What Happened?
Washington state lawmakers recently killed House Bill 2743 which sought to limit privatization guidelines. The bill would place controls over statutes in place to encourage competitive contracting for state services or contracts.
The Goal
Called the “Taxpayer Protection Act,” House Bill 2743 called for amendments to the state’s Department of Enterprise Services’ procedures for state agency procurement and contract management.
According to the Reason Foundation, the Department of Enterprise Services was created in 2011 under the Office of Financial Management to open up six government activities to private sector competition. Under the department’s 2012 guidelines, the agency must:
- Maintain a list of state agency contracts
- Deploy mandatory agency training programs for procurement
- Oversee contractors
- Maximize the use of performance-based contracts
- Evaluate contract bids across a wide range of factors outside of cost
The House Bill 2743 aimed to add a few more stipulations to the department’s operational guidelines and expectations. The legislation also included three components that would hurt competitive contracting and limit city revenues with each partnership:
- 10 percent cost savings mandate The Department of Enterprise Services cannot contract functions unless it would create at least a 10 percent cost savings for the city. This stipulation provides the city with a financial cushion with all contracts. It also, however, places stronger emphasis on the cost of each bid rather than other factors with greater long-term impact.
- Treatment of performance monitoring The DES would have to consider the cost of the agency staff time and resources utilized for performance monitoring when calculating the 10 percent cost savings threshold. It can be argued that there should always be built-in performance monitoring resources for each function, and privatization does not create a new cost to the city.
- Public/private cost comparisons State agencies would have to conduct cost comparisons between public and private management of functions. Because the public and private sector have different financial environments and regulations, it would be difficult to make fair comparisons.
By killing the legislation, Washington state will continue to offer privatization contracts annually, just with significantly less requirements for the DES and private bidders to satisfy.
Both Sides of the Argument
While many cities and states across the United States are embracing privatization contracts that free up city resources for other projects, there still exists anti-privatization push back. In Paraguay, for example, protests have erupted in response to the president’s plans for privatization of many government functions.
Paraguay recently passed a law allowing private companies to invest in government infrastructure in exchange for ownership of concessions and the ability to charge fees. Paraguay residents are concerned taxpayers will lose in privatization contracts, while small business owners and entrepreneurs will struggle to compete.
The proposed privatization plans include a contract for an international airport, the state-owned water treatment plants and international toll roads connecting to Brazil, Argentina and Bolivia.
To Privatize or Not To Privatize
Gov1 has kept pace with the rising popularity of privatization contracts and debates surrounding functions such as airports and IT.