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This Week’s Outsourcing Scan 6-29-2015

Update: Upcoming Outsourcing Issues. June 29, 2015

1) National: Federal employees’ data hack turns into a contracting issue. “A breach of KeyPoint Government Solutions—a contractor used by federal agencies to conduct background checks—gave hackers the credentials needed to access sensitive employee data held by the Office of Personnel Management, the agency director confirmed [last] Tuesday.” This comes on top of OPM contractor USIS’s scandal in 2013. USIS, which conducted background checks for federal security clearances, was the target of a cyberattack.

The Office of Personnel Management watchdog is also looking into a contract with CSID, the company providing credit monitoring services for potential victims of the recent attack, “citing concerns that the contract was awarded unusually quickly.” Rep. Jason Chaffetz (R-Utah), chairman of the House Oversight Committee, says “here we have someone who lost millions of dollars, [is] under investigation by the Department of Justice — we’ve got to figure out how in the world how these people get the contract.” Journalist Tim Shorrock tweets, “KeyPoint & CACI picked up the majority of OPM’s contracts—now the 2 largest background investigators for the gov’t.”

2) National: In a major victory for Columbia Prison Divest, the Columbia University Trustees vote to disinvest from private prison corporations. In a statement released after the decision, Columbia Prison Divest (an effort born out of Students Against Mass Incarceration, a Black-led prison abolitionist group), said “We hope that Columbia’s divestment contributes to the larger antiprison movement in effort to weaken mainstream notions that prisons = justice and prevent private prison companies and other institutions from upholding punitive frameworks of justice. We hope this victory opens doors to more campaigns, to more organizing, to more victories.” [How the campaign was organized]

3) National: Governing magazine looks at the serious problems created by bad government data. Among the issues: “problems with data collected by private-sector contractors. (…) When government services are privatized, often the data available on performance is greatly diminished. Bruce Myers, the longtime Maryland auditor who retired in 2012, often warned about data problems when governments deal with third parties, such as contractors, other levels of government or school systems. Contractors specifically tasked with reviewing or analyzing data may stumble in their efforts to communicate the information adequately.”

4) National: Rep. Raul Grijalva (D-AZ) visited two for-profit detention centers last week, and “blasted the practice of holding women and children” in them. “Grijalva also criticized the relationship between federal officials and the private prison industry, saying that the industry was ‘turning a buck by imprisoning the most vulnerable among us.’”

5) National: Fitch Ratings warns about the vulnerability of subsidy-supported “public private partnerships” to shifts in operations and maintenance and lifecycle costs. While the Fitch report (which is aimed at defining adequate debt coverage) emphasizes the importance of accurate cost analyses and projections by Technical Advisors retained for the benefit of lenders, it also reinforces the public interest community’s argument for tight and rigorous “value for money” and public comparator analyses before deciding to proceed with a project, or choosing a public vs. private delivery method. Outsourcing operations may pose a special risk of cost overruns. [Analyzing Cost Risks in PPP Projects: Operation and Maintenance and Lifecycle Costs Are Key; sub required]

6) National: Bloomberg reports that local government bankruptcies are down as the economy improves (only two petitions were filed this year), and that U.S. states have reduced their debt load for the first time in 28 years. This shows that “lawmakers are still reluctant to borrow even six years after the recession.”

7) National: Aramark gets a $2 billion, 15-year contract from the National Park Service “to take over hotels, restaurants and outdoor activities” at Yosemite National Park. The contract requires Congressional review.

8) National: Within the next few weeks, military housing privatization specialists will begin to develop plans for housing troops. “The Army’s housing privatization program is in a ‘strategic pause,’ pending announcements of specifics on troop cuts, the service’s chief of privatization initiatives said.”

9) National: Ruth Conniff, the editor of The Progressive, reports that the future of public education is in serious jeopardy. “Superintendents, school boards, as well as administrators of local public schools have been writing letters and testifying against the privatization and defunding of public education.”

10) National: The Huffington Post’s Peter Greene, a teacher and writer, analyzes the push for the privatization of public education. “The privatization machine involves the end of local control. It is the end of any democratic control and accountability in a fundamental community institution. This is doubly troubling because so far, the people who are having democracy stripped away are mostly black, brown, or poor.”

11) National: The National Council for Public Private Partnerships’ US P3 Forum identifies “political risk”—skepticism by public officials and citizens—as the biggest obstacle to “public private partnerships.” David Sikorski, senior bid director at Parsons Enterprises, says “all we can do on the private side is look at the political players and other local stakeholders and see which way the winds are blowing. Some of it is a crapshoot.”

12) Alaska: Republican state representative Paul Seaton reviews the legislative session and warns that, next year, budget cuts will be even more severe and will impact local government. Seaton says, “I encourage everyone to evaluate services in your area and start to figure out alternative models to State funding—whether it is co-ops, privatization, or local government—so next year does not catch us unprepared.”

13) Colorado: Five groups respond to the state transportation department’s Request for Qualifications from potential bidders on the I-70 East “public private partnership” DBFOM project. “We invite the public and stakeholders to join us this summer as we discuss next steps in this process,” said Michael Cheroutes, Director of CDOT’s High Performance Transportation Enterprise. The first draft of the RFP will be issued this Fall.

14) Illinois: The Chicago Reader’s Ben Joravsky names Joanna Klonsky, the publicist for the Chicago City Council’s 11-member progressive caucus, as the “best political flack.” Writes Joravsky, “over the last four years Klonsky’s been the one calling reporters to get out an alternative point of view to the mayor’s cuts and privatization deals.”

15) Illinois/Indiana: The Environmental Law and Policy Center has charged that Illinois officials are blatantly violating the state’s freedom of information law by refusing to provide information on the proposed Illiana toll road “public private partnership.” “’They are trying to keep this a secret. Why, I don’t know,’ [ELPC executive director Howard Learner] said. ‘You would think they would be sufficiently embarrassed by now—now that the Illiana has been disowned by the governor and a court found its approvals unlawful. … There is something they don’t want us to see.’”

16) Illinois: The Amalgamated Transit Union Peoria local suggests a way to save taxpayer dollars—fire the CityLink management company. “I feel we can do it cheaper by having local people run the system. The riding public is taking the brunt of the cuts,” says Ron Cox, president of ATU Local 416. “The city is represented by three (of the five) CityLink board members. They should be overseeing what the public needs—not First Transit.”

17) Illinois: The Sun-Times reports that interim Chicago Public Schools CEO Jesse Ruiz “is pushing behind the scenes for the scandal-plagued United Neighborhood Organization to have a continued role in running the 16-school charter network it created.”

18) Kentucky: Gov. Beshear appoints Linda C. Bridwell, an engineer with Kentucky American Water, to the Kentucky Infrastructure Authority.

19) Maryland: Gov. Hogan finally announces his plans for the Purple Line “public private partnership,” saying the state will proceed with a scaled-down project if Montgomery and Prince George’s counties agree to pony up more money. “Montgomery signaled quickly that it was ready to contribute more to get the project built. Prince George’s, which is less flush, was more guarded, saying the county has already pledged a significant amount to the project.” PG County has just come through a bitter public fight over school funding shortfalls and tax increases, and it remains to be seen if such a long term commitment to subsidize the Purple Line will pass muster. Hogan cancelled the Baltimore Red Line “public private partnership,” calling it a boondoggle.

20) Michigan: An arbitrator rules that the state must make severance payment to nurses who were laid off when it privatized the Grand Rapids Home for Veterans. “Two years ago, more than 130 nursing aides were laid off to save the state a little more than $4 million a year. But that savings didn’t account for the severance packages employees should have gotten.” An AFSCME spokesperson said the union “is making similar arguments on behalf of food service workers who were laid off from the state prison system.”

21) New York: Resident-to-Certified Nursing Assistant (CNA) staff ratios have risen dramatically at the Golden Hill nursing home in Kingston, which was privatized two years ago. “‘It’s definitely neglect when you have one to 40, which is what’s happening here, and we want to change that,’ said Danielle Barrie, whose mother is a resident at Golden Hill. Dozens of family members packed a special board meeting of the Golden Hill Family Council [last] Tuesday evening, voicing their concerns regarding the level of care.”

22) New York: Nassau County hires KPMG at $45,000 per month to advise it on privatizing its sewer system. “The one-year contract, which would begin next month, must clear the GOP-controlled county legislature and the Nassau Interim Finance Authority, a state monitoring board that in 2012 blocked a previous effort by Mangano to lease the system. Minority Leader Kevan Abrahams (D-Freeport) expressed concern that Nassau would cede control of a public utility to a private investor ‘entirely focused on profits. It’s the ultimate one-shot. I had grave concerns in the past and unless they are addressed now, I still have those concerns.’” [Sub required]

23) Ohio: Prison officials reject the Ohio Civil Service Employees Association’s proposal to supply food services to inmates, and renew their contract with Aramark. “Union President Christopher Mabe complained the state rigged the process to sink the union’s $60.5 million bid. ‘We believe this was a deliberate attempt to ignore our proposal, because we were clearly the cheaper option. We were simply not given serious consideration or any of the allowances that Aramark had been given, and we are deeply disappointed,’ Mabe said in a statement. He added, ‘The union will be looking at all its options moving forward, including through legal channels and the contract grievance process.’”

24) Pennsylvania: The Department of Transportation has reorganized its “public private partnerships” office and moved it into the office of the Deputy Secretary of Planning, Jim Ritzman. “Brian Kendro, who led the successful procurement of the $1 billion Rapid Bridges P3, left PennDOT this month. His deputy Dale Witmer remains, as does the project staff headed by Gary Kleist, who oversees consultants AECOM and Gannett Fleming.” [Public Works Financing, May 2015, sub required]

25) Texas: A lot is riding on how well a new law to merge state health agencies is implemented. Contracting and procurement practices will be front and center. “It all began late last year when the Austin American-Statesman reported that the Health and Human Services Commission awarded a $110 million contract to an Austin company that didn’t submit a bid.”

26) Texas: Plano begins a “public private partnership” for some of its recycling services with Simple Recycling, a private company. “The company then compensates the city at a rate of $20 per ton of recycled material collected, potentially generating about $47,512 in revenue for Plano. (…) One concern, raised by Mayor Harry LaRosiliere, was the use of the city logo on material Simple Recycling would plan to mail out to residents in advance of beginning the service.

27) Wisconsin: Gov. Walker’s budget includes a major expansion of school privatization through the voucher system. “Walker is taking his cues from the American Federation for Children (AFC), a major force for school privatization nationwide.” The Wisconsin Budget Project reports that Walker is “redirecting resources from public schools to private schools.” Charter school expansion is also on Walker’s agenda: “The budget establishes new ways to create independent charter schools, without the approval of the local school board. Among those options is the creation of a new ‘Office of Educational Opportunity’ within the University of Wisconsin system, which will be authorized to create independent charter schools in districts with at least 25,000 students… As charter schools expand, they will be financed like vouchers by shifting funding from public school districts.”

28) Washington: Seattle turns two of its parks over to private management for a year. City officials denied this is “an attempt to clear homeless people out of the city’s most prominent open spaces.” The Seattle Times reports that “private management of public space can also yield problems, however. In New York City, investment in some parks and not others has led to debates about equity, and Michigan’s American Civil Liberties Union organization sued a Detroit nonprofit this year over a security contractor allegedly forbidding political activism in a park there.”

29) Wisconsin: Three Milwaukee physicians weigh in on whether Milwaukee County’s mental health system should serve for-profit companies or the public good. “That the county is seeking a contract with an out-of-state for-profit provider of services to come to Milwaukee and plan, build and staff the requisite facilities is not comforting. The request for proposals is wrapped in secrecy, with no knowledge of what the county can afford or what the bidder is willing to provide. Not everything done for profit is for the public good.”

30) Wisconsin: Milwaukee County bus drivers will vote on a new four year-contract today.

31) Think Tanks: Ben Crewe, Alison Liebling, and Susie Hulley of the Institute of Criminology at Cambridge University publish their research on the impact of prison privatization on individual inmates’ lives. “Prison privatization has generally been associated with developments in neoliberal punishment. However, relatively little is known about the specific impact of privatization on the daily life of prisoners, including areas that are particularly salient not just to debates about neoliberal penality, but the wider reconfiguration of public service provision and frontline work. (…) The study identifies some of the characteristic strengths and weaknesses of the public and private prison sectors, particularly in relation to staff professionalism and its impact on the prisoner experience.”

32) Think Tanks: The Virginia Foundation for the Humanities has sponsored In Plain Sight: Stories of American Infrastructure—a series of informative online programs on the history of American infrastructure. “How have Americans decided what infrastructure to invest in, how to maintain it, and who ultimately has to pay for it? Our stories take a look behind the scenes at the electric grid, the shipping industry and the origins of oil pipelines.” Looking forward, City College professor Hillary Brown has written Next Generation Infrastructure: Principles for Post-Industrial Public Works, which argues for “a connected infrastructure system drawing on ecological design principles taken from nature.”

33) Think Tanks: The Council of State Governments mulls over why the market for “public private partnerships” is so “sluggish.”

34) Revolving Door News: AECOM appoints former Port Authority NY/NJ director Christopher Ward to direct its Metro NY DBFOM strategy. [Public Works Financing, May 2015, sub required]

Legislative Issues:

 1) National: On Friday, the Senate Finance Committee held a hearing entitled “Unlocking the Private Sector: State Innovations in Financing Transportation Infrastructure.” At the hearing, Sen. Mark Warner (D-VA) “said both funding and financing are needed” and “suggested that at times states suffer from a lack of ‘sophistication,’ which has resulted in the failure of some public-private partnership projects. He noted that he has introduced the ‘Building and Renewing Infrastructure for Development and Growth in Employment (BRIDGE) Act’ (S. 1589), which would create a federal infrastructure financing authority. He said states need additional expertise when dealing with private sector proposals.” [Congressional Hearing Report, Williams & Jensen; sub required]

2) Connecticut: The privatization industry pushes tolling, vehicle mileage fees and “public private partnerships” for the state’s roads, including its federal interstates. William Blair and Mayer Brown push for public revenues for private road work, and CDM Smith urges interstate tolling. But Gov. Malloy “is backing away from a state commissioned study which concludes that slapping electronic tolls on all of Connecticut’s highways could generate more than $62 billion in revenue over 25 years.”

3) Illinois: A plan to partially privatize the state Department of Commerce and Economic Opportunity clears the House. “Advocates say the plan would make DCEO more efficient. But opponents say states have been plagued by scandal after reconfiguring economic development responsibilities.” [HB 574]

4) Iowa: The Story County Board of Supervisors has come out in opposition to a budget provision to privatize the debt collection system of the state courts, and asks Gov. Branstad to line-item veto the measure. “The county attorney’s office fears privatizing the process would put profit over the welfare of debtors, particularly those with little money, because of payment plan fees the county doesn’t charge. The bill has also put plans for upgrades to the Story County Justice Center in jeopardy, because the county believes it would receive less money from the collections process than it previously budgeted for the project as a result.”

5) Massachusetts: Organized labor mounts a public campaign to block efforts to undermine the Pacheco Law, which is designed to ensure taxpayer accountability and proper vetting of outsourcing proposals in the state. The Amalgamated Transit Union has “been flooding radio airwaves and other media with imagery of attacking sharks in an attempt to mock [Gov.] Baker’s proposal to suspend the so-called Pacheco Law.”

6) Michigan: A bipartisan bill would require food safety inspections of state prisons. “Just in the past few weeks there was yet another allegation of maggots in food served by Aramark in one of our prisons, so clearly fining the company and the bad press they’ve received over previous incidents hasn’t helped get them to run a good food service operation or clean kitchens,” [Rep. John Kivela, D-Marquette] said in a news release.

7) Pennsylvania: The state budget battle between GOP lawmakers and Gov. Wolf comes to a head this week. The GOP proposal “would increase spending by about $1 billion, relying partly on surplus tax collections and cash from a yet-to-be produced plan to privatize the state-controlled liquor and wine store system.”

8) Vermont: The legislature’s Corrections Oversight Committee comes under criticism for failing to respond to inmate deaths, including one at a Corrections Corporation of America Kentucky prison. Kentucky officials have not provided an autopsy report to Vermont officials. Vermont plans to complete a move of 280 prisoners to the reopened GEO Group prison in Baldwin, Michigan.