Update: Upcoming Outsourcing Issues. December 15, 2014


1) National: The Senate Intelligence Committee releases a report finding that contractors played a “central role in the operation, assessment, and management of the CIA’s Detention and Interrogation Program.” One company formed by two psychologists “got a CIA contract valued at more than $180 million and the contractors received $81 million before the contract was terminated in 2009.” The Senate report says “the psychologists carried out inherently governmental functions, such as acting as liaison between the CIA and foreign intelligence services, assessing the effectiveness of the interrogation program, and participating in the interrogation of detainees in held in foreign government custody.” David Isenberg points out that “the International Code of Conduct for Private Security Providers has provisions against torture” and asks “if a government is willing to hire private contractors to do its torture for them and indemnify them against any charges for what they do, what good are such codes?”


2) National: The Center for American Progress’ Kevin DeGood sketches out some of the differences between traditional public infrastructure procurement and “public private partnerships.” He writes, “public private partnerships are a poor mechanism for increasing the total volume of infrastructure expenditures. The controlling factor that constrains overall investment by government is not access to credit; rather, it is the public’s willingness to pay the taxes and fees necessary to service project debts. Sophisticated procurement contracts cannot overcome the basic political challenge of raising tax revenues to support needed infrastructure investment. Similarly, creating a national infrastructure bank, or NIB, likely would not increase the total volume of infrastructure investment.”


3) National: The 7th Federal circuit court of appeals rules that an employee cannot sue Corizon for retaliationagainst her for supporting a colleague’s sex discrimination claim. “The 7th Circuit said the prison’s decision to privatize counseling services, and the associated reduction of staff, did not target Ripberger in retaliation for her support of Orton-Bell.”


4) National/Wisconsin: Picking up on New York Times story on the role of the  Republican Attorneys General Association (RAGA) in coordinating state ASGs to defend corporate interests, the Milwaukee Express reports that  “AG-elect Schimel also picked up his share of cash from RAGA’s Wisconsin committee. In addition, the person Schimel hired as his top aide is leaving his job as a lobbyist for the same industries and companies Schimel is supposed to regulate—including the coal industry.” The Express says “RAGA appears to be actually encouraging their state attorneys general to privatize the office by allowing corporations to secretly back legislation and support lawsuits in their interests.”


5) National: GAO issues a report saying the Defense Department needs to do a better job on planning and fiscal control of contract services.


6) National: Audrey Watters, an online education analyst, says that the outsourcing of education technology to third party providers may be a more important trend to follow than focusing solely on MOOCs. 


7) NationalProPublica reports that profiteering by charter school operators is going unmonitored. “While relationships between charter schools and management companies have started to come under scrutiny, sweeps contracts have received little attention. Schools have agreed to such setups with both nonprofit and for-profit management companies, but it’s not clear how often. Nobody appears to be keeping track. What is clear is that it can be hard for regulators and even schools themselves to follow the money when nearly all of it goes into the accounts of a private company.”


8) Arizona: The South Mountain Freeway Project “public private partnership” receives statements of qualification from five bidding teams. AzDOT is expected to issue a shortlist in February. A group is suing to block the project for environmental and economic reasons. “Inside a binder is the group’s 350-page response to the agency’s final environmental impact statement. ‘It was basically a lot of baloney,’ PARC President Pat Lawlis said.”


9) ArkansasLaSalle Corrections offers to house some of Arkansas’ prisoners in its facilities just over the border in Louisiana. LaSalle has eight prisons and its headquarters in northern Louisiana. Billy McConnell, LaSalle’s managing director, “currently serves in various executive management and ownership roles in Southwestern Correctional, BAS Construction, M&T Property, Red River Corporation, and many others.” Their chief lobbyist, Bob Prince, was a “forensic hypnotist” for the Texas Rangers.


10) California: Costa Mesa gets a new pro-outsourcing Mayor, Steve Mensinger. “He was instrumental in adopting the Civic Openness in Negotiations ordinance to shed light on contract negotiations between the city and its employees. He has also supported efforts to privatize city services, first by voting for mass layoffs in March 2011 and later by twice backing a city charter measure that would have given Costa Mesa home rule.”


11) CaliforniaSanta Barbara golfers fight privatization of their golf course. “Members of the Golf Advisory Committee urged the council to reject privatization, one calling it ‘an abomination.’ With 12 city positions on the chopping block, the Service Employees International Union has also opposed the move. (…)  Likewise the police and firefighters unions have been lobbying behind the scenes to scuttle the deal; both unions have faced privatization scares of their own, which helped prompt this unusual display of common interest among city employee unions.”


12) FloridaGov. Scott appoints Julie Jones to head the Department of Corrections starting in January. During her time heading the Department of Highway Safety and Motor Vehicles, she “was forced to abandon a plan to privatize license tag services. Jones had argued that the move would save money by letting private companies make tags and distribute mail and online orders. But she abandoned the idea under pressure from the tax collectors, Attorney General Pam Bondi and Chief Financial Officer Jeff Atwater.”


13) Illinois/Indiana: The Federal Highway Administration has approved moving ahead with plans for the controversial Illiana Expressway, a $1 billion toll road that the two states hope to finance as a “public private partnership.” A Chicago agency, The Metropolitan Planning Organization Policy Committee, recently voted to approve Illiana a day after its sister agency, the Chicago Metropolitan Agency for Planning, “voted 10-4 in favor of removing the Illiana project. The failure to reach a super majority prevented the action from taking effect” [Sub required]. The Chicago Tribune reports that “chief among the issues still unresolved is whether the project will have the backing of Gov.-elect Bruce Rauner, who has been non-committal on the Illiana.” Rauner’s spokesperson has said “we must make sure that any potential public private partnership deal doesn’t leave taxpayers holding the bag if revenue projections don’t meet the goals.”


14) IndianaIndianapolis Mayor Greg Ballard chooses WMB Heartland Justice Partners to develop a criminal justice center, which would be the largest “public private partnership” of its kind. “The consortium is made up of equity partners Meridiam Infrastructure Indy Justice LLC, Balfour Beatty Investments Inc. and Walsh Investors LLC with Walsh Construction Co. and others on the project side. The Meridiam- and Walsh-led team is also on the short list of teams to work on the Illiana Expressway, a $1.3 billion P3 project with Illinois and Walsh is also the lead on the Ohio River Bridges, a massive P3 project with Kentucky.” [Sub required] 


According to the Indianapolis Star, “the project still needs City-County Council approval—a step which may not come without a fight.” The Mayor’s spokesperson said protections will be built in—the city will own the building and provisions will be made if the vendor needs to be changed.


15) Indiana: IBM and the state have agreed to take their multimillion dollar dispute over the failed privatization of social services to mediation. “The new court filing says mediation is scheduled for Feb. 25. If the mediation effort fails, the Supreme Court—which heard oral arguments in the case Oct. 30—could move ahead to reach a decision in the dispute.” John Van Winkle of Van Winkle-Baten Dispute Resolution is the mediator.


16) Kansas: Gov. Brownback reaffirms his support for the privatized child support system despite the fact that The Topeka Capital-Journal reported that “collections have fallen since privatization, with the percentage of current support collected at a 14-year low.”


17) Maryland: As the state’s incoming Republican governor is still being coy about whether he will pull the plug on the Purple Line light rail “public private partnership,” former Chevy Chase Mayor David Lublin raises questions about its finances, particularly about whether the decades of subsidies should be counted as state debt. “The problem for MDOT and Maryland is that no one knows if the bond rating agencies will swallow these manipulations. After all, the great portion of the availability payment is to cover the building of the Purple Line, not to operate it, despite the work of fiction authored by MDOT.” Ben Ross of the Greater Greater Washington blog pushes back, claiming that “fare revenue will repay the investors.”


18) Michigan: A state official tells the Detroit Free Press that Aramark continues to have problems with food service and inappropriate relationships between staff and prison inmates. “Last week, the Michigan Department of Corrections confirmed six incidents since late September in which female Aramark employees were fired and banned from prison property as a result of sexual contact with inmates. It also confirmed an October incident in which a male Aramark worker was fired after retrieving meat from an otherwise empty trash bag and feeding it to prisoners. (…) The incidents make up only a portion of the Aramark infractions since Ed Buss, an official with the Department of Technology, Management and Budget, was brought in just after Labor Day by Gov. Rick Snyder to oversee the Aramark contract.”


19) New YorkThe sale of the Chautauqua County Home is scheduled to be complete December 31. “‘Almost all of the employees have transitioned (to the new employer),’ said [Mayor] Horrigan, who noted other employees have retired and others have transferred to county agencies.” [Sub required]


20) Oregon: Despite earlier reports that privatization would be taken off the table, the Oregon Land Board votes to sell off  92,000 acres of the Elliott State Forest. The money would be directed to education. A Request for Proposals will be issued, with bids not likely to be accepted until 2016. “If a government or conservation group does not submit a bid, private interests could take ownership of the forest.”


21) Pennsylvania: In a letter to the editor, a retired UFCW worker warns incoming Democratic governor Tom Wolf not to privatize the state’s liquor stores. Tom Banotai of Allentown writes that “public relations consultant Larry Ceisler says he believes it would be easier for Wolf to anger the United Food and Commercial Workers Union representing the state store workers than it would be to anger the Pennsylvania State Education Association that wants to see additional educational funding. As a retiree of the UFCW, I predict if Wolf turns his back on the blue-collar workers of UFCW Local 1776 and the residents of Pennsylvania, he will be a one-term governor.”


22) Texas: The state is to close 14 charter school operators that failed to meet heightened financial and performance rules. The Texas Charter Schools Association complains. “Charter schools facing mandatory closure cannot appeal the decision in court, but they may request an informal review that could lead to a reversal of the revocation. Some charter operators have argued the closure process does not account for a full picture of a school’s financial or academic health—unfairly dinging them on technicalities and stifling practices that should be encouraged.”


23) UtahIron County rectifies a budgeting error that consistently showed its ambulance service running a deficit. The county now projects a profit for the service, which is still threatened with outsourcing.


24) Revolving Door News: Robert Rangel, a former Defense Department budget and policy gatekeeper and sidekick to Robert Gates, has been named Lockheed Martin’s chief DC lobbyist. Lockheed Martin had $45 billion in sales in 2013.


25) Think TanksA new study by University of California professor Adam Millard-Ball takes a critical look at the Institute for Transportation Engineers’ standards for estimating traffic. Flawed traffic statistics often skew road infrastructure financing and planning. Streetsblog’s Angie Schmitt looks at some of the latest research, writing that “Millard-Ball argues persuasively that ITE is overestimating traffic not just on mixed-use projects, but on all developments—and not by a little.”


26) Think Tanks: To the surprise of observers, Macke Raymond, a researcher funded by the pro-market Fordham Foundation and Hoover Institution, admits that education “is the only industry/sector where the market mechanism just doesn’t work.” Online and for-profit charters in Ohio were the worst performers.



Legislative Issues:


1) NationalDick Durbin, a leading Senate Democrat, says he “begged” Arne Duncan’s Education Department to cut funding to Corinthian Colleges, the for-profit that went bankrupt, leaving thousands of students in the lurch. “Durbin has introduced legislation to better coordinate the government’s oversight of for-profits. In August, he and other Democrats publicly criticized the Department of Education for its poor financial oversight of the industry. But with Democrats set to lose control of the Senate next year, Durbin acknowledges that industry oversight may be more difficult. Republicans have historically been far more favorable to the for-profit college industry than their Democratic counterparts.”


2) NationalLawmaker defends municipal bonds, speaks out against limitations, including the Obama administration’s proposal to cap tax exemptions at 28% and Ways and Means Chair Dave Camp’s proposal to impose a 10% surtax on interest for high earners. Rep. Randy Hultgren told the Government Finance Officers Association’s winter meeting “he thinks Camp put out his plan, which was released in February and formally introduced in the House on Thursday, to see what kind of pushback he would receive. It’s important for people to be vigilant and explain the importance of the tax exemption for municipal bonds, Hultgren said, because if they don’t, the exemption may be seen as a tax preference that can be easily changed in tax reform.” [Sub required]


3) MichiganRepublican lawmakers attempt to ban Community Benefits Agreements. Similar bills are being promoted by ALEC across the country. “Most of the discussion around HB 5977 has revolved around the high-profile construction of a new Red Wings stadium in Downtown Detroit and the fight by residents and community leaders for a CBA. But HB 5977 has statewide implications and will ultimately prevent residents in every town and city in Michigan from having a say on how local development is handled and how local tax dollars are spent.”


4) New Jersey: Rutgers Prof. Daniel Van Abs tells NJTV that privatizing water systems, the subject of legislation currently being debated, “wouldn’t necessarily result in more investment in infrastructure.”


5) Pennsylvania: Republican lawmakers may try to ram through liquor store privatization legislation in a lightning session in January before the new Democratic governor takes office on January 20. “‘I’d be shocked’ if lawmakers take action before Wolf’s inauguration, said Sen. Mike Stack, D-Philadelphia, the incoming lieutenant governor. But, he said, ‘I wouldn’t rule it out.’”


6) VirginiaGov. McAuliffe says he will push the legislature to reform the “public private partnership” procurement process. Legislation would increase transparency, reduce risk to taxpayers from unanticipated liabilities, and increase accountability. “The legislation, sponsored by House Delegate and Chairman of the House Appropriations Committee Chris Jones, calls for a P3 steering committee comprising staff from the House and Senate transportation committees to determine whether a project qualifies as a P3. Once the determination has been made, the Secretary of Transportation will have to sign a document confirming a project’s suitability to be procured as a P3.”


7) WashingtonTwo years after liquor privatization, stores are feeling the pinch “and sales across the border, in Idaho and Oregon, are through the roof.” But “privatization isn’t just hurting small businesses. Washington residents pay more per gallon of alcohol than any other state. And the promise of privatization was that taxing booze would help fill a budget hole. However, Washingtonians are spending far less on liquor than the state projected. That means the budget hole continues to grow, instead of shrink.”

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