Three years of debate over the city of San Diego’s outsourcing program known as “managed competition” might have been misplaced.

The city can outsource services now provided by city departments without having those departments compete for contracts. That’s the position of City Attorney Jan Goldsmith, who undertook what he believes is the first legal opinion on the meaning of a proposition passed by city voters in 2006.

Goldsmith’s opinion takes on increased significance amid discussions on the city’s $179 million budget deficit. Managed competition often is mentioned as a potential cost saver, and this opinion expands the authority Mayor Jerry Sanders was thought to have in outsourcing city services.

Prior to Goldsmith’s opinion, it was believed the proposition allowed private businesses to compete with city departments for contracts for services now provided by the city. If the city’s bid came in within 10 percent of the private bid, the city would retain the service. If the city’s bid came in higher, then the service would be privatized. Hence the name “managed competition.”

Despite being a signature part of Mayor Jerry Sanders’ financial platform, no city service has gone through the managed competition process and the program has suffered all kinds of delays. The city and its two affected labor unions are now at impasse.

But in Goldsmith’s opinion, voters agreed to outsource city departments, not have city departments compete for services. Competition “certainly was envisioned and permitted, but it was an outsourcing proposition,” Goldsmith said in an interview.

“Under this section, there is nothing that requires the mayor have a proposal by the department,” he added.

In Goldsmith’s view, the proposition requires three steps before the city can outsource. The mayor must decide a service can be provided more economically and efficiently than a city department without affecting service quality. He must refer the matter to a review board, which gives an advisory opinion to City Council. City Council must then accept or reject a contract in its entirety. At various points, the city must negotiate with affected labor unions.

Asked if Sanders could outsource a department tomorrow under his interpretation, Goldsmith said the mayor couldn’t, but he could begin evaluating individual departments for cost and efficiency purposes.

Just because Sanders can outsource a service, doesn’t mean that City Council will ratify his decision. Councilman Kevin Faulconer, who has advocated managed competition in every public discussion of the city’s budget gap, isn’t necessarily for outsourcing without giving city departments a chance to bid.

“He’s an advocate of managed competition, not outsourcing,” said Tony Manolatos, Faulconer’s spokesman. “That said, we need the support of labor to take advantage of managed competition.”


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