Ins and Outs of Privatization

Schools and universities turn to privatization for a variety of reasons, but primarily to save money or improve operations.

Schools and universities turn to privatization for a variety of reasons, but primarily to save money or improve operations. However, various factors, including such things as district size and in-house capabilities, should be carefully weighed before services are farmed out to independent contractors.

The Wooster City School District, Ohio, started contracting out services in 1986 because capital expenditures were not being maintained as well as they should have been. Currently, Wooster is outsourcing food services, grounds maintenance and custodial operations to two separate firms, according to William Sturgeon, director of support/fiscal services.

Daniel Rodriguez, superintendent, Old Bridge Township Public Schools, N.J., says that schools in his area use privatized services in a number of areas, including transportation, custodial, maintenance, food service and security. The district has been contracting out services for 15 years.

Rodriguez says the typical reason districts turn to contract services is financial. Districts can save a significant amount of money because the contractor pays the associated payroll costs that the schools typically would pay. For example, in Old Bridge, contracting custodial services saves about $1 million a year and the change to food-service vendors saved about $300,000.

In Old Bridge, the savings resulting from outsourcing services are returned to the classroom. Consequently, Rodriguez says, the attractive feature of contracting services is that the district can take non-classroom expenditures and direct them into the classroom. "That really is the essence of what we do," says Rodriguez, "and we're constantly trying to find ways to increase the money put into the classroom."

Keeping it in-house

According to American School & University's 5th annual privatization/contract services survey (September 1997), 10 percent of school districts surveyed found using privatized services unnecessary because the district could do the job just as well.

The Newton School District, Kan., continues to be a part of this trend. Gary Jantz, director of business operations, says that the only contracted services the district uses are repair services. The district has looked at other services to outsource, but for reasons such as cost and convenience have decided not to use them. After looking at the quality of contract services at other schools, the district found that it could perform these services at a comparable cost and quality.

School districts often do not make use of privatized services because they would threaten the jobs of loyal employees. Sometimes, union contracts prevent outsourcing from being worthwhile. Some districts find privatization to be too expensive, while others believe that if a contractor can turn a profit, so can the district.

The South Portland School District, Maine, also has found that outsourcing certain services, such as transportation, maintenance and cafeteria services, is not a valid option. Lee Averley, assistant superintendent, says, "We really haven't, to this point, felt that it [contract services] was beneficial to us."

Because the South Portland schools are located within a relatively small area, transportation costs are not exorbitant. In addition, the district has experienced much success in terms of maintenance and building concerns. In the cafeteria, the district is not to the point where it thinks there would be significant savings to justify using privatized services.

In general, teachers' associations and various negotiator units for district-run operations are against the move to privatization because typically jobs are lost, says Old Bridge's Rodriguez. He suggests two ways of mitigating tension. The district can either require that the new specifications guarantee that current employees will have the first opportunity for the new jobs, or the district gradually can transition from district-owned to contractor-owned services, so as not to affect all employees at once.

What to look for

When considering outsourcing, schools should look at the quality of service a company offers and any available references. When the Wooster City School District began looking at contracted services, administrators talked to other superintendents, treasurers and business managers. Then the district requested proposals from each one of the vendors. From these proposals, the district chose the best applicants, made site visits, and then made a decision.

When investigating contractors, Rodriguez suggests speaking to districts where the firm under consideration has worked. This way the district can see how employees are treated and ascertain the degree of savings achieved. Wooster chose its grounds and maintenance services based on a reference, which Sturgeon says the district followed up with some investigation. It found that work under the firm's leadership had been outstanding in other districts, and performance expectations had been met or exceeded.

An outside food-service contractor presently manages the cafeteria employees. Wooster has been using this contractor, which it found through references and a request for proposals, for six years.

Some contractors, like those used by Wooster, train and manage district employees. They also may have made national purchasing agreements, which Sturgeon says can save an enormous amount of money during the life of a contract.

Health care is at the front of minds across the United States; and college students are no different. While foodservice, bookstore operations and vending are among the top services outsourced by colleges and universities, some are turning the school's healthcare over to an outside firm.

Wanting to keep healthcare costs down and improve the quality of care, Radford University, Virginia, turned to an outside healthcare management firm-Collegiate Health Care.

"We were looking to stay within a fixed budget, but that was completely incompatible with the improvements we knew we had to make," says David Hill, assistant vice president for student life. "The key to staying within our budget and yet improve the quality of health services for students, we realized, was to move away from being physician centered and toward a student centered model that allowed other kinds of health-care professionals into the mix.

"It was scary. Privatizing health services was new, but the handwriting was on the wall. Change was coming and we had to act if we were going to be in control of that change."

The student health center was renovated to include student-centered accessories, including skateboard racks, computer access during waiting times, a self-help center and televisions in the waiting area. A 24-hour-a-day nurse line was made available to students, as well as wellness and preventive-care programs.

"While tuition and fee increases have exceeded the inflation rate at almost every college and university, we have not raised student health fees in more than three years," says Paul Harris, vice president for student affairs. "Our fear was that with someone else doing the hiring, we'd lose control. But the results were excellent and instantaneous; we got immediate feedback from day one that we had turned around our health center."

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