Washington state government is belatedly wrapping up a review of services for possible privatization and could make its biggest decision so far – whether to farm out state printing – as early as this week.
The decision would follow the state’s conclusion last week that it can’t save money by contracting with a private courier service to deliver interoffice mail to far-flung locations. State employees will keep that work.
The Legislature created a Department of Enterprise Services in 2011 to handle back-office services, including printing and mail services. Lawmakers mandated that a few of the department’s lines of work be reviewed every two years to see if the private sector could do them more efficiently. Typical contracting rules, which include a role for unions, wouldn’t apply.
But the privatization review hasn’t moved as quickly as predicted, and analysts completing the first round have missed their deadline by more than a month and counting.
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Lawmakers ordered that the first round involve the state printer. Private presses already do much of the state’s printing. Now the state is offering up bulk print jobs such as stationery, business cards, brochures and maps.
Private competitors have long argued they could do the work cheaper. Public employees disagree, and a union leader expressed confidence Friday that analysts recognize the state workforce as the lowest-cost provider.
“I think the anticipation is that we’re going to keep doing what we’re doing,” said Brian Earl, president of the local Teamsters union, Graphic Communications Conference Local 767M.
He said the printing operation has long been run as the “most unlike state government of all state government, and most like the private sector.”
A lobbyist for printing companies, Bill Stauffacher, worries that comparisons between public employees and private bidders might not be fair. He’s especially concerned that the state’s analysis won’t account for its own capital costs, such as buying equipment.
Gov. Jay Inslee’s budget office must pick more services, up to six, to examine in the next two-year period that started July 1. But first it has to wrap up the first round of comparisons started by former Gov. Chris Gregoire’s administration that was supposed to be finished by June 30 and was predicted to finish months earlier.
The services picked: state websites, interoffice mail outside the Olympia area and bulk printing.
Officials have encountered some difficulties putting whole areas of government out to bid, they said. It’s much more open-ended than the usual contract that seeks some specific product or service, said Roselyn Marcus, assistant director for contracts at Enterprise Services.
“I don’t think any of us really realized that until we started reviewing them,” Marcus said.
Marcus said other factors added to the delay, listing the creation of a new agency, personnel turnover, and most recently, preparations for a possible government shutdown that never materialized.
Marcus said the contracting process needs improvement and she would order a review of the first round.
While she wouldn’t reveal yet whether printing would be farmed out or kept in-house, she said, “We’re going to need to do a real scrub on what happened on that one.”
MAIL STAYS IN-HOUSE
In the most recent privatization decision, budget director David Schumacher wrote in a letter Monday that contracting mail delivery outside Thurston County didn’t pencil out.
Just two companies bid on the work.
Schumacher wrote that Enterprise Services spends $595,000 to $765,000 delivering the roughly 1 million envelopes that cross county lines each year. That stacked up favorably against a bid from a Renton-based company, Delivery Express, which offered to do the work for $1.4 million a year.
Atlanta-based BeavEx offered to do it for just more than $509,000, but the proposal was disqualified because BeavEx wouldn’t agree to reimburse the state if the U.S. Postal Service decides to charge postage on its deliveries.
The documents wouldn’t touch a mailbox or a post office. But state lawyers advised that postage would still apply because of a law that, with a few exceptions, creates a federal monopoly over mail delivery.
Both companies shed doubt on that conclusion. BeavEx told the state its other clients hadn’t been affected by the postal law. Delivery Express, which delivers for Paccar and University of Washington Medicine, agreed to be on the hook for any postage costs. Delivery Express lawyers determined the state would not be exposed to risk, said David Hamilton, president of the company.
It “seemed like a non-issue,” Hamilton said in an email. He also wrote that the state’s contracting process was rigorous and fair.
Marcus said the risk of postage wasn’t the only reason Enterprise Services turned out to be more cost-effective. The agency’s employees pick up all kinds of items – more than just letters – and carry them from office to office in ways a private business wouldn’t do, she said.
“When you really look at what services we’re providing, it’s actually a lot more,” Marcus said.
WEBSITE IN LIMBO
Officials are moving toward outsourcing Web work, but they haven’t figured out how to untangle a knot the Legislature tied in their plan to do so.
The budget office decided to privatize the Access Washington website, hoping Kansas-based NIC would turn the state’s main Web portal into a one-stop shop for paying taxes, getting a license and other transactions – all at no cost to the state.
The catch was that NIC wanted to recoup its costs by charging businesses, such as insurers, more to access motorists’ driving records. That’s how it turns a profit operating “e-government” sites in other states.
But Washington lawmakers this year stepped in to forbid such a charge. The state hasn’t worked out another funding source with NIC, leaving that deal in limbo.
The state has signed contracts with two companies to design and maintain government websites, and it has a verbal deal with a third company, Valtech, a DES spokeswoman said.
Government entities inside and outside state government can opt to use the companies or do the website work in-house.
Imex Systems will be allowed to charge a maximum of $60 to $90 an hour and could receive as much as $1 million over the contract’s three-year life. The same total applies to Logic 20/20, which may charge up to $167 an hour.
The state’s DES had estimated it cost $161 per hour to have its employees do the same work.
Jordan Schrader: 360-786-1826 firstname.lastname@example.org