Make Outsourcing Work
- By Michael Fickes
- July 1st, 2011
Outsourcing has generated a lot of bad blood in K-12 schools and their communities over the years.
A district brings in a company that specializes in facilities management, food service or transportation. Existing janitorial and maintenance people, many living in the community, get fired. So do the food service folks and the bus drivers.
Somehow, the district loses control of the outsourced operations. Costs spiral out of control. What a mistake. We’ll never do that again.
Such stories explain why most school districts, the majority in fact, don’t outsource. According to Philadelphia-based ARAMARK Education, 12 to 15 percent of K-12 school districts outsource food service and 18 to 20 percent outsource facility services. Figures on transportation outsourcing are difficult to find. Industry estimates range from 11 percent to 20 percent and higher.
The point is that districts in-source more than they outsource, although outsourcing seems to be growing, due to the damage the recession has done to K-12 district budgets.
Observers say outsourcing horror stories stem from school district management weaknesses.
Take the issue of losing control of operations, a common fear among officials from districts that do not outsource.
“If there is poor communication between you and outside providers, you will lose control and fail,” says Aiman Mahmoud, business administrator and board secretary with Hillsborough Township Public Schools in New Jersey and an enthusiastic outsourcer. “If the outside provider’s managers aren’t aligned with your strategic plan, they will go in a different direction. You may both have good goals, but if their goals aren’t aligned with yours, the consequences can be a total collapse of the services and termination of the contract.”
Outsourcing does not mean bringing in a provider that relieves you of the responsibility for facility management, food service, transportation or other category of outsourcing. It means forming a partnership with a company more expert in a category of service than you are and molding the expert’s services to fit your district’s educational goals and strategic plans. In some cases, it may mean adjusting your plan to fit circumstances that the outsourcing experts bring to your attention.
In short, outsourcing creates an active back-and-forth partnership between a for-profit company and a public (or private) school system.
Is Outsourcing for You?
Of course, no one but you can decide if outsourcing is right for your district.
Every district has many issues to consider. Economics ranks among key considerations. Can you bus students just as safely for less money by outsourcing transportation?
What do your district’s union contracts say about outsourcing? How will outsourcing a particular task affect employment in your community? Might the parents of some of your students lose jobs?
Some districts are comfortable with the concept of outsourcing and take broad advantage of it at certain times. “It’s cyclical,” says Terry Elfers, chief operations officer with Cincinnati Public Schools. “Sometimes it works well, and sometimes it doesn’t. Here we outsource buses with First Student, Inc. (Cincinnati, Ohio), and we’re pleased with that contract.
“We’ve outsourced and in-sourced maintenance. At one time we outsourced HVAC filter changes because the charges were less than we were paying for the filters. In that instance, we got the labor essentially for free. But now filter pricing has changed and it is cheaper to bring it back in house.”
Some districts dislike that idea of moving services to outside providers and then back in again. “We take a very cautious approach,” says Rick Harris, chief logistics and operations officer with the Washoe County School district in Reno, Nev. “There are many other moving parts to think about. We’ve been outsourcing food services for 12 years now. We’ve thought about transportation, but we have a huge fleet of buses and a lot of assets. What do you do if it doesn’t work?”
The keys to successful outsourcing lie in finding and managing the right partners.
Finding the Right Partner
Districts seek outsourcing partners through conventional requests for proposals (RFPs). Develop an RFP that lays out your requirements in detail and send them out. Most districts have established procedures for assessing proposals that work well. As always, say experts, don’t fail to check references. Do current clients recommend the provider?
Make sure you attract proposals from all levels of providers: local, regional and national. Washoe County School District recently changed food service providers when ARAMARK Education replied to a routine RFP issued as the current suppliers contract came up for renewal.
“We thought all along that we would continue with our current supplier but ARAMARK blew us away with their presentation,” says Harris. “You could tell the company really wanted the account. Their people talked to our leadership. They discovered dissatisfaction with the quality of food in some elementary schools, researched the problems and included proposals for remedies in their response.”
Washoe County Schools signed ARAMARK up. Today, just over a year later, breakfast participation and lunch participation have risen, and costs are down. Harris credits innovations made by Tony Cook, ARAMARK’s director of food services.
Washoe County Schools not only bought an attractive proposal, they wrote performance expectations into the contract and managed ARAMARK with an eye to those expectations.
“Standard contract language is performance based,” says Hillsborough Township’s Mahmoud, “If you aren’t up to par, we’ll fine you every day until you get up to par.
“In fact, we talk about this before awarding the contract. We tell companies responding to RFPs exactly what performance standards we will put into the contract. If you get the contract and don’t meet the criteria, we’ll exercise a 30-day termination clause and find someone else.”
Cincinnati Public Schools takes a similar view of contract language. “Our contract says that First Student will deliver students by a certain time and comply with all state and federal regulations regarding bus drivers, bus maintenance and age of the fleet,” says Cincinnati’s Elfers. “The contract says that they agree to liquidated damages if they fail to perform to the standards set in the contract.”
For instance, the Cincinnati transportation contract requires First Student to equip buses with video cameras and to maintain the system. It then requires the company to deliver copies of requested video from the buses within three days of a request. The contract specifies liquidated damages at $100 for every day longer than three days.
When First Contract took more than three days to deliver a tape, the district levied the penalties. First Contract revised its procedures so that it could deliver in three days.
While performance criteria can be used to end a contract, no one goes into a relationship expecting that. The purpose of performance criteria is to provide management touchstones. This is what we expect. Find a way to do it.
One more thing about performance criteria: If you fear outsourcing because of stories about current staff losing their jobs, solve the problem with a contractual performance criterion requiring the outsource provider to hire the current staff.
“It makes sense for us to hire people who know the schools and students,” says John Gillie, senior vice president of commercial development with First Student. “They have a vested interest in serving the communities in which they live and work.”
Benefits of Outsourcing
Unless you require your provider to maintain current wages — some districts do require this — chances are that wages will go down to levels considered competitive by your provider. That can create discontent and drive some current employees away. On the other hand, some may accept lower wages in exchange for the prospects of a career.
In an outsourcing company that specializes in facilities management, a janitor can learn best practices and rise into management, an unlikely prospect for janitors employed by school districts.
That is one of the benefits of outsourcing. There are others. Mahmoud puts lower costs at the top of the outsourcing benefits list. He also points to the time saved by not having to manage employees. “If there is a problem, you tell the supplier to fix it,” he says. “You also get a concentrated level of expertise that is important in many ways. Take training for example. We’re not equipped to train custodians or maintenance technicians. Outsourcing companies specialize in facilities management, food service, transportation and other fields. They have the expertise and the facilities to train people.”
Mahmoud also relies on the expertise of outsourcing providers to know about and to comply with federal and state regulations. “We funded a retrofit of our special education classrooms in our high schools with federal money,” he says. “To get the money we had to comply with stringent regulations. ARAMARK’s facilities managers knew the regulations and ensured we were in compliance. They follow federal, state and local regulations. When something changes, they know about it and respond.”
The big benefit, of course, is that well-managed outsourcing operations enables the district to focus more financial and human resources on educating students instead of busing them, housing them and feeding them. Let the experts handle those chores.