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Contracting out measure for Enterprise Services draws some critics in Senate hearing

Post by Brad Shannon / The Olympian on Feb. 26, 2013 at 5:43 pm | No Comments »
February 26, 2013 6:08 pm
Michael Baumgartner
Michael Baumgartner

The Senate Ways and Means Committee gave a hearing Tuesday to a bill that would give the state Department of Enterprise Services more leeway in contracting out for software services. Senate Bill 5717 is sponsored by Sen. Michael Baumgartner, who sponsored the agency-consolidation bill in 2011 that created DES through a merger of five agencies into three.

The testimony was mixed – with major state landlords and state employees questioning the need for the measure. TVW carried the hearing here (testimony starts about 2:15 hours in).

But Baumgartner, a Spokane Republican, said the bill could save the state unspecified amounts of money, and he said after the hearing he expects the measure eventually to pass the full Senate and become part of the Majority Coalition Caucus’ budget negotiation with the House in April.

He noted that the DES merger has already led to about $30 million in operations savings, and another $37 million may be saved over the next biennium. DES merged the back-office functions such as payroll, contracts, technology and personnel for many state agencies, while cutting positions; another new agency, Consolidated Technology Services, now runs the state’s data services like a utility service to other agencies.

As outlined in this previous post, Baumgartner’s proposal not only would free DES from collective bargaining limitations on software development, it also calls on the governor’s Office of Financial Management to specifically study three DES functions – real estate brokering, custodial services and the Motor Pool – to see if the state could save money by farming the work out to the private sector. OFM already is studying three other functions under the original bill, but it has not offered recommendations yet.

But that study aspect did not calm fears of critics.

Brent McKinley, owner of the Arlington-based Vine Street Group that is a major lesser of office space to state agencies, said the current set-up works well for real estate transactions affecting the state. He questioned why the state would want to change what is working.

McKinley implied the private sector brokers would be motivated by commission and be less loyal to the state’s interests. He warned the use of such brokers instead of state employees could open the system to graft and “no end to the favoritism.’’

McKinley is well known in public-sector real-estate circles and serves on the board of the quietly influential Government Building Owners and Lessors Association. GBOLA formed in the early 1990s after the state built three major agency headquarter buildings and left private-sector landlords with about 1 million square feet of vacant office space.

Baumgartner said his bill does not mandate that the state turn real-estate transactions over to private businesses. “Again the intent is to look at this function to see if it saves any money’’ to farm it out, Baumgartner explained.

Contract lobbyist Mark Gjurasic, who represents GBOLA, said the state could save money just by not studying the real-estate leasing options.

But Baumgartner replied: “There were many people who said we shouldn’t do CTS and we ended up saving $30 million.’’

A contracts specialist for the Washington Federation of State Employees and several unionized workers at DES also testified against the bill. Some said they want to retain the competitive contracting provisions of the Personnel Services Reform Act of 2002, which gave workers in targeted areas of government 90 days to create an Employee Business Unit, or EBU, that could offer bids to keep their jobs.

“Bring it on. We’re ready for competition,” said Robert Bristol, an electrician for Enterprise Services.

Others like custodian Bill Morgan said they are “continually looking out for our customers” and using environmentally friendly – “green cleaning” – on state buildings.

Don Canright, a former private sector worker, said he knows what it takes to submit winning bids in the private sector. He said  the state system for cleaning office buildings  is “the best we can buy. It is focused on safety and health. You have to remember these are historic buildings … I think you should keep the professionals in these buildings and not put the health and safety of these buildings out to the lowest bidder.’’

Baumgartner said that if employees are already able to form EBUs under existing law, “you should start doing that now.”

Under the 2011 law, the governor’s budget office selected agency web services, bulk printing and out-of-county mail delivery for possible privatization. The state budget office has not given its recommendations yet on whether any are worth putting out to private bid.

In a news release put out after the hearing, Baumgartner underscored that the goal is to take a look to see if the state can find ways of saving money.

“The state can literally find millions and millions of dollars that can be used for education funding by continuing to pursue efficiencies in back-office technology management,” Baumgartner said. “Exempting CTS has been a huge success. Software continues to become a service and more functions are stored in the cloud rather than in physical infrastructure; giving that same flexibility to DES will allow us to save millions more.”

The bill now awaits action in the Senate Ways and Means Committee, which has a Friday deadline for passing fiscal bills. But because Baumgartner’s proposal could be considered necessary to implement the budget, it can easily be exempted from the cutoff.

“I thought that the hearing went very well. I expect as folks learn more about what is actually in it, it will gain support,” Baumgartner said in an email. “What happens next? I expect it will pass the Senate and be part of our overall budget negotiation.”

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