Public works outsourcing: Proceed with caution
Tuesday, August 28, 2012
I read with interest the article in this newspaper about the city of Washougal’s plans to explore the feasibility of outsourcing the work now performed by employees in its public works department. Affected public works employees would most likely be laid off and the work would be done by employees or contractors working for the outsource company.
Having written about outsourcing in the legal industry and having led a delegation of lawyers to India to meet with companies doing outsourced work, I was quite surprised and concerned. I sent emails to the mayor and members of the City Council and started a Facebook page (Don’t Outsource Washougal). The Mayor and one council member responded to my emails and Mayor Guard even weighed in on the Facebook page.
A few years ago, outsourcing was seen as a way for public and private employers to off-load employee salaries to a private contractor — either in the U.S. or offshore, depending on the work being outsourced — and contract with the outsource company to perform the work. The outsource company typically would pay its employees (often in India or elsewhere) substantially less than the domestic employees were paid. Results have been mixed and, in some cases, employers have chosen to bring those outsourced jobs back into the organization after promised savings failed to materialize or the quality of work suffered.
Having said that, I have no doubt that any study will show that outsourcing Washougal’s public works department is quite feasible and will likely lower costs. The reason it will be shown to be feasible is that both the city and the outsource partner will have every incentive to come up with an initial contract that projects big savings, whether those projected savings are real or illusory.
The rubber will hit the road, however, after that contract has been signed. From that point on, the devil will be in the details and the city will be motivated to interpret the contract to get as much as possible from the outsource partner for the lowest possible price and the outsource company will be motivated to do as little as it is legally required to do for the maximum possible fee. What’s more, the parties will likely need to negotiate additional fees for work not contemplated in the original agreement and assorted contingencies. That will inevitably lead to tensions between the parties, but the city’s alternatives will be limited by the fact that, by then, it will have laid off its employees and dismantled its public works infrastructure.
That means that if the outsourcing arrangement does not work out, the city would have to spend great sums of money to re-establish that infrastructure and hire and train public works employees. Not only that, but city managers and elected officials might have to admit to the voters that they had made a mistake in approving the outsourcing in the first place.
I applaud the mayor and City Council for wanting to deal with budgetary issues. The solution that they are exploring, unfortunately, is fraught with danger. It was not that long ago that a different mayor and council decided that the way to solve the city’s fiscal problems was to open Washougal up to La Center-style casino gambling. It was only after a public outcry that the idea was jettisoned. The current effort to balance the budget by outsourcing the public works department is as flawed as the notion that casino gambling would bring prosperity and baskets full of cash to our community.
All the elected officials involved in the near-miss involving the casino are long-gone. Like most small municipalities, Washougal’s mayors and council members come and go. Current elected officials and city management, too, could be long-gone before the final verdict on their outsourcing plan is rendered.
K. William Gibson is an Oregon attorney whose property lies adjacent to the city limits of Washougal.