In September 2011, the Ohio Department of Rehabilitation and Correction (ODRC) announced the results of a groundbreaking procurement that will see the state raise $72 million from the sale of one state prison to a private operator—the first sale of its kind in the nation—and two others turned over to private management, for an estimated $13 million in annualized cost savings. One additional facility formerly under private sector operation was also brought back under in-house operation.
Notably, the state’s biennial budget signed in June 2011 authorized ODRC to sell up to five prisons to help close the state’s budget deficit and reduce corrections costs, though ODRC ultimately opted to pursue a mix of asset sales, outsourced facility operations and facility consolidation/insourcing.
In May 2012, Reason Foundation’s Director of Government Reform Leonard Gilroy interviewed ODRC Director Gary Mohr on the rationale behind this large-scale and historic procurement, how ODRC uses the private sector in corrections, and the role of privatization and competition in driving positive change throughout the state-run correctional system.
Leonard Gilroy, Reason Foundation: Last year, Ohio made history by becoming the first state to sell a prison to a private operator, at the same time that you both insourced and outsourced the operation of several other prisons. Can you describe the rationale for those moves, and what benefits do you expect?
Gary Mohr, Director, Ohio Department of Corrections: In a labor-oriented state, when we talk about outsourcing and privatization, it’s always a contentious topic. But my vision all along was this: we’re going to reform our system, which means that we need some catalysts for change. And my vision has been that you use competing forces. When you put in people that are earnestly concerned about competing and have a solid framework—which is the request for proposals (RFP)—what you can do is not just save resources, but you can literally enhance all of the operations by ratcheting up the standards and ratcheting up the best practices that can be created from both the public sector and multiple private vendors.
So in terms of reforming, we wanted to develop systems to reduce violence, and we wanted to develop programming to reduce recidivism, because that should be our measure, quite frankly. And what we have seen with this initiative is that we have reduced violence, and we’ve reduced the gang violence by 25 percent if we look at January through March of 2011 compared to the same period in 2012.
Now was that exclusively due to privatization? No. But I believe that the element of competition plays an important role in that.
Second, I’ve been a believer in decentralized unit management. I was involved in putting it in place in Ohio in the mid-1980s, and I know it is the most effective way to safely and proactively operate prison settings. And the benefit of outsourcing is that while Ohio had essentially deleted unit management, the ability to outsource immediately put in the RFP the requirement that these facilities will be fully unit managed to allow them to get a jump-start on shifting back to unit management. This served as an incentive for rest of state facilities to get back into the unit management way of doing business.
And along with that, we’re continuing to enhance the training and providers of evidence-based programs that have direct contact with inmates.
So those were huge for us as I looked at reforming our system to a safer, more proactive, and more evidence-based program delivery methodology, and certainly served in that positive, competitive sense.
Gilroy: There's been much media scrutiny of late on the subject of public versus private cost comparisons. Are you going to save money through the privatization initiative, and if so, how much?
Mohr: Under our statutory authority in Ohio, any outsourcing of private facilities must save at least 5 percent on the operational costs. As we developed and submitted the RFP, we mandated that that savings would take place. So in fact, we are going to save a bit over 5 percent on the operational side of that savings.
And the other thing that people don’t realize is that we sold the Lake Erie [Correctional Institution] facility for $72 million, while we built it for just about $40 million. What that allowed us to do, as we looked at the outsourcing—we have capital needs at Lake Erie, and the private sector assumed that responsibility. This allowed us to take some capital resources that may be available in the budget bill and put them into other state facilities, significantly reducing our bond indebtedness, which affects our operational line as well.
Gilroy: How do you know that? Can you describe the process through which you conduct cost comparisons?
Mohr: Actually it was pretty simple. Let’s take a look at the North Central [Correctional Complex] facility. We had operated that as a state facility for many, many years. And we knew the post assignment, where we wanted our officers posted. We had all of the data in terms of the utilities. We had the ledgers of 15+ years of actual operations.
So in the RFP, we stipulated those exact same posts that would be operated. We mandated that they would have to operate under all of Ohio’s policies, with the exception of some of the human resources policies that deal with benefits and leave. We mandated that they would have to serve exactly the same menu that we have. We mandated the policies, the posts, the number of unit management positions and the number of security supervisory posts. We mandated that they had to have one warden and two deputy wardens just like us.
So we replicated the post assignments and the staffing pattern and the policies and the food requirements. We basically said, “you must identify a minimum of a 5 percent savings” from exactly the cost of what it has cost us to operate North Central.
And with Lake Erie it was the same process, although it was operated by another private vendor. What we basically said was, “here are the posts, here are the number of staff, here is the food requirement, here are the policies that you must comply with.” And in addition to that you must save us at least 5 percent.
So we have some pretty close apples to apples comparisons of the costs, because we know exactly what it costs us to operate these prisons as state facilities.
Gilroy: You've worked both in the public sector and the private sector in corrections. Can you both comment on the differences as well as offer your perspective on how both sectors work together?
Mohr: I think if you were to talk to both Management & Training Corporation (MTC) and the Corrections Corporation of America (CCA), I think they would acknowledge that Ohio is really a model for a healthy relationship. I’ve been in a lot of jurisdictions on the private sector side, and I do think that there is a collaborative relationship.
For example, all of the wardens from the private sector always attend the wardens meetings with us. They are involved in all of the videoconference meetings. They’ve been involved in the development of a three-tier prison system in Ohio and the training we put together so they are fully engaged. They have tables at our Correction Officer of the Year banquets just like all of the other prisons. They are our full partners.
In terms of the operations, there are a couple of big differences. The private sector operates under a relief factor for staffing that is less than the state. They combine leaves into personal time off. They don’t have sick leave, vacation and personal leave. Their annual time away from their posts is less, which allows that relief factor to be more accurate. So they can fill exactly the same security posts and we know that human resources expenses are 70 percent of the cost of operating these facilities.
So they can actually have fewer overall employees filling the exact same posts as the state, which means that their total complement of staff and the fringes they pay are a little less than what’s required in state government because we give a whole lot of time off for different kinds of leaves. So the relief factor is a significant factor, and they’re different.
And in the private sector, they go in and analytically look at the region of the facility, the economic conditions of the facility, the degree of education, the comparable types of work provided and the salaries, etc., and they will develop a compensation package that is competitive with other types of business that would attract similar people. And because of liquidated damage issues, they will ensure that their turnover rate is reasonable and is, in fact, similar to and consistent with the state service. They will do all of those things, and what we typically find is that their compensation is slightly less than the state’s as well.
So if you take slightly less compensation, you take a fewer number of total employees necessary to do the exact same thing, and you realize that 70% of the costs of operating facilities is in salary and fringe, then you start to see how they can compete and save that amount of money.
They are also a little smarter in terms of purchasing and a little more opportunistic in terms of purchasing food and other commodities, as opposed to having state term contracts and those sorts of things. So there’s some savings there as well.
Gilroy: So you see this as a collaborative process where both sides are working with and learning from each other.
Mohr: We create an environment where we encourage and recognize best practices, which means that the best practices from the state and private sector that are initiated, talked about and presented at our wardens meetings where we all learn from each other and in a very competitive way, we learn from each other.
Secondly, we have a system of metrics that we use to gauge performance, which covers everything from violence indicators, to use of force indicators, to program completion indicators (GED, etc.), to recidivism data. And we use those to basically say, these facilities are doing this, what are you doing? We do it in front of everyone. We use a dashboard approach where all of this data is visible, and it’s amazing how operations just get a whole lot better when metrics are published.
And the private sector, because they have not been lifelong Ohioans in some cases, bring different approaches that we all learn from, and they learn from us as well.
This whole environment of best practices that I envisioned 17 months ago when I took this job is truly coming into fruition because our metrics are getting better.
Gilroy: How much control do you have over private prisons in your state? How do you monitor their performance and hold them accountable?
Mohr: We have a full-time monitor at each of the private facilities who is accountable for looking at the staffing patterns and all of the incidents that take place and being present around the quad, watching their performance. That’s number one.
Number two, we’ve taken the position that we require our private vendors to operate under the same state policies that we work under. We do give waivers for some of the personnel and human resources areas, such as the leaves I talked about. But all of the posts are the same.
We have internal audits in Ohio with an internal auditing team that audits our state facilities and the private facilities with exactly the same standards.
In Ohio, we also have a legislative inspection committee, called the Correctional Institution Inspection Committee that does surprise inspections of facilities. And they continue to go into private facilities just like they go into public facilities and use their same protocol for assessing performance.
The private facilities are measured on our dashboard for the metrics that we use to measure program completion, violence and other types of indicators.
Also, Ohio is a “Golden Eagle” state where all of our facilities, parole offices, training facilities and headquarters are accredited by the American Correctional Association (ACA). And we do require the private facilities to become accredited, and I believe that we give them a year to do that. Maintaining accreditation with ACA is a condition of their continued contracting with us.
Gilroy: Opponents claim that private prisons cherry pick "easier," lower security inmates and burden the rest of the state system with the more difficult cases. Is that the case in Ohio? If not, why not?
Mohr: That’s a great point, and I’ll tell you how states can address this. They can do exactly what we did at North Central, which was publicly operated for about 15 years. At the stroke of midnight the private sector can take over a facility with the exact same mix of inmates that have been assigned there for years. And today we send the same inmates to North Central that we have been sending for 15 years.
The way to ensure that is to convert directly from the public to private sector if you really want to ensure that cherrypicking doesn’t take place. And you should use the same metrics to assess performance that you’re using with the public sector facilities.
So literally, you have the private vendor take over the exact same population, and then use the same metrics you use to assess the public facilities. That starts to give you a comparison and ensures that they are managing 100 percent of the same population that the public sector has been managing.
Gilroy: How do you involve the private sector in treatment, programming and recidivism reduction efforts?
Mohr: Let me start by saying the first consistency is unit management and the need to deliver unit-based programs, and they got a a head start on us in the state system because they started with full staffing, which was a good thing.
The other piece is that the private vendors have also developed individual partnerships in their communities because they live in different areas, and they share those as we go to wardens meetings. An example is that I attended a Kairos [Prison Ministries] event, which is a prison ministries initiative, at North Central. We had not had a Kairos event there before—we had in other facilities—but the private sector took initiative to engage with Kairos and have a Kairos weekend where there was a spiritually based initiative.
The privates have the ability to implement special types of housing units, be it a therapeutic community or a drug program or a substance abuse unit. They have the ability to do those kinds of things.
I have challenged our systems that as we look at cohorts of inmates from site to site that have spent a majority of their time at that single site, we’re going to start measuring the impact that the facility can have on recidivism and start looking at the cultural differences and programmatic differences, which can have a big impact.
In fact, I’ll be delivering a presentation to the Pew Institute in June about our plan to do that, to start measuring those kinds of things.
We are also engaging our private sector facilities just like our state facilities in working with our reentry coalitions that I’m establishing in all of the counties in Ohio to help our people to reenter into the community successfully.
Gilroy: How would you respond to opponents that claim that private prisons are less safe and unaccountable? In Ohio, how do you ensure that the private sector delivers on its contracts?
Mohr: I think that we do as well as probably any jurisdiction in ensuring their compliance. It starts with requiring them to comply with our policies. We have an internal management audit that they are scored by, and I mentioned our legislative inspection committee treats them just like the state facilities as well.
The inmates also have the ability to utilize our inmate grievance system, where we monitor grievances. And then we have the instant reporting system where the private facilities are required to report the exact same kind of incidents that we are in the public sector. And all of that is monitored by an on-site monitor that is at the deputy warden level, but works for us in the central office.
And in the case that we find something of concern, we would start just like we would with any of our facilities. I’m going to pick up the phone and call the warden right away and talk that through. Second, our RFP has a pretty significant section on liquidated damages for not complying with our policies or if there happened to be positions not filled or posts not filled. These liquidated damages are in our toolkit and are readily available to use.
And we also have the responsibility to go to the legislature and controlling board to talk about the progress and get renewals of the contracts together as well.
Gilroy: If you were talking to peers in other states considering the use of the private sector, what advice would you offer?
Mohr: That’s a great question. First, they should go into it knowing that they will be highly scrutinized, so as you set up a system, it’s critical that you set up as close to an apples to apples comparison as you can to measure performance, financially as well as operationally.
Second, I believe it’s important to go into this expecting positive change for your entire system, which means setting up a system that is communicative, where there are meetings that they are absolutely part of, where there’s a culture of encouraging best practices that can be shared. As a director, I set out as a goal that our entire system would be improved, not just financially but also operationally. I wanted to create a culture of positive competition and communication of the best practices that would be spread throughout the entire system.
In my opinion, you go into privatization with the belief that the entire system can get better, and that includes how you treat your staff as well as the inmates. Because we can learn a lot from the private sector in terms of managing staff and how we lead staff. They’ve been ahead of the curve relative to state government.
So overall, I think it’s the positive culture of competition and shared best practices with the belief that the whole system can be improved.
Gary Mohr is the director of the Ohio Department of Rehabilitation and Correction. Appointed by Governor John Kasich in January 2011, he is a 37-year corrections professional with a national reputation for innovative and efficient prison management. Throughout his career, Director Mohr has served in a number of corrections leadership positions in both public and private sectors.
In 2002, Director Mohr served as deputy director and superintendent of the Ohio Department of Youth Services. Previously, he was DRC deputy director for administration, as well as a deputy director in the agency’s Office of Prisons, where he supervised, mentored and advised a region of the state’s wardens. In addition, Director Mohr has served as warden at the Ross Correctional Institutional, Chillicothe Correctional Institution, and the Correction Reception Center.
From 1992-1994, Director Mohr served as director of the Governor’s Office of Criminal Justice, where he led the investigation into the cause of the 1993 Lucasville riot. Many of his team’s recommendations for preventive measures and improved conditions were incorporated into DRC’s standard operating policies and adopted by prison systems across the nation. He also chaired the Governor’s Task Force on Gun Violence.
In 2005, Director Mohr founded Mohr Correctional Insight, where he advised the Corrections Corporation of America in areas of staff leadership and development, and implementing unit management.
Other articles in Reason Foundation's Innovators in Action 2012 series are available online here.