Competitive Contracting Keeps King County's Accountability and Service High
2007-05
For almost twenty years, King County has contracted with the private sector to provide recyclable hauling services—a service where a private company picks up recyclable waste at division transfer stations and drop boxes and hauls it to private recycling processors.
The policy has worked well, providing effective recycling services at a reasonable cost to the public. County officials are now considering reversing that stance and “insourcing” recyclable hauling in order to “save” the County money and “improve operational efficiency.” However, doing so may complicate the system for ratepayers, provide little or no improvement in service quality or prices, and permanently shut the door to any future third-party contracting opportunities.
The goal, according to the County is to absorb recyclable hauling into its existing Solid Waste Division in order to streamline operations and save approximately $1.1 million over the next several years. One year after an initial capital expenditure necessary to expand the County’s workforce and fleet in order to meet demand, the County is expecting to save around $400,000 per year.
It is important that King County continue to look at ways to improve efficiency and lower costs to taxpayers. A county should, however, refrain from implementing policy that would cut out, hinder or complicate any future attempts at competitive bidding for services that were previously contracted to private vendors. Reversing its stance on competitive bidding by doing away with a system that has been successful sends a message that a county is not interested in tapping any private-sector resources for the good of ratepayers.
A state, local or municipal government contracting with private enterprises is nothing new. Since 2001, the federal government has taken aggressive steps to open federal contracts to competition for non-inherently governmental activities with the private sector. An Office of Management and Budget estimate puts taxpayer savings at around $6.9 billion since 2003 alone. Likewise, Washington state government—along with just about every other state—has taken important steps to implement competitive bidding programs. (for some specific examples, see Policy Note 07-02: New contracting out law saves money and improves service to the public.)
Competitive bidding allows government agencies to open work normally performed only by in-house employees to bids from a variety of sources. Public employees are allowed to bid for contracts along with contractors from the private sector. Introducing competition allows government managers to provide improved services at lower cost to taxpayers.
Concerns about government not being able to properly oversee and maintain control of a system that is contracted out are largely unfounded. Competitive contracting is about holding the winner of the competitions accountable for delivering an agreed-upon level of service at a good price. Clear and accountable guidelines that determine how and when a service will be carried out lend itself to a degree of openness. Reporting requirements help keep the contracted parties accountable.
One major concern mentioned by County analysts, and echoed by Washington Policy Center, is that King County’s proposal would further complicate the competitive bidding process. Many times it is tough for government agencies to put projects up for bid that could affect a public employee’s job status. State agencies must notify any employee who could be displaced 90 days prior to soliciting any bids. Therefore, any future attempts to contract out recyclable hauling services could be hampered by this policy—essentially blocking any effort to increase efficiency through contracting out in the future.
Contracting out recyclable hauling will also continue to save the County a considerable amount in overhead because the private sector has a strong incentive to reduce overhead as much as possible. The public sector lacks the same incentives and the extent to which overhead costs can be avoided is mostly a function of political will. Contracting with a third party to take on the bulk of the overhead and administration burden allows the County government to focus on the solid waste division—which it currently runs.
The County expects recycling to grow as consumers and businesses increase their recycling efforts and officials are worried that a third party vendor will not be able to adapt as quickly to the changing market. Again, this notion is unfounded because private vendors stake their business on being able to quickly adapt to the fluctuating nature of the market like adding new services and adapting to demand (i.e. more trucks, different routes, etc.). If one vendor is unable to adequately adapt, the County can choose another vendor after a contract expiration date.
The process of competitive bidding for government contracts benefits taxpayers who are interested in efficient government and lower taxes; governments that are more focused on results than process; and private enterprises looking for projects.
What King County is proposing is not the winning bid in its own competition. Rather it is proposing to do away with the existing competitive system and absorb a successfully contracted-out program. If King County wants to play fair, it should continue to accept bids for the recyclable hauling service and then submit its own bid. What King County is vying for is a monopoly on solid waste and recyclable hauling—and monopolies, whether public or private, lack the stimulus to innovate and improve service delivery.
There will always be people who feel government needs to do more, regardless of the added cost to ratepayers. Many in government want to work in a growth sector so they tend to benefit when government takes on more tasks. That is why it is so important for policymakers to keep government focused on its core functions.