Be clear on outcomes and only pay for performance. I've found private companies very willing to do that. They come in and if they don't perform well, you don't pay them.[62]
          —Dr. Richard Holzman, Superintendent
          Lindenhurst Public Schools, New York.

Structuring a privatization effort to assure fair treatment for current workers is also important.

Procurement pitfalls exist in both the public and private sectors. There are steps schools can take to avoid them. In evaluating any potential provider, school administrators should take the time to visit another school that is using the contractor's services. Talk with the school staff to find out their level of satisfaction with the provider. Ask what they would do differently, or find out what has been especially beneficial.

The Five Stages in the Bidding Process

  1. Prepare a Request for Proposal

  2. Invite Proposals

  3. Evaluate Proposals

  4. Select the Desired Proposal

  5. Award the Contract

Once school administrators decide to contract for services, time should be taken to prepare carefully written contracts to reduce the likelihood of problems. Consult legal counsel: contracts are legally binding. Of great importance is the bidding process itself. Contracts with the private sector must be thoughtfully designed, carefully monitored, and competitively bid.

"The single most important technique for preventing contracting problems is to promote competition between service providers," writes public-administration expert John Rehfuss.[63] He continues:

Competition encourages bidders to lower their bids through concern that a competitor will bid lower. Furthermore, in a competitive process unsuccessful contractors are quick to raise legal objections, thus discouraging sweetheart deals and other forms of collusion between contractors and public officials. Frequent competitive rebidding of contracts ensures that ineffective contractors who may have developed cozy relationships with public officials are replaced by new firms if they fail to provide quality services.

Structuring a privatization effort to assure fair treatment for current workers is also important. Superintendent Ken Hendriksen of the Mt. Zion Community Union School District No. 3 in Illinois says, "It's a tough and turbulent decision when a district decides to contract because many of the people employed by the district live in the community. It's emotion versus dollars and cents."[64] His district smoothed the transition by requiring the private bus contractor to offer employment to affected employees. About three-quarters of the roughly 25 drivers accepted employment under the new arrangement, which involved a reduction in compensation.

Administrators should think strategically about the long run and avoid getting into a situa-tion where they become so dependent on a single provider—be it public or private-that switching to another provider becomes cost prohibitive. While cancellation clauses are essential, they may not provide protection once a district has become deeply invested in a particular provider. Contracts can be structured to avoid being captured or monopolized by a single provider over time. Education consultant Eric Premack suggests including an option in contracts to lease back or buy back essential school equipment, for example, should the arrangement with the contractor not work out.[65]

Whether school administrators decide to purchase services or provide them in house, ultimately the responsibility for student services lies with the school itself. Administrators should take care to see that the services they provide are cost-effective, customer-oriented, and of high quality. One of the best ways to monitor the quality of services is to consult the people who use them most: students and teachers. When asked how he measures the performance of his school's maintenance contractor, Dr. Richard Schilling of the New Rochelle Schools in New York responds, "Oversight comes from the people who live in the buildings—the teachers and students. The complaints I get are virtually nonexistent with respect to the quality of services cleanliness. The buildings really sparkle."[66]

CASE STUDY #6: Avoid the Pitfall of Non-Competitively Bid Contracts
The fact that the private sector is involved doesn't necessarily mean that there is competition. Contract in hand, private companies are just as eager to avoid competi-tion as anyone else.

Dr. Richard Holzman inherited a $50,000 budget deficit in food-service operations when he became school superintendent of the 10,000-student Middletown School District in New Jersey.[67] Although the district used a private company for food-service operations, the contract had not been reviewed in nearly a decade. Protected from being held accountable for results, the contractor had grown lax and inefficient.

To remedy the problem, Dr. Holzman, now superintendent of the Lindenhurst Public Schools in New York, threatened to look elsewhere for a new food-service operator, getting the contractor to accept new terms. Instead of absorbing the company's losses, the district pays a flat management fee and holds the company responsible for losses. "If you don't make a penny, that's your problem," said Dr. Holzman. The restructuring of incentives led to immediate improvements. "As soon as he (contractor) knew it was going to cost him, he improved services and efficiency. Now food service generates a substantial surplus."