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Reason Foundation

Tallahassee Democrat

State Outsourcing: The Sky Isn't Falling

Outsourcing saves 10 to 20 percent, improves service

Geoffrey Segal
February 2, 2005

Recent developments — including Gov. Jeb Bush's concession that some of the state's outsourcing initiatives have encountered problems — have led to renewed calls for greater legislative oversight of the process. Some critics — citing glitches during the startup phase of the Convergys contract to take over payroll and other personnel functions from state bureaucracies — have even called for an end to all outsourcing.

However, any fair assessment will conclude that getting rid of all outsourcing is out of the question, and interjecting intrusive legislative review may do more harm than good.

Here's why: The Legislature is, by definition, a political body whose constitutional role is to enact laws to be implemented by the executive branch. Outsourcing is properly a management issue and ought to remain within the purview of the executive branch.

Indeed, when legislative politics are injected into matters that properly ought to be management issues, the decision-making process regarding contracts and other matters generally gets mucked up. In the legislative arena, sound management practices too often lose out to a volatile mix of politics, personalities, and parochialism. Recent controversies involving meddlesome legislative decisions affecting Florida's public universities are symptomatic of this.

Despite what the critics say, outsourcing has had a long successful history in Florida. The late Lawton Chiles, for instance, asked Lt. Gov. Buddy MacKay to include outsourcing among the options to consider when exploring ways to improve governmental efficiency.

Saving money and improving services should always be among every governor's goals. Competitive sourcing is a proven tool to assist them, and it should not be hastily discarded or needlessly disabled.

As a rule of thumb, outsourcing will typically lower costs 10 to 20 percent while maintaining or improving service levels. This has been demonstrated time and again in a vast array of studies by the federal government, academic researchers and others.

A review of practices around the country found many other important factors in a state government's decision to outsource or institute competitive sourcing of services. They include a need for greater flexibility, private-sector innovation and access to skills and expertise not available in house.

Those factors were key considerations for Florida last March when Gov. Bush created the Center for Efficient Government (CFEG) to review the state's outsourcing procedures. Among its goals was the creation of a new process to ensure that future initiatives would be conducted in a standardized, transparent, performance-based manner. The result was the GATE Management process, an innovative, first-of-its-kind process to guide future endeavors. Several other states, including South Carolina, Virginia and Indiana, have expressed an interest in replicating the GATE process. While some legislators and agency heads may have their doubts, they need to give this relatively new system and the process a chance to work.

The GATE Management process and CFEG are two critical steps toward achieving those ends. While the process is still new and, as with any start-up, will probably have some kinks that need to be worked out, it's nonetheless the most innovative, performance-based, transparent and accountable process out there.

CFEG has pored through past competitive sourcing experiences to learn what works and what doesn't. It has built a process that applies the valuable lessons learned in order to implement the best management practices.

If you're like most Floridians, you want your tax dollars spent in the most effective and efficient manner possible. If there's one thing to learn, it's this: Competition works.

While it may be hard for the Legislature to resist intervening, lawmakers ought to take a hands-off approach. When it comes to competitive sourcing, Florida has emerged as a national leader and ought to stay the course. Let the CFEG do its job, and let the GATE process manage the system. In the end, Florida will be better off for it.

Geoffrey Segal is director of privatization and government reform at Reason Foundation.



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