The risks and costs of contracting out vital city services

Managed Competition

Since 2007, the City of San Diego has used a process called “managed competition” to allow private companies to bid for the job of providing essential city services. So far, city employees have demonstrated they can do the work most efficiently and have won the competitions for all five services put out to bid.

Mayor Bob Filner, elected in 2012, immediately put a hold on his predecessor’s plans for managed competition of other services, saying he wants to make sure it really saves money and doesn’t harm service quality. However, some councilmembers want to push forward with the complex process for services such as trash collection.

CPI repeatedly has raised concerns about maintaining the quality of city services for all neighborhoods. Outsourcing to the lowest bidder raises risks of service failures and hidden long-term costs, including environmental violations, the loss of local jobs and a lack of transparent and accessible public decisions.

The city implemented managed competition at a time of budget-cutting that reduced services to unacceptably low levels. Before locking those low levels into place for five-year contracts, it makes sense to develop realistic measures of what city residents need. The city also needs to develop quality controls on private contractors and a way to track results of reduced services.

After all, the 2006 ballot initiative that allowed San Diego to begin using managed competition specified it should be used only if it can save money while maintaining service levels and protecting the public interest. The ballot question read:

Shall the Charter be amended to allow the City to contract services traditionally performed by City civil service employees if determined to be more economical and efficient while maintaining the quality of services and protecting the public interest?