A survey of roughly 300 school districts by American School & University magazine (AS&U) found that most school districts responding to the survey (66 percent) use between one and four contracted services for support operations. Almost 20 percent of school districts said they are currently contracting for five or more services, while just 15 percent said that they contracted for none of the services listed in Table 1.
"The trend is going to be toward more contracting for noninstructional support services," says Joe Agron, editor of AS&U magazine. "More and more school districts are having trouble passing bond levies; with salaries going up and prices going up, a lot of them are looking for ways to cut back on costs without harming services."
The following sections describe the nature and scope of food service, transportation, and maintenance and custodial services in America's public schools. In each section, case studies depict successful partnerships between the private sector and school districts for the provision of these services. Appendix I presents suggested performance measures to help school administrators evaluate the quality of their current operations, be they provided in-house or through private contractors.
A. Food Service
We've had excellent service from our operation and we've operated in the black ever since (contracting for food-service). We're able to stay ahead and buy equipment and improve our facilities at the same time. The best part is that our program is operating without any money from the general fund.
—Don Duncan, Superintendent, Ottawa, Kansas
Each day, an estimated 25 million public-school children eat school-prepared lunches and five million consume school breakfasts. As a restaurant industry, the $4.7 billion school-lunch program compares only second in size to McDonald's Corp.
Approximately 95 percent of all schools participate in the National School Lunch Program. These schools receive cash subsidies and donated commodities totaling $6.8 billion from the U.S. Department of Agriculture (USDA), which administers the program. More than 32 percent of all public-school students participated in federal free or reduced-price lunch programs for low-income families in 1992. In exchange, the schools must serve meals meeting federal requirements for food groups, and they must offer free or reduced-price meals to eligible children.
However, a 1993 USDA study found that less than one percent of school meals served to children comply with the department's dietary guidelines. The study found that school lunches exceeded recommended levels of fat by more than 25 percent, saturated fat by 50 percent, and sodium by nearly 100 percent.
There is some disagreement over the number of school districts using contract service to operate their cafeterias. A survey by American School & University magazine found that almost 25 percent of food-service operations were contracted. However, the survey measured the responses from just 300 districts of 15,000 nationwide, and industry experts contend that the 25 percent figure is too high.
An industry estimate puts the figure at approximately 10 percent of all districts, excluding small rural districts. A study by the USDA found that nearly 1000 school districts„oor roughly 7 percent of all districts nationwide„ocontract with a private company for food-service operations. The USDA study reports the states with the greatest number of food-service management contracts are New Jersey (195 districts), New York (113), Pennsylvania (96), and Michigan (73). Contracts with private food-service companies can include the provision of management, consulting, labor, menu items, or some combination of the four.
In California, Marriott School Services is the largest provider of food-service consulting to the state's public schools, serving roughly three-fourths of the districts that contract with private companies for food-service consulting. California law prohibits private food-service companies from managing or operating school cafeterias; such companies may only provide consulting. Despite these limitations, the impact of private consulting has been significant. The company has demonstrated that well-run, customer-oriented cafeterias can not only pay for themselves, but they can also generate surplus revenues for schools. The following are results from 28 districts for which Marriott provided consulting services in 1994:
Before Marriott was hired, 22 districts operated their food-service programs at a deficit. Today, all but one program pay for themselves.
Twenty-five programs generate surplus revenue between $1,000 and $250,000 for the schools, with a median surplus of $20,000.
Student participation in school food programs increased in 26 districts after hiring Marriott.
More jobs were created than existed before Marriott was hired in 19 districts because of the increase in student participation.
Why are private food-service companies often so successful at what they do? "Companies can offer more resources. You get the clout and economies of scale in purchasing. You get research and insights into products such as milk and biodegradable materials," says Paul Kelly, Business Manager for the Pocono Mountain School Board in Sweetwater, Penn. His district has contracted with private companies for food service since 1980.
CASE STUDY #3: Hungry for Savings, A School District Hires Private Food Service
"We would have had to cut ten to fifteen teachers if we hadn't saved $500,000 by privatizing cafeteria services," says Robert Winter, superintendent of the Wayne Township Public Schools in New Jersey.
ARA School Nutrition Services, which manages and operates the district's cafeterias, turned a deficit operation into a break-even operation. More importantly, after the company was brought on, students began dining-in, buying their lunches at school. Participation jumped from 40 percent of enrollment to 60 percent due to quality improvements introduced by ARA, says Winter. "We have to compete," says Winter, noting, "kids can go across the street to Wendy's."
ARA is responsible for administering the food-service program, making sure revenues cover all costs. The district pays ARA a flat management fee of $27,000 on total sales of roughly $1.1 million. Any surplus revenues revert to the school district.
"We have expertise in our lunch program that we wouldn't have had. How could our district afford experts to run our nutrition program, and our marketing program? It's easier to contract it out," Winter concludes.
B. Pupil Transportation
Each day, more than 22 million students are transported in more than 380,000 yellow school buses at a cost of $8.6 billion annually (excluding capital outlay). The most common types of school-bus transportation service are: regular home-to-school, special education, extracurricular, and desegregation.
Pupil transportation is a growth industry. Not only are greater numbers of students taking the bus to school (both as a proportion of total enrollment, and in absolute terms), but the cost of transporting each pupil has increased significantly. In 1960, 12.2 million students, or 38 percent of all students, were transported at public expense at a cost of $181 per pupil. Three decades later, in 1990, a majority (58 percent) of students took the bus to school. In total, 22 million students rode the bus in 1990 at a cost of $394 per pupil—representing an inflation-adjusted cost increase of 117 percent.
That growth is likely to continue throughout the 1990s, according to School Bus Fleet magazine, which projects expenditure growth between 5.3 and 9.3 percent annually. Figure 2 shows the most conservative projected rate.
In the 1991-92 school year, private contractors owned and operated more than 110,000 buses of the 390,000 school buses serving public schools. In other words, just under one third of bus service was contracted out in the United States. By contrast, virtually all school-bus service in England and New Zealand is provided through contractors, as is 80 percent in Canada.
More important than cost, safety should be of paramount concern to the school community. Because of differences in data collection methods and classification procedures, accident statistics for school-bus transportation are often unreliable or may not be comparable across states. However, a number of regional studies find public and private bus providers have very similar—and very good—safety records.
A 1994 study of safety records for public and private school-bus fleets in Connecticut found little difference in accident rates. In that state, just 6 percent of the buses are publicly owned and operated; 94 percent are in private hands. Of the 654 accidents occurring during the time period studied, just over 8 percent involved public buses, and just under 92 percent involved private buses. In other words, private bus drivers have proportionately fewer accidents than do public drivers. Private bus operators may actually have even better safety records than it appears considering that they operate in more high-density areas and so are more exposed to potential accidents compared to public buses. Public fleets primarily serve rural areas where accidents are more infrequent; they are also less active in the summer months and so limit their risk of accidents.
The California Highway Patrol reports contractors have a higher incidence of accidents compared to district operators for the larger Type I buses, with 11.8 collisions per million miles versus 7.15 collisions for district operators in 1993. However, contractors have a lower accident rate for the mid-size and small Type II buses (6.2 collisions per million miles) than public operators (6.0 collisions). It should be noted that proportionately greater numbers of contractors operate in dense urban settings, and thus, under more accident-prone conditions. San Francisco Unified contracts for 100 percent of its bus service; in the Los Angeles Unified School District, 43 percent of bus service is contracted. Contractors serve roughly one-third of the state's public schools.
School administrators in Washington and Oregon believe contracted bus service to be safer than district operation, according to a 1993 survey by the consulting firm KPMG Peat Marwick. Fifty-four percent of respondents thought contractors had a better safety record; the remaining 46 percent thought safety records were the same for contract and in-house service.
Private companies may be hired to take on a number of responsibilities in bus operations including:
Management, operations and dispatch
Routing and scheduling
Fleet and terminal facility ownership
Schools can avoid the high costs of fleet acquisition or can enjoy a one-time capital infusion from sale of an existing fleet, through private contracting. However, selling off a bus fleet is not a decision that should be undertaken lightly. Reacquisition, should the district decide at some later time to resume ownership of bus operations, will likely be costly and difficult.
Some districts choose to retain ownership of their bus fleet and contract out for driving and maintenance only. The Hart Union High School District in California leases its fleet to a private operator which then supplies the district with all other bus operations. The arrangement has saved the district $250,000 annually since it began contracting in 1984. A decade later, "we're still experiencing reductions in costs," says Gary Smith, director of transportation. "If we got rid of our contractor today and had to go back to running our own operations, I have no doubt our cots would increase."
Smith notes, "The biggest cost savings is in labor. Contractors do not have to pay their drivers what a district does." Contracting does not mean abdicating all responsibility for school-bus operations, says Smith. "It's incumbent on the school district to monitor and make sure the carrier is in compliance with all regulations, because the liability is horrendous."
CASE STUDY #4: District Contracts for Bus Service and Peace of Mind
School bus safety is paramount in the Wichita Falls Independent School District in Texas, says school superintendent Dr. Leslie Carnine. Over a decade ago, two separate bus incidents claimed the lives of two children, and the Wichita Falls community has never forgotten it. When the school board considered contracting for bus service for the district's 15,600 students, it looked closely at company safety records before choosing Mayflower Contract Services in 1988.
Carnine is satisfied with Mayflower, citing the company's "outstanding record of safety," while under contract with the district. With in-house provision, he says, the district faced tricky legal questions over mandatory drug testing—something it wanted to implement after a driver came to work intoxicated. "With a private company, we're on better legal grounds in making sure that drivers are not using drugs or alcohol," says Carnine.
"Safety is the most important. But we also ran the numbers and found that we could save money," says Carnine, who estimates costs would increase by 10 percent if the district were to return to in-house bus transportation. The district spends roughly $1.95 million on transportation operations and an additional $260,000 on capital investment.
"As someone who's spending taxpayer money, we want to make sure we provide the best quality at the least cost," says Carnine. He adds that contracting is not always the answer. He encourages administrators to review school operations on a regular basis looking for ways to provide better, more cost-effective services. If the best provider is the district, stick with it, he says. If not, contract it out. "These people have more expertise; it makes sense to go to the people for whom that's their business."
C. Maintenance, Grounds, and Custodial Services
The level of satisfaction has gone up significantly. (With private management), we have cleaner buildings, better equipment, better training, and it's costing us less. We're working smarter now, not harder. It's a win-win all the way around.
—Glenn Capps, Senior Director of School Plant and Facilities,
Norfolk City School District, Virginia.
There are roughly 83,000 K-12 public-school buildings in the United States. All require cleaning, maintenance, and repair. The market for such services is estimated to be $22 billion annually. Approximately 10 percent of this work is currently contracted.
The cost of school upkeep is a major one. In 1993-94, roughly 9.2 percent of school-district expenditures were allocated for maintenance and operations (M&O), representing a cost of $515 per student, or $3.64 per square foot of building, according to a nationwide survey by American School & University magazine. (Note: the above figures encompass the total cost of M&O including energy retrofits, controls, and equipment. The cost just for routine maintenance, custodial, and grounds services totals $13 billion annually, or approximately $300 per student.)
What's more, M&O budgets appear to be on the rise. National median salaries for custodians, responsible for building upkeep and cleaning, rose 6.6 percent between 1993 and 1994 to $19,311. For maintenance personnel, who are skilled in areas such as electrical or plumbing repair, salaries increased 1.5 percent to $24,799 on average. Overall, total M&O costs per pupil rose 7.8 percent in the one year between 1993 and 1994.
Contracting for maintenance services can help schools reduce the cost of cleaning and maintaning schools. According to the Association of School Business Officials International (ASBO):
A professional organization will probably use fewer staff-hours and more sophisticated equipment and materials to perform required tasks. Furthermore, such a firm will usually work on a fixed price contract which provides a known cost for the operation and often provides a savings over current costs. Most contractors work on a predetermined schedule to ensure that all required tasks are performed. Generally, new equipment, training, better materials, and better supervision are also viewed as advantages of contractor's service agreements.
In addition, contractors can also draw upon a range of back-up support personnel, including electricians, plumbers, and other experts to handle non-routine maintenance problems.
Because of the advantages that it offers, maintenance and custodial contracting is being seriously considered by the Chicago Public Schools. A 1994 audit found the district spends 55 percent above the nationwide norm on school maintenance, yet conditions at many of the district's 552 schools are deplorable. Leaking ceilings, bathrooms with no doors, crumbling walls with exposed asbestos and loose wires, unsanitary conditions, and gross mismanagement were some of the examples cited. The audit, conducted by KPMG Peat Marwick and Washington, Pittman & McKeever management consultants, recommended completely revamping the district's $2.4 billion facilities department, which it described as "broken." Martin Koldyke, chairman of the Chicago School Finance Authority, which commissioned the audit, said, "[Y]our report indicates the need for the Board to examine privatization. There's little doubt in my mind that the Board would save money and have a far better work product."
One big-city school district that did switch to private contracting for facilities maintenance is the Memphis City Schools. A 1994 survey conducted by the district found that service quality increased significantly at each of its schools after contracting with a private company for custodial, maintenance, and grounds services. The 130 school principals surveyed rated the private company, ServiceMaster, higher in all areas assessed by the survey—including leadership, training, equipment quality, and general cleanliness and appearance of the schools—compared to the services received one year earlier with in-house operations.
CASE STUDY #5: How One District Cleaned Up with Contracting
By contracting for maintenance and custodial management, the Union Public Schools in Tulsa, Oklahoma, trimmed $75,000 a year from their upkeep costs. The district turned to ServiceMaster in 1992 hoping to improve service quality and employee training. ServiceMaster trained district employees to work efficiently and cost effectively. Before private management, mowing the lawn—all 300 acres of it—required ten district employees and 14 days. With better equipment and improved labor techniques, the process takes just eight people and five days, says Timothy Raymer, Chief Financial Officer of the Union Public Schools.
The financial backing of a private company proved essential when a heat-generating boiler shut down in mid-winter. With just one replacement boiler in town, the school district had to move fast to get the vendor to hold it. "But we couldn't issue a purchase order because the school board didn't meet until the following Monday," says Raymer. Without the purchase order, the vendor would not hold the boiler.
That's when ServiceMaster stepped in, guaranteeing payment for the heating equipment so that the district could take delivery immediately.
Raymer likes the accountability contracting with a private management company brings. "ServiceMaster requires people to be accountable, no matter what. With marginal (underachieving) employees, it's been a problem, but with our other employees, it's worked out really well." He shrewdly notes that accountability applies to management as well. "If we have a problem with ServiceMaster, we call up and say, 'Hey, this just isn't working.' That's their problem. If they don't do something about it, they're going to lose a multi-thousand dollar contract."
The Union Public Schools operate a $6.0-million maintenance and capital improvement budget. Of that, it pays ServiceMaster a flat $350,000 management fee which includes the cost of training, supervision, supplies, and some equipment.