For example, contractor management practices can reduce costly personnel problems and improve labor productivity. Milwaukee’s 10-year outsourcing of management of its wastewater system led to decreases in job injuries by 60 percent, employee grievances by 33 percent, and sick days by 20 percent.90 In outsourcing of water and wastewater utilities in general, the most comprehensive study to date found that outsourcing reduced the rate increases that were planned prior to privatization, and at 17 percent (five) of the facilities, outsourcing brought cost savings of between 10 percent and 40 percent, allowing them to avoid large increases in water rates.91
By not being tied down to one jurisdiction, consultants can move to another project upon completion, thus building up much greater experience and more diversified expertise.
F. Outsourcing to Spur Innovation
Competitive outsourcing can produce innovative solutions to infrastructure delivery. The freedom to invent “allows for old processes to be discarded in favor of entirely new ones—processes that integrate relevant
technological advances and streamline communication channels.”
Furthermore, “partnered projects have the
93 potential to discover and eliminate redundant efforts, reduce supervisory activities, and expedite processes.” According to CSG data, at least one in five state agencies says that increased innovation is one of the top reasons for outsourcing.94
Why is outsourcing necessary for innovation? One answer is that the system does not always reward government employees for innovative ideas. Consider the plight of a government employee with an innovative idea. She can face crushing institutional barriers to change. Government agencies rarely face competition, and government employees have no property rights in their jobs or missions and rarely have independent authority to make changes. A professional or political committee, sometimes more than one, often must approve an innovative new approach. At the end of the day, even if the employee’s idea is accepted, she is not likely to reap any professional reward—and one of the individuals or committees higher in the decision process may well have stolen credit for the idea. Private firms have far more opportunity and incentive to encourage and foster innovative ideas at all levels.
When Virginia contracted for the design, construction, and operation of two new prisons, the Department of Corrections (DOC) strove to specify only outputs and leave the details to the private bidders. One result was that the winning bidders chose to have food delivered to the kitchen every few days, rather than the traditional practice of having food warehouses with 30 days’ worth of food on hand. Russell Boraas, the state’s private- prison administrator, describes a meeting of the state’s prison wardens when they were asked why every state prison had an expensive warehouse and staff to store 30 days’ worth of food. The response was a long
City of Milwaukee, Metropolitan Municipal Sewerage District, April 1999. NAWC, A Survey of the Use of Public-Private Partnerships, pp. 41-43.
Paul Thompson and Steve Sanders, “Partnering Continuum,” Journal of Management in Engineering, vol. 14, no. 5 (September/October 1998), p. 77.
Ibid., p. 73.
Chi and Jasper, Private Practices, p. 8.