charter schools as being part of an effort to bust, you know, teachers unions, and dismantle public education.”

8) National: Writing in Politico, Stephanie Simon reports that taxpayers in 14 states spent nearly $1 billion on private schools that teach “creationism“ and that a “major push” is underway to expand the voucher programs that fund them.” The campaign “has flown largely under the radar, as a well-funded political campaign has pushed to open the spigot for tax dollars to flow to private schools. Among them are Bible-based schools that train students to reject and rebut the cornerstones of modern science.” The organizations behind the effort include the American Federation for Children and the Koch-backed Americans for Prosperity, which “has worked to promote subsidies for private schools in 10 states, including Maine, Tennessee, Virginia and Wisconsin.”

9) National: New corporate partnership calls for more investment in transportation infrastructure.

10) Alabama: The troubled Jefferson Township Sewer Authority is “on its way out of the red,” but may still consider a long term concession to a private, for profit company. “The lease should be worth at least $18.3 million over 50 years, Mike Vind and Mike Sobota, who work for companies affiliated with Stevens & Lee, have said.”

11) California: Long Beach mayoral candidate campaigns on government contractor transparency. Gerrie Schipske’s “top campaign priorities are bringing more transparency to government, jump-starting economic development and expanding performance measures for city departments.”

12) Florida: The Tampa Bay Times warns Pasco County residents and officials to listen carefully to critics of a proposed private toll road. The unsolicited proposal by a group including International Infrastructure Partners and OHL is a for 33-mile elevated road between U.S. 19 to U.S. 301. “There is no technical data, no engineering study, no traffic and revenue projection. (…) The state should be careful in its review to avoid a repeat of past performance. OHL’s toll road in Madrid, Spain, recently entered bankruptcy proceedings after high construction costs and falling traffic counts triggered unexpected financial difficulties, according to international press accounts.” [IIP/Guggenheim Securities unsolicited proposal; a detailed proposal is expected next month]

While the Tampa Bay Times finds risk to the public in the form of possibly skyrocketing tolls, there is also a risk that bankruptcy might land the project’s debt onto taxpayers. OHL is part of a consortium that is now seeking to offload its 3.6 billion Euros debt onto the public for its bankrupt “public private partnership” toll roads in Spain.

13) Iowa: As controversy mounts over secret state settlements with former public employees, details emerge of the Branstad’s administration secret settlement with an employee who blew the whistle on improper bidding practices. “Patricia Harmeyer, a transportation department employee, believes she was a victim of retaliation for blowing the whistle on the state agency’s improper bidding practices. An email shows the state auditor warned the department in 2010, when Gov. Chet Culver was still in office, that it had failed to conduct formal bidding for multiple projects. Harmeyer’s case was secretly settled by the Branstad administration in November of 2012, placing her in a different job. Harmeyer declined to comment Monday.”

14) Maryland: The state is reportedly set to abandon its $125 million health insurance website and adopt Connecticut’s system. “To knit together the new system, Maryland will turn to the consulting firm Deloitte, which wrote the code for Connecticut’s exchange.” Maryland recently ended its contract with Noridian Healthcare Solutions, which designed the flawed system, and several states are considering suing contractors for similar problems. Serious contract management and bidding issues have been exposed by the problems with some exchange website contracts. “‘You have government employees, who are well-intentioned, good people but who don’t understand software code, and basically have to trust that the vendors they hire know what they are doing,’ [Georgetown professor Sabrina Corlette] said. ‘There was such a gold rush on the part of these vendors that there was a lot of over-promising and underpricing.’”

15) Michigan: Standard & Poor’s downgrades Detroit’s water and sewer bonds to junk status just as the city is moving to privatize the system. S&P views the potential restructuring of the bonds, which is contemplated as part of Detroit’s wider debt restructuring proposal, as a default. Interested parties have until April 7 to respond to the request for proposals. “S&P signaled another downgrade could come within 90 days.” Veolia, United Water, and American Water may bid on the system. [Sub required; RFP]

16) Mississippi: The Mississippi Parents’ Campaign reports that out of state lobbyists from Florida are pushing a school voucher program in the state. “That revelation explains why Sen. Nancy Collins, who is handling the bill in the Senate, clarified that the vouchers can be taken out of state—to Memphis, for example—where they can be used at a private academy, a for-profit school, etc. That’s right, my tax dollars and yours can be used to pay tuition at a private academy in another state. A national group also reported yesterday that this same bill is being pushed in numerous state legislatures across the country—and the Florida lobbying group is backing them, too.”

17) New Jersey: Powerful political figures oppose privatization of toll collectors’ jobs. “Weinberg, pointing out the state’s firing of a private company that was hired to distribute money to victims of Superstorm Sandy, said the state did not have a good history with privatization. One problem, she said, is that the public does not have access to the financial transactions for a private company in the way it does for a public agency.” A May deadline for bids to be submitted by private companies is approaching.

18) New Jersey: The Glen Rock school district renewed its contract with the outsourcing company that supplies its teaching assistants. Mission One Educational Staffing was the only bidder.

19) New Jersey: Newark political leaders, community groups, students and the NJEAprotest in the state capital to oppose the proposed “One Newark” school reorganization plan. “Chris Christie’s appointed puppets are trying their hardest to privatize our schools and lay off experienced teachers, all while ignoring the law that requires the state to properly fund Newark schools,” Newark Students Union president Kristin Towcaniuk said.

20) New Jersey: Moorestown Township privatizes trash collection to Casworth Enterprises, effective today. “Residents began to show concern over the fact that not all of Casworth’s employees will get background checks following a council meeting in late February.”

21) New York: CSEA Region One and Local 870 in Commack fight to save the jobs of13 cafeteria workers in the Miller Place School District whose jobs are being outsourced. CSEA LI Region President Nick LaMorte says most of the workers “are part time with no health benefits and a small pension.” A school district budget hearing is scheduled for May 13, and a budget vote is scheduled for May 20.

22) North Carolina: The Sanford Herald congratulates Republican Rep. Marilyn Avila for receiving an award for her steadfast commitment to government transparency in the face political pressure. “Minutes after the meeting ended, Sen. Tucker famously told the querying publisher: ‘I am the senator. You are the citizen. You need to be quiet.’ When government—at any level, whether it be from a Republican or a Democrat—takes that stance, we should be worried. But Rep. Avila was cited for her ‘political courage’—because she opposed her party. In doing so, however, she did the right thing. We shouldn’t need awards for keeping government open and accessible, but these days it’s the way it is. Things in Raleigh have gotten so bad that this is the first time the award has been presented since 2010.”

23) Ohio: Investigative report by The News Outlet‘s John C. Veauthier and Karen S. Bell says that over 100 charter schools fail to disclose who is in charge. “By law, Ohio charter schools ‘must follow health and safety, ethics, public records and privacy laws; and comply with open meetings laws,’ states a 2014 position statement by the Ohio Alliance for Public Charter Schools.” They found, e.g., that “each of the nonprofit schools run by White Hat Management referred calls to Shannon Allen, a media representative at the for-profit company’s headquarters in Akron. Several messages were left for Allen, without a response. Also, Kyle L. Gaul, an attorney representing White Hat, offered no help. White Hat’s schools’ websites were inconsistent regarding school board information.”

24) Pennsylvania: As the Springfield School District considers outsourcing its transportation services, it hears opposition from the residents and workers. Last Thursday night, “the school board heard from and responded to members of the community and representatives of about 50 employees in the transportation department. The first thing made clear by the administration was that no decisions have been made.” Responses to a request for proposals are due at the end of April.

25) Pennsylvania: Four consortia have been shortlisted to compete for the contract to replace up to 650 bridges and maintain them for 30 years. The teams include Plenary Group, HNTB, InfraRed Capital Partners, Kiewit, Fluor, Meridiam and AECOM.

26) Pennsylvania: Bradford County privatizes its last two day care centers. “Mark Smith, who cast the sole vote against privatizing the day care centers, said he thought the process for deciding to privatize the day care centers and carrying out the privatization ‘moved too fast. I had some more questions about it,’ Smith said. ‘I was not necessarily against it.’ He said he would have liked to get more feedback from parents on the privatization.”

27) International: Britain’s main business lobby, the Confederation of British Industry, calls for greater transparency and simpler contracts when dealing with outsourcing companies. CBI’s recommendations include:

  • Proactive releases of information as contracts are being negotiated, and an effort to “make the information released as accessible and comparable as possible.”
  • That all government contracts be published “as long as the customer is happy for this to happen,” but if contracts are not published “there should be a clear explanation of why this has been done and at whose request.”
  • That there should be “a full and frank discussion” about “the contractor’s profit margin.”
  • That the national auditing authority should be able to audit government contracts.

Legislative Issues:

1) National/Minnesota: In the Public Interest releases a video on the outsourcing of public services and the movement to regain public control. Bills to rein in reckless outsourcing have advanced all across the country.

2) National: The Daily Beast reports that there is “a Republican street fight” over transparency in government. “A growing rift in the Republican Party about transparency has deepened within the Senate, with 16 Republicans now scolding a federal agency for the outrage of requesting that scientists submitting studies in a rule-making procedure identify any financial conflicts of interest. But to see just how crazy this scolding is, we need some background.”

3) National: The Senate Homeland Security and Governmental Affairs Committee holds a hearing on the role of “public private partnerships” in cyber risks to critical infrastructure. Last week the GAO published a report on critical infrastructure protection.

4) Alaska: Lawmakers may revive the Anchorage-area Knik Arm Bridge project by abandoning a “public private partnership” model in favor of all-public financing. They would raise one thirds from bonds, one third from National Highway System Funds, and one third from federal TIFIA loans. The new version of House Bill 23 was introduced in the legislature two weeks ago and heard in the Senate Finance Committee. [Sub required]

5) Arizona: Eleventh-hour $900,000 payout to the GEO Group in the state budget provokes outrage. “House Minority Leader Chad Campbell of Phoenix was incensed by the additional money for GEO. (…) ‘This is somebody getting a handout,’ Campbell said. ‘It’s unnecessary. This came out of nowhere—I mean that. No one said a word about it. It wasn’t in the Senate budget, it didn’t come as a request from DOC. There’s something really shady here.’”

6) Florida: As the legislature pumps a record amount of money into the construction of charter schools, the public education capital projects program is being squeezed. “House Democrats questioned whether the split was fair on Wednesday when many public school systems had buildings falling apart.”

7) Florida: State Rep. Matt Hudson, R-Naples, has introduced a bill to outsource the Medicaid agency’s legal counsel. “Hudson’s spending plan includes $3 million in ‘supplemental’ funding to contract with outside attorneys.”

8) Florida: Tampa Bay business lobbies oppose government transparency legislation. “But supporters of the legislation say that, in politics, sunshine is the best disinfectant. In an editorial, the Ocala Star Banner praised the bill saying it would limit fees for record searches, clearly define what records are exempt and require all public employees to be trained on public records laws.” [HB 1151]. The bill is on the agenda of the House Government Operations Subcommittee for today.

9) Florida: Red light camera repeal bill is nearly killed in committee by proposed amendments, but is still alive. “I think we need to step back and take a fresh look at it,” lawmaker says. The bill will be considered this week.

10) Idaho: The state legislature has appropriated more funds to refurbish and improve the state’s liquor stores. “In fiscal year 2012, for example, the state distributed more than $63 million from the sale of liquor. The three largest recipients were the state’s general fund, more than $26 million; city government, slightly less than $17 million; and counties, more than 11 million.” Nevertheless, a state lawmaker is pushing for a referendum on privatizing the stores, which may be supported by the Northwest Grocery Association, and the right wing Cascade Policy Institute, which has been funded by the dark money Donors Capital Fund and State Policy Network.

11) Kansas: Wichita approves a “no bid” process to build city-owned projects. “I think they need the lowest bid, don’t you?” asks Wichita resident, Lou. “I mean, I’ve been in construction 45-years and that’s the way we always done it.”

12) Maine: Lawmakers give initial approval to a bill that would “cancel a $925,000, no-bid contract to assess the state’s welfare system made with the Rhode Island-based Alexander Group, which has missed deadlines for reports and had its objectivity questioned by critics both inside and outside Maine.” [LC 1794]

13) Maryland: Two bills that would have required companies bidding on “public private partnerships” to disclose their involvement in deportations by the Nazis may not move forward, according to Infrastructure Investor. The bills threatened federal funding for the Purple Line light rail transit project because the federal government claims they would not comply with “full and open competition requirements.” [Sub required]

14) Massachusetts: State lawmaker pushes for more government transparency, increased use of information technology to facilitate public access. One of Antonio F.D. Cabral’s bills “would encourage government agencies to put high-profile public records online, pre-empting unnecessary requests, a provision from one of my bills. The policy would make records more readily available and eliminate the requirement for government agencies to needlessly spend time, paper and ink generating hard copies to respond to public records requests.” The effort has the support of the Massachusetts Newspaper Publishers Association, Common Cause and MASSPIRG.

15) Mississippi: Senate passes the second of two bills expected to improve access to government records. SB 2507 would give the Mississippi Ethics Commission the authority to settle dispute over access. The governor recently signed HB 928, which restricts the costs agencies can charge for getting records.

16) Nebraska: Lawmakers advance a package of measures to reduce overcrowding in the state’s prisons and block construction of a new prison. “Strategies include requiring drug and other nonviolent offenders to wear electronic monitoring bracelets, stay clean, get jobs and undergo treatment instead of going to prison.”

17) Pennsylvania: Lawmakers may consider watered-down plans to reform the state liquor distribution system short of full privatization, such as expanding the ability of grocery and convenience stores to sell wine and permitting existing beer distributors to sell wine. The United Food and Commercial Workers Union is opposing such proposals.