Tuesday, April 7, 2009

New Indianapolis Privatization Effort?

Yesterday, Mary Milz of Channel 13 reported that the city is considering privatizing a whole host of services.

Indianapolis - Mayor Greg Ballard is looking at privatizing some city services to save money, a move that could ultimately effect hundreds of city employees. His administration recently sent draft letters to three unions alerting them to the possibility.The draft letter reads, "The city has determined that it is in its and the taxpayers' best interest to competitively bid out the work of the following areas: 1) grounds maintenance; 2) forestry; 3) pool/plumbing maintenance; 4) mowing; 5) towing; 6) water maintenance; 7) fleet services: 8) payroll; 9) HVAC; 10) electrical; and 11) procurement."

Anyone who has followed this blog knows that I have written on privatization many times. For years I have been a big proponent of privatization, which I believe was about bringing market competition to the delivery of services that previously was provided by government. Unfortunately in recent years, I've come to see the dark side of privatization. Wannabe contractors giving large campaign contributions to elected officials trying to get the inside track. Long contracts handed out where there is no concern by the vendor over competition. No supervision by elected or appointed officials over existing privatization contracts. Campaign contributors winning no bid contracts. Contracts that are actually bid off often come with specs written in such a way as to ensure that only one company can win the bid, usually a bid contributor, wins the bid. (Ask Diana Vice about that one.) The executive revolving door where a top level executive official comes from the private company to head up an agency and then agency gives a contract grants a private company to that agency head's former employer. Example: Mitch Roob and the FSSA privatization.

The city privatization effort raises a number of red flags. First, Mayor Ballard's 2008 campaign report showed the vast majority of his fund-raising came from contractors seeking to do business with the city. Privatizing more services opens up more possibilities for campaign contributions from more companies wanting to do business with the city. Second, you have the pervasive influence of Barnes & Thornburg in the current administration, who represent a number of government contractors. You have already seen Barnes & Thornburg clients, John Bales of Venture Real Estate and Andy Mohr Toyota, winning highly questioned contracts from the city. One small business owner who wanted to do business with the city told me that a very high level official in the Ballard administration told him that if he wanted a contract, he needed to retain Barnes & Thornburg. He was happy with his attorney though and wasn't going to change just in the hopes of getting a city contract.

While privatization in many cases makes sense, the problem is that government has totally bungled the implementation of many privatization efforts. Unfortunately money from contractors (the new form of patronage) has a way of clouding people's good judgment.


jabberdoodle said...

While I come at privatization with a jaundiced eye, I agree with you that it is a reward system for campaign contributions.

Mayor Ballard said he was not beholden to anyone since hardly anyone had contributed to his campaign. Then he held a post-election fundraiser where all manner of money was collected - no strings attached I'm sure.

I asked the City for a list of no-bid contract recipients and did get those from Susan Steward of the City's Purchasing Department. From January 1 - February 5, 2009, these 'Professional Services Contracts' added up to $16,815,314.18. Not bad for a cash-strapped City, eh?

There is also something called a 'grant' that the City supplies to various entities in a no-bid system. I still have to get that list. More taxpayer money spent efficiently or not. Who knows? And that's the problem.

Citizen Kane said...

Well, with the economy dragging, these firms are desperate for money, so they are likely putting heavy pressure on the mayor's office to send money there way. So, don't be surprised when that privatization list grows exponentially.

Ask anyone in the city (the rank and file) about some of the privatization contracts that have continued since the Goldsmith era. Along with these consulting contracts, these so-called services are the biggest waste of resources.

Ask the city for information about the new KPMG contract to analyze core city services. For some reason, no one in the city is capable of doing that themselves.

Sean Shepard said...

I agree with many of Paul's points in this post. I am very, very pro privatization but agree 100% that the intent should be to introduce market competition not reward political contributors, friends, elected officials' 'arms length' businesses or other insiders.

There also should be no long-term contracts. One to three years for most services with competitive bidding and lots of public involvement and blogger/media scrutiny in the process should be the norm.

The other impact of this is that in tough times, private firms can downsize to meet economic realities so long as their service doesn't suffer causing them to lose business. Government - just raises taxes to cover the shortfall which further retards economic growth or recovery.