Like Philadelphia, San Diego compared its activities to the private sector, but preferred to keep the work in-house. The city's foray into this area began in 1993 when then-Mayor Susan Golding enlisted local business people to propose means to improve city efficiency.
A program initiated by the city manager, who solicited input from city employees, matched the citizen task force. With input from the two groups, the city embarked on a wide-ranging series of changes that have won recognition over the past two years from the Government Finance Officers Association and the International City and County Management Association.
One of these developments was the creation of the Optimization Program. The five-person office acts as an internal consulting firm for the city. It concentrates on three areas: public contract operation, information technology integration and best practice integration.
San Diego does outsource some of its operations.
For example, it spun off its IT department forming the non-profit San Diego Data Processing Corporation (SDDPC). In addition to serving the city's needs the SDDPC provides computing services to cities, counties, state agencies and utilities. Its clients are primarily in Southern California, but its reach also extends as far as Chester County, Pa.
San Diego wants to achieve the same efficiency level as private enterprise, and SDDPC has been successful, but outsourcing has become the exception rather than the rule.
"We are finding that when we give our public employees tools to be effective they can compete effectively with private-sector vendors," said Doty. "There are still opportunities for us to do competitive outsourcing, but we are being much more selective."
The city uses a process called Bid to Goal to help agencies achieve private-sector efficiency levels. It typically hires an outside consultant to help with the technical aspects of assessing an agency's performance and comparing that to what is available commercially. Then the contractor puts together a Private Market Proposal stating what the city would pay an outside vendor to perform the service at the desired quality level.
But rather than putting out an RFP, Doty's staff puts together an Optimization Plan containing the best practices needed to reach that level of performance. This is then assembled as a contract between the city and the employees where they agree to provide a certain level of service for a certain budget, just as if they were an outside firm.
In addition, the city recruits volunteers from the business community to conduct zero-based management reviews (ZBMR). The volunteers go into the departments, do assessments of the operation and make recommendations of ways to bring private-sector expertise to the public sector. The goal is to have every department reviewed at least once every five years. Once a review is completed, the department has 60 days to create a plan for implementing the recommendations. The Optimization Program staff work with the departments in developing performance measurements and tracking the progress made.
"Since 1995, 25 ZBMR assessments have been completed with the savings approaching $100 million," said Doty. "As the work continues we estimate we will see another $50 million."
Clearly Defined Goals
Whether the service is best performed by city staff or contracted out, certain principles apply. When outsourcing, Segal cautions against micromanaging the contractor. The contract needs to make clear the desired outcome but must leave it up to the contractor to determine the best way to achieve the outcome.
"Governments need to avoid 'bureaucratic creep,' where public officials spell out exactly what and how the contractor is to perform," said Segal. "If they fall victim to this, they often repeat in-house processes and that undermines the whole point of outsourcing."
He also advises government officials to clearly establish performance requirements, with penalties and rewards that establish a clear financial incentive for the contractor to produce more than the contract minimum.
When contracting with one's own employees, Doty emphasizes bringing labor, management, front-line employees and citizens into the process right from the beginning.
"None of this happens unless all the stakeholders are involved and they all have a voice," he explained.
But once everyone is operating as a team, the benefits extend far beyond the individual project and permeate the entire work environment.
"There has been a major impact on the culture of the city, in the way people think about process improvement and improving efficiency," Doty said. "We reap the benefits of that culture change a thousand different ways each day."