State needs to do more competitive contracting

Washington lawmakers again face a multi-billion dollar budget deficit, meaning they will either increase the amount of money they collect from citizens each year, or re-evaluate the way they deliver services to the public.

Increasing taxes during a recession would add economic hardship, while changing the way services are delivered offers part of the solution to closing the deficit without raising taxes.

One tool available for improving service delivery is Washington’s competitive contracting law, passed as part of civil service reform and signed by Governor Gary Locke in 2002.

The Legislature and Gov. Locke authorized state agencies to open up public work traditionally held as an in-house government monopoly to competitive bids from the open market.

In practice, however, state managers rarely use their contracting out authority, meaning an important provision of the 2002 civil service law remains largely unused.

Before 2002, state agencies were barred by law from competitively bidding any public services that had traditionally been provided by state employees. The ban stemmed from a court ruling in a 1978 Spokane Community College case filed by public-sector union leaders to prevent college administrators from loosening an in-house monopoly on janitorial work.

The legislature soon codified the Spokane decision, establishing a state-wide rule that any work historically performed by state workers always had to be performed by state workers.

The ban on contracting out public services remained in place until 2002, when the legislature passed the Personnel System Reform Act.

The new law provided that, beginning in July 2005, agency managers could seek competitive bids to lower the cost of delivering services to the public.

In the years since, however, little competitive contracting has occurred. The primary reason is that an agency’s contracting authority is itself subject to mandatory collective bargaining.

Not surprisingly, union leaders seeking to maintain an in-house monopoly generally make bargaining away their agency’s contracting out authority a top priority.

On the whole, they have been successful at inducing state managers to maintain the ban on contracting out.

This past summer I asked the state Office of Financial Management’s contract division how many personal service contracts have been requested or approved by agencies under the “Civil Service Competition” provision of the 2002 law.

The answer was zero.

I then conducted a direct survey of 20 state agencies to determine whether and to what extent managers were using their competitive bidding authority under the 2002 law.

Of all the agencies surveyed, only one reported it had used competitive contracting under the 2002 law.

The primary flaw lawmakers included in the 2002 civil service law was making an agency’s contracting authority subject to collective bargaining. Lawmakers should simplify the 2002 law while removing the requirement that contracting be subject to collective bargaining negotiations with public sector unions.

This would allow managers to use all the tools the legislature has provided to deliver services in a way that makes best use of taxpayer money.

Public employees should be encouraged to participate in competitive bidding processes, but union leaders should not exercise a veto over a management decision that a public service be improved and streamlined through price competition.

Lawmakers should also adopt a formal Competition Council to help agency managers identify cost savings and public services that could be improved through competitive contracting.

Letting state agencies use competitive pricing to lower the cost of delivering public services, and at the same time improve service quality, is one of the reforms necessary to solving the state’s long-term deficit problem.

Properly implemented, a well-managed competitive pricing policy would lead to a more cohesive state government that focuses on core services, while using competition to tap the efficiencies of the open marketplace.

Jason Mercier is the government reform director at the

Washington Policy Center.

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