Time to Strengthen Washington’s Troubled Competitive Contracting Law

Despite legislation passed in Washington state in 2002 authorizing competitive contracting (part of the 2002 Civil Service Reform), it still remains a relatively unused tool, primarily because competitive contracting has been subject to collective bargaining by state employee unions. Counter to the intent of the political compromise brokered in 2002—unions were supposed to get collective bargaining rights in exchange for removing most restrictions against agency privatization and outsourcing—it hasn’t worked out that way in practice.

The unions have craftily managed to give themselves a major seat at the table of any privatization decision-making, and have in some cases even written competitive contracting out of the picture entirely via their collective bargaining agreements.

To make things marginally worse, the Washington Federation of State Employees sued the state to have the rules implementing competitive contracting (developed by the state Department of General Administration) thrown out. Earlier this week, a Washington state appeals court struck down three rules guiding implementation of the competitive contracting statute. More details from The Olympian are here.

The legal issue involves the definition of a “displaced worker” in the rules. But as Jason Mercier at the Washington Policy Center explains in this post, this won’t be much of an impediment to privatization because…well, the state wasn’t doing much competitive contracting anyway. What’s really needed is a revamp of the competitive contracting process to level the playing field and divorce competitive contracting from the collective bargaining process:

Even before today’s ruling, the use of competitive contracting by state agencies under the 2002 reform has been less than stellar. A performance audit conducted by the Joint Legislative Audit and Review Committee (JLARC) in January 2007 found:

“…few agencies have competitively contracted for services in the 16 months since receiving authorization to do so. Agency managers reported two main reasons for not competitively contracting. First, managers perceive the process itself to be complicated and confusing, providing a disincentive to pursue competitive contracting. Second, competitive contracting is a subject of collective bargaining, which creates additional challenges by requiring labor negotiations. Managers must bargain, at a minimum, the impacts of competitive contracting. Additionally, some agency collective bargaining agreements include provisions which prohibit agencies from competitively contracting.”

Regardless of whether the state appeals today’s ruling on the GA rules, Washington policymakers should simplify the bidding process to make it easier for agencies to use competition to improve services. Lawmakers should also shield contracting out from union and political influence by removing it from the collective bargaining process. Improving service to the public is too important to be a bargaining chip in government labor negotiations.

That’s spot on. Mercier also points to a legal brief filed by the state, which offers a handy reminder that this was the original intention in the first place:

[T]he 2002 reform act rested on three “legs”: Granting greater collective bargaining rights to state employees; removing the general restriction against state agencies to contracting for services customarily and historically performed by civil service employees; and making various changes to the civil service system. The Federation’s view that the 2002 reform act essentially retained the severe limitations on contracting out that were in existence prior to 2002 fails to acknowledge the political trade-offs that made passage of the 2002 act possible. In exchange for full-scope collective bargaining, which some unions had been seeking for decades, state agencies got most of the restrictions lifted on contracting out civil service work. The legislature did not retain the general prohibition against agencies contracting for services customarily and historically performed by civil service employees. On the contrary, it repealed the statute (former RCW 41.06.380) that had embodied that general prohibition.

It’s clearly time to update the competitive contracting statutes, which would be relatively straightforward to implement if tweaked to clearly force a separation between outsourcing decisions and collective bargaining.

But I’d go even further and create a Florida-style Council on Efficient Government to help agencies prepare business cases for potential outsourcing initiatives and drive the ones forward that make the most sense for the state. Right now, agencies don’t have much of an incentive to even consider competitive contracting, so some external tension in the system–with an outside driver–might be the best way to move forward.

After all, the reality is that Washington state is facing deficits exceeding 20% of its general fund and more to come, so something has to give. The state needs to have solid, working privatization tools at its disposal to help it weather the fiscal storm. Agencies and their union minders have proven that they won’t get it done themselves, so it’s time for the legislature to step back in.

Reason Foundation’s Annual Privatization Report 2009
Reason Foundation’s Privatization Research and Commentary