Real World Applications for Alternative Service Delivery Jeffrey Horne, City Administrator Clinton, Iowa & Jim Halverson, Principal HR Green, Inc.
Has your local government studied the feasibility of Alternative Service Delivery in the past 3 years? 1. Yes 2.
What factors contribute to your decision to consider Alternative Service Delivery? 1. Decrease Costs? 2. Restrictions on increasing revenue? 3. Political desire to decrease role of government? 4.
What opposition have you experienced…, or do you expect to experience? 1. 2. 3. 4.
HR Green Background • • • • • Founded in 1913 by Howard R. Green in Cedar Rapids, Iowa Long history in civil engineering as “Howard R. Green Company” Growth and diversification since 1970 (esp.
City of Clinton, Iowa • 26,885 Citizens • Manager/Council form of Government • FY 2013 Budget of approx.
Alternative Service Delivery - ASD • Alternative Service Delivery – Simply stated, alternative service delivery is providing services without your own employees to do the work. It encompasses shared services, contract services, and shared contracts.
Variations on ASD • Shared Services – In local government terminology, the sharing of services is not necessarily within the organization, but most often is with other governmental entities. • Contract Services - This term is similar to shared services except that the contracting is with a private sector partner. This partner may be a for-profit or not-for-profit organization.
Variations on ASD • Shared Contracts – The utilization of a single contract by multiple entities to gain economies of scale. The shared contracts may be for providing services, purchasing equipment or supplies, or for capital projects.
The Concept Purpose: Determine if it’s feasible to achieve lower operating costs in the delivery of street, building, grounds maintenance through an alternative service delivery option
Factors that prompted this assignment • Challenges associated with capital for operations • Reorganizing staff from Parks & Recreation to Public Works • Escalating labor costs – particularly attributed to health care and pensions • Flat population growth in Clinton and how roads are financed in Iowa via Road Use Tax revenues – Slow tax base growth 1995-2008 – average 0.
Shared-Services Selection • Area government based organizations – Adjacent cities – County Secondary Roads Department – Public Schools • Summarize service needs with a relatively simple “yes” and “no” response – Yes responses requested additional information on unit prices
What we want to know • Estimated costs associated with services – Personnel – Equipment – Avoided-cost linked to administrative expenses • We also wanted to maintain the anonymity of participants – To prevent an advantage or disadvantage if the project proceeded to implementation
We also wanted to know… • Which services the participant was capable of doing • Whether the participant would provide equipment • Level of interest in purchasing or renting City equipment if made available • Determine how equipment would be maintained • Who would provide required materials (i.e.
In light of these findings what would you do? 1. Only pursue those services with several potential vendors? 2. Look for greater operational efficiencies with the existing team(s)? 3. Implement a process much like what Clinton chose? 4.
Approach • Define services and service-level expectations; • Evaluate historic public sector costs associated with these service and comparing them with private vendors and other governmental agencies • Input was sought from private vendors and sister-communities (i.e., using a shared-services model) • Cost comparisons were assembled to determine if it’s feasible to achieve savings via operating costs by choosing an ASD.
Work Product • Report findings linked to the comparative cost of maintaining the exterior of public buildings, parks and related public domain open spaces, roads and right-of-way maintenance – Current “city” delivered services – Private Vendors – Shared Services • Other ancillary elements were investigated (e.g., purchase of city-owned equipment, insurance, performance bonds, etc.
Private Sector Partner Selection • Road Maintenance – Within a 30 minute commute – Capability of providing snow removal equipment – Targeted excavation companies and related earth moving businesses • Buildings & Grounds – Targeted local lawn service businesses • Identified 8 in the region – Within a 30 to 60 minute commute – Provide equipment that meet the different needs associated with ground maintenance
Factors influencing results • The absence of operations manuals or documented procedures posed challenges for measuring how services were delivered • Full cost accounting methods that measured specific responsibilities • Ability to identify vendors that would participate in the study & submit bids if the City chose to privatize services • Ability to identify a critical mass of vendors that could respond within a reasonable timeframe
Summary of Findings • The region has several landscape and facility maintenance businesses that can address most of the City’s needs; – Exceptions to this would be changing light bulbs in exterior lights and tree maintenance that requires specialized equipment • Soliciting information from contractors to satisfy road maintenance duties was more challenging; – Difficulties in providing timely responses – Lack of interest to participate
Summary of Findings • While hourly rate estimates suggest opportunities for cost reduction could occur , it’s important to: – Review current labor agreements and determine what the City can do and when – Define service level expectations – Performance expectations – Metrics that measure costs – man-hours, commodities, and units of completed work – Identify unintended consequences of alternative service delivery methods
Recommended Actions • Phase 1 – Create an Implementation Plan: – Prepare an Operations Policies & Manuals for Streets, Buildings and Grounds Maintenance; – Define performance metrics; – Define core and optional services; – Review appropriate Labor Agreements
Recommended Actions • Phase 2 – Execute the Plan: – Develop a transition plan for selected services; – Prepare RFP/Bid Document to solicit proposals and/or prepare Intergovernmental Agreement(s) for select services – assuming this is not in conflict with any labor agreements; – Engage prospective vendors prior to issuance of RFP/Bid Document, etc.
What else could be done to make this more attractive to a partner? 1. Engage more vendors by breaking the community into a series of sub-areas? 2. Offer special terms on the sale of city equipment and facilities? 3. Offer performance compensation based on savings when compared to previous costs? 4. Offer performance based compensation for approval ratings among citizen surveys? 5.
Parting thoughts • Efficiencies that may result from outsourcing is an important consideration from both a financial and service delivery standpoint. • Properly specified performance contracts that guarantee service levels for the City while allowing private sector vendors to compete in a “bidding” environment employing their efficiencies may well be one of the most attractive methods of securing savings.
Additional parting thoughts • A concern expressed about ASD is that it’s difficult to start over again – i.e., the cost of re-entry would be higher – However, several factors can mitigate this concern (e.g., performance agreements, lease-back equipment, etc.) • Several variables should be considered. • Look at longer term cost specifically.
Questions/Comments? For Additional Information please contact Jeff Horne at jeffreyhorne@ci.clinton.ia.us Or Jim Halverson at jhalverson@hrgreen.
