Fact Check: The Clock Is Ticking

Statement: “We came up with a very conservative cost estimate on how much money taxpayers would have been able to save had … city politicians actually listened to the will of the people and implemented competitive bidding,” City Councilman Carl DeMaio said on KUSI during an interview about his Managed Competition Clock.

Determination: Misleading

Analysis: Like an author on a book tour, DeMaio’s been making the rounds with local news media to plug an online gimmick that purportedly estimates how much money the city could have saved through managed competition in recent years.

It’s aptly called the Managed Competition Clock.

When we published this, the running clock projected the city could have saved $230 million if a 2006 ballot measure, Proposition C, had been implemented. (The proposition gave the mayor the authority to pursue managed competition for city services.)

DeMaio calls the clock a very conservative estimate, but we’ve tagged it misleading because it assumes an extreme interpretation of how managed competition would have been instituted in San Diego, one far beyond even the most ambitious visions offered by the proposition’s principal leader, Mayor Jerry Sanders.

The councilman’s estimate relies on a study that assumed the city would have pursued private bids on core functions like libraries, water and sewage treatment, and parks and recreation.

But most of the local conversation over managed competition has not focused on these core services, but instead on services often contracted out to private companies, such as information technology or trash collection. If the clock didn’t include libraries, water and sewage treatment, and parks and recreation, the projected savings would be about 60 percent less.

In an interview, DeMaio took issue with our determination and said he was being very conservative in his estimates. He argued that the number represented the total taxpayers could have saved under all that was allowed under Proposition C and that he had always advocated putting all these services through managed competition.

But in presenting the clock on KUSI, DeMaio said it tracks the amount of “taxpayer dollars that we’re losing because San Diego’s city labor unions have blocked implementation of Proposition C.” He also said that city politicians had not listened to the will of the people.

Even if the labor unions or city politicians hadn’t resisted Proposition C, there is no indication that the mayor or City Council would have pursued such an extreme version of managed competition.

Libraries, for example, were ruled out for competitive bidding because research showed an insufficient amount of private bidders, mayoral spokeswoman Rachel Laing said. Just one private company would have been qualified to bid.

We also asked Laing whether the mayor would have pushed for managed competition of water and sewage treatment after Proposition C. She said the utilities were “not considered for managed competition at any time.”

DeMaio is the City Council’s most vocal proponent of managed competition, collecting signatures to force it upon all public services through a proposition on the November ballot.

The clock is by no means the city’s official estimate of projected savings through managed competition and DeMaio doesn’t pretend that it is. It’s based on this 2007 study conducted by the Reason Foundation in partnership with and funded by the San Diego Institute for Policy Research, the project of former mayoral candidate Steve Francis that has since moved to the National University System.

The study examined a breadth of research on managed competition to identify which governments had the most successful programs in the country. With those cases in mind, the researchers estimated that governments save between 10 and 25 percent per contract using managed competition.

The researchers estimated San Diego could save between $80 million and $200 million each year through managed competition. The $80 million is based on the cost of city services dropping by 10 percent and the $200 million estimate is based on the cost dropping by 25 percent.

To be clear, DeMaio did take the more conservative estimate in this case — $80 million per year — and calculated the savings per second. Then he adjusted the rate to account for information technology contract changes recently, bringing the rate to $2.34 per second.

But ultimately, the figure in the clock represents DeMaio’s ultimate vision for managed competition, not what would have happened after Proposition C passed had it not met opposition.

If you disagree with our determination or analysis, please express your thoughts in the comments section of this blog post. Explain your reasoning.

You can also e-mail new Fact Check suggestions to factcheck@voiceofsandiego.org. What claim should we explore next?

The original version of this story incorrectly described who conducted the 2007 study on managed competition and who funded it. We regret the errors.

— KEEGAN KYLE