Update: Upcoming Outsourcing Issues. January 6, 2014


1) National: The industry-run Association for the Improvement of American Infrastructure is poised to launch an aggressive privatization campaign in 2014. This will include a civil infrastructure “best practices” guide prepared by Fluor Corporation; a social infrastructure guide prepared by Skanska; and a comparative analysis of states’ “public private partnership” legislation together with proposed model legislation. AIAI is also coordinating its efforts with the National Association of Water Companies. Its lobbying efforts will focus on New Jersey, Florida, Maryland, and New York. Noted privatization advocate Frank M. Rapoport is AIAI’s government affairs coordinator. [Public Works Financing, December 2013, sub required]


2) National: Major government contractor Booz Allen Hamilton marks its 100thanniversary. CEO Ralph Shrader tells CNBC that the scandal involving its employee Edward Snowden was “just an aberration,” and that “actually it hasn’t been as tough as one might imagine.” The theme of BAH’s upcoming yearlong anniversary celebration is “Start With Character.” The company will report on its quarterly results on January 21.


3) National: Road privatization industry clamors for an increase in the authorization of private activity bonds, which receive special tax treatment. Interests promoting “public private partnerships” for public buildings are also clamoring for developers to be able to issue their own tax exempt debt. But Public Works Financing notes that “ominously, the congressional Joint Tax Committee has indicated its intent to review the revenue impact of combining PABs with TIFIA loans” during the transportation reauthorization process next year. [Public Works Financing, December 2013, sub required] Federal caps on Private Activity Bonds were increased by 5.2% by the IRS in November.


4) National: TheStreet.com, a financial news and services website founded by Jim Cramer and Martin Peretz, lists Corrections Corporation of America as one of its top five dividend yielding buy-rated stocks, despite the fact that its stock price is down 8.7% year to date and its revenues are down.


5) National: Susan Milligan, in an opinion piece in U.S. News, says UPS’ failure to deliver Christmas packages on time shows that private isn’t always better than public. “There’s another issue here, and that is the public/private bias. Why is Amazon using UPS instead of the U.S. Postal Service? I ordered two books and a CD from Amazon 10 days before Christmas, and my package arrived (thankfully) late afternoon on Christmas Eve. The packages I sent through the U.S. Post Office arrived exactly as promise: When I got two-day Priority delivery, it got there in two days. And (‘free’ shipping aside), the U.S. postal service is cheaper than the private alternatives.” Project Censored has cited the conservative attack on the U.S. Postal Service as a prime example of “news that didn’t make the news“ last year.


6) National: Audrey Watters discusses the top Ed-Tech startups of 2013. Top 3: Lumen Learning, A Domain of One’s Own, and Desmos. Citing CB Insights, she reports that the top 10 education startup companies raised $594,300,000 in new investments in 2013, including $63 million by Coursera.


7) National: Dhawal Shah breaks down some of the numbers on Massive Open Online Courses (MOOCs), which have been criticized by some as threatening public education. “Coursera remains the largest MOOC provider by far, with almost half of all the MOOCs offered. But its share is slowly being reduced by new MOOC providers from different parts of the world. Aside from Coursera, edX, and Udacity, other startups from outside the U.S. are gearing up to offer MOOCs. To mention a few, 2013 saw the launch of FutureLearn, Open2Study, iversity, and France Université Numerique.”


8) National: The Defense Department has contracted with the Rand Corporation to report on the DOD’s 60 schools. “The $900,000 study, expected to be completed by fall, may recommend some schools be converted to charters, others be taken over by the local public school district and still others be shut down.”


9) National: A new issue of The Utility Worker, the magazine of the Utility Workers Union of America, AFL-CIO, is out. “UWUA members are engaged in an epic battle against those who profit most from the nation’s failing utility system. We are fighting to keep the lights on, the power and water flowing as we hold the line for workers and consumers. The shortcomings of our current system are most evident in the electric industry, but others are also on the brink of failing.”


10) California: Caltrans floats the idea of a $264 million tourist highway in Monterey County. The project would be a revenue-risk toll concession. But Public Works Financing quotes a developer as saying Caltrans’ “advisers are ahead of their client” on the proposal. Uncertainty over development funding, environmental studies, and traffic estimates loom over the project. [Public Works Financing, December 2013, sub required]


11) District of Columbia/Hawaii: New corruption scandal hits charter school industry. “A senior official at the D.C. Public Charter School Board allegedly received $150,000 to help the former managers of Options Public Charter School evade oversight and take millions of taxpayer dollars for themselves, according to a new court document.” An official responsible for overseeing the business practices of the city’s charter schools was allegedly on the take himself [Amended complaint]. A similar scandal over charter schools has hit Hawaii.


12) Florida: The Orlando-Orange County Expressway Authority will select an executive director this year. The authority board will meet tomorrow to consider several candidates, including “Jorge Figueredo, a senior vice president and director of national tolls at Atkins North America, an infrastructure firm with offices across the U.S, Canada, and in Trinidad.” [Sub required]


13) Idaho/National: In a blow to the for-profit prison industry, the state is to take over the CCA-operated Idaho Correctional Center by June 30. “An Associated Press report last year raised questions about how the Nashville, Tenn.,-based company was staffing the prison, and the state’s move is part of a larger debate over whether prison privatization works.” The Idaho Statesman applauds the state takeover. “Taking back control of the prison might lead the Legislature to much-needed prison reforms. We hope it does. (…) Something good can come out of the CCA saga if [Gov.] Otter and the Legislature keep their eyes focused on the open doors that lie ahead.”


14) Illinois: The Chicago Infrastructure Trust, a vehicle for promoting “public private partnerships,” pushes back its timeline for bringing its first deal to the City Council for approval to this month. It had hoped to close the deal, for city energy efficiency projects, by the end of the year. The Trust “has struggled to finalize a deal with a lender based on its proposed term, structure, sizing, and pricing, according to market participants with knowledge of the process.” [Sub required]


15) Illinois: The Quincy city government will continue to debate the possible outsourcing of trash and recycling services in 2014. The mayor recently put off a plan to privatize the system. “With signs leaning towards the city continuing to operate the service, officials will likely allow private operators to continue operating in the city.”


16) Iowa: AFSCME and four state lawmakers sue to block Gov. Branstad (R) from closing the Iowa Juvenile Home in Toledo. “Human Services officials indicated they determined that other state facilities and community-based, private providers could provide the treatment needs for both delinquent girls and children designated as in need of assistance.” Layoff notices issued last month come into effect January 16.


17) Kentucky/Ohio: The two states plan to use a “public private partnership” model to partially fund the $3.57 billion Brent Spence Bridge Replacement and Renovation Project between Cincinnati and Covington. “Alternative delivery and funding options, including tolling, are necessary to ensure the project is built in the foreseeable future.” There is no toll on the current bridge. Using a P3 for the Kentucky portion would require passing legislation. State Rep. Leslie Combs, D-Pikeville, is preparing a bill. [Sub required]


18) Nebraska: Concerns have been voiced that the privatization of the local public mental health system could leave Lincoln “without sufficient resources to take care of the needs.” Although a new private mental healthcare company is moving into the city, it will only “be able to serve a limited number of people without insurance.”


19) Nebraska: Sen. Amanda McGill begins her campaign for state auditor. “McGill said she was running after seeing firsthand the ‘waste and mismanagement’ in state government, including the state’s problem-plagued effort to privatize foster care services.” McGill also promised to continue inspections of the Department of Correctional Services.


20) New York/New Jersey: The Port Authority’s “public private partnership” procurement of the new La Guardia Airport Central Terminal has run into trouble. Talks with the four final bidders are “bogged down over the amount of public equity needed to calm airline fears about high use fees needed to fund the $3.6 billion project.” The project’s prospects have been further complicated by the controversy over Gov. Christie’s political operatives allegedly jamming traffic on approaches to the George Washington Bridge to exact political revenge. [Public Works Financing, December 2013, sub required]


21) New York: Gov. Cuomo signs a bill to mandate audits of state special education service providers [A7302-A]. In December State Comptroller Thomas DiNapoli found widespread waste, fraud and abuse in the system.


22) New York: Herkimer County Legislature puts off sale of its adult home for six months. The Civil Service Employees Association is expected to withdraw its lawsuit attempting to block the sale. CSEA recently reached a deal with Advanced Healthcare Management to keep the facility open.


23) New York/National: As Bill de Blasio is sworn in as mayor of New York City, The Washington Post reports that education secretary Arne Duncan lobbied him “not to choose Montgomery County Schools Superintendent Joshua P. Starr as the city’s next schools chancellor.” Starr has been a vocal critic “of some of the Obama administration’s school reform policies.”


24) New York: State benefit cards issued by Chase bank have been hacked, according to the Albany Times Union. “The State is awaiting an explanation from Chase as to why the State and its departments were not informed until December 3 of the potential security breach that was discovered in mid-September,” the Labor Department said. A similar problem has affected Connecticut, where an official saidChase “has to get ahead of these problems before they snowball out of control.”


25) North Carolina: Bertie County administration steps into the breach when a private ambulance contractor goes bankrupt and shuts down service in the county and in more than 70 municipalities. “‘We’ve had a long, hard challenging week and a half,’ said Bertie County Emergency Management Director Mitch Cooper in his opening remarks to the county’s Board of Commissioners at their meeting here Wednesday. ‘But we met all these challenges head-on.’”


26) North Carolina: Gov. McCrory moves to privatize “parts of the public agency that woos companies and jobs to North Carolina (…) and assign it to a nonprofit organization over the coming months.” The outsourcing would remove contracting and salary limits. “Critics say the changes risk making it harder to track public money used to entice companies and opening new doors to cronyism.”


27) Ohio: The Youngstown Vindicator calls on “all good MEN and women” to lobby the Bureau of Prisons by February 28 to renew Corrections Corporation of America’s contract to operate the Northeast Ohio Correctional Center.


28) Ohio: Plunderbund writes about the largest charter school in Ohio, Electronic Classroom of Tomorrow (ECOT), and its head, “Ohio’s first public school hundred-millionaire, William Lager.” The blog reports that Lager made more in political contributions than the recently-hired Toledo Public School District superintendent is paid. “At this current rate, Lager will see a paycheck of over $23,000,000 for FY14 (including the Straight A Fund bonus check).”


29) Ohio/National: Dayton Power and Light wins $26 million contract to supply power to Wright-Patterson Air Force Base in 2014. The deal “is separate from a 50-year deal DP&L won in 2009 to privatize electric operations at Wright-Patt. As part of that contract, DP&L purchased the electric infrastructure at the base—including substations, poles and underground lines—and the base pays DP&L to maintain and operate the system.”


30) Oklahoma: Behind the scenes moves by Gov. Fallin’s senior staff “helped lead to a severe weakening of a program designed to cut the state’s high incarceration rates and save taxpayers more than $200 million over a decade,” according to interviews and records obtained by Oklahoma Watch.


31) Pennsylvania: State auditor general applauds Gov. Corbett’s decision to abandon his move to privatize the state lottery. “I am pleased to see that we will be refocusing our efforts on improving the lottery and revenue for senior programs using existing lottery employees to save money that would have been spent on a private management firm,” Eugene DePasquale said. The costs for privatization consultants on the failed process ballooned from $725,000 to an estimated $4.6 million.


32) Pennsylvania: Employee concessions may stave off privatization of the Lawrence County jail for now. “The county prison board has been talking with Community Education Centers Inc. of West Caldwell, N.J., since November.”


33) Puerto Rico: The Puerto Rico Public-Private Partnerships Authority is working on four projects, “a new women’s correctional facility, a new men’s correctional facility, conversion of the Puerto Rico Electric Power Authority’s power plants to natural gas, and a commuter train from Caguas to San Juan.” [Sub required]


34) Texas: Houston is to consider using a “public private partnership” to financeconstruction of a new police headquarters and courthouse. A request for proposals is expected to go out in March. [Sub required]


35) Texas: The Wall Street Journal reports on the troubled, privately run SH 130 toll road, which is undergoing financial restructuring. “Some drivers and trucking groups said motorists have avoided the privately operated toll road because of the expense—fees can exceed $8 for cars and $29 for commercial trucks—and it often isn’t the fastest way from point A to B.” [Sub required]


36) Virginia: Terry McAuliffe is to take office as governor on January 11, and has announced he will appoint Aubrey Lane to become transportation secretary. Lane has served two terms on the state transportation board, and will be in a key decision-making role as Virginia implements its $6 billion road improvement budget. “State transportation officials face choices about using tolls to build major thoroughfares under public-private deals, and dispersing an infusion of road-building money that lawmakers approved earlier this year.” Sean Connaughton, an aggressive proponent of road privatization, will leave office January 11.


37) West Virginia: Division of Corrections review team is “impressed” with what it saw in a tour of a private prison in Kentucky seen as a possible site for incarcerating some of its prisoners. The state corrections commissioner reportedly said “it will be interesting to see how much CCA will propose charging West Virginia to keep its inmates.” The Division of Purchasing will decide “when a bid opening will take place.” The Huntington Herald-Dispatch supports an alternative proposal by the Regional Jail Authority to add counselors, which it says would be preferable to sending inmates out of state.  


38) International: Brazil considers privatization of prisons. But CUNY Prof. Byron E. Price proposes an alternative. “Before considering the privatization of additional prisons, Brazil should look at justice reinvestment strategies, which encourage reinvesting billions of dollars being spent on corrections into communities decimated by incarceration.”


39) International: Bankrupt private toll roads that have landed in the government’s lapput stress on Spain’s chances of hitting its EU budget targets.


40) International: The Mexican government has issued regulations for selecting projects under its “public private partnership” legislation, passed in 2012. “A working group composed of at least seven senior public servants will then evaluate the suitability of the proposed projects, using a score card based on criteria such as cost-benefit analysis, risk profile, upfront and ongoing cost for relevant authorities, potential public revenue and sustainability.” [Sub required]


41) Revolving Door News: The administration’s contracting chief, Joseph Jordan, is leaving his position as head of the Office of Federal Procurement Policy to take a job at FedBid, a private contracting marketplace company. “‘Unfortunately, we think the OFPP has become a launching pad for future contractor lobbyists,’ said Joe Newman, spokesman for the Project On Government Oversight, which monitors government contracting.”



Legislative Issues:


1) Resource: Current and upcoming state legislative sessions. Interactive map.


2) National: The New York Times urges legislative action to rein in private contractors. “But for all the research and recommendations, nothing much is happening in Congress or the administration, in part because the status quo is lucrative for powerful corporations and big campaign donors, and is entrenched by the revolving door between government agencies and private-sector contractors. Reform will not be simply a technical exercise. It also will be a political battle, one that no one has taken up in earnest yet.”


3) National: The Bipartisan Budget Agreement requirement that all new spending be accompanied by offsets “makes passage of an infrastructure bank bill a heavy lift.” [Public Works Financing, December 2013, sub required]


4) National: Republican Senator Richard Burr (NC) wants to reduce or eliminate funding for “the Enhanced Transitional Jobs Demonstration program, which aimed to help find jobs for men who were released from prison or owed child support.”


5) Indiana: Showdown looms over the possible private outsourcing of the annuity payments system for public workers. The state legislature has “recommended that the pension board keep the annuity program in-house and not contract with a third-party provider.” But the Indiana Public Retirement System (INPRS) board of trustees is proceeding anyway. “Representatives from several unions spoke in opposition” to the outsourcing plan. The state legislature reconvenes today and legislation to block the privatization is expected to be introduced.


6) Kentucky: Privatization will likely become an issue in 2014 in the General Assembly. In 2006, a performance audit of Kentucky’s oversight of privatization projects found legal deficiencies, the use of employee attrition to avoid oversight, minimal justifications for private services, and inconsistent application of the requirement that outsourcing must save 10%.


7) Pennsylvania: Talks continue on a possible revival of partial privatization of liquor sales. “It’s unclear what the proposed system would look like. Legislative staffers say it’s likely to be a hybrid that expands private sales and at least begins to scale back the 600 state-owned wine and liquor stores. Wendell W. Young IV, president and CEO of United Food and Commercial Workers Local 1776, which represents state store clerks, called the optimism ‘lots of New Year’s cheer.’”


8) Tennessee: “Education reform” lobbyists gear up for battle in the state legislature to promote vouchers and charter schools. “Both items, certain to resurface after the legislature reconvenes Jan. 14, had the backing of StudentsFirst, the pro-school choice organization founded by controversial former Washington, D.C., Schools Chancellor Michelle Rhee.” Other lobbying groups include “Stand for Children and K12 Inc., the for-profit company that operates the Tennessee Virtual Academy, a computer-based virtual school.”

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