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This Week’s Outsourcing Scan 11-30-2015

1. National: The proposed $160 billion merger between Pfizer and Allergan may jeopardize Pfizer’s annual $1 billion in federal contracts for drugs and related services. “By merging with Dublin-based Allergan, U.S.-based Pfizer risks violating Section 52.209-10 of the U.S. Code of Federal Regulations (CFR), which prohibits the federal government from doing business with inverted domestic corporations. Inverted corporations are companies that were once headquartered in the U.S. and become foreign-based through relocation or changes in corporate affiliation.” The merger, which is subject to federal approval, would make it easier for Pfizer “to shield its revenue from higher taxes in the U.S.” [Bloomberg Government, November 25, 2015; sub required]

2. National: A federal agency, the U.S. Commission for the Preservation of America’s Heritage Abroad, is caught violating rules against contractors performing inherently governmental functions. “Among the inherently governmental functions the executive director performed: supervising a federal employee, serving as the Designated Agency Ethics Official, preparing responses to Government Accountability Office audits, obligating agency funds, certifying and approving financial transactions, including payments to his firm and other contractor personnel. The executive director was also conducting business related to his outside lobbying practice from the Commission’s office.”

3. National/New Mexico: Supporters of the idea of expanding national wilderness protections around the Pecos Wilderness “argue that doing so would actually ensure locals could keep up their traditional uses in the face of mounting calls to privatize public lands. Max Trujillo, sportsman organizer with the New Mexico Wildlife Federation, called the efforts at privatization a ‘dark energy coming after our lands.’”

4. California: Moody’s gives a thumbs up to Los Angeles’s decision to create task forces to identify school budget savings. A $333 million deficit is projected for 2017-2018. “Increases in charter school enrollment and declines in birth rates have caused the district’s student enrollment to plummet to 542,000 recently, a 100,000 drop in a six year period, according to recent school district figures. The loss of 100,000 students equates to about $900 million of lost state aid revenues for the district, according to Moody’s.” [Sub required]

5. California: Los Angeles World Airports, the city agency that owns LAX, decides to build two of the five components of its $5 billion modernization plan as “public private partnerships.” In a statement, LAWA claimed that “in comparison to the design-bid-build delivery method, DBFOM [design-build-finance-operate-maintain] can result in cost savings, greater cost control/cost certainty, schedule acceleration, increased access to private sector innovation, an ability to transfer appropriate risks to the private sector, life-cycle efficiencies, fixed operations and maintenance payments for the life of the project, and reduced administrative costs.” A request for bidder qualifications will be issued in the first half of 2015. [Sub required]

6. California: Public school advocates circulate a petition demanding that Teach for America’s contract with the Los Angeles Unified School District be rescinded. “Cancel the contract that pays TFA to recruit untrained interns to teach our vulnerable special education students. Identify reputable programs to recruit graduates and student teachers who are committed to the teaching profession, to our schools and our students.”

7. California: The University of California board of regents approves UC Merced’s 2020 Project expansion plan, a DBFOM “public-private partnership.” Campus officials said “UC Merced’s use of a single developer for all phases of the master-planned project is expected to create significant time savings and additional long-term value for the university compared to traditional development methods.”

8. District of Columbia/Revolving Door News: Mayor Bowser announces the creation of a ‘public private partnerships’ office. It will be headed by Seth Miller Gabriel, who comes to the post from a private, for-profit company that promotes ‘public private partnerships’ (Tetra Tech), and was deputy executive director of the industry-backed National Council for Public-Private Partnerships; and Judah Gluckman, currently Deputy Director in the Office of Policy and Legislative Affairs for Bowser. Gluckman served as Assistant to the Chief of Staff for former Chicago Mayor Richard M. Daley, architect of one of the worst P3 deals on record, the privatization of Chicago’s parking meters.

9. Florida: Hillsborough County School District pays $35,000 to a consulting firm “whose owner also is on track to oversee seven charter schools.” The Tampa Bay Timesreports, “the biggest expenditure—$11,500 to construct the new superintendent evaluation—didn’t appear on the agenda until after the work was complete, and without naming the consultant. The board did vote on Oct. 13 to allow a charter organization that Rod Jurado chairs to launch four new tax-funded, privately managed schools in addition to three that are already open—Henderson Hammock, Winthrop and Woodmont.”

10. Idaho: More than 300 citizens pack a hearing on privatizing pristine federal forest in exchange for a clear-cut piece of property owned by a developer. “The Forest Service completed a draft EIS analyzing the exchange in 2010. About 92 percent of the people who commented opposed the trade. Then the Clearwater National Forest supervisor went to U.S. Sen. Mike Crapo to explore introducing a bill (probably a rider) to legislate the exchange. The Upper Lochsa Land Exchange is the national model to privatize desirable national forest land. It must be stopped.”

11. Iowa: An administrative law judge has recommended that the state throw out one of four outsourcing contracts with for-profit companies for Medicaid services. “The ruling calls for the state to reverse the contract awarded to WellCare, a company that has faced millions of dollars in fines for fraud or mismanagement in other states and last year saw three former executives sentenced to prison for fraud convictions.” It is not clear how this will affect Gov. Branstad’s plan to privatize Medicaid delivery, which requires federal approval. The Des Moines Register has denounced Branstad for his condescending and dismissive response to critics of his privatization scheme, saying it shows “just how little regard the Branstad administration has for the people of Iowa, only 22 percent of whom support his privatization plan.”

12. Maryland: The state has received four technical proposals to build the Purple Line light rail P3 project. “The monthly payments also would include the private sector’s profit and could be reduced if certain performance standards—such as clean trains and reliable service—aren’t met, state officials have said.” Financial proposals are due Dec. 8 and will include cost details.

13. Missouri: Citizens complain that tax increment financing to a big downtown Kansas City developer, Shirley Helzberg, is draining too much money from the public school district. “Most notably, she and her husband have invested $40 million to build the facility that houses the K-12 University Academy charter school.” Helzberg “says her real estate company is a business, not a charity.”

14. New Jersey: The Christie administration continues to defend lottery privatization despite revenue falling short of Northstar’s contractual obligations. The lottery generated a record $3 billion in sales in fiscal year 2015, but returned only $960 million to the state. “The lottery is among the five top sources of revenue for the state.”

15. New JerseyGov. Christie vetoes ‘pay for success’ (‘social impact bond’) legislation. “Christie didn’t nix the entire bill but he did gut key parts and instructed staff to consider ways to use existing resources to accomplish the same goal. He noted that the fiscal note accompanying the bill was inconclusive about how much the program would cost (or save) the state. While noting the ‘possibility for cost savings through more efficient health care provision,’ the note went on to say that the details of the loan and loan guarantee agreements ‘will be significant factors in determining whether those cost savings may be realized.’ In his veto, Christie said the finances were too vague.”

16. OhioTen city schools receive no busing as Akron must cater to 29 charter and private schools. “Do the math on an average 180-day school year and the taxpayer-funded bus will travel 4,140 miles more to pick up only three more private students than public students. The Mason route takes a third of the time (30 minutes versus 90 minutes) and requires less than half as much gas and stops (seven versus 15).”

17. Ohio: The Parma school district is billing the state for unfair and excess” funding to charter schools. “Parma school board President Kathy Petro said the board is unanimous on this effort and hopes other districts will also speak up against the state funding formula. ‘I don’t think taxpayers in our district realize we’re pretty much funding two school systems,’ she said. ‘The goal we have for these resolutions is to bring awareness.’”

18. PennsylvaniaThe state public private partnerships board has approved two new unsolicited projects, “a project aiming to improve dozens of county-owned bridges, as well as an initiative to support transit-oriented development at the Middletown train station. (…) One of the approved projects authorizes Northampton County to undertake a P3 to replace 28 bridges and repair six more Northampton County-owned bridges. If advanced by the county, PennDOT would serve in an advisory capacity throughout the procurement.”

19. Rhode Island: The state DOT is insourcing 40 administrative positions, “and expects to save money as a result by bringing in-house more of the work it now contracts out.” The department “performed a cost-benefit analysis that compared the current cost of outsourced contracting for this work versus establishing an in-house pavement marking team. It consulted with other state DOTs including the New Hampshire DOT, and reviewed contract costs and best practices in several states. RIDOT said its cost of pavement marking contracts averages $6.8 million a year, while in-house striping services would cost about $4.8 million a year. When factoring in additional savings for winter operations, it said total savings through this effort would be $22.1 million over 10 years.”

20. Tennessee: A community is in uproar about plans for the state to take over their neighborhood elementary school and turn it into a charter school. The Aspire charter school network wants to take over Sheffield Elementary. “’What they did was very unimpressive,’ [grandparent Barbara] Riddle said. “They said, ‘Well, if we take over your school, your child receives a free laptop, iPad, or desktop.’ Well, I’m not impressed with that, and my children are not for sale. It made me wonder if the children’s best interests are at heart or if there’s a hidden agenda.’”

21. TennesseeStaff members of Austin Peay State University in Clarksville oppose Gov. Haslam’s plan to privatize state-run institutions. “Privatizing facility management would harm the livelihoods and careers of our fellow staff members, who also are our friends, peers, colleagues, neighbors and fellow proud residents of the great state of Tennessee,” the statement said. [United Campus Workers]

22. Texas: A Spanish company, FCC, wins a contract with Dallas to provide recycling services for 15 years. “Mexican businessman Carlos Slim became the largest shareholder (25.6 percent) in FCC Group at the end of 2014. Bill Gates also holds a 5.7 percent stake in the group.”

23. TexasThe Texas Tribune looks at who Gov. Abbott might appoint to be the new education commissioner. “With his education platform, Abbott has strived for the support of the homeschoolers, business-oriented accountability groups, charter school advocates, and voucher proponents who make up the education reform movement. So any appointee he selects is likely to at least be palatable to those groups, if not one of their own. Examples: Chris Barbic, founder of the Houston-based Yes Prep charter school network; Mike Feinberg, co-founder of KIPP Public Schools and former superintendent of KIPP Houston; Former Texas House Public Education Chairman Kent Grusendorf, R-Arlington. Complications: Asking someone to move from the innovation-focused environment of charter schools and business to a regulation-laden agency may be a hard sell. And some options—particularly Grusendorf, a harsh critic of public schools who has continued to be an outspoken proponent of school choice since losing his seat in 2006—may be polarizing.”

24. VirginiaThe state is in talks to revive the I-395 toll lanes project with Transurban. The project had been suspended a few years ago due to a lawsuit and concerns that lower income families would be priced out of the ‘public-private partnership.’ “‘This proposal is not the same as proposals in the past,’ [Transportation Secretary] Layne wrote, explaining some of the revisions. These include guaranteed funding for new and enhanced transit service and carpooling incentives, doing away with plans to build a new ramp at the Shirlington Interchange and refining the proposal further through an environmental assessment. Layne also stressed that public meetings will be held in all affected jurisdictions as well as individual meetings with local homeowner associations and businesses as the project 
is further developed.”

25. International: The Canadian pension fund CDPQ will be taking a 30% stake in Bombardier’s rail unit, which sells many rail cars to the public sector. “Demand for streetcars, subways and high-speed trains is likely to increase as more people around the world move to cities and as governments adopt stricter pollution controls, said the pension fund’s chief executive, Michael Sabia. ‘Global drivers of urbanization and growing environmental concerns is what we see as big drivers behind the growth of the business,’ he said in a phone interview.”

26. Revolving Door News: The GEO Group has appointed J. David Donahue to the role of Senior Vice President, U.S. Corrections and Detention, effective February 1, 2016, to replace the retiring John Hurley. Before joining GEO in 2009, Donahue was Deputy Commissioner of the Kentucky Department of Corrections, Warden of the Kentucky State Reformatory in LaGrange, Kentucky, and Commissioner of the Indiana Department of Corrections.

27. Think Tanks: Saskia Sassen, co-chair of Columbia University’s Committee on Global Thought, analyzes the corporate takeover of urban buildings and real estate and describes how it is fundamentally changing the nature of our cities. “This proliferating urban gigantism has been strengthened and enabled by the privatizations and deregulations that took off in the 1990s across much of the world, and have continued since then with only a few interruptions. (…) The result is a thinning in the texture and scale of spaces previously accessible to the public.”

Legislative Issues

1. National: Conservative senators John McCain (R-AZ) and Lamar Alexander (R-TN) wrote a letter to Education Secretary Arne Duncan expressing concern about a new interagency task force created to encourage shared oversight of for-profit colleges by federal agencies. “A press release from McCain’s office said they are ‘demanding answers’ about the task force’s efforts to ‘unfairly target the University of Phoenix and other fully-accredited for-profit educational institutions.’”

2. Maryland: A bill introduced by Del. C. William Frick (D-Montgomery) would ask voters whether they want to privatize Montgomery County’s liquor stores. “State Comptroller Peter Franchot (D) has said he intends to file similar legislation for the upcoming General Assembly session.” A hearing on the bill is set for this evening in Rockville. “The proposed bill has also touched off a larger political scuffle involving big money, union jobs and accusations of conflicts of interest. Montgomery County Executive Isiah Leggett (D) and nearly all County Council members contend that revenue loss resulting from privatization would be ruinous.” Leggett says the county’s bond rating may be at stake. This has not inhibited him from boasting about his privatization of the county’s economic development program.

3. Washington: The Wall Street Journal interviews Shavar Jeffries, the head of Democrats for Education Reform, on the state supreme court’s ruling that public funding for charter schools is unconstitutional. The Yakima Herald is demanding the state legislature step in and reverse the decision.

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