Privatization or managed competition? The Fort Lauderdale experience.

• Author: Sharp, Terry
• Position: Fort Lauderdale, FL's concept of managed competition - Includes related article on Fort Lauderdale, FL's cemetery case study

A managed competition process enables the city to identify the services that are the best candidates for competition, encourage private and public service providers to bid on contracts, and carefully compare the costs among submitted bids.

Government at all levels has seen an increase in privatization of service delivery in the 1990s. In the push to hold the line on taxes and run government like a business, government often has looked to contract out its services to the private sector. In Fort Lauderdale, Florida, the city has approached these objectives from several vantage points and come away with solutions to fit the differing circumstances of each service. Rather than assuming that privatization is the only way to reduce costs, Fort Lauderdale has applied the concept of managed competition.

Types of Service Delivery

Fort Lauderdale has examined its service delivery and categorized five options: contracting out, public-private-public competition, franchising, service shedding, and self-help.

Contracting Out. The city has some services that it has traditionally provided through an outside entity. These include the city attorney, specialized legal services, specialized mass transit, school crossing guards, auctioneering, and elevator maintenance.

Public-private-public Competition. This option provides the opportunity for the city to compare the cost of delivering a particular service with city employees, with a private contractor, or under a contract with another public entity. Services previously handled by city employees that have been contracted out include water meter reading, bridge tending, and vehicle maintenance. The city has replaced a private-sector contract with city employees for the installation of utility pipe and for the collection of bulk refuse. An agreement with Broward County has resulted in a public-public arrangement for emergency medical services.

Franchising. This is the traditional approach of granting exclusive rights to deliver service within a certain geographical area for a fixed period of time. Fort Lauderdale's franchises include electricity, telephone, natural gas, and cable television. The changes in technology may drastically affect the ability of governments to capitalize on franchises, especially telephone and cable television, in the future. In Florida, there is talk of a flat tax for such franchise fees and utility taxes with all revenue going through state hands and being distributed back to local government on the basis of population. An analysis prepared by staff shows that under this scenario Fort Lauderdale would lose as much as $56 million over the next 15 years.

Service Shedding. The concept of this option is that the governmental entity does not take any responsibility for delivery of a particular service and simply leaves it up to the market to provide services as needed. Examples might include art classes or lessons for tennis or golf. Fort Lauderdale has not utilized this approach to date.

Self-help. This approach capitalizes on the participation of interested residents who voluntarily assist with the delivery of city services. Fort Lauderdale has more than 50 neighborhood associations that interact with the city on a regular basis. Residents have helped the city in identifying violations of the city code and in supplementing law enforcement efforts with community policing. The city has bolstered the capability of residents to help by providing opportunities for learning more about Fort Lauderdale and its services through a citizens police academy and neighborhood leadership college.

These varied approaches to service delivery expand the potential of government beyond the traditional advantages of privatization. Privatization in the form of a management contract has been the right choice in many instances, as exemplified in the cemetery case study in the accompanying sidebar.

More About Managed Competition

Fort Lauderdale's approach to evaluating service delivery has been to inject competition into the mix. For services delivered by city employees, the private sector has been invited to submit cost-saving proposals. Likewise, services delivered by the private sector at the city's request have been compared to proposals from city employees. The process involves issuance of a formal request for proposals. Private companies and city employee groups operate under the same guidelines and are required to submit sealed bids. Proposals are evaluated by a review committee composed of experts from inside and outside the city. The recommendation of the committee is submitted to the city commission for final approval.

During the 1993 union contract negotiations, the city and the American Federation of State, County and Municipal Employees (AFSCME) Local 532 agreed to establish a labor-management committee to promote understanding and cooperation. The union was receptive to this...