Competitive Bidding Saves Taxpayers Millions, but Is Doomed to Failure in San DiegoEdit

Source: Richard Rider, candidate in San Diego

Historically, competitively bidding government services results in the government departments winning about 90% of the federal bids, and a large majority of the state and local bids as well. Fortunately such bidding is a win-win situation for taxpayers, as WHOEVER wins the bid provides the services at significantly less cost than was previously paid by an unaccountable government monopoly.

Carl DeMaio's Performance Institute provides a good PowerPoint "slide" that details this finding. Indeed, quite a bit more data and information is found on the institute's website -- Rather than attempting to attach the PowerPoint file, I'll include the info below, with amplification.

The slide asserts that, with competitive sourcing:

IT SAVES MONEY -- 15% average cost savings for state and local initiatives.

But this FAR understates the savings available. On the website, the institute points out that "more aggressive" competitive sourcing results in an average 30% savings.

Because San Diego employees are so grossly overpaid and over-perked compared to other cities, I would guess that the average savings on an aggressively pursued San Diego city service competitive sourcing would approach 45%.

So what does "more aggressive" bidding mean? Are most government contracting efforts too timid?

Simply stated, YES! Sadly, most government efforts at private contractor competition are rigged from the get-go to favor government employees. This bias can be done a thousand ways. By improperly designing the specs in the contract, the bid is usually rigged to favor government employees.

Also, the government employee bid usually does not include the TOTAL costs of the city providing the service. For instance, they understate or ignore such piddling matters as the pension funding obligation, or the lifetime unfunded free retiree health care costs.

Even so, the bidding process STILL results in significant (if disappointing) taxpayer savings, even when the government employees win the bid. Even rigged contracts result in some savings.

EMPLOYEES WIN! -- Government employees win 90% of the federal contracts; 75% at the state and local level.

In San Diego, when there has been such bidding (it is seldom done), most of the time the city employees win the rigged competition. Even then, my labor boss opponent proudly announced in our debate that the city bids won by government departments saved San Diego taxpayers $150 million (I suspect this is the aggregate savings over the period of the contracts).

IF the city of San Diego does aggressive competitive sourcing (something I don't expect to happen -- I'll explain that below), the savings could easily approach $300 million ANNUALLY. The city labor costs now consume an astonishing 85% of the city budget -- so the savings opportunities are HUGE.

Quality improves because of enforced performance standards.

This is a point often missed when discussing competitive bidding. Effective, honest competition almost always results in better service as well as less cost -- as long as the provider is facing the loss of that business (and/or contractual fines) for inadequate performance. Once again we come back to how well or poorly the government contracts for such services.

Also included in the PowerPoint slide is a chart showing results of putting federal functions put out for bid. Note below the tremendous savings per employee position even WITH government employees winning 90% of the contracts.

The data is gleaned from information provided by the Office of Federal Procurement Policy. [1]

Fiscal # of Win Rate for Savings Per Net Cost Savings

Year Competitions Government Employee to Taxpayers

                   Held              Employees               Position

2003 662 89% $12,000 $1.1 billion

2004 217 91% $22,000 $1.4 billion

Mayor Sanders' city competitive bidding initiative will NOT work.Edit

Outsourcing initiative: Edit

The Mayor picks an area he feels is ripe for competitive bidding. An independent review board investigates and makes its recommendation. Assuming competitive sourcing looks promising, the mayor then presents his recommendation to competitively source a designated city function to the city council for majority vote approval. The city council kills the effort.

In 1992, in San Diego, City Council has been owned and operated by the city public employee labor unions. Since then, the union bosses have controlled at least 6 of the 8 city council seats -- regardless of the political party affiliation of the incumbents.

Currently the unions own 6 or 7 of the 8 seats, depending on how one counts Donna Frye -- who has made it quite clear that she will NOT support competitive source efforts. The only possible maverick currently in office is Kevin Faulconer, the recently elected newbie.

So here's how I see it going down. The competitive bid initiative will probably not be put on the ballot by the city council, but WILL make it on the ballot through signature gathering efforts. The measure will pass. Then the city council will sabotage any meaningful competitive bidding, usually through hamstringing the process to make it all but impossible to achieve savings from private contractors.

Oh, there will be a couple of small contracts put up for bid. The city printing department is so outlandishly expensive that it will be contracted out. The County of San Diego has already done this, cutting their printing costs from a nickel a page to a penny a page. But in terms of MEANINGFUL functions put out for bid ("meaningful" is defined as functions that employ a lot of city employees), the city council will do what their union masters tell them to do.

My solution? Put on the ballot a much tougher measure that bypasses the city council all together, leaving the competition function to the new city manager -- a.k.a. the mayor. If that won't fly, the initiative should at least require that it would take a supermajority of the city council to veto the mayor's effort.

I'll surely support whatever competitive sourcing measure reaches the ballot. But, absent a substantial toughening of the measure, I predict that this is all an elaborate exercise in futility.

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