VOL. 131 | NO. 55 | Thursday, March 17, 2016
View From the Hill
Bipartisan Skeptics Doubt Haslam’s Outsourcing Plan
SAM STOCKARD | Nashville Correspondent
Poor timing and questionable numbers: That’s how legislators are viewing a business justification plan for outsourcing facilities management across Tennessee.
The Office of Customer Focused Government tells state senators, if all departments opt in, the state could save $35.8 million by the second year of a contract under study for building operations and services – without laying off state workers or cutting pay and benefits.
The savings would come through increased worker training to cut subcontractor costs and reduced purchasing expenses using the vendors’ ability to buy materials on a larger scale, the analysis states.
Widespread skepticism – on a bipartisan scale – is the primary response.
Sen. Steve Dickerson, a Nashville Republican, contends mixing state services with a private company’s drive for profit “starts to misalign incentives.”
“And when they tell me they’re going to hire the same people at the same price with the same benefits, and yet they’re still going to save money, to me it strains credulity that you can do that,” Dickerson says.
Senate Majority Leader Mark Norris, who holds a good deal of clout, says he doesn’t accept the numbers, either, though he could eventually. But his biggest concern is timing, since the administration didn’t present its plan to the Senate State and Local Government Committee until the second week of March.
“It felt to me it would have been more beneficial if we’d had that presentation at the end of last session or perhaps at the beginning of this session,” Norris points out.
Norris describes the presentation as “a lot of corporate rhetoric.” And even though it may be valid, he says lawmakers are wrapped up in legislation and haven’t had time to “fully digest it.”
Tennessee has saved $10 million the last two years by outsourcing management of 10 percent of its office space to Chicago-based JLL [Jones Lang LaSalle], according to Terry Cowles, head of Customer Focused Government.
The state spends $550 million annually, including utilities, on some 7,500 buildings with 94 million square feet. Using a formula based on costs per square foot, industry benchmarks and a percentage of that benchmark, the administration came up with savings of $29.7 million in the first year and $35.8 million each year afterward, if departments from state parks to prisons and higher education campuses opt in.
“We agreed to protect the employees regardless of what the number might be,” Cowles adds.
Any contract signed with a vendor would contain “strict language” prohibiting the company from initiating any reduction in force, and no “qualified and productive” employee would lose their job because of the contract, according to the analysis.
State agencies and individual campuses would be able to decide whether to participate in a state contract after state costs are verified by a third party, proposals are received and a comparison of state costs to the vendor’s costs is complete.
In the analysis, the University of Tennessee system would save $10.6 million in year two, while six state universities, including MTSU, would save $10.9 million. Community colleges and colleges of applied technology would see $6.7 million in annual savings, and remaining general government offices would net $7.7 million in cost reductions.
“Their opt-out is whether to use the contract,” says Greg Adams, chief operating officer of the governor’s administration.
Departments and colleges wouldn’t have to decide until after the process is done in late 2016. The analysis points out, though; agencies and campuses could redirect savings to other areas.
Yet despite the efforts of Cowles, Adams and Commissioner of Finance and Administration Larry Martin to put a pretty face on the plan, senators are unimpressed – in a bipartisan fashion.
Republican Sens. Richard Briggs and Ken Yager, of Knoxville and Kingston, say their constituents at UT-Knoxville are worried this could put their jobs in jeopardy no matter what promises the Haslam administration makes.
“We need to search for savings, but don’t need change for the sake of change,” says Briggs, in his first Senate term. “If the university is running an efficient operation, we need to keep it.”
Yager, who chairs the committee, echoes Briggs’ sentiments and asks for more time to look at the administration’s numbers.
Gov. Bill Haslam, who consistently says he’s not predisposed to privatization but continues to push in that direction, points out the state is always under pressure to keep tuition down at colleges and universities.
He says no layoffs would be made as a result of the contract, but he said “quality” will be part of the state’s decision as well.
“Any money you save is significant,” Haslam says.
“If I told the higher-ed institutions we’re giving them back $28 million more this year, I would get a round of applause from them if we can do that. So if we can protect the employees, provide a better quality service and save $28 million, I think that’s what the taxpayers would want us to do.”
Whether to move forward with such a contract appears to lie in the governor’s hands, too. At least some senators are conceding as much, saying they don’t like the proposal but don’t have much say in it.
Asked by Briggs whether the final decision to proceed with the contract lies with legislators or the executive branch, Commissioner Martin says it would be an “executive” decision.
Reality or not
Democratic Sens. Jeff Yarbro and Lee Harris, both leaders in the Senate Minority Caucus, are calling for more oversight by the General Assembly rather than yielding to the Haslam administration.
Harris, of Memphis, is sponsoring legislation requiring the Fiscal Review Committee to look at all competitive state contracts over $5 million. He points toward the snafu with Measurement Inc. and TNReady, which flunked its online testing debut, as one reason.
“You’ve got to remember there are at least 800 of these contracts. They total about $2.6 billion in state spending through private vendors. And nobody in the General Assembly knows anything about them,” Harris says.
Harris’ legislation initially sought Fiscal Review oversight of contracts over $1 million, but he is amending it because such a move would put a heavy burden on the panel, which already goes over 135 contracts a year. His bill would add 250 contracts to their purview.
“Let’s have a second set of eyes. Let’s make sure taxpayers are getting what they expect, because they expect the checks and balances,” says Harris, a former Memphis City Council member.
Yarbro says he would like to see savings but questions the administration’s transparency. He notes legislators knew nothing about the administration’s plan at the recent Senate State and Local Government meeting.
Yet he says he believes a bigger point could be in play.
“I think the saddest part of today is that you had legislators who said they were powerless to do anything about this contract. And I don’t think that’s true,” he says.
If the General Assembly can lock itself out of oversight on these types of contracts, it can enact legislation such as Harris’ bill to enable it to “do its constitutional job, which is to provide oversight and a counter-balance to the executive branch.”
As lawmakers prepared to hear the administration’s plan recently, members of United Campus Workers from across the state rallied in the Legislative Plaza hallway, shouting, “Tennessee is not for sale!” rolling giant petitions with thousands of names across the floor opposing job outsourcing.
Thomas Anderson, a member of United Campus Workers and UT-Knoxville employee, says he believes state workers will be pressured out if a company such as JLL were to get contracts at Tennessee universities.
“They’re claiming they can do a better job for $2.26 a square foot with no loss of service, no job cuts, no benefits cuts. Everything’s going to be better, but you’re going to cost less with no evidence to back that. That’s just a sales job that I won’t buy,” he says.
Campus Workers spokesman Thomas Walker explains the business justification plan doesn’t make sense to the union or the administration and points toward a business review done six months ago showing outsourcing would cost more than keeping services in-house.
“So we’re really concerned that what’s going on is people are playing with the numbers and that they’re just trying to push this plan through, which would be a huge, multi-million-dollar giveaway to big corporations headquartered outside of Tennessee,” Walker says.
Sen. Bill Ketron, who chairs the Fiscal Review Committee, has his own doubts about the administration’s numbers. But one of his biggest concerns lies with the argument a private company could save money with more buying power.
The Murfreesboro Republican sponsored the Procurement Reform Act of 2010, which was designed to give Tennessee more ability to buy items in bulk.
If a state agency was buying 6,000 rolls of toilet paper, it’s still going to have to buy that same amount.
“Are you getting it a dollar cheaper per roll? Give me that kind of information. … Evidently, they’re not paying attention to this because it gave them full authority to do that in 2010 in the last administration,” Ketron says.
With a $35 billion budget, Tennessee has some pretty good buying power.
At the same time, if a vendor such as JLL can train employees to avoid sub-contracting, then the state could do the same thing.
What appears to be happening with this is a rush to judgment and some possible numbers finagling to make outsourcing look more inviting.
And without full consideration of Harris’ contracts legislation, the General Assembly will be abdicating its authority as a branch of government. If that’s case, they might as well step aside and let the governor do as he pleases.
Sam Stockard can be reached at firstname.lastname@example.org.