Georgia’s First Contract City Continues to Innovate Private Service Delivery
© Dreamstime

Innovators in Action

Georgia’s First Contract City Continues to Innovate Private Service Delivery

An interview with Sandy Springs City Manager John McDonough on startup cities, public-private partnerships, and metrics for delivering services to taxpayers.

When more than 90 percent of area residents voted to incorporate Sandy Springs, Georgia in 2005, it became the first of several new Atlanta-area “contract cities.” These cities are known for their nearly exclusive reliance on private providers for delivery of the city’s public services (outside of police and fire), a nontraditional practice confined to several locales in the U.S. While officials in Sandy Springs have made changes with their contracting relationships over the years, the city of just over 100,000 continues to rely heavily on contracting to deliver government services, receiving consistent positive feedback from area residents.

Although residents have been pleased, local city leaders continually look for ways to improve service delivery. In 2009, the city combined with nearby contract city Johns Creek to pursue a new, fully-integrated emergency call management system—known as the Chattahoochee River 911 Authority, or ChatComm—managed by the private firm iXP, which city leaders credit for improvements in service delivery as well as responding effectively and quickly to policy changes surrounding public safety.

Reason Foundation’s Austill Stuart and Leonard Gilroy recently spoke with Sandy Springs City Manager John McDonough to discuss the city’s successes and challenges in managing its service contracts and improvements made along the way, lessons learned from over a decade of managing a contract city, and the process of transforming from a community mostly reliant on county-provided public services to a municipality largely reliant on privately provided public services.

Austill Stuart, Reason: Since you decided to pursue plans for your new regional 911 service in 2009, which led to the creation of ChatComm, what’s the biggest change you’ve seen in comparison to your previous arrangement with Fulton County?

John McDonough, Sandy Springs City Manager: It’s night and day from a service delivery standpoint—the responsiveness we have today, we did not have previously. We were dissatisfied with the service under Fulton County—there weren’t really any metrics, the quality of the service was not good, and the citizen feedback that we had been receiving gave it poor marks. So, Wendall Willard—our city attorney at the time and a state representative—assisted us in getting a 911 bill through the legislature, which allowed us to establish our own E911 Service.  

With the new system, we started with Sandy Springs and Johns Creek. The issues of responsiveness and accountability were very important to us, and with ChatComm, the accountability would remain with the two cities, and that allowed us to determine what the appropriate performance measures and the key performance indicators were going to be. And at that point, we were responsible for the service delivery once ChatComm had been established.

So, the biggest change has been the improved level of service: the responsiveness, and improved customer service.

Stuart: Since ChatComm has been in operation, has it always been contracted out to the same provider, or have there been multiple providers, or a period of in-house management?

McDonough: We did our staff work internally and looked at what might be the best method for day-to-day operations. We looked at metrics and determined both Sandy Springs and Johns Creek were committed to the outsourcing model. So the manager from Johns Creek at the time and I put our heads together and said, “It makes sense for us to do this jointly and outsourcing’s worked for us across a wide variety of other services; let’s see if we can find someone in the private sector that has the requisite experience and qualifications to do this.”

We then put out 911 services for bidding, and that’s how we started our relationship with IXP. There was an initial five-year agreement that was extended another five years—we have about another 18 months on the current, fixed-price contract agreement.

Stuart: In those nearly eight years since ChatComm’s launch, what have been some of the biggest lessons learned from its management and operations? Have there been any course corrections?

McDonough: We learned that total service-level delivery from a single provider with extensive expertise—which includes responsibility on their part for facilities and technology, along with day-to-day operations—can be a highly successful model. We started with two cities initially, and have since added two more: Dunwoody and Brookhaven.

I think there’s a very good lesson from that for others about the speed of how a similar operation or transition can be rolled out if you use the outsourcing methodology and the process we went through. We value customer service highly, and with IXP, our citizens and businesses have received great customer service over the past nine years.

What’s been impressive to me is the police and fire chiefs’ ability to change policies and procedures and how responsive the private partner has been to adapt and make changes in operating procedures to implement those policies.

Our fire chief, Keith Sanders, came in roughly three years ago with a different philosophy on handling dispatch. He met with iXP leadership, and in very short order, made those changes to policies and procedures.

We recently adopted a new “false alarm” ordinance and the protocol that goes along with that.  iXP has shown great flexibility in changing processes to implement the new ordinance. And the nice thing about it is, it has not just been the police chief and the fire chiefs of Sandy Springs and Johns Creek that are IXP’s customers, but they also have police chiefs from Dunwoody and Brookhaven to support. For me, those are the ultimate drivers—they are the consumers of the service; ChatComm needs to support their needs. The fact that a private company has been able to meet and exceed their expectations for nearly nine years has been pretty impressive.

Another thing that has impressed me is how quickly iXP adapts to technology changes and the opportunities to make service improvements. At ChatComm, we do a “technology refresh” about every 36 months. Having a private sector partner that does business across the country, with both the public and private sector, allows us to benefit from best-practices.

Stuart: Through your tenure as city manager, what’s the biggest change you’ve seen in how Sandy Springs operates and how its services are delivered?

McDonough: We’ve been very consistent from a leadership standpoint: both in terms of elected officials and management in utilizing a priority-based approach to how we manage the city. We’ve been committed to the contract/outsource model; it has served us well. Our core focus has really remained unchanged: it’s about providing a high level of customer service.

We have had some different companies provide services, and we’ve made some tweaks to scopes of services based on experience as we redo RFPs. We’ve learned some lessons on how to make a better RFP and have made some modifications in our service contracts. We’ve always experienced a high level of service and customer satisfaction since we first began utilizing the outsourcing model.

Stuart: What’s the biggest change you’ve seen comparing pre-incorporation service delivery to post-incorporation service delivery?

McDonough: It’s very similar to the 911 service—the high level of service, the quality, and the response of the service providers to our citizen and business customers. We now have the ability to set our own priorities and to see the fruits of being able to set those priorities in terms of feedback from our citizens.

Fulton County has over one million people and seven commissioners—obviously, the level of attention and responsiveness that a community can provide with 105,000 people is different than one with a million people. With the incorporation of Sandy Springs, we were given the freedom to develop a service delivery model, or customer service platform, to provide what it is our citizens are looking for.

Stuart: An important part of contracting out services concerns ensuring the contract terms align with the effective delivery of government services. Oliver Porter, in his first book, Public/Private Partnerships for Local Government, called performance metrics a “two-edged sword,” in that while effective performance measures will result in quality service delivery, poor measures can result in poor delivery, and their ineffectiveness may be difficult to detect. Can you name some services where identifying the proper metrics has been easy, and some others where getting contract terms to align with effective delivery has been more difficult?

McDonough: We talked about 911; that’s pretty straightforward—we have specified call answering times and dispatch times, so those are pretty straightforward.

Finance, that’s another task-based service. You have X number of tasks, and either they get done or they don’t within a set period of time.

Public Works might be a little more difficult, a bit more art than science, since you’re talking about litter pickup and maintenance of rights-of-way. So, we’ve tweaked how we evaluate those services through the years. We have a community appearance report card, where every week, a senior member of the city manager’s staff will go out with a field services manager, a contract manager who oversees those contracts, and we assign the contractor a grade every week. If there is poor performance, we sit down with the leadership of that company and point out what we are seeing and share with them what our expectations are in getting it fixed. So, there’s a good contrast between Public Works and 911 or Finance, which are more transactional-based evaluations.

Stuart: And for those public works tasks that are more difficult to assess, the best means of ensuring performance would be monitoring progress as much as is feasible, so doing so every week would seem to provide as effective a feedback loop as one could hope for.

McDonough: Yes, and another example would be Community Development. There you have code enforcement which is both proactive and reactive. We still have a 24-hour call center that now has a chat feature as does our 911 center. I think we were one of the first to implement that, and I think that’s given our customers another option to provide us with feedback and to respond to their requests for service.

Everything starts with our 24/7/365 citizen response call center, and the scripts and responses that we have developed come from 12 years of experience. We may not have an answer for every call that comes in, but we’ve got answers to 99 percent of them based on experience; so, they’re standardized, and the customer service representatives provide responses to different citizens based on experience of resolving similar requests in the past.

Not everyone has a 24/7 call center, and given the value we receive from it, the return on investment for our community has been very impressive. They are able to consistently achieve over a 94 percent rate of resolving calls before having to transfer them outside of the call center. What that means is that (most of) these calls aren’t getting transferred to me, my assistant manager, the department heads, or their departments, because the call center resolves the customer’s inquiry over 94 percent of the time.  

Stuart: Turning briefly to the city’s operating facilities, a 2012 New York Times article noted your unconventional approach to office space—renting part of an industrial park, but with the new “City Springs” PPP development underway, it appears that won’t be the case for much longer. Can you describe the decision-making process that led you to pursue the project and how is progress going?

McDonough: There were three primary drivers. Number one, we went through a community-based planning process back in 2012. It was about a year long, and in December of that year, our mayor and council adopted the City Center Master Plan that was the blueprint for this project. The goal was to create a “sense of place” for the community. We’re a suburban city and didn’t have a traditional downtown. Our community thought that it was very important to create a “sense of place.” So, that was the first one—creating a place where the community could gather and create its own identity. It’s a section off Roswell Road about 14 acres and is a mixed-use development.

The second one—the cost of paying the rent over time, just wasn’t worth it in the long run. It was more cost-effective for us to own our own facility.

The third driver of the City Springs project was for it to act as an impetus for economic development. Since we announced the project, there’s been multiple adjacent assemblages purchased and are under construction today.

The city’s investment in City Springs was a catalyst for private redevelopment along Roswell Road. We’ve seen 80,000 square feet of new retail installed along Roswell Road and more than 1,000 new housing units added as part of these mixed-use developments. The construction is removing outdated strip shopping centers, and in several cases, older apartment communities, and replacing with developments that better match the master plan created by the community, featuring mixed-use, connectivity, and opportunities to access amenities via transportation other than car.

Overall, we’ve committed close to $350M to redevelopment efforts.

Stuart: With respect to the current RFP for parks/recreation and court services the city is planning to release, what are some of the attributes you seek in service providers of those services?

McDonough: We have some restrictions. If an entity submits a proposal for IT or Finance and is awarded a contract, they cannot submit a proposal for other services. We felt it would be a conflict of interest. We structured that about five years ago when we went through the first rebid process after having a single provider. We think that change has served us well. But if one company wants to submit proposals for everything other than those, there’s no restriction.

To your question on some of the things we’re looking for, in prospective service providers—first, a proven track record of success. They need to show us what they’ve done in the past, where they’ve operated. They need to have a “can do” attitude, demonstrating going “above and beyond” in terms of providing customer service. Their approach to customer service is very important. Their ability to be innovative and bring new ideas on how we can improve customer service is important.

Second, transparency is an essential part of the proposal. We’ll pay them fairly, but they need to be transparent on what their costs will be. And that’s something that will continue to evolve as we go through these bidding processes, to make sure that transparency is there.

Third, flexibility is important to us. People work here work on behalf of Sandy Springs and its citizens. Just because they have a scope of work doesn’t mean that they aren’t expected to demonstrate flexibility. If a task arises outside of a worker’s scope of work, but that person is capable of handling it, then we expect them to handle it.

And fourth, it needs to be cost-effective. So, those are the things we’re looking for when we’re evaluating prospective providers.

Leonard Gilroy, Reason: From your perspective having spent time in more “traditional” community management, what were some of the differences you could see in the scale of contracting that Sandy Springs does versus more traditional, in-house public operations with very little outsourcing? Did it require a different level of sophistication of contract management skills, or did it build upon what you already knew from your previous experience?

McDonough: I think you’ve hit on an important point there. Obviously, I’d had some contract management experience, but not to the degree to which we contract out in Sandy Springs. But it’s all scalable. To give an example, I used to manage a fleet maintenance contract for another city and had to know about contracting methodology, overseeing a contract, finding and collecting data for key performance indicators, and that sort of thing. So, contract management is scalable—I think people can go out and get educated on this type of thing—but (with Sandy Springs) significantly more of those skills were needed.

Whether contract employees or city employees, they all come to work with a good attitude to approach their work. You set the expectations with the workforce; you want to develop a good relationship with the contract management lead, whether it be on-site or off-site, in the event you have issues or challenges. And from time-to-time, we do and we work through those things.

But again, it’s all scalable. If you’ve managed one contract, you’ve managed contracts—there are varying degrees of sophistication in contracts, as I’ve learned with the City Springs contract. Our budget now for the City Center project is close to $230 million—it took a good year just to negotiate the construction contract. We’ve learned it is essential to put in the time and effort to making sure your contract and your scopes of work and your performance measures are well thought out.

It’s a team effort: senior leadership (manager’s office, finance and procurement staff, legal department) works and evolves with the rest of the team on how to make better contracts and to get a better product out of this process. It’s very important to have a well-balanced team. You can’t just delegate the work of RFP and contract development to the procurement and legal departments. The operators and the senior leadership must be involved. One of the keys to our success is how we’ve approached effective service delivery as a team effort.

We have dozens of contracts here—in addition to managing a traditional workforce, we also have to keep an eye on our contracts to make sure the community is getting what it’s supposed to be getting from a quality standpoint. It’s definitely different, but I think the benefits far exceed the challenges. It’s an evolutionary process: we learn more each year about how to improve the contracts, and I think you’ll see, as the RFPs come out, we continue to evolve to make (services) better, and that’s what we should be doing. That’s what our job is—to continue to make improvements to providing great customer service.

Gilroy: This is Phase 3 of contracting out services of Sandy Springs—the first being the initial bidding upon incorporation, and the second being the first scheduled rebidding after several years in place. Is it fair to characterize Sandy Springs’ transition from Phase 1 to Phase 2 as going from large aggregated contracts to more disaggregated and more detailed contracts?

McDonough: Yes, I would say that’s a good generalization; I concur with that.

Gilroy: Will we see something different in the transition from Phase 2 to Phase 3?

McDonough: I think you’ll see more transparency and attention paid to the burden rate. What you’re paying for in a service level contract is the capital—the position, the person to fill the position. Let’s say their salary is $50,000, that can be described as 1.0. The “burden rate” is the factor you apply to the salary that ends up being the total cost for that particular person, if you will. So you multiply the $50,000 by “one-point-something.” And the “something” is the burden rate, which is made up of health benefits, retirement costs, FICA, Medicare, the overhead and profit for the company (providing the services). So, when you add all of those things up—say they come to 75 percent, you multiply the salary of $50,000 by 1.75, and that 1.75 is the burden rate. What I’m saying is, in this next go-around, we’re taking a bigger interest in the breakdown of the burden rate, to make sure it’s fair and it’s reasonable. Which isn’t to say that it hasn’t been (fair and reasonable) in the past, but we’ve had different burden rates for different companies.

We’re also seeing a broad range of benefits for contract employees. We’ve identified a set of what we call “most important requirements,” and they really drive our preparation of RFPs, and one of those requirements is continuity, so we want to keep our high performers, because they have institutional knowledge, and they’re doing a good job for us.

We took a dive into what constitutes the “full burden rate” and set some markers for what we believe should be a threshold for the type of benefits that are provided, and the percent of the total burden rate that those benefits should make up. And that comes from experience and a desire to maintain that quality. We’ve also put a maximum—something we had not done in the past—on the burden rate.

Stuart: Would you say that the contract city model could potentially work anywhere? Or is it more easily confined to certain types of cities?

McDonough:  Any city could go through our RFP process. It could be departmental; it could be task-based. I think more and more you’re seeing cities find that there’s a cost-effective benefit from outsourcing and contracting for certain services from an economy of scale standpoint. It makes sense to do that. But certainly for larger functions—Oliver (Porter) did a good job of pointing this out—it really just comes down to political will. If the will is there to go in that direction, anything’s possible.

Gilroy: Can you share any lessons learned from your experience performing the balancing act of operating a startup city with a heavy reliance on complex public-private partnerships, while simultaneously keeping the citizens that created the city happy?

McDonough: The biggest lesson learned is to be flexible, to have a continuous process-improvement program in place. We’ve got a whole set of guidelines that we put out to our senior leadership team and anybody who works for Sandy Springs that we see as Keys to Success. And one of the things that we talk about as being important is the speed of delivery. It doesn’t just have to be good in the 21st century, it’s got to be quick, so how quickly we adapt to the feedback we get is essential to meeting the public’s expectations.

That’s why our 24/7 citizen response call center is so important to us. We’re able to log everything that comes through, and work flows from that as does feedback, both good and bad. The fact that we have a central repository for feedback and our communications director, who reports directly to the city manager, allows us to adapt very quickly to changing expectations and requirements and to meet and exceed our customers’ expectations.

Appointed in January 2006, John McDonough serves as the city manager of Sandy Springs, Georgia and is responsible for the oversight and management of one of the most extensive applications of public-private partnerships (PPP) for the provision of local government services in the country. Under Mr. McDonough’s leadership, Sandy Springs has received numerous awards and praise for its operations, including recognition for innovative contract management and competitive sourcing, as well as receiving high marks for the city’s livability. In addition, Mr. McDonough has provided advisory assistance to numerous cities in the United States and abroad concerning the use of competitively sourced municipal services.

Prior to joining the City of Sandy Springs, Mr. McDonough served as city manager of Beaufort, S.C. and other South Carolina cities. A retired colonel with more than 26 years of active and reserve service in the U.S. Marine Corps, he holds a Master of Public Affairs degree from Indiana University and a Bachelor of Arts in political science from The Citadel, The Military College of South Carolina.