Stacking the Bidding Deck Against a Revolution
Justin Katz
As much as I encourage our readers to come up with brilliant political reactions to instances of our state government's corrupt insanity, I'm not prepared to be sanguine about the midnight amendment's (PDF) effects. According to a plain reading of the text, here's how the in-house group that may potentially be privatized (read, the union shop) must be handled to construct the baseline bid:
- Document the current costs.
- Subtract overhead and other costs that would remain after privatization.
- Prepare a statement of work and quality expectations.
- Prepare a "best practice" cost estimate taking into account any belief of current "employers and their supervisors" that they "could perform the work more efficiently" and including "any innovations" that could be incorporated.
Now here's the list for potential private contractors:
- Compare private companies with the "best practice" estimate, which is based on an optimistic view of future work, not actual experience and historical data.
- Specifically search for "areas where bidder's costs appear artificially low."
- Add the costs of "contracting, including monitoring vendors for accountability."
- Add any "new program costs."
- Add the cost of health insurance for all employees (covering families), with a minimum penalty of 10% to salary costs if this information is not included.
Under normal circumstances, the opposition might be content to complain that the union workers can offer up their optimistic estimate of future efficiency, while private companies must be scrutinized for numbers that have the potential for proving "artificially low." In Rhode Island, however, we are fortunate enough to have even more egregious things to complain about. Compare, for example, item 2 from the first list with items C and D from the second list. If our state government currently has infrastructure to "monitor" the progress of projects, and if these costs will continue with a private vendor, it would seem that the cost would be subtracted from the union bid, but added to the private company bid.
On a political stage — and let's not ignore that the legislature has (contrary to separation of powers) reserved for itself a right to administrative veto — this comparison might prove so broad as to include any instances in which the administration slightly retools its processes, with the expense being subtracted from the union bid (on the grounds that the cost will continue) but added to the private bid (on the grounds that it's a new cost). In this vein, consider the following verbatim provision of the new amendment/bill:
To be considered competitive (eligible for a possible contract), vendor bids must come in at least ten percent (10%) below the in-house cost estimate. This "conversion differential" adjusts for transition costs and the costs associated with starting up or closing down during conversion to purchase of service or in event of the need to bring services back in-house.
Remembering (again) that the legislature is reserving "the right to review any final program decision," one wonders why this "conversion" is necessary if all new costs must be enumerated and added to the private company's bid. The answer is that the union's representatives in the legislature wish to stack the deck.
They've done the same with health insurance: If one of the ways that a private company would save us — Rhode Island taxpayers — money is by utilizing its employees only partially for our services when they aren't needed full time, the entire cost of their mandated family health insurance would be added to the bid. For hypothetical instance, some rubber stamper in the company's legal division, who spends a total of two hours per week scanning relevant documents, costs the private company 1/20th of his salary to provide our public service, but his entire health insurance costs must be included in the bid. If the legislature wants to ensure that all employees are insured, that's one thing, but why on Earth must a bidder include costs that may not actually translate into the bill they send the state in their bid? As a consumer of their services, I just want to know how much it is going to cost me.
And as a final kicker — as if citizens teeth haven't been sufficiently bashed in by this bit of oligarchical gerrymandering — Ms. Union Whore Lima has thrown in the following:
Before any final awards are granted, affected parties must have an opportunity to appeal the final decision. Affected parties include recipients, and their families of the affected public program, state employees and their representative organizations and bidders. Appeals shall not apply to questions concerning awards to one contractor in preference to another or the decision to keep the service in-house.
Take a moment to choke on that last sentence. Although I'm reluctant to rely on Ms. Lima's grasp of the English language, a plain reading of this paragraph allows all state employees to appeal any privatization plan, but nobody in the state has a right to appeal the decision to maintain in-house (read, union) services.
This, dear reader, is the sort of legerdemain that rises to the level of justifying revolution. It is the sort of thing that ought to inspire we who've our eyes open to walk from door to door explaining it to our neighbors — in the hopes that they are not all too corrupt, apathetic, or stupid to exact a political price for supporting the legislation.
ADDENDUM:
Reader Mike points out that the language of the bill was changed somewhat for inclusion in the budget (PDF). It is important to note that some of the language is different in significant ways:
- The 10% price advantage given to the unions has been changed such that the savings from privatization must be "substantial."
- Whereas the in-house "bid" was initially required to "eliminate" overhead and other costs that would remain, it now must "include" them.
- Appeals are still limited to "program recipients, state employees and their representatives," but the decision to keep a program in-house is no longer barred from appeal.
- The language laying out the General Assembly's review rights has been softened to decrease the implication that it has a veto.
Although my cynicism about the Rhode Island government is such that I wouldn't be surprised to see these provisions work their way back into the text before all is said and done, I must admit that the language, as it currently stands, is significantly different. I would, however, note that:
- Judges will likely look to legislative history when trying to figure out what a "substantial" savings might be.
- The General Assembly still gets a review, which would seem mere symbolism if there isn't an implied right to step in.
- One would assume it unlikely that state employees would appeal the decision that they may keep their jobs, and program recipients can be targeted by ads (of a sort that is already familiar) and campaigns warning them of catastrophic loss should the programs be privatized.
- The initial bill gives a clearer view of what it is that our (quote, unquote) representatives would like the law to accomplish.
For Cox customers-
Tonight on channel 155 (WE Network) at 9PM see a 1 hour report on the rampant pedophilia scandals within the ranks of the AFT and NEA.
Yes, this is off-topic. Forgive me a one time lapse.
The General Assembly has made its position clear: it is choosing union special interests over the private sector worker who pays taxes.
I'm all for making the private sector compete with the public sector to demonstrate cost-effectiveness, but as Justin points out, the intent of this bill is to stack the deck in favor of union employees.
I don't know if you can call this corruption. This misuse of public funds is occuring openly right before the eyes of apathetic Rhode Islanders.
The Projo editorial criticizing Carcieri's announced plan to lay off 1,000 workers is partially correct. The plan wasn't as detailed as it could have been, but Carcieri's approach was right on two counts. First, state government is too large and second, the only way to realize a cost savings is to cut personnel back. Throwing out the number of 1,000 based only on averages may not be adequately specific. But Carcieri's approach is the right one.
Of course, it wouldn't make good business sense for a unionized paper to admit that fact. I don't suppose you can sell many papers by admitting that lay-offs are necessary.
A few months ago, I mentioned that according to bond rating firms, RI's economy was not currently in terrible shape, but would head there if the General Assembly did not take a fiscally responsible approach. Unfortunately, it appears that the General Assembly is taking the finanically irresponsible route.
The decision to advance the tobacco funds and the decision to protect union interests over the taxpayer's interest will come back to haunt RI.
For those of you who think RI is in terrible economic condition now, just wait 2 or 3 years and you'll see what terrible economic condition really means.
You are looking at the wrong piece of legislation. You link to the bill, the budget article is here http://www.rilin.state.ri.us/BillText/BillText07/HouseText07/Article-042-SUB-A-as-amended.pdf and it does not contain the 10% reference.
Hey, since Mike took us off topic, are you the same Mike who posted as "Tommy" on my blog? Just want to know before I let your comment go forward
Anthony,
I wonder whether a lot of the heated differences that some of us had with you related to our sense that the GA had already taken the route that is now crystal clear. (There's a similar point to be made re: Chafee, but I really don't want to go there.)
The reaction by public sector unions and some Democrats to the proposed reduction of the state work force has been ... interesting. In no way has the size and cost of our state government been defended nor has there been any assertion that Rhode Island taxpayers are getting good value for all the taxes they pay. Instead, the response has been purely emotional - "state employees are afraid", "the Governor must reassure them", etc., etc.
This culminated in the hysterical eleventh hour addition to the budget bill of the absurd and terrible article to block privatization of state services. Again, there is no defense or justification for this measure; they are doing it for their own incredibly selfish reasons.
While Justin's concerns about this measure are fully warranted, it may also be an instance where the action taken is so irrational and extreme, it triggers negative, unforeseen consequences back onto those who instigated it. Sort of like setting out to rob a bank, then being "forced" to shoot a guard and finding yourself in custody for murder.
Dear Susan,
You know what hysterical is??
Hysterical is announcing you plan to cut 1000 jobs without doing the homework first to figure out where they are going to come from.
Hysterical is inviting in the state police to investigate one of your own departments.
Hysterical is the Plexus contract.
Hysterical is DEM now being investigated.
You want to win GA seats, like Gablinske's, in 08?? Ask the Governor to resign. You just might have a chance. If you let him stay, we do what we have done since he's been in office every election cycle: take more control.
I want the Republicans to lose every seat in this state so when it goes bankrupt there is no confusion as to who is responsible.
Justin,
Not at all. On Chafee, I said that if Chafee lost, the GOP would lose the Senate and I didn't want that to happen. Others said that the numbers didn't work out that way and losing Chafee would cost the majority. I was right and the country is paying the price right now.
On the RI financial front, I said that the state's bond ratings were still strong, but held the position that the General Assembly's actions this session would set the direction for the future of the state. This is correct, too.
I don't disagree that the General Assembly made poor choices in the past, but the state was able to survive the poor choices. Hence, my comment that those people who think the state is in terrible shape now should wait a couple of years. The reality is that RI is not currently in "terrible" shape---but because of the actions taken this year, it will be in 2-3 years.
My previous post should have read that others thought losing Chafee would NOT cost the GOP the Senate majority...
Bobby,
Carcieri is looking to do what is best for the state as opposed to doing what certain special interest groups want him to do.
You're right. The announcement about laying off 1,000 people wasn't backed up by a definitive plan, although I wonder if Carcieri just wanted to send a message as to the level of seriousness with which he is approaching the matter. He certainly isn't doing this for political gain, as he had to know that layoff announcements are always unpopular.
If Carcieri has made one error, it is trusting the wrong people. He has presided over the expansion of government as opposed to a reduction, even as he calls for a reduction in staffing. His executive agencies do whatever they want and he doesn't hold directors responsible when their agencies don't execute his policies. Yet, he should have cleaned out DOT years ago or appointed a director who was up to the task.
But Carcieri is right about the budget and while there shouldn't be a need to call in the state police to investigate executive agencies, Democrats would be insisting there was a cover up if he hadn't.
It's easy to criticize Carcieri's response to the problem. His attempts have been politically tone deaf at times and there is a lot of fat and some mismanagement in the executive agencies. But at least he is responding in an attempt to solve the state's problems.
The General Assembly is not only failing to respond, it is making the problem worse while at the same time criticizing the one person who is trying to take the steps to prevent a real financial crisis from wrecking the state.
"The General Assembly is not only failing to respond, it is making the problem worse"
In a way, the group most at risk from the General Assembly's handling of the budget is current state employees. Everyone agrees that state gov't cannot get any bigger. In fact, it's not clear that Rhode Island will be able to cover already vested pensions. Yet with their irrational action in blocking privatization opportunities, the GA is signaling that it feels no need to demonstrate any restraint when it comes to new hires.
If we're not sure we can honor our commitment to the workers we presently have, doesn't it further endanger their financial security to add to their ranks?
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For Cox customers-
Tonight on channel 155 (WE Network) at 9PM see a 1 hour report on the rampant pedophilia scandals within the ranks of the AFT and NEA.
Yes, this is off-topic. Forgive me a one time lapse.
Posted by: Mike at June 18, 2007 7:02 PMThe General Assembly has made its position clear: it is choosing union special interests over the private sector worker who pays taxes.
I'm all for making the private sector compete with the public sector to demonstrate cost-effectiveness, but as Justin points out, the intent of this bill is to stack the deck in favor of union employees.
I don't know if you can call this corruption. This misuse of public funds is occuring openly right before the eyes of apathetic Rhode Islanders.
The Projo editorial criticizing Carcieri's announced plan to lay off 1,000 workers is partially correct. The plan wasn't as detailed as it could have been, but Carcieri's approach was right on two counts. First, state government is too large and second, the only way to realize a cost savings is to cut personnel back. Throwing out the number of 1,000 based only on averages may not be adequately specific. But Carcieri's approach is the right one.
Of course, it wouldn't make good business sense for a unionized paper to admit that fact. I don't suppose you can sell many papers by admitting that lay-offs are necessary.
A few months ago, I mentioned that according to bond rating firms, RI's economy was not currently in terrible shape, but would head there if the General Assembly did not take a fiscally responsible approach. Unfortunately, it appears that the General Assembly is taking the finanically irresponsible route.
The decision to advance the tobacco funds and the decision to protect union interests over the taxpayer's interest will come back to haunt RI.
For those of you who think RI is in terrible economic condition now, just wait 2 or 3 years and you'll see what terrible economic condition really means.
Posted by: Anthony at June 18, 2007 7:51 PMYou are looking at the wrong piece of legislation. You link to the bill, the budget article is here http://www.rilin.state.ri.us/BillText/BillText07/HouseText07/Article-042-SUB-A-as-amended.pdf and it does not contain the 10% reference.
Posted by: Mike at June 18, 2007 8:30 PMHey, since Mike took us off topic, are you the same Mike who posted as "Tommy" on my blog? Just want to know before I let your comment go forward
Posted by: Pat at June 18, 2007 9:00 PMAnthony,
I wonder whether a lot of the heated differences that some of us had with you related to our sense that the GA had already taken the route that is now crystal clear. (There's a similar point to be made re: Chafee, but I really don't want to go there.)
Posted by: Justin Katz at June 18, 2007 10:58 PMThe reaction by public sector unions and some Democrats to the proposed reduction of the state work force has been ... interesting. In no way has the size and cost of our state government been defended nor has there been any assertion that Rhode Island taxpayers are getting good value for all the taxes they pay. Instead, the response has been purely emotional - "state employees are afraid", "the Governor must reassure them", etc., etc.
This culminated in the hysterical eleventh hour addition to the budget bill of the absurd and terrible article to block privatization of state services. Again, there is no defense or justification for this measure; they are doing it for their own incredibly selfish reasons.
While Justin's concerns about this measure are fully warranted, it may also be an instance where the action taken is so irrational and extreme, it triggers negative, unforeseen consequences back onto those who instigated it. Sort of like setting out to rob a bank, then being "forced" to shoot a guard and finding yourself in custody for murder.
Posted by: SusanD at June 18, 2007 11:57 PMDear Susan,
You know what hysterical is??
Hysterical is announcing you plan to cut 1000 jobs without doing the homework first to figure out where they are going to come from.
Hysterical is inviting in the state police to investigate one of your own departments.
Hysterical is the Plexus contract.
Hysterical is DEM now being investigated.
You want to win GA seats, like Gablinske's, in 08?? Ask the Governor to resign. You just might have a chance. If you let him stay, we do what we have done since he's been in office every election cycle: take more control.
Posted by: Bobby Oliveira at June 19, 2007 12:47 AMI want the Republicans to lose every seat in this state so when it goes bankrupt there is no confusion as to who is responsible.
Posted by: Greg at June 19, 2007 6:50 AMJustin,
Not at all. On Chafee, I said that if Chafee lost, the GOP would lose the Senate and I didn't want that to happen. Others said that the numbers didn't work out that way and losing Chafee would cost the majority. I was right and the country is paying the price right now.
On the RI financial front, I said that the state's bond ratings were still strong, but held the position that the General Assembly's actions this session would set the direction for the future of the state. This is correct, too.
I don't disagree that the General Assembly made poor choices in the past, but the state was able to survive the poor choices. Hence, my comment that those people who think the state is in terrible shape now should wait a couple of years. The reality is that RI is not currently in "terrible" shape---but because of the actions taken this year, it will be in 2-3 years.
Posted by: Anthony at June 19, 2007 8:02 AMMy previous post should have read that others thought losing Chafee would NOT cost the GOP the Senate majority...
Posted by: Anthony at June 19, 2007 8:03 AMBobby,
Carcieri is looking to do what is best for the state as opposed to doing what certain special interest groups want him to do.
You're right. The announcement about laying off 1,000 people wasn't backed up by a definitive plan, although I wonder if Carcieri just wanted to send a message as to the level of seriousness with which he is approaching the matter. He certainly isn't doing this for political gain, as he had to know that layoff announcements are always unpopular.
If Carcieri has made one error, it is trusting the wrong people. He has presided over the expansion of government as opposed to a reduction, even as he calls for a reduction in staffing. His executive agencies do whatever they want and he doesn't hold directors responsible when their agencies don't execute his policies. Yet, he should have cleaned out DOT years ago or appointed a director who was up to the task.
But Carcieri is right about the budget and while there shouldn't be a need to call in the state police to investigate executive agencies, Democrats would be insisting there was a cover up if he hadn't.
It's easy to criticize Carcieri's response to the problem. His attempts have been politically tone deaf at times and there is a lot of fat and some mismanagement in the executive agencies. But at least he is responding in an attempt to solve the state's problems.
The General Assembly is not only failing to respond, it is making the problem worse while at the same time criticizing the one person who is trying to take the steps to prevent a real financial crisis from wrecking the state.
Posted by: Anthony at June 19, 2007 11:21 AM"The General Assembly is not only failing to respond, it is making the problem worse"
In a way, the group most at risk from the General Assembly's handling of the budget is current state employees. Everyone agrees that state gov't cannot get any bigger. In fact, it's not clear that Rhode Island will be able to cover already vested pensions. Yet with their irrational action in blocking privatization opportunities, the GA is signaling that it feels no need to demonstrate any restraint when it comes to new hires.
If we're not sure we can honor our commitment to the workers we presently have, doesn't it further endanger their financial security to add to their ranks?
Posted by: SusanD at June 19, 2007 3:04 PM