Most people I talk to still
define outsourcing as “shipping out” services (hence, American jobs) to highly
specialized companies in other countries, especially to the front-runners like
China, India and Mexico. But that’s half the story. The other half of the story
is that there are many great American companies that provide very similar
services at very competitive rates.
Likewise, the local governments
(counties, cities, towns, etc.) will do themselves a big favor if they start
outsourcing some of their non-essential services to such great American
companies, without having to worry about the data privacy or compromise of
sensitive records, as they tend to have much better systems in place than the
local governments can ever envision and implement. It will be win-win, meaning
those government services would be more efficient while lessening the financial
burden on the taxpayers. Let’s save the obvious: Before worrying about Unions,
Civil Service, Labor Contracts, Collective Bargaining, etc., governments and
legislative apparatus need to strengthen their will, believing ‘if there is a
will, there is a way.’ Granted, it won’t be pretty or perfect to start with,
but it will provide a start, the future of which will be brighter by the day.
Now, let’s differentiate between
essential and non-essential services. First off, the outsourcing of essential
services – law enforcement, public health, public schools, public
transportations, public works, correction officers/prison guards, fire
fighters, social services, sanitation, the office of management and budget,
etc. – is strictly non-negotiable. While both essential and non-essential
services are needed, in this day and age when better and faster services are
demanded by the public, the need for agency’s direct involvement in providing
non-essential services could however be independently studied and decided upon
(i.e., the cost-benefit analysis of outsourcing vs. keeping the services
in-house). Here are some non-essential services of local governments that would
make good outsourcing candidates:
1. Employee Benefits,
Payroll and Time Processing – These are some of the most commonly
outsourced functions in the private sector. While some small and mid-size local
governments have already been outsourcing these functions, the large cities and
counties are still far behind. These functions generally return the best bang
for the buck when bundled across essential and non-essential services; for
instance, there is hardly any difference between the processing of payrolls for
law enforcement and that of the assessment office. Managing and processing of
human resource components like payrolls, benefits, time, leave, talent, etc. go
hand in hand, often inter-connected via the different modules of the same HRIS
software, as well as a central customer service system with specialty units.
ADP is perhaps the most well-known in this space.
2. Sales Tax Collection
and Processing – Many large counties and cities across the country
levy additional sales taxes, charging local sales taxes on top of the usual
state sales taxes. In addition to the local sales taxes, some of them have
local income taxes, commercial rent taxes, sanitation taxes, water district
taxes, etc. All of these taxes may be bundled and outsourced to companies
specializing in this domain. In many local governments, these taxes are often
managed and collected by separate units under different verticals altogether,
thus wasting significant taxpayer dollars on redundant or inefficient services
that could easily be grouped or combined. In a scenario like that, the
outsourcing is the ideal way out, to avoid having to maintain them separately,
without any additional return on such parallel and wasteful investments.
3. Property Data,
Assessment and Tax Collection – This is the local juggernaut that
needs serious considerations. In fact, if the counties need to just single out
one function to begin the “outsourcing” experimentation, this obviously is the
one – no two ways about it! As we all know, the local elections are often won
or lost on the issue of property assessment alone. Unfortunately, after the
winning party takes over, it reinvents the same losing experimentations,
expecting different results. Of course, the only long-term solution to this
age-old problem is the total abolishment of the existing property tax system
and replacing it with a set of middle-class friendly progressive consumption
taxes. Meanwhile, the mayors and county executives will hopefully understand
the need for real (not make-shift) solutions to this age-old problem and start
outsourcing it to quality economic consulting firms. In fact, the leading
consulting firms like Accenture, Boston Consulting, Deloitte, EY, KPMG,
McKinsey, PwC, etc. should seriously look into this emerging multi-billion
dollar outsourcing business. It will be great for taxpayers as well,
considering the kind of forward-looking solutions these firms will finally
bring in. Taxpayer advocacy groups must also fight to have the full assessment
umbrella outsourced, helping taxpayers get out of this unfair cycle they have
been trapped in for a long, long time.
4. Property Tax Appeals
Review and Processing – In an effort to provide fair and independent
review and processing of property tax appeals, both residential and commercial,
almost all major jurisdictions have established separate bodies (departments,
agencies, statutory commissions, etc.). In fact, some are larger (in headcount)
than the vast majority of mid-size assessment offices. Since the day-to-day
functioning of these bodies does not depend on the assessment office, they
could easily be outsourced to economic consulting firms as well, eventually
saving taxpayers a ton. Additionally, their AI-based expert system will do a
much better job in introducing true fairness and equity in the appeals system.
Their solution could then be ploughed back into the tax roll, forcing the
assessment staff to improve the overall quality of future rolls. As long as the
property assessment system is alive and ticking, the rapid introduction of
AI-based solutions is the only meaningful way forward. And, that is possible
with the direct outsourcing of the assessment review functions to major
consulting firms.
5. Information Technology
(IT) and Help-Desk Services – This is the most common service in the
private sector that gets outsourced to the specialized global players like
Accenture, IBM, Capgemini, TCS, Infosys, etc. Local governments should also
consider outsourcing these services to well-known companies, not only for
efficiency, cost improvement and scalability but also for minimizing redundancy
and duplications. In any case, whenever they need enterprise-level applications
and solutions, they depend on outside vendors. Unfortunately, the applications
they develop in-house are generally low quality and ad hoc. For example, in
this age of modern technology, they still take pride in developing applications
in MS-Access that their own IT does not support. This is a terrible use of
taxpayer dollars. Even when the outside vendors are used, the RFPs are
circulated within a very limited pool of vendors, that are rarely known for the
world-class quality and service taxpayers would expect. Even within the local
government, agencies are generally run mutually exclusively, generating
significant amount of duplication of services. Outsourcing is the only way to
address these inefficiencies and minimize the resulting wastefulness.
6. Public Parking
Maintenance and Traffic Ticket Processing – Private operators like Laz
are already managing numerous public garages and surface lots for government
agencies. Similarly, there are many private companies that help government
process parking and traffic tickets. Considering the fact that these companies
not only use cutting edge technologies, but they also continually upgrade them
to remain competitive. Some of them also provide general (parking) building and
lot maintenance services, and arrange for renovation and reconstruction
services. Some companies even work with the Wall Street investment firms to
help issue bonds and/or securitize the revenue streams. Therefore, the
outsourcing of parking and traffic ticket processing services makes the system,
on the whole, a lot more efficient, generating significant amount of savings
for the government agencies over a period of time.
7. Public Housing
Maintenance and Rental Processing – In almost all major cities in this
country there are (local government owned and operated) affordable public
housing projects. For instance, the NYC Housing Authority provides housing for
over 400,000 low and moderate income residents and employs over 13,000
employees. A number of their basic services like rent and application
processing, building maintenance, safety and security, etc. could be
outsourced. Additionally, it makes no economic sense to use the regular law
enforcement personnel to provide the basic safety and security services for
those facilities which, unfortunately, is quite common; in fact, outsourcing
the security service to established private security firms would be just fine.
Some of these government agencies even provide free vocational and financial
education, job training, transportation, child/day care and a host of other
subsidized services in partnership with other social service agencies and
non-profit organizations, so those services could easily be outsourced as well.
Of course, the same case can also be made for the maintenance of all office
buildings owned and operated by local governments.
8. Public Parks and
Recreation Facilities – Many parks and recreation facilities are
within the jurisdiction of the local governments. They can either be leased to
the private institutions or run as joint ventures with revenue-sharing
agreements. Under the private auspices, these facilities will not only be
better managed and run, but they will also free up the local governments of the
on-going fixed overheads. Selling naming rights for those facilities,
especially of the round-the-year recreational components like indoor swimming
pools, skating rinks, bowling alleys, golf courses, marinas, etc., could also
be viable revenue options. Land lease for future restaurants, food courts, 3D
movie theatres, concert halls, science parks, miniature golf, Go Karts, etc.
within popular parks are other revenue options.
9. Management of Shelters
for Women and Children – Almost all major local governments operate
shelters for women and children. Instead of having to rent from slum landlords
and unsafe hotels and motels, government agencies should seriously consider
working with quality private operators where the operators own and operate
dedicated facilities – in line with the private adult homes – with better
living conditions, safety, job training, day care, emotional therapy,
transportation services, etc. It’s totally immoral to house these unfortunate
women and children in poor and unsafe facilities. Of course, in addition to
living and safety condition, the emphasis must also be on job training and
education so these facilities continue to serve only as transitional
facilities. It’s equally immoral to operate juvenile detention centers. Instead
of building and operating such detention centers, governments must hire more
social workers, school counselors and adolescent/family therapists, thereby
creating long-term solutions to the growing juvenile issues. The reinvented
juvenile functions could be outsourced as well.
As we all know, labor unions are
very powerful so they will fight tooth and nail to protect the status quo. By
the same token, the new generation of local politicians must campaign and run
on platforms that protect taxpayers from the ever-mounting tax burdens. They
need to approach and market the outsourcing issue on humane grounds, walking
down on the curve where the taxpayers are currently being the hardest-hit.
Obviously, one of the most critical areas is the out-of-control property taxes
that heavily favor the rich at the expense of the poor and middle-class, of whom
the minorities and seniors suffer the most, often to the extent that they are
ousted from their roots. Therefore, the umbrella of property assessment and
taxes should be the mother of all outsourcing for local governments.
The next on the queue should be
the establishment of a central processing agency across the entire local
government which will process the vast majority of services indicated above,
thus removing the need for agency-wise duplication of expensive infrastructure,
personnel and mutually exclusive processing. The advantage of having a central
processing agency is that people could be cross-trained on variety of related
processing, gradually ironing out the seasonal impact (seasonality) from the
different services.
Again, unions are not going to
be silent spectators but the concept of central processing (in-house) might be
an easier sell than the outright outsourcing of other services to external
institutions.
Now is the time to emancipate
the maxed out taxpayers.
- Sid Som, MBA, MIM
President, Homequant, Inc.
homequant@gmail.com
