As I was bumbling around the City of Atlanta’s website, I saw this on the frontpage. Posted yesterday – 1/16/2009
I appreciate your suggestions on how the City might generate additional savings. During my administration we have achieved over $100M in operating savings within our General Fund (which excludes among other things the Airport and our Water/Sewer operations). We have been extremely aggressive in identifying, quantifying and executing savings opportunities.
The list you sent is a familiar one. I have to say that the savings numbers you include are simply not credible. For example, we hired CHM2Hill to analyze our solid waste collection operations and advise us on whether we should privatize the service. They advised against it.
In 2003 we had UPS (which runs the largest and most sophisticated private fleet operation in the world) analyze our fleet management operation and advise us on whether we should outsource it. They advised against it. Last summer we had another fleet management consulting firm that specializes in privatization look at the operation again to give us advice on whether we should privatize. They concluded that we were operating at industry best practices in terms of costs and service levels and advised against privatization.
I understand that there are privatization advocates out there that throw out “projected savings” numbers. That is all very interesting, but at the end of the day the savings opportunity is always quantifiable. A private firm has three potential sources of savings:
- cheaper capital (due to scale)
- cheaper labor (usually due to non-union labor)
- better business processes
When we look at the opportunities in the City, what we generally find is that the City is operating at the peak of the scale curves due to our size (smaller cities usually aren’t). Our capital financing capabilities are almost always better than what can be found in the private sector. Our labor is generally cheaper since we do not have collective bargaining in this state so we don’t have the type of public sector unions you find in the Northeast and Midwest. That leaves business processes, and our typical approach is to bring someone in to analyze whether there is enough gap between our practices and what a private firm can do to justify privatization. As the examples above demonstrate, the answer has typically been a resounding “no”.
Have we looked at every area? No, but we have looked at the obvious ones. Not sure I believe that outsourcing fire services is such a wise idea, or whether the public would support such a move. We tried water and that was nothing short of a disaster.
Bottom line is that I have pursued privatization, merging services and outsourcing for 7 year. When opportunities arise where real savings or service improvements can be demonstrated, I will be supportive. My staff always seems to be analyzing one privatization opportunity or another, and we have outsourced a half a dozen operations over my time here. But as I said, do not be fooled by the numbers thrown out haphazardly by a few uninformed people.