Opinion

Junk the Managed Competition Clunker

Junk the Managed Competition Clunker

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The city's publishing services division prints letterheads, creates graphic designs, handles high-volume copying jobs and oversees more than 560 copy machines throughout the city. Four city auditors evaluated the division's performance after it went through the managed competition program.

Let’s say you buy the car of your dreams and it turns out to be a lemon. It keeps stalling and breaking down, despite costly maintenance. The ride is bumpy and dangerous, and you never quite get where you want to go. When do you stop pouring money into repairs and get a new car?

Letters logoThe city of San Diego has clung to a lemon called “managed competition” for seven years now, and it’s time to let go.

There’s now a growing consensus about the problems, which Voice of San Diego reported on in its Dec. 3 story, “Three Managed Comp Fixes That Everyone Agrees On.” But not “everyone agrees” on three fixes. We believe managed competition is flawed beyond repair.

The whole idea is for San Diegans to receive high-quality city services at lower cost. The concept of managed competition – bringing in private companies to bid against city workers for their jobs – hasn’t worked, as all sides now apparently realize.

There are better ways to identify efficiencies and enhance city services – ways that focus on input from the people providing services and the people living in San Diego who rely on those services.

Even former proponents of managed competition now agree on three big problems that are core to the program, and won’t change with small tweaks.

First, most city services – from libraries to trash collection – are inherently public, and very difficult to provide in a way that’s consistent with the legal obligation for-profit companies have to maximize gain for shareholders. These companies profit from public contracts mainly by reducing services, raising fees and cutting wages and benefits, none of which is good for residents.

Second, keeping service levels flexible is crucial but contractually difficult. Once a contract is awarded to a private contractor, there will be no flexibility without added cost to the city.

Finally, the concern that managed competition “isn’t working for businesses” should take a backseat to the fact that it’s not working for taxpayers and residents. The point of the 2006 ballot initiative that authorized managed comp was to save money only if it could be done while maintaining or enhancing services and protecting the public good.

The city can find better ways to increase efficiency and improve services by listening to the frontline workers who know the work best and seeking feedback from city residents.

Experience has shown that a cooperative relationship between city management and blue-collar workers, represented by AFSCME Local 127, leads to more efficient services. For example, in 2009, the union gathered ideas on redesigning trash and recycling service from the drivers. The resulting changes saved the city $4.4 million.

The city also needs to engage with residents of all San Diego neighborhoods on the expectations and costs of services. The aim of efficiency measures should not be layoffs, but rather providing residents with the best possible services, the best bang for their tax buck.

Managed competition, originally pushed by the right-wing Reason Foundation, was mostly scrapped by the federal government after the nonpartisan Government Accountability Office determined in 2008 that there was no proof of cost savings, and no effective way to track deterioration of service quality.

It’s time for San Diego to haul this clunker to the junk heap. There are other options that will better serve our city.

Peter Brownell, Ph.D., is research director at the San Diego-based nonprofit Center on Policy Initiatives. Brownell’s commentary has been edited for clarity. See anything in there we should fact check? Tell us what to check out here. Want to respond? Submit a commentary.

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21 comments
Andy Kopp
Andy Kopp

The question at hand: "When do you stop pouring money into repairs and get a new car?" The simple answer: When the short and projectable long-term costs of repair for the used car are more than the same cost considerations for a new one.

After catching a little flack for a comment on Felipe Monroig's corresponding OpEd, the same can be said here - until someone can provide actual data on how service levels have been affected vs. managed competition cost savings, these opinion pieces from the Center on Policy Initiatives and the San Diego County Taxpayers Association alike, are of little use to any of us other than to start up very partisan arguments.

Andy Kopp
Andy Kopp subscribermember

The question at hand: "When do you stop pouring money into repairs and get a new car?" The simple answer: When the short and projectable long-term costs of repair for the used car are more than the same cost considerations for a new one.

After catching a little flack for a comment on Felipe Monroig's corresponding OpEd, the same can be said here - until someone can provide actual data on how service levels have been affected vs. managed competition cost savings, these opinion pieces from the Center on Policy Initiatives and the San Diego County Taxpayers Association alike, are of little use to any of us other than to start up very partisan arguments.

Frank Pitarro
Frank Pitarro

Mr. Bradshaw, your assumption that someone with an education would take a blue collar job because of the pay and benefits, is insulting and could not be more incorrect. I am one of those educated blue collar workers. I earned a BBA from the University of Memphis in 1971. I was neither happy nor fulfilled with my work. My dream was always to be a Carpenter. However, at the request of my parents, neither of which finished high school, I went on to be the first in my family to obtain a college education. . I went to work at Rohr Industries as a purchasing agent for $15000.00 a year, which is worth $71,056 in today’s dollars. In 1976, 37 years ago, I went on with my dream to become a Union carpenter. The pay was $13,000 a year, equivalent to $53,358.49 in 2013 dollars and $18,000 less than I would be making as a purchasing agent. I have never regretted my decision to become a carpenter. Not all of us base our life’s decisions on just money. I treasure my education because it gave me, not only the ability to choose my career path, but taught me how to think and make educated and informed decisions in life and made my parents and family proud, something I hold dear.
I returned to San Diego in 2002, to be with my aging parents, the people that influenced me the most in life and are, to this day, the hero and heroine in my life. My income was $50,000 a year. Taking into consideration difference in the cost of living, between Memphis and San Diego, I would need to make $76,505 in San Diego. I took a job as a City of San Diego carpenter. Today, working for the City, my income is $50,000 a year, the exact same income I had 12 years ago in Memphis, the 17th largest city in the United States, compared to San Diego which is the 7th largest.
Let me inform you about those great salaries for San Diego Blue Collar workers. We have not only not received any raises for 6 years, we will not receive any pensionable raises for another 5 years, due to Proposition B, we have taken a 6% pay cut in the last 5 years, we do not get social security, our health insurance has increased 120% in the last 10 years and we have only received a 5.25% increase in the last 11 years. We are one of the lowest paid city workers out of the 20 largest cities in the country. If I were to retire from the city my income would be approximately $21,000 a year, with no social security.
I personally know the woman you are speaking of, her name is Joan Raymond. I asked her why she chose to be a Sanitation Driver. Her response was the same as mine; it was something she always wanted to do.
It is my hope that this has better informed you of two things. First do not judge someone because they are college educated and chose a different path in life, and secondly learn more about people before you make uninformed statements.

Augmented Ballot
Augmented Ballot

Close to the mark. What managed competition does *when it works* is get City Depts to bid/propose cost savings the most effective way one can: by reducing the scope of what they do. So the City saves money by doing less. Simple. What's key about MC is that it allows politicians to shrink city services without responsibility or public participation. Sanders, for example, doesn't have to propose that a department will do less at less cost, it just happens as a result of an anonymous process.

That's the function of MC and the basis on which we should judge it.

Augmented Ballot
Augmented Ballot subscriber

Close to the mark. What managed competition does *when it works* is get City Depts to bid/propose cost savings the most effective way one can: by reducing the scope of what they do. So the City saves money by doing less. Simple. What's key about MC is that it allows politicians to shrink city services without responsibility or public participation. Sanders, for example, doesn't have to propose that a department will do less at less cost, it just happens as a result of an anonymous process.

That's the function of MC and the basis on which we should judge it.

Bill Bradshaw
Bill Bradshaw subscribermember

Mr. Mejia, I believe your recollection is quite accurate. I was at a hearing where the then-union President, a woman whose name escapes me, a trash truck driver with a college degree (Side note: Think city jobs don't have great pay and benefits? Think again.) made a very professional presentation which included cutting out a layer of management. You can imagine how that went over with the bureaucracy. Tony Young's committee also took public suggestions. I contributed a few and so did a lot of other people. I don't know a single suggestion from the public that was implemented.

Bill Bradshaw
Bill Bradshaw

I think it’s fair to say the Center for Policy Initiatives is slightly left of center politically. I don’t know about Mr. Brownell, excuse me, Dr. Brownell, but if he’s research director his orientation is also slightly left. By left I mean interested in growing government and suspicious of the private sector because of it’s profit orientation.

Having said this, I agree with Dr. Brownell that “Managed Competition”, as practiced thus far, has been a farce. Sure, there have been some modest savings, on paper at least, but nothing significant has been accomplished and exactly zero work has been outsourced. If my memory is correct, and it often isn’t, there are some serious advantages internal bidders have, things like not counting all employee benefits in the cost comparison and a savings threshold of 10% compared to the city department bid which the private contractor must achieve.

But here’s the key issue: Either the city has the unilateral right to subcontract work even if it results in layoffs of existing employees or it doesn’t have that right. That issue has never been clarified to my satisfaction. If the city does have this right, the people we elect have the power and the obligation to make these decisions, taking into account the extent of the savings alleged and how essential the service is that it must be performed at least as well as the current employes do it.

Were I making these decisions, I would, e.g., NOT subcontract trash collection, although the potential savings might be substantial, simply because the Environmental Services Department does an outstanding job on this function. It’s employees obviously work very hard at a nasty job and are trained to provide the highest possible level of “customer service”, far beyond private contractors. On the other hand, street repair is a mess and I would be inclined to look for a proven vendor to provide this. Park landscape maintenance is another area I’d be inclined to subcontract, simply because of the high availability of experienced contractors who will do this necessary but hardly complex task at far lower cost than the current situation.

These are my opinions and subject to challenge, of course, but let’s not forget the impetus for the “managed competition” plan in the first place. The city has got to get it’s costs down because the pension fund is deeply in the red. Labor costs are by far the majority of city costs. The fewer employees on the payroll, the lower the pension shortfall becomes, so the name of the game is to get by with the fewest possible employees. This takes the sugar coating off the issue so it can be examined objectively to see whether city management (and the voters) have the stomach to make the hard decisions. Frankly, I’m skeptical.

Bill Bradshaw
Bill Bradshaw subscribermember

I think it’s fair to say the Center for Policy Initiatives is slightly left of center politically. I don’t know about Mr. Brownell, excuse me, Dr. Brownell, but if he’s research director his orientation is also slightly left. By left I mean interested in growing government and suspicious of the private sector because of it’s profit orientation.

Having said this, I agree with Dr. Brownell that “Managed Competition”, as practiced thus far, has been a farce. Sure, there have been some modest savings, on paper at least, but nothing significant has been accomplished and exactly zero work has been outsourced. If my memory is correct, and it often isn’t, there are some serious advantages internal bidders have, things like not counting all employee benefits in the cost comparison and a savings threshold of 10% compared to the city department bid which the private contractor must achieve.

But here’s the key issue: Either the city has the unilateral right to subcontract work even if it results in layoffs of existing employees or it doesn’t have that right. That issue has never been clarified to my satisfaction. If the city does have this right, the people we elect have the power and the obligation to make these decisions, taking into account the extent of the savings alleged and how essential the service is that it must be performed at least as well as the current employes do it.

Were I making these decisions, I would, e.g., NOT subcontract trash collection, although the potential savings might be substantial, simply because the Environmental Services Department does an outstanding job on this function. It’s employees obviously work very hard at a nasty job and are trained to provide the highest possible level of “customer service”, far beyond private contractors. On the other hand, street repair is a mess and I would be inclined to look for a proven vendor to provide this. Park landscape maintenance is another area I’d be inclined to subcontract, simply because of the high availability of experienced contractors who will do this necessary but hardly complex task at far lower cost than the current situation.

These are my opinions and subject to challenge, of course, but let’s not forget the impetus for the “managed competition” plan in the first place. The city has got to get it’s costs down because the pension fund is deeply in the red. Labor costs are by far the majority of city costs. The fewer employees on the payroll, the lower the pension shortfall becomes, so the name of the game is to get by with the fewest possible employees. This takes the sugar coating off the issue so it can be examined objectively to see whether city management (and the voters) have the stomach to make the hard decisions. Frankly, I’m skeptical.

Steven Dobbs
Steven Dobbs subscriber

Unions voluntarily sitting down with a politician to determine the best way to save money in a bloated city department? That's a real laugher, Carlos. Do you really think that eligible voters are that stupid? Oh yeah, we elected Bob Filner, so I guess we are.

Managed competition is not new. To do it right, all we have to do is study a place that's accomplished it brilliantly, like Indianapolis, Indiana. They have done it for decades and are recognized as one of the best managed cities in the United States. I predict, though, that the decisions necessary to implement their best practices here would be vehemently opposed by...you guessed it...the same unions whose pension programs have financially killed San Diego.

Don Blucher
Don Blucher

Anyone who believes that 100% Union-led, Union-priced City service contracts are the answer to our woes is living in LaLa Land. Some union-dominated activities may be appropriate.
Merit Shop business entities make up the overwhelming majority of our local work force(aside from the Military) and are just as efficient, productive, and cost-effective as the louder, more vocal Unions.
Most families in this town are fed, housed, and clothed by Non-union workers.

Don Blucher
Don Blucher subscriber

Anyone who believes that 100% Union-led, Union-priced City service contracts are the answer to our woes is living in LaLa Land. Some union-dominated activities may be appropriate.
Merit Shop business entities make up the overwhelming majority of our local work force(aside from the Military) and are just as efficient, productive, and cost-effective as the louder, more vocal Unions.
Most families in this town are fed, housed, and clothed by Non-union workers.

James Weber
James Weber

Summary: Unions cannot compete so they are against competition. Who could possibly believe that competition will not lower prices? Would your car cost more or less if there were only one car dealer in town?

James Weber
James Weber subscriber

Summary: Unions cannot compete so they are against competition. Who could possibly believe that competition will not lower prices? Would your car cost more or less if there were only one car dealer in town?

Mark Giffin
Mark Giffin

Hmmmm,
"Experience has shown that a cooperative relationship between city management and blue-collar workers, represented by AFSCME Local 127, leads to more efficient services. For example, in 2009, the union gathered ideas on redesigning trash and recycling service from the drivers. The resulting changes saved the city $4.4 million."
And what motivated them?
Oh yea, Managed competition.
The reasons managed competition hasn't worked well is the lack of political will combined with rigging the bid.
If nothing else managed competition gives management leverage over labor to do better.

Mark Giffin
Mark Giffin subscribermember

Hmmmm,
"Experience has shown that a cooperative relationship between city management and blue-collar workers, represented by AFSCME Local 127, leads to more efficient services. For example, in 2009, the union gathered ideas on redesigning trash and recycling service from the drivers. The resulting changes saved the city $4.4 million."
And what motivated them?
Oh yea, Managed competition.
The reasons managed competition hasn't worked well is the lack of political will combined with rigging the bid.
If nothing else managed competition gives management leverage over labor to do better.

Judith Swink
Judith Swink

Question: does anyone know if it's city workers who do the street repairs and dig up the streets for repairs to underground infrastructure that is the City's responsibility? I have the impression that I've seen work trucks that are contractors and not City trucks for these jobs.

Judith Swink
Judith Swink subscriber

Question: does anyone know if it's city workers who do the street repairs and dig up the streets for repairs to underground infrastructure that is the City's responsibility? I have the impression that I've seen work trucks that are contractors and not City trucks for these jobs.

Frank Pitarro
Frank Pitarro

Mr. Bradshaw, your assumption that someone with an education would take a blue collar job because of the pay and benefits, is insulting and could not be more incorrect. I am one of those educated blue collar workers. I earned a BBA from the University of Memphis in 1971. I was neither happy nor fulfilled with my work. My dream was always to be a Carpenter. However, at the request of my parents, neither of which finished high school, I went on to be the first in my family to obtain a college education. . I went to work at Rohr Industries as a purchasing agent for $15000.00 a year, which is worth $71,056 in today’s dollars. In 1976, 37 years ago, I went on with my dream to become a Union carpenter. The pay was $13,000 a year, equivalent to $53,358.49 in 2013 dollars and $18,000 less than I would be making as a purchasing agent. I have never regretted my decision to become a carpenter. Not all of us base our life’s decisions on just money. I treasure my education because it gave me, not only the ability to choose my career path, but taught me how to think and make educated and informed decisions in life and made my parents and family proud, something I hold dear.
I returned to San Diego in 2002, to be with my aging parents, the people that influenced me the most in life and are, to this day, the hero and heroine in my life. My income was $50,000 a year. Taking into consideration difference in the cost of living, between Memphis and San Diego, I would need to make $76,505 in San Diego. I took a job as a City of San Diego carpenter. Today, working for the City, my income is $50,000 a year, the exact same income I had 12 years ago in Memphis, the 17th largest city in the United States, compared to San Diego which is the 7th largest.
Let me inform you about those great salaries for San Diego Blue Collar workers. We have not only not received any raises for 6 years, we will not receive any pensionable raises for another 5 years, due to Proposition B, we have taken a 6% pay cut in the last 5 years, we do not get social security, our health insurance has increased 120% in the last 10 years and we have only received a 5.25% increase in the last 11 years. We are one of the lowest paid city workers out of the 20 largest cities in the country. If I were to retire from the city my income would be approximately $21,000 a year, with no social security.
I personally know the woman you are speaking of, her name is Joan Raymond. I asked her why she chose to be a Sanitation Driver. Her response was the same as mine; it was something she always wanted to do.

Carlos Mejia
Carlos Mejia

Mark! for the record, managed competition was not the motivating factor behind the Union (AFSCME Local 127) bringing its members’ ideas forward on how they could be more efficient and save money in trash collection services. The true motivation behind those cost saving ideas resulted from a request from the then-Chair of the Budget & Finance Committee, Tony Young, inviting all City unions to come forward and provide ideas on how the workforce could save the City money. At the February 2009 Budget and Finance Committee meeting, AFSCME Local 127 gave a presentation, putting forward a grand array of ideas on how to save the City money while becoming more efficient in delivering City services. Out of all of the ideas that the union presented, the City chose one: to change the work schedules of its Sanitation Drivers and reorganize the City's trash collection routes That change resulted in a $4.4 million dollar savings for the City and also brought about a much more efficient way to provide trash collection services for the residents of San Diego. Unfortunately, the Sanders administration decided to bury that truth and instead perpetuate the myth that savings and efficiencies are only achievable through Managed Competition.

Bill Bradshaw
Bill Bradshaw

Mr. Mejia, I believe your recollection is quite accurate. I was at a hearing where the then-union President, a woman whose name escapes me, a trash truck driver with a college degree (Side note: Think city jobs don't have great pay and benefits? Think again.) made a very professional presentation which included cutting out a layer of management. You can imagine how that went over with the bureaucracy. Tony Young's committee also took public suggestions. I contributed a few and so did a lot of other people. I don't know a single suggestion from the public that was implemented.

Steven Dobbs
Steven Dobbs

Unions voluntarily sitting down with a politician to determine the best way to save money in a bloated city department? That's a real laugher, Carlos. Do you really think that eligible voters are that stupid? Oh yeah, we elected Bob Filner, so I guess we are.

Managed competition is not new. To do it right, all we have to do is study a place that's accomplished it brilliantly, like Indianapolis, Indiana. They have done it for decades and are recognized as one of the best managed cities in the United States. I predict, though, that the decisions necessary to implement their best practices here would be vehemently opposed by...you guessed it...the same unions whose pension programs have financially killed San Diego.