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Competition
Watch
Vol. 3,
No. 2 June 1998
COUNCIL
MEMBERSHIP EXPANDED The 1998 General Assembly
enacted HB1301 which expands the Council membership from 10
to 15 members. Effective July 1, 1998, the Council will be composed
of four executive branch employees appointed by the Governor;
two members of the House of Delegates appointed by the Speaker
of the House; two members of the Senate appointed by the Senate
Committee on Privileges and Elections; three members of the
private sector appointed by the Governor; two private sector
members appointed by the Speaker of the House; and two private
sector members from the Small Business Commission appointed
by the Senate Committee on Privileges and Elections.
The bill also eliminated
the Private Enterprise Commission and transferred its duties
to the Council. New definitions added by the bill are: commercial
activity; commercial source; competitive process; fully allocated
cost; and managed competition.
COMMERCIAL
ACTIVITY SURVEY In April, the Council distributed to
every executive branch agency a Privatization/Competition Manual
which included an extensive list of "commercial activities."
In July, the Council will be conducting a statewide survey,
to be completed by the end of September, to determine the inventory
of commercial activities that apply to the executive branch
agencies, the results of which will be published in the Council's
Annual Report.
OMB's Survey:
Edward DeSeve, OMB's acting Deputy Director for Management,
plans to ask members of the President's Management Council to
develop a list of duties performed by government that might
be outsourced to the private sector. The list could cover from
data center operations to special software development projects.
Federal agencies and industry then would compete for the work.
By listing inherently nongovernmental services that could by
put up for competition, the government could get the "best
deal for the taxpayer," according to DeSeve. DeSeve
expects agencies to have their lists completed by the end of
October.
EMPLOYEE
STOCK OWNERSHIP PLAN RECOGNITION The March issue of
Competition Watch reported that the 1998 General Assembly
unanimously passed a resolution (SJR No. 103) recognizing the
importance of employee stock ownership plans (ESOPs) as an effective
and viable privatization method for state and local governments.
Referring to this resolution, The ESOP Association, based in
Washington, D.C., states in the May 1998 issue of its ESOP
Report that "the most significant approval of ESOPs
from a state legislature in recent years was recently given
by the Commonwealth of Virginia Legislature."
1998
EMPLOYEE OWNERS GIVE ESOPs POSITIVE MARKS For the sixth
consecutive year, ESOP companies have given favorable marks
to their ESOP and its effect on their companies' performance.
In a survey recently conducted by The Employee Ownership Foundation
of more than 500 companies with ESOPs, 82 percent of respondents
said they thought their company made a "good decision
that has helped the company." A majority of the respondents
stated that their company's ESOP had improved employee productivity.
The responses also indicated that their ESOP companies are thriving
with improved performance and increased sales and profitability
over the previous year.
THE
BENEFITS OF COOPERATION PUBLIC-PRIVATE PARTNERSHIPS LEAD TO
SUCCESS Each year in the United States billions of
dollars owed to agencies of federal, state and local government
go uncollected. Over the past few years this problem has precipitated
the involvement of professional third party debt collectors
to assist agencies in their struggle to collect these unpaid
balances. To date, the results of this partnership have been
successful. In 1996, Congress passed the Debt Collection Improvement
Act of 1996 (DCIA). DCIA was established to maximize collections
of delinquent debts by ensuring quick action to enforce debt
recovery by relying on the expertise of private sector professionals.
DCIA requires government agencies to turn over any debts older
than 180 days to the Department of Treasury which refers those
obligations to private firms for collection. Treasury has awarded
contracts to 13 private collection agencies. These partnerships
allow public employees the opportunity to concentrate on the
administrative functions of their job, while turning the collection
responsibilities over to seasoned professionals.
Dale Schmidt, a veteran
in the government collection field, states that in discussing
a partnership in which he was involved, "over the course
of six months, we brought in $80,000 that they hadn't been able
to collect before." Says Jim Durham, President of National
Child Support Center, "by outsourcing the difficult
cases to private collection agencies, child support enforcement
offices can lower their backlog of cases their staff must deal
with and enable them to devote their time to the cases they
keep in house." Two directors of student financial
services at major universities concur that when a student gets
a call from a collection agency, the third party influence gets
their attention and the student calls the university to work
out a deal.
l
l l l AND MORE ON PUBLIC-PRIVATE PARTNERSHIPS The concept
of public-private partnerships has been around for decades.
Recently, it has increasingly become the way large-scale development
projects get done. The annual volume of public-private partnership
development totaled about $25 million in 1997. In a partnership,
a government agency sponsors the project and provides some type
of funding and the developer is expected to provide the required
equity and some portion of the debt and to manage the project,
sharing in the returns.
"The public-private
partnership is any arrangement between a government and private-capital
investors in which partially or traditionally public activities
are now performed on a for-profit basis by a private company,"
explains Roger Feldman, chairman of the National Council of
Public-Private Partnerships (NCPPP). The movement has created
opportunities for developers to participate in a 3 Competition
Watch June 1998 number of high visibility projects, including
the Times Square renovation in New York; a $193 million convention-
center hotel in San Antonio; the $108 million Hyatt Regency
Hotel in Chicago; and, the $338 million BancOne baseball stadium
now going up in Phoenix.
One of the biggest
public-private partnerships underway is the Queensway Bay project
in Long Beach, California. This 300 acre, $550 million development
includes an aquarium and retail, entertainment and recreational
space. The city is providing some of the infrastructure and
the private firm will develop 400,000 square feet of entertainment
and retail space, plus the streets, sidewalks and utilities.
One of the big merits of the public-private partnership is that
it shifts a lot of the risk involved in a capital intensive
development away from taxpayers onto the shoulders of private
investors.
In its recent issue
of Council Insights, the NCPPP informed its members of
Senate Document No. 12 (1998), the ESOP study, and directed
those interested in a copy of the report to contact the Council.
PRIVATIZATION
BRIEFS
San Francisco
- The board of the San Francisco Bay Area Rapid Transit system
has received an unsolicited proposal from a Chicago developer
to finance and build a new station on the Dublin/Pleasanton
line. LaSalle Partners would build not only the station but
also a hotel and convention center.
Seattle -
The Seattle city council voted to transfer the operation of
the city's waterfront aquarium from the city's parks department
to a public-private partnership to oversee a $126 million expansion
project that will triple the aquarium's size. The transfer allows
the Seattle Aquarium Society to solicit private funds to finance
the expansion project, which is expected to double the number
of visitors to 1 million per year.
Colorado -
The Colorado Department of Health Care Policy and Financing
has awarded Maximus a two-year, $2.26 million contract to provide
managed-care services for 190,000 participants in Colorado's
Medicaid and Childrens's Basic Health Plan programs. Maximus
will provide education and enrollment functions, customer service,
materials distribution, and operation of a toll-free help line.
Pennsylvania
- Officials in Cumberland County, Pennsylvania expect the county's
Claremont Nursing and Rehabilitation Center to make a profit
for the first time. They attribute the profit to efforts to
make the nursing home more competitive with private facilities.
New York City
- The State of New York has selected a joint venture to develop
the 14th Street Armory. The partnership paid $15 million for
the Armory and will build a 275,000 square-foot site that will
include an entertainment complex, retail stores, and luxury
condominiums.
Allegheny County,
Pennsylvania - Ryder/MLS was awarded a two-year contract
to provide maintenance services for Allegheny County's 776-vehicle
fleet. The contract will save the county $293,000 during the
first year and it guarantees 90 percent of all vehicles and
equipment brought in for preventive maintenance will be serviced
within 12 working hours of delivery.
"Privatization
is a tool that can help public officials provide essential services
in a cost-effective manner. introducing competition and
privatization to government services requires real cost imformation.
Privatization increases competition and competition increases
productivity."
Competition
Watch is published quarterly by the Commonwealth Competition
Council. Information appearing in this newsletter is gathered
from various sources. The Commonwealth Competition Council does
not attest to the accuracy or authenticity of the information
provided.
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