Originally posted at Voice of San Diego.
By Lisa Halverstadt.

Whether a voter-inspired push to consider outsourcing some city services thrives or comes to a halt depends on the next mayor.

City Councilman David Alvarez appears likely to nix managed competition while mayoral rival and fellow Councilman Kevin Faulconer has repeatedly said the program could save the city millions.

Many city politicos fall into one of those two camps on the competitive bidding process, which voters gave the city officials the option to try through a 2006 ballot initiative.

City employees have won each bid thus far but union leaders and left-leaning groups call it a demeaning, time-consuming process that hurts employee morale. And city Republicans, most prominently Faulconer, want to commit to a practice they say has demonstrated city workers’ ability to find innovative cost savings.

But both supporters and detractors agree managed competition could use some tweaks, and the wonkiest among them even zero in on some of the same concerns.

All played prominently in a review of the program conducted under former Mayor Bob Filner’s watch. A draft report by a former Filner administration official, first obtained by CityBeat, concluded the time and cost associated with implementing the cut into its projecting savings and that the process itself had a chilling effect on at least one city department.

Another review is forthcoming. The city recently hired former Indianapolis Mayor Stephen Goldsmith, now a Harvard University professor, to produce a citywide efficiency study by March. Goldsmith is known as a pioneer of managed competition and is expected to offer recommendations to improve San Diego’s process.

I combed through the Filner report and talked to a few experts about tweaks they think are worthwhile. Here’s a look at three areas where everyone seems to be in agreement.

The current process isn’t working for businesses.

When the city requested its first managed competition bids in 2010 for print services, 21 outside groups — including FedEx and Xerox– attended a conference to learn more. Five submitted formal proposals.

The Filner report revealed the interest dwindled as the city proceeded with more managed competition efforts — and city employees won each bid.

A 2011 street and sidewalk maintenance competition attracted just two outside companies to spend a day seeking more information. Only one submitted a bid.

Companies willing to provide feedback to the Filner administration complained that that the city failed to provide regular updates as it spent months analyzing potential options, among other concerns.

The report also cited virtually identical feedback from outside firms, the city’s independent budget analyst, union leaders and others on the documents meant to invite outside firms and city staffers to bid. All said they were overly complex but at times, also not comprehensive enough.

“(They) all pointed out that the (requests for proposal) were too cumbersome while many of those same folks provided feedback that the (RFPs) tended to not have all the key information required to formulate low-risk, low-cost bids; both of these discouraged robust numbers of bidders,” a former Filner staffer wrote in the report.

Adam Summers, a senior policy analyst with the libertarian Reason Foundation, said the layers of bureaucratic approval that come with the program and the lack of clarity throughout the process discourage businesses, as does the fact that city staffers have won each competition thus far.

“It takes tremendous time and tremendous cost to go through the process,” Summers said. “If you’re a private bidder, who’s going to want to go through this process?”

Donald Cohen, executive director of privatization think tank In the Public Interest, agreed.

The program’s current structure hasn’t actually produced much competition, said Cohen, the former political director of the San Diego and Imperial Counties Labor Council.


The city needs to get a better handle on what it wants before trying managed competition.

Cohen and others are convinced the success of managed competition rests on what service the city is seeking in the first place and how it outlines that need in a document known as the statement of work.

The Filner administration’s review was critical of these issues too.

Managers with a few firms that weighed competing with city workers on a bid said the very services the city sought were sometimes unrealistic for an outside firm to provide.

An executive with Enterprise Fleet Management, for example, wrote in a letter to a former city official that he didn’t think any company in the industry could fulfill all the city’s needs.

Business and city officials alike raised concerns with the documents that lay out the city’s wishes.

San Diego County Taxpayers Association President Felipe Monroig suggested the city may be too focused on seeking outside assistance for an entire city service rather than a more achievable chunk of it, or even framing the contracts in such a way that puts a damper on innovative ideas.

If managed competition is going to work, Monroig said, the city must consider whether the services it’s asking companies and city staffers to provide are workable.

“The city needs to do a better job and learn to better identify functions and projects for managed competition,” he said.

Service levels must be flexible.

Much of the public focus on managed competition has been on the potential cost savings, and that’s what Faulconer has emphasized on the campaign trail.

But the point is also to ensure the level of service residents get improves, or at least stays the same.

Problem is, there’s some confusion about whether service levels laid out in a managed competition contract can be changed after a particular bid is approved by the City Council.

This is significant in light of a recent audit that found the city’s publishing services division upped its rates by an average of 15 percent last year to ensure it could take in the annual $2 million laid out when city staffers won the bid. The discrepancy was a result of a drastic overestimate of ordered copies, design work and other services the division provides.

Independent Budget Analyst Andrea Tevlin has repeatedly reminded city leaders that they can and should take advantage of their ability to change service levels to avoid situations similar to what occurred with publishing services and to improve services when they think it’s necessary.

She made a similar point in feedback featured in the Filner administration’s review of managed competition:

“Managed competition is the ideal time to consider increasing service levels, quality of service, or new equipment when efficiencies are being identified. By way of example, the employee proposals to data have identified significant savings and have safely beaten all of the outside proposals. There should be an opportunity to use a portion of estimated savings to propose increased service levels or equipment enhancements rather than simply assuming business as usual.”

Summers of the Reason Foundation, a group that supports managed competition, said similar responses from Tevlin, union leaders and various other stakeholder groups show city officials need to give service levels a lot more thought than they have in previous bid processes.

“That’s what the whole managed competition process is supposed to encourage in the first place,” Summers said.

The Filner report concluded that city should more closely record service-level data before a city department goes through the managed competition process so the City Council can track how innovations spurred by the bidding program actually affected services.

This is crucial as the city recovers from the recession and the pension crisis, and future city leaders consider restoring services cut back in the last decade.