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INFRASTRUCTURE OUTSOURCING

A. Outsourcing to Achieve Improved Quality

With the increased private responsibility inherent in outsourcing, there is increased incentive for the consultant to produce high-quality work and to ensure proper performance of facilities. According to CSG data, over 18 percent of state agencies indicate that high-quality service is one reason why they have outsourced.51

One of the most important determining factors for the awarding of contracts is past performance, and delivering a low-quality product could inhibit a consultant from procuring future work. As a result, the consultant and the facility owner work together to plan quality into the project. Reliance on private-sector initiative to enforce quality has the added benefit of not relying on quality enforcement through restrictive specifications or inspection, since quality has been planned into the project since its inception.52

Project quality is hard to measure in head-to-head comparison studies, but Carl Monismith, professor of civil engineering at the University of California, Berkeley, argues that private engineering and construction firms are where innovations in techniques and materials come from. He goes on to claim that state and local governments could dramatically improve road construction, cut maintenance costs, and improve the longevity of street surfaces by outsourcing.53

In water and wastewater projects, outsourcing has brought measurable benefits. A 1999 report examined outsourcing of water and wastewater systems in 29 cities serving over 3 million customers throughout the United States, including asset transfers (acquisitions), leases, operational and maintenance contracts, and specific-service outsourcing contracts.54 The study found that outsourcing improved compliance with environmental standards. Prior to entering into a public-private partnership, 41 percent (12) of the facilities surveyed were not in full compliance with the federal Safe Drinking Water Act. One year after entering into a public-private partnership, all were in compliance with federal water standards.55 Outsourcing also improved customer service. Investor-owned utilities have been able to provide a higher level of customer service at a lower cost by integrating customer-service functions such as call-in centers, billing, and collections into

parent-company systems.56

Quality outcomes from outsourcing arise from appropriate safeguards that governments write into contracts. Contracts can be performance-based (focusing on outputs or outcomes) and can include quality assurances or quality control assurances.57 An increasing trend in contracting is the employment of warranty concepts—a further safeguard for quality projects.58

51

Chi and Jasper, Private Practices, p. 8.

52

The Design-Build Process for the Civil Infrastructure (Washington, D.C.: Design-Build Institute of America, July 1999).

53

Carl Monismith, “Requiem for Potholes,” Access, no. 15 (1999), pp. 6–7.

54

National Association of Water Companies (NAWC), A Survey of the Use of Public-Private Partnerships in the Drinking Water Utility Sector (Washington, D.C.: NAWC, 1999).

55

56

57

58

Ibid., p. 39. Ibid., p. 41. Corey Boock, partner, Nossaman, Gunther, Knox & Elliot, interview with author, April 2000. Ibid.

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