Privatization

Leadership and OutsourcingOR

We are in the What Business?Lee R. EvettVice President Burton and Associates Tampa OfficeCity Manager - 34 Years 7 Cities, 5 StatesB.A. Purdue; M.P.A. Indiana University

Previous Leadership PresentationsElements of Leadership 21 Irrefutable Laws

The Other Side of Leadership

Do you have to be Nuts to be a City Manager?Leadership and Outsourcing Leadership Leadership is a proactive catalyst Leadership recognizes the need for and facilitates change

Outsourcing

Building a better mouse trap Future of local governments in the New Reality

Leadership and OutsourcingStrange combination of topics?

No, we are in the leadership business

And Outsourcing is how leaders are re-shaping local governmentLeadership and OutsourcingFirst - Who are we ?

Where do you work?Why does my position exist?Why does my organization exist?What does my organization provide?You are in the Leadership Supply Business

Leadership and OutsourcingWhy is government in the Leadership Supply Business?

Because Governments are created to supply Leadership Because Governments are a necessary part of society

Why are Government necessary? Leadership and OutsourcingGovernments are formed to fill a natural leadership vacuum - arises when unrelated people start living in proximity to others

Governments are service providers for what we either can not do by ourselves or can do more efficiently together

Leadership and OutsourcingGovernments necessarily exist to protect people and their rights. To provide agreed upon services. To maintain order and promote domestic tranquility.

In exchange, people agree to be governed, abide by the laws adopted by the governed, and give up some of their freedoms (mostly to not run around and wreak havoc)

OK We Are in the Leadership Business How are we doing?When can we say we have met the service expectations of society?

How do we measure our talents of providing services?

When can we say we have succeeded?Measuring Leadership SuccessIn Private Sector Piece of Cake

Success is measured by: 1) Increased market share; 2) Revenue increases meet goals 3) Sales targets are met; and 4) Profit projections are realized

And all on a quarterly basis

Measuring Leadership SuccessIn the Public Sector Its another story

Success is measured by: 1) Satisfying the electorate; movers and shakers 2) Staying out of the media, successful re-elections 3) Comparison with other local governments - employees per thousand, expenditures per thousand, crimes per thousand etc. 4) Staying financially healthy (moving definition)

OK, We Measured Now, how do we do better?Change your Leadership Focus

Private SectorLeadership focus is always external using the base to increase customer satisfaction - revenue, market share and profit Public SectorLeadership focus is often internal demonstrating leadership by controlling the base favorable number of employees, expenditures, and statistics

Change to External Focus Empower Employees to help customers: Ritz Carlton - Empowerment Disney - Same Replace unsatisfactory or marginal employees: Los Angeles the very, very, very, very.. 20-year PlannersRecognize those who do focus on customers: Coral Springs OK We Changed Focus But We Still Want to do BetterWe changed focusWe removed marginal employeesWe empowered our employeesBut we still want (need) to do better How do we do that?

Need to think about re-creating the base need to question why and how you do what you do

Remember - Leadership is a synonym for Change

How do we do better?Do we increase staff, if so When ? Answer - never

Do we have more employees than needed? Answer - Yes Do supervisors supervise ? Answer - Rarely Do your employees think internally to the organization or externally to citizens and services?

Is your organization run for the benefit of the employees or stockholders?Now How do we do better?Concentrate on the Employee/Service Basics

Employees provide services not follow rules without exception, complain about temperature, parking spotsProviding services is the goal, not improving employee moraleEncourage employees to solve service problems not just report themEvery employee is part of the organization you dont want to hear, thats not part of my job, or thats not my responsibility you will have to call someone else

Now How do we do better?Hire employees based on three criteria:CharacterCompetencyChemistry

Every employee should commit to do what they say they will doStill Not There?Do not assume the only way to provide a service is to employ people

Do not assume the cost of providing the service can not be less

Do not assume that you have taken the service to the highest levelNow How do we do better?Outsourcing Remodeling Your Base

Outsourcing is about realizing a private sector corporation can provide a public service

Outsourcing is about setting standards for performance perhaps higher than currently enjoyed

Outsourcing is about providing a public service with a recognizable valueWhat does doing better mean?Doing better isnt just about higher service levels Doing better also means doing the same with less

Revenues are down Worse, revenues are not improving or slowly improvingReserves are used with the hope that things will get betterCitizens are continuing the mantra - Property Taxes are too high, government spends too much What to do? Leadership is about change consider outsourcing

What will outsourcing do for your organization?

What do you want outsourcing to do for your organization control/lower costs, improve levels of service, remove the HR Department?

Is outsourcing really better?

Potential Outsourcing Advantages Efficient performance

Known cost - potential cost savings

Better service levels quantified service levels

Potential Outsourcing DisadvantagesDifficult/awkward to change services or service providers Hard to change back, infrastructure who owns it?Maintenance of public propertyService levels will be what you specify, be careful and know what you presently offer

Outsourcing - Not a New Idea1955 - Directive of the Office of Management and Budget discouraging Federal Government from producing any goods or services that can be obtained from the private sectorPeter Drucker coined the term Privatization in 19681972 Rand Corporation. In-depth study on OutsourcingCommon Examples of Outsourcing Garbage collection, recycling, accounting, building code enforcement, debt collection, parks and grounds maintenance, recreation, 911 Primary Service Answering Points (PSAP), Police, Fire, AmbulanceAbandoning a public service is a forced outsourcingKey Aspect of Outsourcing- AccountabilityAccountability is a fundamentally required aspect of social existence In government - it is often a problemSome crucial functions must be carried out collectively, such as elections, who is accountable?We act on behalf of the public but who really knows what they want - how can we be accountable when seemingly everyone has a different thought of what we should be doing?

Outsourcing may not be for YouHard to measure the value of production hard to demonstrate efficiency, cost reductionMore disruptive it is to change providersInternal experts know more about how to accomplish the taskAnd:Always Remember - hiring employees is more politically popular than paying a for-profit corporation

When Outsourcing May Be The AnswerMore the service can be identified/quantified/specifiedMore the efficiency/production of the services can be measured and costs identifiedMultiple vendors for the service good market place competition other examples in operationPerformance can be objectively evaluated after the fact

When Outsourcing May Be The AnswerMore readily a failing contractor can be replacedLess government is seen as caring only about dollarsStronger the case for employing profit seekers than employing individuals usually the more technicalMore it can be shown that the city wins

OK You want to Outsource a Service or FunctionWhat do I do (being the leader I am) and yet still survive to another day

How do I do what I want to do (being the leader I am) and still survive to another dayStep 1 Pick a Low Hanging ServiceConsider well defined services with know quantities - garbage collection, 911 PSAPs, utility operations, and grounds maintenance are good examples

Less precise but still doable: engineering, planning and zoning, parks and recreation

Step Two Research and TalkKnow your present actual costs, not budget costs - the fully allocated real costKnow what costs you will avoid (save)Have all the facts, actual costs, anticipated savings, comparable examples from other communities. Know what worked and what did notDo NOT do this in a vacuum, do your research quietly: discuss your thoughts with each elected official BEFORE MAKING PUBLIC COMMENTS

Step Three - The RFPWrite clear, tight specifications:Number of units/frequency of activity/special programs currently in placeDetail exactly what you want be cautious of imaginative providersHold a pre-bid meeting to ensure no misunderstandings on what YOU wantCustomer service expectations/penalties for service infractions (e.g. tardiness/non specified practices/behavioral infractions, uniforms, personal appearance)Step Three The RFP Spell out when early termination is appropriate, city should be the final decision makerDefine payments; detail invoicing, when payable, how paid, based on what service frequency, when (if) fee is to be increased, by how much - beware of CPI increasesDefine each required or optional management report by type, contents, when to be delivered, to whom, penalty for non delivery or incomplete performance

Time10:50 AMStep Three The RFP Define the citys option to identify future service changes, special events, special and/or specific reports and data requestsDefine extraordinary events (injuries, accidents, etc.) and spell out reporting responsibilities to whom and how soon Spell out extra duties and specific compensation for known special events, including hurricanesStep Three The RFP Spell out minimum staffing by using performance standards - not numbers of employees Spell out the city will specify uniforms or establish dress codeIdentify behavioral expectations and specific consequences for infractions

Step Three The RFP Make clear the city determines contract infractionsProvide for an internal administrative (not arbitration) appeal processDont be afraid to individualize the services to your communities expectationsIf something cant be done know exactly why research yourself if necessary

Step Three The RFPReview the RFP with each impacted department include front counter personnel and main receptionists those who will be the first to hear citizen issues/questionsClearly define the term and possibility of renewal or extension before re-bidPeriodically re-bid - establish the precedent - even when you like the contractor

Step Three The RFPSpeak candidly with vendor references including both management and field personnelMeet companys top management, learn their personal history, goals for the organization. What is the company personnel turnover rate/why (indicate you will be doing this)When you have finalists, put together a core group who will hear two or three presentations

Step Three The RFPVisit existing contractual operationsSelect a service provider with the same care you would use to hire a department head, key assistant or auditorContractor must assign a senior management person as your key 24/7 contact home phone, cell phone etc.Key contact should periodically attend departmental management meetings

Step Four Approving The ContractEach elected official must understand all aspects of what is happenings before it is on the Agenda

Develop FAQs for the Council and appointed staff to insure continuity of answers

Develop a public presentation on what is being outsourced and why (benefit to the city)Step FiveMONITOR AND ADMINISTER THE CONTRACTOther ThoughtsHey, its NOT an easy taskMost cities have outsourced a service but not recentlyPolitical ramifications every elected official campaigns on running government like a business and then votes for what will get them re-electedOther ThoughtsDo not outsourcing police or fire services unless:

A) You are a brand new city or

B) The union agrees - which means it is in their best interest and may or may not be in your best interest or

C) You have a death wish

Real Life ExamplesThree Examples of Leadership making a change:

The Osceola County Library SystemThe City of WestonThe City of Sandy Springs, GAOsceola Outsources the LibraryOctober 2011 Headline - Osceola Commissioners put library privatization on holdCounty will look at how it can make cuts without outsourcing Osceola County officials find themselves with a dilemma: move ahead with an unpopular proposal to outsource libraries or continue to run the libraries and make cuts themselves

Osceola Outsources the LibraryWhat Happens

County listens to the headlines and re-negotiates the contractRemoves most onerous provisions, insures the County controls policies of operations/administrationOsceola Outsources their LibraryResultOsceola County did Outsource their Library

Cost savings was the motive73 County employees affectedContract signed in December 2011Private Operation started January 3, 2012All employees offered positions with same salary but company benefits 8 or 9 did not acceptOsceola Outsources the LibraryDecember 2011 Headline Osceola County Approves Privatization of Library System

Saving an estimated $6 million over five yearsMaintain current hours of operation at all branches All employees offered positions with LSSI at their current salariesOsceola County retains full ownership of all facilities and resource materials, as well as policy-making and management decisions

Osceola Outsources the LibraryFive year contractFirst East Coast operation for California CompanyCounty savings so far $1 million per yearSome of the saving due to county cut back on book purchasesCounty understands the companys operation is profitableReal Life ExamplesFloridas Outsourcing Poster Child The City of Weston: (FY 2012)$6.4 Billion Assessed Valuation Pop 65,000$115 Million All Funds Budget Zero G.O. Debt$35 Million General Fund - $89 Million in Reserves FY 1127 Square Miles AAA Credit Rating only 2 in StateTheir Mission - ValueNine real employees 278 contract employees provide City services

City of WestonMultiple ContractorsOnly Executive Staff are City EmployeesSpecific contract areas Building Information Technology Police/Fire - Sheriff Parks and RecreationPlanning and Zoning Public Works FinanceCity of WestonThree Types of Contracts: Perpetual, Prime and DemandPerpetual Contracts Key Positions; City Manager, City Attorney, Engineering/Planning & Zoning, IT and Administrative ServicesPrime - 30 plus contracts for basic on-going services - landscaping, fire, police, parks and recreation, accounting, engineering Demand hurricane clean-up, special events, specialized services not used regularly, infrequent use of large or unusual equipment

City of WestonWeston incorporated in 1996 as an outsourced City; originally Indian Trace CDD

Weston Model - city employees administer multiple contracts

In the beginning only one employee, the City Manager later added employees to insure adequate monitoring of contractsReal Life ExamplesSandySprings, GA

Population 97,898AnnualOperatingBudget:$83MillionGovernmentServiceModel: Non-publicsafetyserviceprovidedthroughPrivate/Public Partnership (PPP) Model one contract contractor issues subcontractsLong TermDebt:$0 Short TermDebt:$5Million

Sandy Springs, GACity acquires needed assets City retains budget control Private Sector - responsible for staffing/service costs Private Sector responsible for normal repair/replacement of equipment City controls capital planning and expenditures Employees work for private company/Subs

Sandy Springs, GARecreationandParksServices PPP Traditional ModelRevenue $352,000 $352,000Expenses:Personnel $1,702,521 $2,268,752Operating $520,000 $520,000Other $252,500 $252,500NetExpenditure $2,475,021 $3,041,252

TotalCost $2,123,021 $2,689,252

EstimatedCostSavings: $566,231 Sandy Springs, GAHumanResourceServices ExpensesPPP TraditionalModel ContractforService $350,000 $0 Personnel $0 $364,650 Operating $0 $69,638 TotalCost $350,000 $434,288

EstimatedCostSavings:$84,288

Sandy Springs, GA PublicWorksServices

ExpensesPPP TraditionalModel ContractforService $550,000 $0 Employees(14) $0 $560,560 Maintenance $0 $96,000 Equipment $0 $81,910 TotalCost $550,000 $738,470

EstimatedCostSavings: $188,470

Sandy Springs, GAAmbulance Services PPP TraditionalModel

Revenue: PatientReimbursement $0 $1,984,317Expenses:ContractforService $450,000 $0Personnel $0 $3,213,613Operating $0 $521,647 TotalCost $450,000 $3,735,260NetCost $450,000 $1,750,943

EstimatedCostSavings: $1,300,943

Sandy Springs, GA Essential Elements for a Successful PPP: ValueCost Savings/EfficiencyAccountabilityPerformance Measures:Customer SatisfactionSurvey component

Final Miscellaneous ThoughtsContract with a professional resist the urge to tinkerCitizens will not appreciate the inability to bully council or staff for a personal change/servicePotential manpower reduction in emergency situations, water/sewer line breaks hurricanes (but you can contract for these as well)Final Miscellaneous ThoughtsIf outsourcing were a drug read the cautions on the labelDo not go into this arrangement simply because of dollars and centsBenefits paid contract employees are lower than paid public employees

Final Miscellaneous ThoughtsContractors are paid their costs and a profitMany citizens think government services should be free or provided by not-for-profit agenciesTest the winds for Red and BlueConsider the councils business / professional sophistication (Business IQ)

Final Miscellaneous ThoughtsCommunity Business IQ

Higher the Business IQ the higher probability of success (usually Red)Lower the Business IQ the lower the probability of success (usually Blue)

Thank You