Privatization, Part 4

Part 4: Privatization Contracts Out of Sight

Adrienne Pauley, LWVMPC Privatization Study Chair

State contracts with private providers have rocketed to an estimated $100 million in the 2011-12 biennial budget with little government or citizen oversight. Of this total, about one-third is going to out-of-state contractors. Some of these include no-bid contracts. Both the Statesman Journal and The Oregonian have been covering this subject in detail. [Statesman Journal, September 4, 11, and 25; The Oregonian, September 13, 2011.]

Because no one knows just how many contracts there are or for how much, the Secretary of State’s office is now conducting an audit with a report due to the Legislature in mid-February. After it has seen this review, the Legislature is expected to take some action. Other states are grappling with this issue as well.

The practice of former state employees retiring and then rehiring on as highly paid consultants has prompted the audit. A spokesperson for the Secretary of State said that the audit will take special focus on these arrangements. Two examples illustrate why.

• A leasing manager for the state Facilities Division left her job in 2008 and returned to work on a no-bid contract basis. Several contracts later she was making $90 per hour. The state finally ended its contracts with her consulting firm in April of this year but not before it had generated $394,845 in payments.
• The Office for Oregon Health Policy and Research signed a one-year contract with the Institute for Health Policy Solutions in Washington., D.C., to help analyze new federal and state health care laws. A year later the agency extended the contract and raised the payout to $650,000. It is paying the nonprofit $290 an hour for a specific consultant’s time. All this may be justified, but it should be open to public review.

It is harder to find “success” privatization stories, perhaps because, when they work well, they do not draw attention. Oregon’s Department of Transportation recently drew kudos for a project that stayed on budget. Cited specifically was the agency’s 2003-2008 project that replaced seven bridges and widened Interstate 5 between Highway 22 and Kuebler Boulevard exits. Yet that same agency was taken to task by The Oregonian for hiring a retired Department of Human Services employee as a contractor at $40.36 an hour in 2005; that mushroomed into a three-year contract in 2008 for $292,489–or $97,496 a year for part-time project management. Analysts figure it cost taxpayers an additional $182,163 over what it would have cost using staff employees to do the same job.

Some states are calling for regulations such as a block of time required between retirement from a government job and hiring on as a contractor/consultant.

Undoubtedly there are many examples where state agencies have to bring in outside expertise that they do not have in-house.

Privatization is a subject that will draw a lot of attention in coming months and the public has every reason to demand that the process be transparent, that those in charge are accountable (with consequences if their efforts fall short), and that private performance will benefit the common good.

Unit meetings: At the upcoming unit meetings in February we will offer more examples drawn from the League’s national website and ask the attendees to discuss why each example worked or did not. We will also begin discussing the consensus questions, which accompany this Focus.

Privatization Blog: An online discussion of privatization is at http://statesmanjournal.com; type privatization in the paper’s “search” bar to bring up comments on various aspects of privatization.