Out of Control Policy Blog

Detroit Mayor Bing Opening the Door to Privatization

I was interviewed recently by Detroit Free Press writer Suzette Hackney regarding Detroit Mayor Dave Bing's government reform agenda, which includes a fresh look at potential privatization of a range of government services and activities. Her excellent column was published in yesterday's edition, and it reinforces my feeling that Mayor Bing is a mayor to watch:

Detroit Mayor Dave Bing says he is taking a strategic approach to turning around Detroit -- an approach that will focus on the city running core services such as police, fire and EMS and outsourcing or privatizing others that can be done more efficiently elsewhere. [...]

Bing, his top advisers and department heads spend hours each week holed up in a downtown conference room on the 26th floor of the Cadillac Tower, blocks away from city hall. The space is called the OR, the off-site operating room where they're debating how to restructure city government into a more cost-efficient and effective model. The debates can be intense, but Bing's team members have agreed to walk through the doors with cleansed and open minds. Yes, trash pickup is a vital city service, but who says it must be done by city workers? Certainly Detroiters depend on public buses, but why does the city need to manage the Department of Transportation? Bing acknowledges that the decisions are difficult to make -- which city services will be outsourced and which departments will be consolidated or eliminated -- but he doesn't appear to be flinching from the responsibility.

"Because I'm not worried about my next job, I'm going to make the hard choices that are necessary to move forward," Bing said. "I've had people tell me, 'You've got to be crazy to do the things that you're doing right now and think you're going to get re-elected.' Well, that's not the most important issue to me. The most important issue to me is doing what's right for whatever time that I'm here to make a difference.

My take:

"The more of a union influence and presence, the more difficult it is to even get something off the ground, but the writing has been on the wall for Detroit," Gilroy said. "Mayor Bing only has to look around at other models. It's all out there, and it's all been done successfully. It's not like he'd have to reinvent the wheel; he has to just get comfortable with the new wheel."

It sounds like the Mayor's already getting comfortable, as he seems to be unfazed by the potential public employee union blowback. This blowback has already started, by the way—the article notes that the American Federation of State, County and Municipal Employees (the largest city employee union in Detroit) officially withdrew its support for Bing last Friday.

However, something a former NBA player certainly understands is adversity and competition. Sometimes they go hand in hand. But if you have a solid game plan, stay focused and execute it well, you'll put yourself in the best position to be successful. IMO, the overall game plan here should be fairly straightforward. Here are some key elements:

  • Commercial activities inventory: Mayor Bing should direct his budget team to start preparing a commercial activities inventory to sort out the inherently governmental functions versus those that are commercial in nature. Now, you can break things down by silo to start off with (i.e., focusing on trash collection, for example), and there may be some obvious candidates already. But to reach enterprise-wide across all city agencies and find ways to really maximize efficiencies, the commercial activities inventory might offer the best start. For instance, you may find out that multiple departments have multiple payroll or HR systems, and before looking at privatization opportunities you might want to see if there's some opportunity to consolidate these functions first.
  • Business cases on proposed outsourcing initiatives: Florida's Council on Efficient Government has set the model for pre-budgetary analysis of potential privatization initiatives, doing something rare in government but routine in business—the business case. Essentially the business case is a report that outlines the rationale of a proposed privatization initiative, offering a compare-and-contrast between the in-house and outsourced delivery options with regard to cost savings, service levels, etc. Importantly, the business case moves decisionmaking beyond "intuition" (how most policy is made) and into the realm of rational analysis. The business case is critical for cutting through the politics—let's put Options A and B side-by-side and see what makes the most sense. If it's Option B-Privatization, then that's fine—you've done the upfront due diligence to ensure that it's a smart decision, not one based on intuition or politics.
  • Develop an official competitive sourcing program: The elements above really feed into what should be a larger set of "rules of the game" on competitive sourcing, outlining how decisions will be made, procurements will be run, etc. Again, Florida offers a solid model in the work (and statutory authority) of their Council on Efficient Government. Mayor Bing should also consider whether or not to establish a managed competition program that allows public employees to bid against private sector companies to provide services. As discussed in this article and in this study, this is a proven strategy for fostering competitive service delivery, as demonstrated in recent decades by Indianapolis, Phoenix, and Charlotte, among others. In fact, this year Charlotte's managed competition program hit its 15th anniversary and is viewed by most city officials as a tremendous success. To not re-invent the wheel in Detroit, I hope Mayor Bing's staff is looking closely at Charlotte's policies and those of other pioneers like Indy.

For Detroit's sake, let's hope that Mayor Bing is successful in changing the paradigm of governance in that city. Government-as-usual will not solve the city's ongoing fiscal and economic woes. Outsourcing those commercial activities currently performed by public employees will be a critical part of doing more with less in the future and putting the city back on sustainable fiscal footing.

» Reason Foundation's Annual Privatization Report 2009
» Reason Foundation's Privatization Research and Commentary

UPDATE: I had a recent post on Mayor Bing's proposal to privatize city payroll and tax collection here.

Leonard Gilroy is Director of Government Reform


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