To Fix Budget San Diego Needs to Implement Managed Competition Immediately


To Fix Budget San Diego Needs to Implement Managed Competition Immediately

Statement to the San Diego City Council, December 14, 2009

Good afternoon, Mayor Sanders, Council President Hueso, and members of the City Council. My name is Adam Summers. I am a policy analyst at Reason Foundation, a nonprofit national think tank that has advised presidential administrations and state and local governments on competition and government reform issues for over 30 years. Thank you for this opportunity to address the issue of the City of San Diego’s finances and budget reform.

As the city struggles with a significant budget deficit-and likely will be forced to do so for years to come-it should consider a budget reform that has proven to be a successful strategy at all levels of government, namely, introducing competition to provide government services. Federal, state, and local governments across the nation, led by administrations on both sides of the political aisle, have recognized that outsourcing and managed competition are effective ways of introducing greater incentives to minimize costs and maximize service quality.

In November of 2006, San Diegans overwhelmingly voted to implement a managed competition program when they passed Proposition C. This was supposed to allow city agencies and private sector providers alike to compete for contracts to provide various city services. But more than three years later, city labor unions and the administration have yet to agree upon the rules and process for the program, and the reform efforts remain stalled. This delay has gone on for far too long, and the city has suffered the last three years because of it. Regardless of whether city employees or private vendors won contracts for city services, the City of San Diego could have been realizing significant cost savings by now. In the meantime, the budget crisis has only gotten more severe, and the city can’t afford to wait any longer.

While the participation of city agencies in a managed competition program would be ideal, if the unions and the administration cannot agree about how to run the program, the city may still be able to reap the benefits of competition by seeking competitive bids for services from the private sector alone.

As part of an effort to identify and analyze outsourcing opportunities for the City of San Diego, Reason Foundation will be releasing a series of briefs covering various city services, including how to go about outsourcing, cost savings estimates, and case studies from other city and state governments. You have each received copies of the first couple of these briefs, covering building maintenance and vehicle fleet maintenance services. Using the city’s Fiscal Year 2010 budget expenditures as a baseline, and a conservative estimated cost savings range of 10 percent to 25 percent, we estimate that the city could save between $1.5 million and $3.7 million per year by outsourcing its building maintenance services, and between $5.1 million and $12.8 million a year by outsourcing its vehicle fleet maintenance services.

The city should also consider outsourcing services such as information technology, library operations, parks and recreation, printing and copying, street maintenance, trash collection, and water/wastewater, which Reason Foundation will be examining more closely in the coming months.

The city may not realize enormous savings over the next few months from outsourcing, but if it acts now it can certainly expect significant savings during the next fiscal year and subsequent years. The sooner San Diego does implement outsourcing or managed competition reforms, the sooner it will be able to realize the benefits of competition and use them to balance the budget and prevent program cuts in other areas.

Thank you for your time and consideration.

Adam Summers is a policy analyst at Reason Foundation.