Contracting Transportation Services

A session at last month’s Institute of Transportation Conference and Exhibit titled Privatizing Government Agency Services featured how the private sector can provide excellent services at a much lower cost than a traditional government. The two featured cities of Sandy Springs, GA and Centennial, CO use slightly different approaches. Sandy Springs privatizes everything but police and fire. Centennial, Colorado privatizes some of its services including some transportation functions. The cities provide slightly different templates for other interested cities depending on the situation.

Sandy Springs was formed in 2005. With the exception of Police and Fire, which the Georgia Constitution requires be handled by a public entity, Sandy Springs has privatized all its remaining services. The city continues to be a leader, breaking new ground with the re-bid of its master services contract previously held by construction company CH2M Hill. Following a year-long process, the city awarded contracts to four firms at a May 17, 2011 city council meeting to provide general government services in the areas of communications, municipal court, public works, recreation and parks and community development.

City officials, led by City Manager John McDonough, leveraged an exhaustive split contract service Request for Proposals (RFP) process that, when applied, saved taxpayers almost 30%, or over $7 million, compared to the previous single-provider contract service. Over the course of five years these contracts are expected to save taxpayers $35 million. The city is partnering with the following firms: Pasadena, California-based Jacobs Engineering Group Inc. for a municipal court and parks and recreation, San Francisco, California-based URS Corporation for public works, and Boston, Massachusetts-based Planners Collaborative Inc. for communications and community development. Additionally, the city already contracts with Severn Trent Services for financial services. Overall, Sandy Springs’s FY 2012 contracts are worth $10,126,293.

Similar to traditional cities, Sandy Springs has a comprehensive long-range transportation strategy. This includes new major construction projects as well as routine maintenance. While most cities contract with the private sector to build transportation infrastructure, and some contract out repavings, new contract cities such as Sandy Springs are the only ones who also partner for basic Planning Services and basic Engineering Services. There is a department that handles Civil Works, but its employees work for URS, not the city. There is no noticeable difference between the services provided by a contracted city and those offered by a traditional city. While Sandy Springs residents pay lower taxes than their neighbors in Roswell and Atlanta, the quality of Sandy Springs’ services is better.

Located southeast of Denver in Arapahoe County, Centennial incorporated in 2001 in an effort to keep neighboring Greenwood Village from annexing its commercial corridor. Because special districts in the area already managed library, recreation, fire and water services, the new city’s two largest services would be public safety and public works.

Initially, Centennial signed intergovernmental agreements with Arapahoe County to provide law enforcement and public works services. Although the county sheriff still provides public safety services for the city, a new agreement could not be reached for public works services in 2007, so Centennial leaders began investigating other options.

The city requested proposals from private firms, and it prepared its own estimate for an in-house public works department. The city created a request for proposals, determined the actual service provision, and developed detailed analytics to define the level of service city residents wanted.

Centennial would assume some risk in the contract by purchasing all fuel, asphalt, deicing chemicals and road salt needed for the department’s operations. That removed some cost uncertainty for the private firms so they could focus their proposals on the costs of providing the expected services. The city ensured there was no incentive to minimize the amount of deicing materials.

Three firms submitted proposals for the contract, and their costs were comparable to the city’s estimate for an in-house department, but the level of services the private firms could provide exceeded the city’s ability for the same cost. On July 1, 2008, Centennial launched the public works department through a public-private partnership with Denver-based CH2M HILL. The five-year contract includes transportation and traffic engineering, infrastructure maintenance and snow removal. Centennial retains direct control of public works operations, and the company operates as an extension of the city.

The contract is designed to be flexible and adjustable through a value exchange system the city developed that assigns values to all public works services. Sweeping 30 miles of streets has a certain value; replacing five road signs has a certain value; paving a number of miles of roads also has a certain value. The contractor updates the costs of these services each year when the contract is reviewed, and the city decides how much of each service it wants to provide for the next 12 months. If quantities of services need to change, they can be exchanged for the same value of services elsewhere.

With these annual service updates, the city can bring service back in-house or continue contracting depending on what works best for Centennial residents. In 2010, partly due to the recession when Centennial reanalyzed the costs it was paying for infrastructure services, the city determined it could more effectively perform the services in house. The city chose not to contract infrastructure services. However, with the economy improving the city is once again looking at an infrastructure contract. The city estimates it will send out a request for proposals later this year or early next year. If the new numbers favor contracting, the city hopes to have a new agreement in place by the end of next year.