Public-Private Agreements - A Call for the Legislature to Take Action

Increasingly we are seeing government contract out public services to be provided by private companies. On these pages, I've previously discussed privatization and suggested several factors that should be considered before turning over a public service to the private sector. (I've pasted those below.) In particular, I believe my Republican Party has often charged ahead privatizing services, while forgetting that the purpose of privatization is to instill market competition in the provision of government services. When there is only one vendor bidding on a contract and then you give that vendor a long term contract, your creating not a competitive market environment but a government-sanctioned monopoly.

Having said that, the Indiana General Assembly needs to take a close look at how these companies that get privatization contracts operate. Many of these contractors continue to insist they have the right to operate in secret even though they are receiving taxpayer money and providing a public service. In 1997, the Indiana legislature said otherwise and made these private companies that receive privatization contracts subject to Indiana's Open Records Law as if the company were a public agency. See IC 5-23-7-1.

Don't think for a second that these companies willingly comply with Indiana's Open Records Law. Most fight any attempt to obtain records so the public can scrutinize their performance under the contract. For example, Diana Vice recounts on her blog her ongoing fight with the Wilson Education Center to obtain records.

Some government contractors take it to the next level filing SLAPP lawsuits against private citizens who dare criticize their compliance with the privatization contract or Indiana law. The idea of a SLAPP lawsuit is not to win the lawsuit on the merits, but to shut up the critic by running up his or her legal expenses so high that the critic can no longer continue to speak out.

While there are some safeguards in Indiana law that allow a litigant to ultimately get attorney's fees if the he or she succeeds in the Open Records lawsuit or in defending against a SLAPP lawsuit, those sanctions have failed to discourage deep-pocketed companies from targeting earnest-minded taxpayers who dare ask questions about the companies' compliance with Indiana law and the privatization contract it signed. Just ask Diana Vice about Tremco and Wilson Education Center.

The legislature can put teeth into these legal protections by passing a law requiring that privatization contracts include provisions punishing those private companies that fail to comply with the Open Records Law and punish with extremely harsh sanctions (such as termination of the contract) those companies that are found to have filed SLAPP lawsuits against private citizens who dare criticize the private company for the public service it provides.

See also: Legislative Recommendation: Time for Indiana General Assembly to Slap Down SLAPP lawsuits (November 8, 2008)

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OGDEN'S RULES ON PRIVATIZATION

1) Are there several vendors who are capable of and interested in providing the service?
--If there is only one or two vendors that can provide the service, then you're not instilling market competition into the delivery of the service. You're exposing taxpayers to a monopoly mandated by government.

2) Is the contract for a service that will be bid out?
---A contract that will be subject to bidding rules is less likely to be one where the vendor gets the service because of political contacts or campaign contributions.

3) Is the vendor going to be given a long term contract?
---When you give a vendor a long term contract, then the vendor doesn't have to worry about market competition if they don't provide the service well. The whole idea of privatization is defeated.

4) Is this a service that is going to be provided out in the open, so the public can judge the quality of the service provided by the vendor?
---Garbage collection everyone sees. The running of a maximum security prison is done behind closed doors. The public knows if the company picking up the garbage is doing a good job. The public knows little about how well the prison is being run.

5) Are the individuals who are receiving the service which might be privatized, people who are politically powerless or unpopular?
---Classic example is correctional privatization. A sizable portion of the population doesn't care if private correctional companies cut corners on medicine or medical treatment of inmates. So even though the company may not be living up to their obligations under the privatization contract, that contract often is not enforced by public officials who do not have to worry about the powerless constituency receiving the service. By the way, I would say another example of people without much political power are welfare recipients. Witness the recent FSSA privatization effort here in Indiana.

6) Is the company providing the service going to be properly supervised and held accountable if the vendor doesn't live up to the contract?
---Too often services get privatized and government does not do adequate monitoring of compliance with terms of the contract. The tendency for government is to just pass blame along to the private company. It doesn't work like that though...government is still legally responsible for the provision of the service, even if it's contracted out to a private vendor.

7) Is the company bidding on the privatization contract willing to subject itself itself to the open records law and disclosure requirements public agencies providing that service would have to follow?
---Although providing a public service paid for with taxpayer dollars, many companies insist on operating in secrecy. They claim the secrecy is to protect itself from having the company's secrets stolen. Don't buy that nonsense. The real reason for the scrutiny is that the companies do not want to provide information that could be used to show they are not doing a good job.

8) Did the company or its top employees make large campaign contributions to elected officials and candidates who were in a position to influence the privatization decision?
---Privatization has unfortunately become a vehicle by which elected officials and candidates can generate large campaign contributions from companies interested in currying favor. Even after the decision is made, the money train continues because the companies want to keep the elected officials happy and avoid the scrutiny and criticism of their performance.

9) Is the company hiring local politicians in an attempt influence the privatization decision or reduce the criticism of their performance under an existing privatization contract?
---It's the oldest game in privatization. A private company which offers a service hires the elected official who was responsible for the government providing that service to the public. The person isn't being hired for his or her expertise. The person is being hired for political influence.