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This Week’s Outsourcing Scan 10-19-2015

1. National: As this Friday’s deadline approaches to comply with Federal Judge Dolly Gee’s order for them to show cause why they should not be shut down, Federal family detention centers run for profit by GEO Group and Corrections Corporation of America (CCA) apply for child care licenses. Cristina Parker, immigration coordinator for Grassroots Leadership, says that “in order to license the family detention facilities you have to lower the minimum standards. These are facilities that don’t foster child welfare in the first place.” Without the licenses the private prison companies will run afoul of the deadline. The Lincoln Journal-Star reports that “according to an application filed by Corrections Corporation of America, the 2,000-bed facility in Dilley would provide child care services that can include handling children at risk to themselves or others and restraining children physically.”

2. National: The Wall Street Journal reports on the gold rush atmosphere developing among real estate investors in the charter school market. “But the growing role of for-profit real estate developers has added a new dimension to the debate over charters, which are taxpayer funded and independently operated schools that are largely free of union rules. Critics say charter schools are in danger of cutting costly deals with developers who are more concerned with investment return than educating children. The result can lead to failed schools. Even people in the business warn that the charter school owners need to beware when agreeing to lease and buy buildings from private players.” Diane Ravitch comments: “One of the biggest investment funds is the one created by Turner Impact Capital and tennis star Andre Agassi. Agassi is a high-school dropout. It seems that to start new charter schools, no education is necessary.”

3. National: The Federal Highway Administration has issued a Draft Availability Payment Concessions Public-Private Partnership Model Contract Guide, on which the public is invited to comment. The deadline is October 29. The document can be found here, along with a separate chapter on Labor Best Practices recommended by the U.S. Department of Labor. Comments can be submitted here, using Docket Number FHWA-2014-0006 (click “open” button under comment period).

4. National: FitchRatings issues a 21-page document spelling out its “Rating Criteria for Availability-Based Projects.” They identify the key risk factors of these types of publicly subsidized “public private partnerships” as completion risk, cost risk, revenue risk, debt structure, and debt service. Fitch also discusses termination event risk, performance risk, and handback risk (maintenance costs and performance over the term of the deal). They say a “stronger attribute” of a project is if operations and maintenance and lifecycle responsibilities are “retained by the public sector.” [Sub required]

5. National: Former Goldman Sachs Infrastructure Partners banker Andrew C. Right, who was recently appointed to head the Department of Transportation’s BATIC “investment center,” has hit the ground running promoting “public private partnerships.” Right says “he plans to leverage his private sector experience.” [Sub required] He is already pushing a deal in Port Newark, and has launched a joint institute with AASHTO to “train” public sector organizations. BATIC’s partners include Mercator Advisors and the global construction/design corporation WSP/Parsons Brinckerhoff. Cherry Lane Capital, which Right founded, partnered with Corsair Capital, which created Corsair Infrastructure Management, a subadviser to Citibank’s $3 billion infrastructure fund. Other members of the BATIC team include former Maryland “public private partnerships” official Jodie Misiak—who “has held positions in the Economics and Business Solutions Group at Halcrow and in the Municipal Securities Group at UBS, specializing in transportation finance”—and Roger Bohnert, the former head of the USDOT’s TIGER grant program, a former 24-year active duty Coast Guard officer and ex-acting director of the transportation secretary’s Office of Intelligence. BATIC “stakeholders” were hosted by Vice President Biden at a White House meeting last week. Right and Biden will speak at the 7th North American Infrastructure Leadership Forum on October 26-28 in DC. [NCPPP interview with Andrew Right]

6. National: Corrections Corporation of America (CCA) announces the dates for its 2015 Third Quarter profits report and conference call. The report will be released after market close on November 14, and the conference call will be at 11 AM Eastern, November 5.

7. National: Corrections Corporation of America (CCA) reported last Wednesday that it spent $220,000 from July 1 to September 30 for its in-house lobbyists to lobby Congress on “FY 16 appropriations for Commerce, Justice, Science and Related Agencies—provisions related to privately-operated prisons and detention facilities; FY 16 Department of Homeland Security appropriations—provisions related to privately-operated ICE detention facilities.” Its lobbyists are Bart VerHulst and Jeremy Wiley. CCA’s outside lobbyists are Akin Gump ($120,000 so far this year); Hobart Ventures, LLC (TN; $240,000); and Robert A. Russell (former chief of staff of Mark Pryor; $40,000 thus far this year).

8. National: The IRS is defending itself against a charge by Microsoft that its use of an outside contractor to conduct a corporate audit is inappropriate. “Microsoft maintains that federal law prohibits the IRS from using outside contractors to engage in ‘inherently governmental functions’ such as taking testimony or conducting interviews of taxpayers under audit.” [Bloomberg BNA, October 13, 2015; sub required]

9. National: The GAO finds that the Defense Department has improved its fiscal controls over contractors. “GAO analysis of DOD obligation data from fiscal years 2010 through 2014 indicate that all of the military departments achieved required funding reductions for contractors performing closely associated with inherently governmental and staff augmentation functions—positions that run the risk of contractors inappropriately influencing government decisions.”

10. National: Next week Good Jobs First will introduce its corporate misconduct database. “Violation Tracker, which employs the same proprietary parent-subsidiary matching system developed by Good Jobs First for its Subsidy Tracker database, will include aggregated dollar penalty totals for more than 1,600 parent companies as well as the individual records. The database is a complement to the 70 Corporate Rap Sheets on major violators published by GJF’s Corporate Research Project, whose mission is to provide research tools for those working on corporate accountability.”

11. National: The Bond Buyer reports that port officials in Philadelphia, Massachusetts, North Carolina, New Orleans, and elsewhere are interested in “public private partnerships,” and will be exploring them at the P3 Infrastructure Summit 2015, which opens on Wednesday in New York. [Sub required]

12. California: The Los Angeles County Office of Education announces a series of online meetings for district and charter school leaders, which the public can register to view. The online sessions are scheduled for today, December 14, February 22, and May 23. [Link to online registration]

13. CaliforniaCorrections Corporation of America (CCA) is awarded a three-year contract with the California Department of Corrections. “The contract renewal provides for up to 6,562 beds to be made available to CDCR during the renewal term at any of CCA’s facilities. Actual utilization will depend on CDCR’s bed needs as the state addresses a federal court capacity cap.”

14. California: A development consortium proposes to privatize Highway 37 and charge tolls in order to expand and improve it.

15. Florida: Harvard Business School professor Rosabeth Moss Kanter lauds Miami’s infrastructure privatization drive. Mayor Carlos Gimenez told a private industry forum last month that the P3 drive could surpass $7.85 billion. “Although Miami-Dade is still in the early planning stages of its program, Gimenez said the nation’s seventh most populous county has already compiled more than 50 potential capital projects that will be studied to determine whether they will benefit from the public-private financing structure. The projects run the gamut of those local governments have traditionally financed with general obligation and revenue bonds, including public works, cultural facilities, water and sewer, detention facilities, transit, parks, public housing, roads, aviation, and ports.” [Sub required]

In the Public Interest’s Donald Cohen has warned against Miami’s rush into privatization, and suggested alternatives and safeguards to protect taxpayers and the public interest. “There’s no doubt that Miami needs to innovate to keep up with growth, eliminate poverty, and prepare for climate change. But progress can be made without handing over control to private corporations for decades.”

Widely respected municipal finance expert Matt Fabian also says P3 programs don’t come without risks. “Like swaps, P3s can be highly complex, long-term arrangements that are difficult to restructure if needed.” “P3s, like swaps, can also create an accelerant to unexpected credit troubles, he added. ‘To the extent issuers are using P3s to avoid the characterization of their obligation as debt, it raises serious concerns about the issuer’s disclosure practices and willingness to pay,’ Fabian said. In July, he warned municipal investors to be wary of local issuers engaging in P3 transactions, particularly in states that are actively encouraging the financing technique.” [Sub required]. The Government Finance Officers Association is also wary about P3s. See “P3s: An Infrastructure Development Tool to Evaluate with Caution,” by J. Ben Watkins and Nora Wittstruck, Government Finance Review, August 2015.

16. HawaiiMoney politics is driving the private prison business in the state, according to Sonny Ganaden and Lorenn Walker. “Hawaii must reduce its imprisoned population and renovate its prisons, but partnering with for profit prisons reflects corporate influence, ignores the state’s own concerns, and entrenches public private relationships that work against needed reform, improved public safety, and the common good.” [Sub required]

17. Kentucky: An audit finds that Sodexo overbilled for food services at the University of Louisiana at Lafayette. “The investigative audits, provided by the Louisiana Legislative Auditor, indicated Sodexo Management, Inc., UL Lafayette’s food service provider for nearly 30 years, overbilled the university for catering services provided during tailgating events from October 2009 to November 2013.” The university is “reviewing its contractual relationship” with the company.

18. Mississippi: Critics denounce “chaos” in Jackson’s outsourcing of its JATRAN mass transit service to the U.K.-based National Express Transit Services. “Burns, a 40-year-old Detroit, Mich., native who has worked for JATRAN for nine years, said when he and fellow drivers got wind of the new contract, he reached out to city hall, PTM and National Express hoping to ensure that the City would honor ATU’s contract after the switchover. As the deadline to finalize a deal with an operations firm grew closer, Burns said he grew increasingly concerned by a lack of commitments from either the city or the companies involved.”

19. Ohio: As the Department of Education awaits the recommendations of an advisory panel on evaluating online schools in the wake of a scandal over the existing system, the Columbus Dispatch considers possible options. “Many agree that getting better performance out of Ohio charter schools means getting school sponsors to do a better job of overseeing those schools, and a key first step is the development of quality sponsor evaluations.”

20. Ohio: The Thomas B. Fordham Institute’s Chad L. Aldis recommends how Ohio should spend the controversial $71 million grant it was awarded by the federal government (the largest grant in the country) to support charter schools. “Charter schools applying for a grant to open a new school should be required to show a strong business plan and marketing analysis; demonstrate community need, support and outreach plans; have a strong, experienced board; outline their academic and curricular model; and, most important, show evidence of past success in raising student achievement.”

21. Pennsylvania: The auditor general has blasted the state department of education and board of education for neglect and mismanagement. “In a performance audit of the state’s top education agencies, DePasquale found academically challenged schools are forgotten by the PDE, that the department mismanages its employees and special advisers and the BOE hasn’t updated the master plan for basic education since 1999.”

22. Pennsylvania: The auditor general is looking into possible impropriety in payments to charter schools from gambling revenues, while traditional schools are “scrambling to borrow funds” during the current budget impasse.

23. Pennsylvania: A dispute over whether prisoners have a right to seek information on police officers through public records requestsseems likely to head to court, and may produce action by lawmakers. “[Newton Township] solicitor Jeffrey Garton agreed that it’s a ‘serious issue,’ noting that the state’s open records agency has already acknowledged that more than half of the Freedom of Information requests are from prisoners.”

24. Tennessee: As taxpayer concern grows over Gov. Haslam’s (R) scheme to privatize public assets, the governor tries to stanch the information flow by instructing advisers to avoid using email on public business because it might be discoverable under public records disclosure laws. Knoxville News Sentinel columnist Tom Humphrey stresses the importance of public records laws to get behind the PR veil of bureaucrats and politicians.The Associated Press also reports that Haslam “is defending a practice among his outsourcing advisers to avoid email correspondence to prevent information getting out to the public.” WTFV NewsChannel 5 has uncovered an internal timetable“showing that the privatization push was on a faster track than the governor had previously admitted. Cowles cited that timetable as an example of why ‘controls’ were put into place in an effort to limit future leaks.” Three part-time outsourcing consultants are being paid $612,000 annually to work on Haslam’s privatization drive. One receives $222 an hour, a second $191 an hour, and a third $165 an hour.

25. TexasDallas County is set for another private prison contract renewal battle. The county “is about to get in bed with Corrections Corporation of America, perhaps the most notorious private prison company in the United States. CCA appears set to be handed the reins of the halfway house located in the old Cabana Motor Hotel that’s already a tough place to scratch out any sort of a life, in addition to a couple of other halfway houses filled by Dallas County offenders.”

26. Texas: Dallas is to build a recycling facility. “This will be the largest public-private partnership of its kind in Texas,” Scott Pasternak, a project manager for Burns & McDonnell, said.

27. Texas: The battle is heating up over a proposal on the ballot next month to approve a bond issue for a new Travis County courthouse. One of three possible designs is a mixed use “public private partnership.” The Austin American Statesman supports it, but the  Travis County Republican Party and Travis County Taxpayers Union oppose it.

28. International: The British Communications Workers Union denounces the Cameron government’s announcement that it will sell its final 14% stake in the postal service, and vows to fight further cutbacks and contract violations. “This fire sale nails the lie that the Tories stand up for the interests of ordinary people. By their actions today they have made it abundantly clear that they are only interested in privatization dogma and making the rich richer—even when their actions place public services at risk.”

29. Revolving Door News: Paul Williams, the former head of the Dormitory Authority of the State of New York, is hired by law and lobbying firm Arent Fox’s “real estate, finance and government relations practices in its New York office. He will advise clients on the range of issues such as executing public private partnerships while also helping them achieve their public policy goals.” [Sub required]

30. Upcoming Meeting: This Thursday and Friday in Washington, DC, the National Council for Public Private Partnerships and the Performance Based Building Coalition will hold a conference on “P3s for Public Buildings.” Sponsored by Bostonia, Aecom, Nossaman, Plenary. [Program]

Legislative Issues

1. Florida: Lawmakers are considering “public private partnership” legislation to implement the recommendations of the state’s P3 task force, which finished its work last year. “The Legislature is currently holding committee meetings on pre-filed bills. The regular session begins March 3 and runs through May 1.” [Sub required; HB 65SB 824; the House bill “provides exemption from public records requirements and public meetings requirements for unsolicited proposals”]

2. Illinois: Republican lawmakers introduce legislation to let the state fast-track the sale of the massive, publically-owned Thompson Center in downtown Chicago. “The plan apparently also would let the administration bypass the public hearing requirements put in place by lawmakers and intended to keep governors from moving too swiftly or without public input when closing or disposing of state properties.”

3. Massachusetts: In the wake of last week’s heated hearings on charter school expansion, eyes turn toward a state senate caucus meeting on October 28, “the goal being to reach a consensus by Thanksgiving whether it’s worth anyone’s time to write a charter school expansion bill. House Speaker Robert DeLeo acknowledged telling the Senate they should ‘go first’ this year because it makes little sense to go through the motions in the House if the Senate is going defeat another bill, and Rosenberg agreed it would be a ‘fool’s errand’ to embark on a repeat of last year.”

4. Rhode Island: The Rhode Island Center for Freedom and Prosperity urges lawmakers to privatize the state’s bridges, saying the General Assembly should provide a “case-specific exemption” from project labor agreements, minimum apprenticeship requirements, and prevailing wage laws. The organization has been funded by the right wing State Policy Network and dark-money Donors Capital Fund.