Most public works officials shudder when they hear the phrase “managed competition.” For some, the first thing that comes to mind is lost jobs, a decrease in service to residents, and the tangled nightmare of working with private vendors.
But this doesn't have to be the case. The process can actually make your department more efficient, enhance service to residents, and improve how you handle department funds. The process can educate elected officials on your strengths and how optimizing your performance may be as much in their hands as yours.
Simply put, managed competition is opening the opportunity to bid for city services to both a city department and private vendors. When the city wins this bidding process, each employee must personally take responsibility to manage service delivery and internal operations to make sure that the municipality remains competitive.
Before managed competition can be considered, it's essential to make your public works services as efficient as possible, says Karen Luken, senior director in R.W. Beck's Cincinnati office.
“You have to identify ways to cut costs before even considering managed competition because it can sometimes happen very quickly and unexpectedly,” she says. This often forces departments to look at the long-term big picture through a cost-of-service study. By streamlining processes and ensuring that efficiency is a top priority, your department is then ready to bid out a service. This process can take up to a year, says Luken.
“You should know the value of your service,” she says. “Through a cost-of-service study, you'll know exactly how much everything costs, from salaries to overhead to capital expenditures, and be able to quickly convert that to a bid price (i.e. cost per household per month). In addition, the cost-of-service study will allow you to identify cost centers that may be higher than industry standards so you can focus your efforts on improving these specific areas.”
Once your community is ready to put out a request for proposals (RFP), the next step is to carefully define exactly what expenditures the bid price should include, leaving little room for error in the bidding process.
Determining what should be included in the bid price depends on what you're looking for in the long run. Do you want to include overhead or capital costs? Do you want the garbage truck drivers, for example, to be hired by whoever wins the bid? Should costs that don't directly relate to this particular service, like administrative salaries, be included in the bid? These questions can come from all angles—the mayor, the public works department, or the local or state government. There are no right or wrong answers.
The final step is to collect the bids. Since most RFPs are made public, both public and private bidders can see how they fared overall after the winning bid has been accepted. Throughout the RFPand bidding process, communication with elected officials is paramount, since they generally look only at the bottom line. It can be tough to convince them that short-term investment in capital expenditures will yield long-term operational savings—especially because it may occur after their term has expired.