Playing to win the competition game

Obtaining the highest quality products and services at the lowest possible cost — what government official would not want that? But turn the tables: Would you welcome the opportunity to compare your products and services, evaluated by quality and price, against all others in the marketplace? Until recently, public sector officials, with a virtual monopoly in their markets, never had to consider the competition.

That is changing as competition programs are spreading. On the surface, those programs are simple: Products and services are put up against the competition, and whichever is judged best on quality and cost wins.

But competitive contracting programs are far more complex than that. They represent a shift in organizational thinking. For bureaucratic agencies comfortable with providing the same services in the same manner year after year, shifts in organizational culture can be quite difficult. Since change is usually seen as threatening, or at least disruptive, competition programs often meet stiff resistance.

Staffers who resist change believe that they can ride out whatever program is being tried, and they will still be there to pick up their paychecks and retirement benefits. Others in government are skeptical and have grown tired of managerial “flavors of the day.” The skeptics believe business as usual will prevail. However, cities as diverse as Phoenix, Indianapolis and Charlotte, N.C., have abandoned the business-as-usual approach and achieved great success in a competitive market.

In these cities, public service agencies win 30 to 40 percent of the services subjected to competition. The lesson is simple: The private sector can be, but is not necessarily, better. Once public sector managers and employees are granted the freedom to operate in the manner they know to be responsive to demand, using procedures they establish and resources they deem appropriate, they often compete as well as the private sector.

In fact, public sector agencies bring a number of inherent advantages to the competition process, according to Susan Perkins, deputy city auditor in Phoenix. Among those advantages are existing expertise in the tasks and skills to be performed, thorough knowledge of the client’s needs, existing physical plants that are often ideally situated, exemption from taxes and no requirement to generate a profit since there are no shareholders to please. Consequently, public sector agencies need not assume that they will lose in competition programs.

Still, lack of awareness, education and the political and organizational will to take risks often impedes widespread adoption of competition programs, which basically ask nothing more of public enterprises than that which private enterprises face every day: the rewards and perils of the open market. Asking a municipal photocopy and print shop to compete against a privately-run print shop is, therefore, no more outrageous than asking a neighborhood print shop to compete against another print shop operating down the street.

Some governmental leaders who are considering competition programs have expressed concern about negative reactions from employee groups. Yet, in some cities, unions fully participate in such programs, notes Thomas Olsen, director of enterprise development in Indianapolis, who points out that his city and its union recently earned an American Excellence Award from the Ford Foundation for their joint participation in a competition program.

Steven Quick, president of Local 25 of the American Federation of State, County, and Municipal Employees in Indianapolis, lauded that city’s competition program in a letter to The Indianapolis News. The letter identified several keys in the competition program, including:

• no layoffs;

• institution of incentive pay;

• abolishment of a wage freeze;

• reclassification and upgrading of city jobs;

• empowerment programs for city workers;

• the release or firing of ineffective supervisors, as well as the retention of better ones; and

• a system that encourages city workers to communicate directly with city leaders.

“What distinguishes Indianapolis is the hard stuff — increased communication, better (not more) management, empowerment of workers, incentives rather than threats and an attempt to be a real partner in the process,” Quick wrote.

So, how does a public agency make the transition from a classic bureaucracy to a competitive enterprise?

It takes great amounts of planning, training, assistance and perseverance. First, however, there must be strong, long-term organizational and political commitment to cost-effective, high-quality public services.

The importance of a long-term commitment cannot be overstated, says Ed Sizer, contracts administrator for Charlotte’s competition program. “It’s imperative to have long-term commitment,” he says. As part of that commitment, established organizations must be given the time, freedom, resources and assistance to bring themselves up to a level at which they can be competitive. Government leaders first must expose their organizations to the concepts and general approaches of competition programs. Then, they must provide specific training and assistance to those units being directly affected by a competition program.

Also needed are the following:

• establishment of new group hierarchies and relationships;

• a guarantee that sufficient time will be allotted for development of alternative business methods;

• management training in aspects like debt borrowing, tax filing and cash flow analysis in those instances when an agency chooses to incorporate outside of the governmental structure;

• identification of customers and their values;

• training on how to assess the competition; and

• exposure to new technologies.

Sizer promotes employee involvement as a way to reduce resistance. “I would encourage anyone to make sure their employees are involved up front and early,” he says. Charlotte provides program and stress training to all city staff members, not just those directly affected. The city also includes line staff in the writing of Requests For Proposals.

The negotiation process is another area in which give-and-take can spawn creative solutions to problems. The resulting organization is one in which high quality and low price are embedded within the culture.

This new culture brings benefits not only to the affected agency, but to the entire organization as well. “The key is the mayor’s active involvement in trying to create a value system that stresses competition programs and the advantages of the skills and talents of the employees,” says Bob Hooker, administrator for contract development in Indianapolis.

In successful programs, agencies look forward to competing and take pride in proving that the products and services they provide are better than those of the competition.

Brian Foster is an associate with Hilton Farnkopf & Hobson, LLC, which is assisting Glendale, Calif., in the development of a competition program.