Revising the City's Competition Policy

December 18, 2009 -- Working Partnerships USA

On October 20, 2009, the San Jose City Council approved two policies that together constitute one of the most comprehensive frameworks in the nation for controlling the outsourcing of local government functions and services to private contractors.

Under this groundbreaking approach to protecting the public interest, the Service Delivery Policy provides a clearly delineated procedure for determining if a change in service delivery mode is warranted. The second measure, the Competition Policy, governs the process of competition between the public and private sectors for provision of City services. The two policies safeguard against poor decision making and prevent outsourcing likely to result in negative impacts on quality of services. They are derived from best practices in use around the nation.

When facing significant budget deficits last year, the City proposed consideration of privatization and outsourcing of government services. Because experience indicates that rather than save money and protecting services, outsourcing may actually cost more, lead to inferior services and decrease job quality, Working Partnerships USA (WPUSA) engaged in a ten-month campaign to strengthen the City’s Competition Policy and develop the new Service Delivery Evaluation Policy.

Many jurisdictions have developed standards to compare the ability of the private sector to provide the same service as the public sector. However, in a world of changing technologies, the private sector option is increasingly one that cannot be performed by the public sector. A recent example of such a scenario in San Jose was the proposed change from a traditional warehouse to a “just in time” service delivery model. This was clearly not a case of apples-to-apples comparison, but no alternative process to evaluate the proposal had been developed. The new Service Delivery Evaluation Policy requires that a business case analysis be undertaken to evaluate any changes expected to result in the addition, deletion or reclassification of four or more City full-time-equivalent positions. This policy applies consistent decision-making criteria and ensures stakeholder input. Key questions include impact on quality, customer satisfaction or responsiveness, ability to manage any associated risks, need for management or administrative oversight, ability to protect public interests in the case of default or service interruption, and impact on the public workforce. The business case analysis and recommended service delivery model must be approved by the City Council.

With the passage of an approved Competition Policy, San Jose also has become one of the few municipalities that guarantees public access to contractor records related to service delivery under the same terms and conditions that the City maintains when delivering services. Other key revisions to the Competition Policy include: expanding information about vendors to include information regarding any prior examples of breach of contract, whether or not the breach produced litigation; a comprehensive accounting of all costs (including monitoring and enforcement, transition, effects on overhead, costs of training and equipment and projections of future costs); an RFP process that requires disclosure of relevant contractor employment standards such as training, screening and personal background checks; RFPs that outline performance standards, deliverables and corresponding payment schedules with reasonable, quantifiable and unambiguous quality measures; and a provision to protect core public safety services from competition.

The 7-4 vote on this issue also requires a report, in January 2011, on all services that undergo the new procedures, including cost difference to the city and customer satisfaction. The policies will be evaluated at that time to determine the need for further changes.

A strong coalition of labor, neighborhood, faith, small business and non-profit leaders participated in advocacy at numerous City Council, committee and stakeholder group meetings in order tot secure a policy framework that meets the needs of both City employees and the community at large.