The number of public school districts in Michigan that hire
companies to provide custodial, transportation and food services is on the rise, and a new book from the Mackinac Center for Public Policy explains how the process works and how schools can gain the benefits and avoid the pitfalls of competitive contracting.
"A School Privatization Primer" describes the frequency of privatization in Michigan and
nationwide, details the contracting process and offers "rules of thumb" for
school districts new to this management practice. The author is Michael D.
LaFaive, the Mackinac Center’s director of fiscal policy. The Mackinac Center
also publishes Michigan Education Report.
"Knowledge about competitive contracting is hard to find in a
central source that is focused on the needs of schools, specifically schools in
Michigan," LaFaive said about the primer’s purpose. "But the goal isn’t just
saving money and improving services – it’s freeing district officials to focus
on helping teachers in the classroom."
The primer is the third and final book in the Mackinac Center’s
Michigan School Management Series; the companion publications discuss collective bargaining and school finance.
"Support service privatization is no longer an exotic concept,"
said LaFaive. Nearly 30 percent of Michigan’s conventional public school
districts contracted with a firm for food services in 2006, roughly double the
national rate. More than 11 percent of school districts hired companies for
custodial services that year, about equal to the national rate, and about 4
percent contract for bus transportation, which the primer says is probably well
below the national rate.
The Michigan figures are based on the Mackinac Center’s own
statewide surveys on school privatization, which show consistent growth in the
practice from 2001 through 2006. Numbers from the 2007 survey were not complete
at the time of the primer’s publication or publication of this issue of Michigan
Two factors that lead most districts to consider privatization
are a desire to focus on education and the potential cost savings, according to
Cost savings are one reason Jackson Public Schools has extended
its contract with Enviro-Clean Services through the 2009-2010 school year,
according to William Hannon, deputy superintendent of finance. The district’s
positive experience with that firm influenced it to also contract with
Professional Educational Services Group to dispatch its substitute teachers,
"It’s going well. I would recommend it," Hannon told Michigan
Education Report. The district has two contracts with Enviro-Clean, one for
custodial and minor maintenance services and the other for four grounds
"The price has not gone up since the first year we contracted
with them," he said. The district saves approximately $1.2 million per year
through the contract. With enrollment at approximately 6,600, the savings equals
$181 per student.
Other districts, among them Howell, Northville and Dowagiac,
have said they are considering contracting for support services for the first
time, primarily because of potential cost savings.
Privatization efforts can be controversial, and sometimes fail,
the primer notes, but school districts officials can expect a better experience
if they understand in advance the contracting process and the arguments — often
raised by employee unions — against privatization.
The primer is the third and final book in the Mackinac Center’s Michigan School Management Series; the companion publications discuss collective bargaining and school finance.
For example, LaFaive suggests that school districts take full
advantage of the "Request for Proposal," a written document inviting bids from
vendors which should spell out the services a district expects and the criteria
a vendor must meet. Here the district can establish its expectations for
quality, oversight, employee training, licensing and more.
"The heart and soul of a contract arrangement in the public
sector and the private sector is the RFP," LaFaive said. "The number one pitfall
is not getting it right the first time, because it gives a good management tool
a bad name while causing pain to district employees and other members of the
When Jackson first investigated privatization, it reviewed the
RFPs used by other districts.
"There’s no need to reinvent the wheel," Hannon said. "We just
tailored it to the needs of our district."
The goal of the bidding process is not to seek the lowest
possible price from a vendor, but to obtain a high quality of service as well as
a competitive price, the primer explains.
Once a district has decided to investigate privatization, it can
expect opposition from employees whose jobs might be affected as well as from
organized anti-privatization campaigns by the National Education Association and
Michigan Education Association.
"Passions will also run high at board meetings," the primer
notes. "Shouts, catcalls and angry language are common, and the meetings are
made more uncomfortable by the larger turnout and the probable presence of
reporters and television cameras."
Privatization critics often allege that companies hire
unqualified workers who will pose a danger to school children. The primer
responds to arguments along those lines, noting that most private vendors have
an incentive to hire employees already employed by the district who have
knowledge of the job, while having no incentive to hire a worker who would
damage the company’s reputation by putting a child at risk.
Some school districts ask vendors to give preference to current
employees when hiring new staff, and districts also can establish personnel
qualifications as a condition of the contract.
Another accusation frequently leveled at districts considering
contracting is that vendors pay lower wages than the district pays. Those
charges should be challenged with a comparative analysis, the primer suggests,
adding that vendors’ wages are frequently comparable. There may be a difference
in benefits, however. A key reason vendors can provide services at lower cost
than the district itself is that the company’s employees are not public
employees, and so the vendor is not required to contribute to the state employee
retirement system. Those savings can be passed on to school districts. Another
reason is the economy of scale that large transportation, food service and
custodial companies can bring to bear on purchasing.