Contracting allows our school district to focus on what we're really supposed to do which is to educate children. It means more resources in the classroom and less money spent on noninstructional services.
—Mark Tennant, Trustee and former President,
Pinckney Board of Education, Pinckney, Michigan
Contracting for support services means turning over the management and/or operation of food service, bus transportation, custodial maintenance, or other support functions to an outside provider. In some cases, schools will contract solely for consulting services in which case the school district continues to supervise and operate its own services.
Contracting can provide a needed infusion of expertise, accountability, and cost effectiveness into the public schools. Central administrative tasks—such as payroll, insurance, and worker's compensation—are often reduced when a contractor handles management and operations. In the area of cost control, savings through competitive contracting have been well-documented.
Several studies comparing in-house and contracted cleaning services find cost savings between 13 and 50 percent for contracted service.
In a KPMG Peat Marwick survey of school districts in Washington and Oregon, more than 60 percent of the districts reported lower costs through contracting than in-house provision. Another 15 percent of respondents indicated that costs were the same.
Contracting enables schools to become customers in a market of competing providers. If schools don't like the price or service quality of one provider, they can take their business elsewhere. Alternatively, for a provider to stay in business and make a profit, it must attract and satisfy its customers. Such an incentive fosters accountability, because any provider can be replaced if it performs poorly. Through competitive contracting, schools can harness the efficiencies and expertise that the private sector offers.
To do so, schools must evaluate which services they should make and which services they should buy. Many states and districts have implemented programs giving students greater choice among schools; contracting gives schools greater choice among providers—an option that can help schools better meet the needs of their students. Case Study #1 gives a quick look at how one district, by tapping the efficiencies of the private sector, improved support-service operations and the welfare of its students.
Competition among different providers, be they public or private, helps keep prices low and quality high. Even if a private provider is not chosen and the schools remain with in-house services, just the existence of competition can often bring about savings and improvements (see Case Study #2).
CASE STUDY #1: How a District Got More for Less
"When the noninstructional costs of operating schools are reduced, more money can be spent on educating children," says Philip Geiger, superintendent of the Piscataway Public Schools in New Jersey. His school district has contracted out for everything from administrators to bus drivers. "We've shifted 10 percent of our school budget in the last three years from noninstructional to instructional purposes," says Geiger who attributes part of that shift to savings from support-service contracting.
With a district budget of $60 million, contracting for support services saves the district well over $1 million annually. Moreover, sale of the district's bus fleet generated an additional $1.3 million one-time cash infusion-money the district used to install computers in the classrooms.
"We're not just talking about saving money, we're rechanneling it so more resources flow to the classroom," says Geiger. "We put guidance counselors in the elementary schools last year. Where do you think the money comes from? From God? The money comes from saying, `We're not going to pay more money for bus drivers than we need to. Instead, we're going to do more for kids."' Contracting with Ryder Transportation has reduced transportation expenses by 37.5 percent annually to $1.5 million, says Geiger.
When the district switched to Daka Restaurants in 1992 to run the district's $1.2 million cafeteria operation, it turned a $500,000 operating deficit into a break-even operation. Daka guarantees that its food-service operations will pay for themselves and will absorb any financial losses involved in their operation, thereby minimizing risk to the schools.
Moreover, student participation in the food-service program at the high school increased from just 28 percent of enrollment to 77 percent with Daka Restaurants. (Participation refers to the number or percentage of students actually served.) Daka attributes the participation increase to the variety of food items it offers to students and to the use of brand-name suppliers, such as Snapple and Pizza Hut, popular among students.
Geiger encourages school administrators to look at all their provider options. Says Geiger, "There's two questions to ask about the budget. Is this the right thing for children? And, if this were your own money, would you be spending it this way?"
CASE STUDY #2: Cherry Creek Cuts Costs, Keeps In-House Bus Drivers
Competition from private providers can help school districts enhance efficiency within the public sector, too.
Hoping to cut costs for its $4.8 million in-house bus transportation operations, the Cherry Creek, Colorado, School Board solicited bids from private busing companies. After Mayflower Contract Services returned a bid guaranteeing annual savings of $800,000 in bus transportation, the school board found an unexpected contender: the district's own bus drivers.
Rather than let an outside provider win the busing contract, the district's drivers decided to compete by cutting the cost of their operations by $500,000 (largely through salary and benefits reductions). That was enough to convince the school board not to switch. The drivers saved their operations, and the district saved scarce dollars.