‘Make or Buy’
PETER O’CONNOR
Contributing Columnist
oconnor@lbknews.com
The popularly held name for a contracting decision is “Make or Buy.” One decides to continue to perform the task or produce the product (make), or to contract with another to perform the task or produce the product (buy). This term has been widely used for many years.
At the Kennedy School of Government at Harvard, the late Manuel Carbollo developed a third option in his public policy classes. That was to regulate. His method became “Make, Buy or Regulate.” This third method was reserved to government entities; those who can regulate. The classic example of the third method is civil aviation in the United States. We neither make it nor buy it; we simply regulate the provision of civil aviation by private sector entities. There is, of course, application of these methods in municipal government, as we will see here.
“Government services: Here’s how to do it,” headlines a piece in The Economist (July 28, 2012) that seems to be right on point. It seems that Sandy Springs, Ga., one of Atlanta’s northern suburbs experiments with outsourcing government.
“The leafy, strip-malled suburb of around 100,000 people just north of Atlanta does not look unusual. Its Tuesday morning business — a meeting of its Design Review Board, held in the city-council chamber, which is little more than a large, low room at the back of a warren of anonymous office buildings and also functions as the municipal court — was positively prosaic. What sets Sandy Springs apart from other cities is that it lacks something that most have in abundance: employees.” Continuing, “Apart from its policemen and firemen — which, under Georgia’s constitution, must be public workers — Sandy Springs has only seven full-time employees: a city clerk, a court clerk, a finance director and four people who work in the city manager’s office. The city manager himself works for Sandy Springs.”
Private firms carry out city functions. These include Boston’s The Collaborative and California’s multinational engineering firm Jacobs.
The Economist notes, “This experiment in radical outsourcing began back in December 2005, when Sandy Springs went from being merely a part of Fulton County—which also includes most of Atlanta, Georgia’s capital and largest city—to an incorporated city itself. CH2M Hill, a Colorado-based engineering firm, signed a contract to provide city services, which it did until the middle of 2011. Then Sandy Springs took the experiment further and solicited competitive bids for different services. It also signed contracts with losing bidders for every winning one. These contracts came with neither pay nor work; they simply provide insurance in case the winning bidder fails to provide good service or raises prices.”
The city manager boasts that the city spends about one-fifth of its annual budget on capital projects. Its employees receive 401(k)s rather than the defined-benefit pensions. This model has proved appealing. Other Fulton County areas have incorporated and outsourced some municipal services.
The Economist goes on, “Privatisation on this scale may not work everywhere. The north Fulton cities had the advantage of starting from scratch, without entrenched systems and legacy employees — and their pensions — already in place.”
Of course we here on Longboat Key are not stating from scratch. I observe the new in place regime talking particularly about the pension costs of our legacy employees. I do not claim that the current Town Commission has thought about or proposed any sort of privatization. Let’s get this straight.
Privatization, the ‘Buy’ in “Make or Buy” decisions, becomes an obvious option.
I like one element on the Sandy Springs model. They have retained city employees as police officers and firefighters. This seems to be an essential part of any contracting-out scheme. Of course that direction here would leave the major part of legacy pension liabilities to deal with. I like employee-manned public safety functions.
The remaining municipal functions clearly can be bought instead of made. At the federal level, including within the armed forces, many of the support functions have long been accomplished by civilian contractors. Pan American World Airways ran the downrange island bases of the Atlantic Missile Range long ago. The base maintenance folks close by at MacDill Air Force Base are contractors. In my Navy Public Works career, contracting-out won out, if there was any conflict.
I present the striking example of Sandy Springs as something to consider. I support our team of fine employees. The real politics around here may mean that some compromise must be made. Think about it.
