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This Week’s Outsourcing Scan 12-01-14

Update: Upcoming Outsourcing Issues. December 1, 2014 

1) National: Charles Kenny of the Center for Global Development argues, in the Wall Street Journal, thatwe should take the mystery out of government contracting and publish the contracts with necessary redactions. Currently a commercial vendor, DelTek, runs a database with 1.7 million contract entries for which it charges a hefty price. “The U.K.’s Confederation of British Industry, comparable with the U.S. Chamber of Commerce, has called for greater contract transparency in Britain. In a 2014 report, the group’s Public Service Strategy Board backed online publication of all government contracts.”

2) National: The privatization industry lays out what it considers to be best practices for public building P3 projects. “The panel addressed the importance of assessing, at the earliest stages of project development, whether the public sector owner has the necessary legislative authority to procure and finance public buildings using a P3 model.” The industry wants legislation similar to TIFIA passed to help privatize public buildings.

3) National/New Mexico: Bryan Bird of WildEarth Guardians warns against the privatization of public lands in the west. “While industry might be enriched under these schemes to privatize public lands, it’s whole communities and regions that benefit from the natural values protected by public lands. Research shows that counties with protected federal public lands economically outperform those without.”

4) National: K12 Inc., the largest operator of online public schools, sees its stock plunge to a 52-week low. The company now has a price to earnings ratio of 27. Last month Bloomberg took a close look at the troubled company once backed by Michael Milken and praised by Jeb Bush. “The U.S. Securities & Exchange Commission has also taken an interest in K12. In letters, the agency this year asked the company for more public disclosure of student attrition rates and test scores.”

5) California: “Parent Revolution,” the Walton Family Foundation-funded group which advocates for “parent trigger” campaigns that open the door to privatizing supposedly underperforming schools, conveys its battle plan to new Los Angeles schools’ chief Ramon Cortines. “Austin went so far as to share with Cortines the sites where parents are planning to use the parent trigger law to overhaul schools. (…) ‘I talked to him frankly about the state of the different organizing campaigns throughout Los Angeles Unified. I told him which schools, so that he could think about fashioning a school turnaround proposal, so he wouldn’t be surprised when the parents began organizing.’”

6) Connecticut: Jackie Lightfield, the chair of the Norwalk Center Task Force, says the privatized parking system is hurting the city’s downtown restaurant business. “‘When we go back to the heyday of SoNo, prior to the Parking Authority, where the Webster lot was free at night, where we weren’t aggressively ticketing, SoNo was booming,’ Lightfield said. ‘We had lots of restaurants. People came to SoNo.’ Under former Mayor Alex Knopp, the city created the Parking Authority and hired LAZ Parking to manage parking operations. The changes were meant to shift the cost of parking operations from taxpayers to motorists.”

7) Florida: The top state corrections official has resigned. “Under Crews’ leadership, the Department of Corrections has been plagued by reports of abusive behavior by correctional officers, budget issues and allegations that the department specifically targeted whistleblowers. (…) Additionally, Crews inherited a department grappling with approximately $120 million in debt and a mountain of litigation over health care privatization.” He is the third corrections chief appointed by Gov. Scott to resign. Scott has appointedTimothy Cannon to replace him.

8) Florida: Escambia County and the Emerald Coast Utilities Authority issue a Request for Qualifications for a source separated recyclables and solid waste processing plant. Potential bidders should show a “track record of working in a public-private partnership.” The deadline is December 18. [RFQ]

9) Florida: Highland County considers privatizing some of its municipal functions, beginning with the landfill. Progressive Waste Solutions will be meeting with county staff. “At a goal-setting workshop in March, the commissioners picked nine for future analysis: janitorial, building repair and maintenance, emergency medical services, fleet maintenance, land planning, recycling, surveying, asphalt production, road paving and Healthy Families.” An RFP for janitorial services has already gone out. A previous EMS outsourcing is mired in controversy for raising costs.

10) Georgia: Deteriorating bus services in the Savannah-Chatham public schools may be tied to poor labor relations of the private operator, First Student. School officials are concerned the situation is getting worse. Teamsters Union Local 728 has threatened to strike.

11) Georgia: The Barrow County Board of Commissioners votes down a proposal to outsource 11 departments all at once, but may move forward with plans to outsource them individually. The jobs of about 100 employees would have been outsourced to CH2M Hill. Opposing commissioners “said they were uncomfortable with such a large number of departments being outsourced at once, and that the county could find other methods to improve finances.”

12) Georgia: The University of Georgia System’s outsourcing of dormitory operations to Corvias is expected to reach financial closing this Spring. “Under its joint governance structure, instead of granting Corvias the concession and letting it collect student rents and keep the profit, the University System of Georgia will pay Corvias management and operation fees based on performance. Rent increases are capped at 3 percent per year to protect students.”

13) Illinois: The State Supreme Court has overturned an Illinois Education Labor Relations Board order that McLean County Unit 5 schools cancel an outsourcing contract with First Student. The district signed the deal in the middle of a contract impasse with AFSCME drivers and monitors.

14) Illinois: Education blogger Mike Klonsky pours scorn on an Illinois attorney’s idea of starting a marijuana farm to fund charter schools. “Following the lead of the privatized prison industry, they plan to open a $5 million to $7 million, 20,000-square-foot medical marijuana farm in Edgewood, a town of just over 400 people in Effingham County. (…) Yes, it’s a medicine and will ultimately be part of big pharma. But the thought of public schools, or even  privately-run charters, being dependent for funding on the good will and political orientation of drug privateers is antithetical to democratic education.”

15) Indiana: The Associated Press picks up on Indiana transportation commissioner Browning’s significant comment that he does not think the state should commit to more “availability payments” (permanent subsidies) in privatized toll road projects. Browning is concerned they are unnecessarily adding to public debt. “Indiana Chamber transportation lobbyist Cam Carter said no P3 deal will make up for the fact that the federal gas tax hasn’t risen since 1993, cars are becoming more fuel-efficient and Americans are driving less. ‘What you have to understand with public private partnerships in the transportation realm—they’re a financing mechanism,’ Carter said. ‘They’re not a funding mechanism.’”

16) Louisiana: Kenner Mayor Mike Yenni takes the first steps to insource the sewer system, which is current run by Veolia North America. The town will create its own department. “But he did say that even if the city decides to continue to outsource the contract, which is up for renegotiation next summer and will cost the city roughly $5.6 million this year, having the scope of services and responsibilities spelled out in a city ordinance is the right way to go.”

17) Massachusetts: Teamsters Local 25 is organizing parking attendants, including at private, for profit operators. “The Teamsters next expect to sign up attendants from LAZ Parking, which has about 50 lots in Boston. One 36-year-old LAZ parking attendant, who oversees a small outdoor lot near the waterfront, works alone and said he is not allowed to leave during his eight-hour shift. There is no bathroom on the lot, so he shuts the door of the booth and urinates in one of the plastic bottles he collects from the trash, he said. On a nighttime shift at a different lot, he relieves himself between the cars.”

18) New Jersey: Gov. Christie’s privatization of the state lottery is already faltering. Christie had been amply warned of these risks before privatizing the system last year, but pushed ahead anyway. “Northstar New Jersey Lottery Group’s revenue fell short $24 million in the year ended June 30, even after Gov. Christie let the company cut the target. Lottery collections, the state’s fourth-largest revenue source, were down 9.2 percent from July 1 through Oct. 31. The forecast calls for annual growth of 7.4 percent.”

19) New York: Following a State Public Service Commission investigation, NBC New York has bustedUnited Water for spending “thousands on brunch, booze, [and] golf balls,” then asking for a rate increase. A company official said the payments were to “recognize employees that have demonstrated the company’s values.” NBC reports that “last month, United Water New York disclosed to regulators the company’s quarterly financial statements had been ‘materially misstated since September of 2010’ resulting in $2.9 million that had to be written off. The utility said rate-payers were not affected.”

20) New York: Real estate tycoons are gobbling up urban parking lots. Sam Schwartz, a former New York City Traffic Commissioner, says “it’s going to be harder and harder to find off-street parking facilities in Manhattan as time goes on. Those parking facilities will be for the 1 percent of the 1 percent.”

21) Rhode Island: More than 200 people packed East Providence City Hall last week “to protest water and sewer bills that some say have doubled or tripled since last year. (…) The city maintains ownership of the plant and sets rates, but United Water operates and manages it, said Kevin Chandler, vice president of United Water. That answer resulted in shouting from the crowd as some city officials suggested earlier in the evening that they had no control over the rates.”

22) Texas: Terrell residents voice concern about being cut out of the process of privatizing the state psychiatric hospital to Geo Care, and confront one of the company’s officials. A “goal” that the privatization save 10% was waived by the state. Privatization “will likely shield the hospital from the kind of scrutiny that prompted reform and could even inhibit state oversight. (…) Equally troubling is the state’s choice of contractor, selected without input from employee unions or patients’ rights advocates.”

23) International: Emma Lui, the water campaigner for the Council of Canadians, denounces the Liberal Party’s Justin Trudeau for embracing “public private partnerships,” including for investment in First Nation communities. She writes, “the Council also urges the New Democratic Party and the Green Party to differentiate themselves from Trudeau and Harper by rejecting P3s and commit to funding infrastructure and public services that keeps them under community control.”

24) International: MSCI launches an index to measure the performance of infrastructure investments. “Results show that investment in a pool of underlying infrastructure investments delivered an annualized return of 14.7% as at June 2014.”

25) International: The Banker reports that reaching the point where institutional investors will commit “significant amounts of long-term capital” to infrastructure projects may be “years away.” In addition to legal, regulatory and budget risks, “a fundamental reason for the gap between current infrastructure needs and investments is because, almost by definition, such projects have a public utility or ‘public good’ element, with features external to the initial investment.” [December 1, 2014; sub required]

26) International: Critics target the privatization of power in Australia’s New South Wales, warning it will blow an annual “$1 billion black hole” in the public budget due to the loss of dividends and tax payments.”

27) Report: KPMG publishes a report on what it considers to be the 100 “most innovative, impactful infrastructure projects,” including “public private partnerships.” The report says “governments and supporters must be armed with facts to educate the public on the pros and cons of using PPPs. Standardized contracts, clear performance standards, robust contractor management and better communication are a few things that are needed to achieve a consistent and successful approach to PPPs. This requires skilled professionals in the public sector with the flexibility to lead non-traditional procurement and project implementation.” Says the pay gap between public vs. private sector experts is a serious constraint. [Infrastructure 100: World Markets Report]

Legislative Issues:

1) National: Caitlin Emma of Politico looks at how private companies are scooping up personal data from public school students. “Parents, activists and a select group of lawmakers are clamoring for a fix. They’ve made student data privacy a top issue in state legislatures, and they’ve even dismantled major data collection efforts.” Corporations have responded with a pledge, “but the pledge omits key protections, some privacy advocates say. And conspicuously absent were big names like Apple, Google, Pearson and Khan Academy, which offers free online tutorials used by millions of people worldwide. Also not listed are edX and Instructure Canvas Network, two MOOC providers that offer courses to high school students.”THE Journal recommends “10 Terms You Must Include in Contracts With Online Providers” to help protect privacy.

2) National: The National Council for Public Private Partnerships will be holding a Federal P3 Summit in DC from February 12-13, 2015. It will include “a survey of the political climate surrounding P3s on Capitol Hill; analysis of current legislative P3 proposals and their chances for success; exploration of current challenges to federal P3s, including OMB scoring; the outlook for P3 success under the current administration and new Congress; and lessons learned from current federal P3s.”

3) Pennsylvania: The possibility that a short lame duck session of the legislature could be called still exists, but any effort by Republicans to ram through privatization legislation faces challenges. The session begins January 6 and the new Democratic governor, Tom Wolf, takes over from Republican governor on January 20. Still, the new Republican Senate majority leader hasn’t ruled it out.

4) New Jersey: Opposition mounts against a bill that would ease water privatization by cutting out public review. “Under the terms of the bill, a water system could be sold without a public vote in certain circumstances—the system must be under duress as defined in the bill. But critics say the indicators of duress are written so broadly that nearly any water system could meet the definition and avoid a vote. They are also concerned that the bill reduces oversight of the sale price by the state Board of Public Utilities.” The bill has made it through a Senate committee but not yet progressed in the Assembly. [S 2412; MoveOn.org petition against the bill]

5) Ohio: Bill Phillis of the Ohio Coalition for Equity and Adequacy warns that Gov. Kasich plans to privatize Youngstown’s private schools. “According to a November 20 Youngstown Vindicator article, the state representative-elect from Youngstown said the Governor told her he would like to shut down Youngstown City Schools and replace the district with a great charter school. Could this happen? That scheme already exists in New Orleans. Look for it in the state budget bill to be unveiled by the Governor in February 2015.” The Youngstown Education Association released a statement saying it strongly opposes such a move.

6) Vermont: The state auditor has come out in favor of privatizing the state’s liquor operations. The legislature would make any final decision. “Mike Hogan, commissioner of the Department of Liquor Control, says the department is open to having the privatization conversation. But he says privatized industries in other states haven’t necessarily yielded the desired results. (…) ‘[What Washington State got] was more stores, longer hours, higher prices and not much else from it,’ Hogan says. ‘I think the taxpayer didn’t get the whole story of what was actually going to happen.’”

7) Wisconsin: Two Acts which stripped the Milwaukee county board of much of its oversight authority have led to less information being provided to the board, “but also to the public about the inner workings of county government.” Lisa Kaiser reports that “the opaqueness of county business is beginning to fuel a behind-closed-doors effort to strip Milwaukee County of its assets—including valuable parkland on the lakefront and, as the Shepherd can report exclusively, in Greenfield—with county residents being none the wiser until long after the deals are struck, long after their voices could be heard.”