Media Scans
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This Week’s Outsourcing Scan 3-2-2015

Update: Upcoming Outsourcing Issues. March 2, 2015

1) National/California: In the Public Interest releases a detailed analysis of the largest provider of online K-12 education in California, CAVA (California Virtual Academies). “Our report shows that students at CAVA are at risk of low-quality educational outcomes, and some are falling through the cracks entirely, in a poorly resourced and troubled educational environment. The numbers show lower graduation rates and higher dropout rates, as well as lower academic performance and rankings, than in traditional schools in the state with similar demographics. Teachers we interviewed reported technological problems, limited availability of textbooks, and an environment that makes it difficult for students to thrive. The books show that in 2011-2012, the average CAVA teacher salary was close to half of average teacher pay in the state while K12 Inc. paid almost $11 million total to its top six executives. CAVA’s problems in California are not isolated incidents.”

2) National: The Project on Government Oversight has had a look at the government contractor performance database, FAPIIS. “The public FAPIIS site fared especially poorly. Most users were unable to complete all of the data retrieval tasks and found the public site’s design ‘very confusing’ and ‘distracting.’ The study found ‘extreme dissatisfaction’ and a ‘consistently high level of discontent’ with the public FAPIIS site.”

3) National: Corrections Corporation of America will hold its annual stockholders meeting on May 14, 2015. Last week the company announced that its chairman, John D. Ferguson, will be resigning from the board. Ferguson was paid over $900,000 in compensation for his board position in FY 2013. When he was CEO in 2009, Ferguson exercised $11,154,922 in stock options (p. 46). Last week CCA released its 2014 Annual Report and held its 4th Quarter earnings call. In the call CCA said it was actively marketing its Northeast Ohio Correctional Center, the BOP contract for which expires this June. It will also actively pursue a contract for an additional 3,000 beds in Arizona, which the governor called for in the budget. Oklahoma and Ohio are also targets for new business.

4) National: Top executives of the Blackstone Group, owner of the janitorial services company GCA Services Group, pull down massive annual compensation. Stephen Schwarzman, Blackstone’s CEO, received $656 million in dividends and pay; and its real estate chief Jon Gray took in $205 million, for a combined total of $861 million. GCA has faced repeated accusations of low pay. The New Haven Register reported in 2011 that “a proposed GCA contract for custodial services would plunge 200 New Haven, Connecticut, Public Schools custodians into poverty, according to a research report by the Political Economy Research Institute at the University of Massachusetts.”

5) National: In a new report, Scott-Macon analyzes the janitorial industry, finding that government services account for 6.2% of the market, while educational facilities account for 31.7%. “Over the past five years, this segment has grown as an increasing portion of municipal school districts and public universities have opted to privately outsource janitorial services.” They estimate that industry revenues will reach $64.2 billion by 2018.

6) National: Grassroots Leadership analyzes current trends in the private prison industry, finding that they are betting on “increased profits from immigrant detention and re-entry contracts. (…) ‘Locking up refugee families and children continues to be a revenue generating tactic for both CCA and GEO Group,’ says Cristina Parker, Immigration Programs Director at Grassroots Leadership. ‘While the rest of the country was shocked and concerned by the humanitarian crisis at the border this summer, CCA and GEO were giddy.'”

7) National: American Water Works posts a 56.6% fourth quarter profit jump. The company is awaiting rate hike decisions in New Jersey, California and Tennessee.

8) National: Writing in Mother Jones, Brian Joseph investigates the troubled privatized foster care system. “When the government took [Alexandria Hill] from her family, it outsourced her safety to a for-profit corporation. Nine months later she was dead.” University of Michigan researcher Roland Zullo, “who has studied foster care privatization, believes tragedies like these may be linked to the financial incentives of the industry, which he says are not aligned with child welfare. ‘This is just the kind of service where the market approach doesn’t work,’ he says.”

9) National/Wisconsin: Writing in The Nation, Scott Keyes details how presidential hopeful Scott Walker “built a career sending Wisconsin inmates to private prisons.” Keyes reports that “most of the prisoners, along with almost $45 million in Wisconsin taxpayer money, went to private prisons operated by one company: the Corrections Corporation of America. (…) CCA was also a major contributor to Scott Walker’s political career.”

10) California: Metro project labor agreement moves the needle on community jobs. “To date, of the 1,419 workers who have worked on Metro project labor agreement contracts, more than 1,000 workers have met the hiring provision criteria. ‘Together, these policies provide concrete opportunities for local residents to benefit from Metro’s investments in our public transit system,’ said Supervisor Ridley-Thomas, who co-authored the 2012 motion.” [Metro PLA]

11) California: The Equal Justice Society releases a report saying that Proposition 209, the 1996 anti-affirmative action ballot measure, has cost minority and women business enterprises (MWBEs) the equivalent of $1 billion per year in public contracts. The report was discussed at an informational hearing held last week by the California State Assembly Committee on Judiciary. [Video of hearing]

12) Florida: Former legislator Paula Dockery denounces Gov. Scott for his silence on major problems in the prison system, including healthcare contracting. “The cynic in me is starting to believe that the Scott administration doesn’t want to fix the problems at the department and doesn’t want to fully investigate the abuse that has been and still is occurring. In the meantime, people in state supervision are dying and the state is exposed to costly litigation and liability. Perhaps this is the means to an end and Scott’s true mission is to fully privatize Florida’s prisons—at any cost.”

13) Illinois: In a dramatic development in Chicago’s mayoral race, in which privatization played a central role, Rahm Emanuel is forced into a runoff with challenger Jesus “Chuy” Garcia. Emanuel has come under heavy criticism for failing to adequately restructure the city’s disastrous privatized parking meter deal, for a customer-gouging deal with private banks on transit cards, for slow-walking accountability legislation on privatization deals, for a regressive revenue-grabbing red light camera deal, and for massive schools closures, which many see as a prelude to school privatization. SEIU Local 1, which recently launched a contract renewal campaign for janitorial workers, is reportedly considering abandoning its neutrality and backing Garcia in the mayoral race. Unionized janitors clean many of Chicago’s public schools. The Chicago chapter of the American Federation of Teachers’ Alliance of Charter Teachers and Staff (ChiACTS Local 4343) is backing Garcia. Both the Chicago Teachers Union and ChiACTS are supporting efforts to unionize charter schools in Illinois. The runoff is April 7.

14) Michigan: Conflict of interest concerns swirl around a no-bid contract between the state Department of Corrections and a law firm. “A partner in a law firm that holds a $4.2-million MDOC legal contract is married to a woman who was the department’s registered lobbyist when the contract was extended without bids in 2012 and 2013.” A state administrative panel approved the contract extension last week.

15) Missouri: The Monett school district hires Aramark to provide food services in the 2015-2016 school year.

16) New York: Concerns mount over Gov. Cuomo’s plan to privatize and expand Republic Airport. “Alissa Taff, president of the Civic Association of Sweet Hollow, said leaders of her organization and the House Beautiful Civic Association in Dix Hills will join with leaders in Farmingdale to keep an eye on the plans and be ready to fight if they feel the state overreaches.”

17) North Carolina: Legal motions are to be heard tomorrow in the I-77 case over the legality of tolling. “The group contends that the project would violate state law in part by converting a stretch of an existing general purpose lane into a toll lane. ‘Our hope is that the injunction will show this privatization of our public infrastructure and roads is an unconstitutional way to proceed,’ Widen I-77 member Vince Winegardner has said.”

18) Ohio: The Ohio Civil Service Employees Association has submitted a bid to lower prison food costs and replace Aramark. “The OCSEA says it can serve a meal for $1.22 where Aramark is slightly higher at $1.28. The proposal also includes beefed up security and more sanitation training. That means certifying all food service workers. In the end, the union says it could save a total of $2.9M for the year. The Department of Rehabilitation and Correction says it will review the proposal over the next several days and everything is under consideration.”

19) Tennessee: Sparks continue to fly over state efforts to convert some Memphis schools into charter schools. A board of education member has “gone so far as to liken the ASD leaders to ‘terrorists’—to the apparent approval of many of the teachers in the audience. (…) There is a deep suspicion of the charter school movement, which is widely seen in Memphis’ minority community as being a stalking horse for outsiders to privatize public schools.”

20) Texas: Kyle Janek, the head of the state HHS, under heavy fire for granting $110 million in no-bid contracts, has hired an ethics chief for the agency. David Reisman “most recently worked at the Cancer Prevention and Research Institute of Texas, which generated controversy in 2013 for its own series of questionable contracts.”

21) International: Greece’s new Syriza government has called a halt to most privatizations initiated under the Troika austerity memorandum, though the already finalized investment deal with the Chinese shipping group Cosco in the Port of Piraeus will proceed. “Diplomats in Athens have some sympathy for the Syriza view, confirming that many of the past deals were corrupt or tailored to the interests of powerful oligarchs. ‘These people “own” the energy industry. The property sales and airports are a stitch-up, all going to the same small circle,’ said one veteran. (…) The Piraeus Port, the lottery and other state holdings generate an income stream for the government.”

22) International: India’s new government releases its first budget, promising an increase in infrastructure spending and a revamping of its “public private partnership” model.

23) Think Tanks: The Brookings Institution has released a report on highway and transit transportation funding challenges at the federal, state and local levels. “Roads, bridges, and transit are funded through a partnership among the levels of government in which the financial contributions are substantial and deeply intertwined.”

24) New Report: The World Economic Form and Boston Consulting Group have collaborated on a report looking into the problem of “Mitigating Regulatory and Political Risk in Infrastructure Projects.” Among the recommendations are that the private sector should practice “inclusive community engagement” throughout the lifecycle of any project. This includes “participatory planning and low-burden construction,” and “ongoing community involvement during operation.” However, the report’s concept of the public interest is rather limited, seeing it mainly through the lens of risks to industry from “inconsistencies” in “societal concerns” and “government incentives” (p. 18), rather than as transcending the particular interests of government structures and the private sector. There is no discussion of risks to the public from weaknesses in government oversight or from private incentives. In addition, there is the questionable assertion that infrastructure assets should be made more tradable since this would “‘discipline’ government behavior by deterring adverse interventions.”

Legislative Issues

1) National: Key Senators introduce a bill to strengthen the powers of inspectors general. “The measure would allow inspectors general to subpoena testimony from federal contractors, grant recipients and former employees, whereas they can only subpoena documents and records from those individuals under current law. The legislation would also exempt federal auditors from a law that prevents them from accessing agencies’ electronic records without first obtaining permission.”

2) National: At Congressional hearings on FOIA reform, Miriam Nisbet, the former director of the Office of Government Information Services of the National Archives and Records Administration, says existing FOIA procedures have significant delays and obstacles. Nisbet endorses FOIA reform legislation. [HR 653]

3) National: The right wing billionaire Koch brothers are backing a new conservative veterans group that is calling for legislation to privatize the Veterans Administration. “The plan, called the Veterans Independence Act, is the result of a six-month effort launched last fall by a health-care task force led by former Republican Senate majority leader and physician Bill Frist and former Democratic congressman Jim Marshall, a Vietnam veteran and former Army Ranger.” Last week, Veterans Affairs Secretary Bob McDonald told lawmakers he has no plans to grow the agency’s payroll or bureaucracy, or to completely privatize VA health care. “Far fewer [veterans] than initially expected” have taken up the opportunity to use private providers under an existing program. McDonald proposed transferring some of the funding back to the public system, but was rebuffed by lawmakers. [Sub required]

4) California: Senate budget committee chair Mark Leno (D) rejects an appeal for more money for a computer system at the state department of consumer affairs. The estimated budget for the project has ballooned from $28 million to $96 million. The project vendor is Accenture. The company has had major problems in Texas over cost overruns and poor performance.

5) Kentucky: The House passes a “public private partnership” bill for large transportation projects. “In a key vote, the House defeated an amendment by Rep. Arnold Simpson that would have banned the use of tolls to fund a new Brent Spence Bridge. Similar anti-tolling language was attached to last year’s public-private partnerships bill, prompting a veto by Gov. Steve Beshear, who is a strong advocate for the partnerships. Simpson, D-Covington, called tolls “an abomination,” and said local residents including his constituents would bear the brunt of the tolling to pay for the bridge work.” [HB 443]

6) Pennsylvania: The House has voted to approve the sell-off of the state’s liquor stores, and the Senate is expected to take the issue up this week. “Two Democratic senators representing the county oppose eliminating state liquor stores, saying there’s no added benefit for taxpayers to sell a money-making asset. ‘No one has yet made the case to me as to why it would be better for the people of Pennsylvania. We know it would toss a lot of high paying union jobs to be replaced with a lot of lower paying nonunion jobs,’ Sen. Daylin Leach, D-17, of Upper Merion said.” If no agreement is reached between the two bodies, liquor privatization will be dead again this year.

7) Washington: Bremerton city council member Leslie Daugs calls for a reevaluation of red light cameras, which are outsourced to Redflex Traffic Systems, citing declining revenue, increased costs, and dismissed tickets. “I also have other reservations about the red-light cameras. Bremerton is a town full of working-class families that often cannot afford a $124 ticket. Citizens who cannot afford the ticket are often the least knowledgeable about the justice system, and most likely to fall through the cracks. All too often, governments view citizens primarily as a source of revenue. However, government is made up of citizens and exists to protect and serve the citizens, not use them as a revenue source.” [Sub required]

8) Wisconsin: Open records law raises concerns after a pro-privatization group seeks access to student data. “The decades-old provision of the state’s open records law is now troubling some Democratic lawmakers after voucher school lobbying group School Choice Wisconsin sought student information from about 30 Wisconsin school districts for marketing purposes. Rep. Sondy Pope, D-Cross Plains, and about 30 Democratic Assembly members are asking Attorney General Brad Schimel to issue a legal opinion about who and what organizations can obtain such information and whether school districts are obligated to hand it over. Two Democratic legislators from Green Bay plan to introduce legislation to limit who can get such information.”