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This Week’s Outsourcing Scan 10-20-14

Update: Upcoming Outsourcing Issues. October 20, 2014

1) National: As the midterm elections approach, the Center for Media and Democracy releases a report highlighting the intensive efforts of governors seeking re-election to privatize important public services to private firms. Time after time, outsourcing has gone awry, generating worse outcomes for the public, scandals, lawsuits, and scorching headlines that are impacting the campaigns. The report includes examples from Florida, Kansas, Michigan, Ohio, Pennsylvania, Maine, and Wisconsin.

2) NationalGovernment comes to the rescue, saves two federal transparency databases that were about to go dark when the private contractor that operated them went bankrupt. It also brings data back out from behind the private curtain and into the open: “The move frees up previously contested federal contracting data, which will facilitate increased competition for future contracts, according to outside observers and the General Services Administration.” [Procurement document]

3) National: The Sierra Club’s Michael Brune asks “Why Are So Many Big Companies Unfriending ALEC?” ALEC will hold its annual States and Nation Policy Summit from December 3-5 in Washington, DC.

4) NationalTransit agencies move to lease out or sell public land to raise funds. “Transit officials expect real estate to become an increasingly important revenue source, amid stagnant federal funding and rising costs of upkeep for aging systems.” It is unclear what protections might or might not be in place to prevent public asset rip-offs.

5) National/Texas: Pearson, a leading provider of educational tests to public and private schools, is to face a big test itself next month “as it learns whether Texas plans to renew its contract for Pearson to provide testing in schools.” The London Telegraph says “industry sources fear it will not go Pearson’s way.”

6) NationalThe New York Times’ Gretchen Morgenson looks into the risks to public pensions of investing in private equity deals. “Last year, 10 percent of public pension fund assets, or $260 billion, was invested in private equity, according to Cliffwater, a research firm. That was up from $241 billion in 2012. But the terms of these deals— including what investors pay to participate in them—are hidden from view despite open-records laws requiring transparency from state governments, including the agencies that supervise public pensions.”

7) NationalSarah Jaffe sees a resurgence of support for public education. “We want community schools,” Tanaisa Brown of the Newark Student Union told Public Education Nation. “Not a community school that is now a charter school, but a school that is embedded in the community and helps out the parents, the teachers, and anyone else who lives there that can benefit from wraparound services at those schools.” The Public Education Nation videos have been posted online.

8) NationalThe current NSA CTO is moonlighting for IronNet Cybersecurity, a firm run by Keith Alexander, the former head of the NSA. It is “an unusual arrangement undercutting Keith Alexander’s assurances he will not profit from his connections to the secretive, technologically sophisticated agency.”

9) Arizona: AzDOT invites statements of qualification for a road “public private partnership,” the South Mountain Freeway project, which originated as an unsolicited proposal. The project would not include a private financing option, but cover only design, building and maintenance. “The transportation department also said it expects maintenance for the project to be funded in the same manner as its current maintenance program, through a combination of federal funds and legislative appropriations of [Highway User Revenue Fund] revenues.” [Sub required]

10) CaliforniaThe San Diego Reader reports on Republican Mayor Kevin Faulconer’s moves to privatize city planning. “The new GOP mayor moved swiftly to consolidate the developers’ hold on the planning commission, appointing architect Doug Austin, whose most prominent client is one of Faulconer’s biggest financial backers, U-T San Diego publisher Douglas Manchester, to the key panel.”

11) CaliforniaPlans are unveiled for the Long Beach Civic Center, which is expected to be developed as a “public private partnership.” Last week two potential bidders showed their ideas. The winning bidder will be announced in November.

12) Florida: The upcoming gubernatorial election poses a stark choice on privatization issues. Gov. Scott has fought unsuccessfully to privatize prisons, while “Crist says he opposes further privatization. ‘Private prisons focus on filling beds rather than rehabilitating those who find themselves behind bars.’”

13) Florida: Pasco County Commission considers privatizing one of its EMS routes. “The proposal has been painted by supporters as a desirable privatization that will improve service and public safety, while critics contend it is little more than cherry-picking by the profit-driven private sector.”

14) GeorgiaFirst Student drivers and mechanics vote to authorize a strike. Teamsters Union Local 728 lead negotiator Eric Robertson said about 500 First Student employees “want their employers to set up a payment system that banks one hour’s pay every day they work so that they can be paid over the summer break.” The move is in response to recently passed legislation “which makes contracted school employees ineligible for unemployment benefits during school breaks and holidays.”

15) GeorgiaThe state cancels its plan to create a pilot project for privatizing foster care, citing a lack of bids and that pricing exceeded budgeted amounts. “While the state hopes to rebid the project again, the need for more foster homes in Northeast and Northwest Georgia remains a serious concern.”

16) GeorgiaDruid Hills group withdraws its petition to create a charter school cluster after DeKalb County objects. “Earlier this month, the DeKalb school district announced its intention to apply to the state to become a county-wide charter school system.”

17) Idaho: Democratic gubernatorial candidate A.J. Balukoff releases a statewide ad targeting Gov. Butch Otter’s dealings with Corrections Corporation of America. The ad says “Governor Otter cut a sweetheart deal and let CCA off the hook. It’s no surprise. Otter took thousands in campaign contributions from CCA.” [Balukoff ad]

18) Indiana: As calls mount for the state to take back the privatized Indiana Toll Road, whose operator has declared bankruptcy, the state receives a report on its condition. “[State Senator] Donnelly calls the situation ‘a mess of epic proportions’ and says travelers have complained of long waits at toll plazas, bridges that haven’t been repaired in over a year and rest stops that reek of urine.” The operator’s assets may be auctioned off in the next three or four months, with bidders reported lining up.

19) LouisianaThe school board race in East Baton Rouge pits a veteran board member against a candidate backed by the Baton Rouge Area Chamber (BRAC). “But Smith credited BRAC’s influence on some board members for the divisions. He said in his district, parents and taxpayers distrust BRAC’s motivations and are concerned that the chamber is angling to privatize education.”

20) Massachusetts: As his term approaches its end in January, Gov. Patrick tries to push “public private partnerships“ in order to “get folks comfortable with their potential.” Last week MassDOT held an industry forum to discuss several publically subsidized P3 projects—a third bridge over the Cape Cod Canal, express toll lanes on Route 3 south of Boston, service plaza/rest area P3s, and for the Housatonic Railroad Company.

21) MichiganElk Rapids votes to privatize its emergency services. The head of the private nonprofit that will take over the EMS services says “we are not going to come into your area and cut services to the point where it’s jeopardizing everybody.”

22) Nevada: Some Las Vegas City Council members advocate third party private financing for a proposed downtown soccer stadium. The deal is currently supposed to be financed by the developers, who insist they can pull off the financing, but want public money too. “Cordish Chief Operating Officer Zed Smith in a written statement downplayed the need for a third partner and didn’t mention Ader. Smith said his Baltimore-based companies have the ability to self-finance the entire $200 million stadium investment, but ‘the need for public investment in infrastructure and related improvements is a result of the fact that the financial returns for the stadium simply do not pencil without public investment.’”

23) New YorkJudge orders United Water to release detailed information on its proposed desalination plant. “The decision is a blow to UWNY, which sought to pass the $56 million in pre-construction costs and $4 million in interest payments on to ratepayers without disclosing where the costs came from. UWNY fought to keep the records confidential on the grounds that they contain trade secrets, sensitive market data and confidential legal information subject to attorney-client privilege. However, Casutto concluded UWNY did not prove the information could give them a competitive advantage that would characterize the data as a trade secret or that any confidentiality agreement existed with vendors.”

24) New YorkPrivate charter school company pumps $78,000 into state Senate races. “New Yorkers for a Balanced Albany, an independent expenditure political action committee created last month and funded largely by pro-charter hedge fund executives, is dedicated to preserving the current majority in the Senate. The upper chamber is controlled by the Republicans and the Independent Democratic Conference, who have been largely supportive of charter schools.” New Yorkers for a Balanced Albany was formed by StudentsFirst and run by the New York chapter of the organization

25) Ohio: As the gubernatorial election approaches, Prof. John McNay reminds voters of Gov. Kasich’s failed effort to privatize state universities in 2011. “With great fanfare, the governor introduced the plan. Gradually, however, over several months, as the university presidents studied the options, the obvious became clear to them. Less regulation might be nice but there was no way to make up for the millions in funding the Kasich administration planned to remove through the privatization plan. Faculty members and students added to the pressure by loudly criticizing the destruction of our fine public university system. Gradually, the plan was dropped.”

26) PennsylvaniaGov. Corbett has been ordered by the Office of Open Records to release data on his plans to lease rights in state parks and forests for natural gas drilling. State Rep. Greg Vitali, D-Delaware, “Vitali in April filed a Right-to-Know request with the governor’s office, asking for records that show how the [governor’s $90 million] revenue figure was calculated, the state parks and forests under consideration for additional drilling, estimates of acreage to be leased, and correspondence between employees of the governor’s office and oil and gas companies related to the additional gas leases.”

27) Puerto Rico: Officials move forward with efforts to privatize the operations of the Port of the Americas in Ponce; issue a Request for Proposals. Bid deadline is December 19. “Analysts say the primary reasons undermining Ponce’s appeal are the Jones Act and high labor costs for stevedoring, which make the site uncompetitive with ports in Jamaica, the Dominican Republic, Bahamas and Panama, among others. The Jones Act is a 1920s-era law designed to protect the U.S. maritime industry.” [Sub required; RFP]

28) Rhode Island: The Cranston school board and unions reach agreement on three contracts. Privatization is off the table. “The School Committee threatened to consider privatizing the jobs of the teacher assistants in order to economize—a conversation that inflamed the alliance. The alliance made a complaint to the state Labor Relations Board that the committee had committed an unfair labor practice. The idea did not progress beyond the talking stage, however. The committee never sought proposals from outside groups or companies to do the work of the assistants.”

29) Texas: TxDOT issues Request for Proposals to three finalist groups to bid on the SH 288 highway toll lanes project in Harris County. “Partners in Mobility Alliance are OHL Concesiones and Macquarie Capital Group, while Bluebridge Transportation Group includes ACS Servicios y Concesiones, Shikin & Binui, and InfraRed Capital Partners. SH 288 Mobility Partners includes Cintra Infraestructuras.” [Sub required; RFP documents]

30) TexasThe Texas Observer’s Amy Silverstein looks at the battle over a proposed private toll road that pitted local citizens against the North Central Texas Council of Governments and the private company, the Texas Turnpike Corporation. One citizen complains at a public meeting called to discuss the proposal that no data had been released. “‘What am I supposed to comment on here and what are you supposed to vote on next month?’ she said. ‘I demand that the public is given a public meeting after the study has been finished and made available to us.’ Then she read off a list of traffic estimates from TxDOT showing that the state agency had projected much lower numbers for the area than NCTCOG had. One TxDOT statistic said that there would be 22,880 drivers on S.H. 66 in 2030, a fraction of NCTCOG’s 2035 estimate. ‘Where are you getting these numbers?’ she yelled, ending her speech to enthusiastic applause.”

31) UtahA six county coalition issues a request for proposals for “public private partnership” advisers. “Upcoming projects may include toll roads, railroad spurs, passenger and scenic rail service add-ons to freight lines, dry bulk terminal joint ventures, pipeline projects, electric transmission and distribution lines, among others.”

32) VirginiaThe state has tightened its procurement guidelines for “public private partnerships.” The transportation board “will have the responsibility to review the financial risks involved before any state money is spent on a P3 project, before it goes into the procurement process, and before a final contract is signed, he said. ‘There will be no quiet decisions made,’ [VA P3 Office director Doug] Koelemay said. The state’s P3 steering committee authorized by the Public-Private Transportation Act of 1995 will be expanded to include members of the transportation board, leaders of the state House and Senate transportation committees, and a financial expert from a non-transportation state agency, he added. There will be regular briefings on proposed projects to legislative leaders as well as additional public communications and a more comprehensive web site, Koelemay said.”

33) Wisconsin: Milwaukee County Executive Chris Abele submits a budget that attempts to close a deficit by outsourcing jobs, freezing workers’ wages, and increasing their healthcare costs. The Public Policy Forum reports that “in the case of Milwaukee County, resizing is reflected by the reduction of 263 full-time equivalent positions (FTEs) in the 2015 budget, made possible primarily by the outsourcing of Courthouse security, mental health community service programs, and Zoo concessions.”

34) International: Margaret Kimberly looks at the role of privatization in facilitating the Ebola epidemic, especially the gutting of the World Health Organization’s supposedly leading role. “The Gates are not alone in using their deep pockets to confound what should be publicly held responsibilities. Facebook founder Mark Zuckerberg announced that he was contributing $25 million to fight Ebola. His donation will go to the Centers for Disease Control Foundation. Most Americans are probably unaware that such a foundation even exists. Yet there it is, run by a mostly corporate board which will inevitably interfere with the public good.” Emira Woods, social impact director at ThoughtWorks, says “the neoliberal economic model assassinated public infrastructure.”

35) InternationalTens of thousands of public sector workers demonstrate in London, Glasgow and Belfast to protest their low pay. “Our message is that after the longest and deepest pay squeeze in recorded history, it’s time to end the lock-out that has kept the vast majority from sharing in the economic recovery,” says TUC leader Frances O’Grady.

36) InternationalFerrovial and Macquarie buy three U.K. airports for £1 billion including debt. “David Bentley, chief airports analyst at the Capa centre for aviation, said: ‘It’s what Heathrow and the shareholders in Heathrow Airport Holdings wanted. Big pension funds and sovereign wealth funds don’t want small provincial airports.’” [Sub required]

37) InternationalMacquarie Capital hires a former Veolia executive to head the firm’s portfolio management business. Prior to working at the private equity firm CVC Capital Partners, Frédéric Devos was with Veolia for 20 years.

Legislative Issues

1) National/PennsylvaniaActivists defeat ALEC legislators’ attempts to block local governments from instituting worker protections.  Ellen Bravo of FamilyValues@Work writes “So far 11 states have passed laws prohibiting voters or legislators in local communities from passing paid sick days—and in some cases other workplace protections. Two of those, Oklahoma and Alabama, passed in 2014. But similar efforts this year failed in Washington, South Carolina and now Pennsylvania – a place that had been declared a priority by the PA Restaurant Association. As activists around the country celebrate a growing string of wins on paid sick days, special interests who are finding it harder to squash them.”

2) Kentucky: Construction contractors and the Kentucky Chamber of Commerce are to renew their effort to get “public private partnership” legislation passed next term, which begins January 6. They lost out in the last session when Gov. Beshear vetoed a measure. “However, the political roadblock that kept P3 off KRS books is unmoved: Rep. Simpson remains adamant in his position that tolls on a new Brent Spence Bridge would harm his constituents and said he will do all he can to ensure they are proscribed.”

3) PennsylvaniaWrangling continues between Gov. Corbett and the state senate over lottery policy.