Managed Competition:Part of a

Successful City’s Strategy

Teresa CurlinCity of Charlotte

May 2007

City of Charlotte• Population: 664,232

• Council/Manager Government

• 14 Key Business Units 6,300 employees

• $1billion plus budget

• Second largest financial center in U.S.

Context for Strategy

Priorities and Focus AreasCouncil communicates themes to Leadership

Corporate ScorecardResponse becomes strategic objectives

OrganizationOrganization implements

VisionCity’s vision statement

Annual Council Strategy Retreat

Council Committees/Focus Area

Cabinets

16 Corporate Objectives

Key Business Unit (KBU)Scorecards

City Council Focus Areas

Community Safety

Housing & Neighborhood Development

Transportation

Economic Development

Environment

City Strategy

City Council Focus Areas

Community of Choice for Living, Working, and Leisure

Comprehensive Citizen Service

Corporate Scorecard

Develop Collaborative Solutions

Enhance Customer Service

Invest in Infrastructure

Expand Tax Base & Revenues

Deliver Competitive Services

Develop EmployeesDevelop

Employees

Run the BusinessRun the Business

Manage ResourcesManage

Resources

Serve the CustomerServe the Customer

Recruit & Retain Skilled, Diverse Workforce

Achieve Positive Employee Climate

Promote Learning & Growth

Vision

Strategic Themes

Strategic Principle

Optimize Business Processes

Maintain AAA

Bond Rating

Promote Economic Opportunity

Increase Perception of

Safety

Strengthen Neighborhoods

Provide Transportation

Choices

Reduce Crime

Safeguard the Environment

Council StrategyFocus Area: Restructuring Government

Development PlanIncrease skill or knowledge; get certification

KBU Balanced ScorecardMaximize Fleet Availability

Division Balanced ScorecardEstablish Fleet Availability Rate

Corporate Balanced ScorecardEnhance Customer Service

Employee Performance PlanMaintain 90% Fleet Availability

Linking Employees to City Strategy

City / County Consolidation

• Building standards• Planning• Purchasing• Utilities• Animal Control• Emergency Mgt• Crime Lab• Action Line• Charlotte-

Mecklenburg Police

•First Responder

• E-911

• Landfills

• Veterans Services

• Elections Office

• Tax Listings

• Tax Collections

• Parks & Recreation

Mayor’s Task Force

Mayor Richard Vinroot felt that more needed to be done to streamline City costs for services. In 1993 the City established three (3) citizen task forces.

• Organization Task Force• Privatization Task Force• Compensation Task Force

Current Key Business Units (KBU) Result Of The Organizational Task Force

Service KBU

• Aviation

• Engineering & Property Management

• Fire

• Neighborhood Development

• Planning

• Police

• Solid Waste

• Transit

• Transportation

• Utilities

Support KBU

•Budget & Evaluation

•Business Support Services

•Finance

•Human Resources

Privatization and Competition Advisory CommitteeResult Of The Privatization Task Force

• 11 member PCAC committee

• 8 members appointed by City Council, 3 members appointed by the Mayor

• Committee Chairman selected by the Mayor from the body of the committee

• Each member can serve two possible terms of two years each

• Each year a five-year competition plan is presented to the committee

$ Saving Options

• Competition: private sector and City staff submit bids to provide service to citizens, so that City may select the most cost effective solution

• Optimization: City’s efforts to extend lessons learned in competition to similar operating units

• Privatization: service contracted to private sector; employees do not compete

Source: Douglas Bean, City of Charlotte Utilities Key Business Executive

How Do We Choose What To Compete or Privatize

• Outcomes must be measurable• Annual expenditures should be in excess of

$500,000• Private firms must be interested in performing the

services• The “risk of privatization” must be acceptable

– Risk of Default– Loss of Human capital– Loss of Control

The Proper Support

• Internal Audit:– reviews City proposals – reviews private company financials– audits City contracts for possible gain sharing

• Legal:– consultation and review of solicitations and

contracts

• Procurement:– supports KBUs in solicitation development and

contracts negotiation

How We Measure Success

• Continuing competition

• Savings from competitive solicitations

• Savings from on-going contracts resulting in productivity gains and gainsharing

• Change in the corporate culture

Program Accomplishments

• Competition:– 49 won / 10 lost– Annual savings of $6m

• Optimization:– 26 services optimized/reengineered– Annual savings of $4.5m

• Privatization:– 72 services outsourced– Annual savings of $3.1m

Source: Douglas Bean, City of Charlotte Utilities Key Business Executive

The Link:Employees and Competition

• Skilled employees can identify opportunities for operational improvement

• Employee commitment makes competition execution successful

• Employees are the ones that “operationalize” improvements

• Employees commit to a program that recognizes their efforts – gainsharing

Employee Gainsharing

• Employee incentive for exceeding performance and budget targets

• Savings shared between bidding unit and individual employees – Half to unit / half to employees

Source: Douglas Bean, City of Charlotte Utilities Key Business Executive

What About HR?

• Cost of HR KBU factored into bids– Bidding unit’s portion of cost of

centralized HR function included in bid

Do you want to be the reason an operating department loses a bid?

Included Employee Costs

• Pay• Raises• Health insurance• Incentive pay• Workers’ comp• Longevity

• Social Security tax• Medicare• Overtime• 401(k)• Retirement• Temporary pay

Lessons Learned

• Take the time to develop expectations and communicate clearly with the vendors

• Construct a meaningful contract with consequences if the vendor does not perform to specific and measurable outcomes

• Not every service is suitable for competition• Communicate with employees• Follow through with contract monitoring and open

communication with the vendor• Staffing infrastructure is critical to success

More Info

• Meeting the Changing Demands of Your Community with Competitive Services…Human Resource’s Vital Role presentation

– http://www.charmeck.org/Departments/Human+Resources+City/Human+Resources.htm

• City of Charlotte’s Managed Competition Program– http://www.charmeck.org/Departments/Business+Support+Services/Pro

curement/PCAC/PCAC+Main+Page.htm