Privatizing Public Procurement
Alaska’s pilot program to privatize state procurement has set the stage to conduct contracting activities for Maintenance, Repair and Operations (MRO) and general services for two targeted agencies and other state functionalities. The recently awarded contract went to a newly formed limited liability corporation (LLC). Procurement positions in the affected areas were eliminated at a purported cost savings of millions in personnel reductions.
Actually, it happened quickly, with little resistance. The Alaska State Legislature was looking for ways to cure its serious budget deficit and decided it could save money by eliminating personnel from the payroll. They quickly targeted procurement because there wasn’t anything on the record that demonstrated procurement’s value to the state. Nor did the record reveal much of anything that the private sector couldn’t do better, faster, and cheaper.
In merely 10 days, the empowered clueless passed legislation establishing the pilot program to privatize all procurement in selected agencies for a period of up to three years. Interestingly, the legislation also exempted the successful private contractor from complying with the state’s procurement code.
The state legislation spelled out a plan to evaluate and assess current procurement activity in the designated areas to be privatized, develop a formal, sealed Request for Proposal (RFP) to obtain competition, conduct a feasibility study after receipt of proposals, and then decide whether or not to privatize.
Also of interest was the use of the latest political buzzword, “globalization,” in the legislation.
The state procurement office then issued an informal RFP to contract with a “reputable” third party to perform the initial assessment of purchasing activity. Neither the National Institute of Governmental Purchasing (NIGP) nor the National Association of State Procurement Officers (NASPO) were asked to participate, even though Alaska’s state procurement director is a member of both professional organizations.
A single response was received from a company in Tucson, AZ. The assessment contract was awarded without any apparent investigation or justification, which is standard practice when only one proposal is received.
I personally participated in a three-hour telephonic, pre-proposal conference and commented on several of the proposed conditions of the RFP for privatization. Of particular interest was the state’s intent to award federally funded construction and professional contracting activity to a contractor who would be exempted from the procurement law. The state had not checked on that with the Feds. Subsequently, that procurement activity was removed from the RFP.
In light of the “globalization” term used in the legislation, I was also concerned that only Alaska-based businesses would be considered for award. That condition was not removed from the RFP.
The privatization RFP was issued and after eight addenda and three months, two proposals were received, with only one accepted as responsive. After a letter of intent to award was issued, the worker’s union representing the displaced employees was given one month to submit a “counter proposal” at their expense. That, apparently, is the “feasibility study” portion of the legislation. I think the outcome is a foregone conclusion.
Editor’s Note: Beau Grant, CPPO, is a master instructor for the National Institute of Governmental Purchasing (NIGP) and president of Beau-Geste Enterprises.