UCCS study says outsourcing city and state jobs is not a good move

Published: March 18, 2014, 8:04 pm, by Monica Mendoza

Is outsourcing government jobs a good thing?

The city of Colorado Springs thinks so. It has outsourced jobs in two departments in recent months.

But a report from the Colorado Center for Policy Studies at UCCS says outsourcing government jobs may not be all that it promises to be, which is to save taxpayers money.

The center’s researchers identified the social and economic impact of outsourcing public services, which they say, includes reduced accountability and transparency as control of key public decisions is removed from citizens and their elected officials. Quality also often suffers, the report says.

“There is a wealth of evidence that outsourcing public jobs often diminishes quality without substantial cost reduction. Unfortunately, few states and cities have a serious oversight process to let citizens evaluate what is happening,” said Daphne Greenwood, professor, Department of Economics, University of Colorado at Colorado Springs and center director.

The study found that contracting with private corporations generally reduces worker wages and benefits, which leads to a host of negative effects for the community including: reduced spending in local communities and declining retail sales; risks to public health and safety with less experienced employees and more bureaucracy; fewer opportunities for middle-class jobs and upward mobility; higher wage gaps between men and women and blacks and whites; and more workers and retirees on public assistance, especially in female-headed households

In June Colorado Springs announced that it would outsource its entire fleet management department — about 70 positions. The city now has a $35 million, five year contract with Serco. Virginia-based Serco is the American division of Serco Group, which is based in London.

In December city officials said some of the 70 fleet employees found other jobs and 54 were offered jobs with Serco at or above the same pay.

By using a private company to maintain the city’s 4,500 vehicles and pieces of equipment, the city estimates it could save about $4 million over five years. That figure does not include what the city would have paid in retirement benefits for the 70 employees, the city’s former chief of staff Laura Neumann said in December.

Last year, the city also announced that it would outsource nine positions in the Information Technology department. The outsourcing, which still is being negotiated, will pare the IT department from 61 to 52 employees. The move was motivated by an aging city data center, the city’s IT director Joe Palmer said in October as the City Council held its budget hearings. The city spent $11.6 million on the data center in 2008, but the technology is old now, he said, and it would cost $10 million to upgrade.

The city is in the process now of confiming “reduction in force” packages with nine IT employees.

In November, Neumann said the city had not identified any other departments or positions for outsourcing, but added that it would be an on going discussion.