Outsourcing services
Last week, we discussed how deregulation was supposed to open up opportunities for private enterprise in spaces that were previously occupied by the government bureaucracy. Contrasts were passingly drawn between theoretical expectations and reality in the conduct of business. We asserted that the expected benefits and spill overs from businesses, thriving in areas that were previously closed off from them, did not eventuate in the manner expected. It appeared that business thinking had too many entrepreneurial offshoots that could not be anticipated in the theorising that led to the public sector reform framework. Readers will have noticed single-storeyed houses growing into 2-3 storeyed buildings in Housing Authority estates around Nasinu – that was a direct result of deregulation. Pockets of land that were once considered integral parts of the marine ecosystem have been converted into commercial estates – again a result of deregulation.
We ended the last article by highlighting that aside from deregulation, the size of government was directly reduced by either outsourcing or contracting-out government services. Let us delve deeper into this here.
Provision of public services by the private sector
IN a classic case of contractingout public services, garbage collection was moved into private hands amid much fanfare in the 2000s by Suva City Council. Potential contractors were expected to present competitive bids that would be evaluated objectively. The contractor or contractors chosen would be the best based on set criteria like cost, type of personnel, quality of equipment and machinery, etc. We were all (adults and children alike) very excited when the mantis-like green trucks started doing the rounds. Even the dogs looked agog at the “terminator trucks” before realising that the barking and harassing contest had just taken a new, and exciting, turn. These were just garbage collectors disguised as aliens! That was what the dogs saw.
The first thing we noticed was that the green trucks arrived at odd times and not punctually before eight in the morning as had become the norm. Then a range of strange behaviours followed. Garbage placed on the roadside in plastic bags and not inside garbage bins were left uncollected. Rubbish that was not biodegradable, no matter how small, was ignored. Rubbish that had been scattered by raiding dogs was left untouched. Complaints were filed and issues raised with Suva City Council. The contracted collector came back with a list of concerns and proposals for rules to be followed by the citizenry. It was understandable from their perspective as they wanted the whole collection exercise to be conducted in a hasslefree and smooth manner.
However, the ratepayers were affected negatively by these rules set by private contractors and accepted too readily by SCC. This section is being written based on recall because I did write a newspaper column on this issue at the time. Let’s look at some of those rules here.
One, garbage had to be put out in an appropriate garbage bin. This meant that garbage in plastic bags would be rejected. I found out later from personnel involved directly that this was meant to avoid the hassle of having to collect garbage scattered by hungry strays as well as playful pet dogs. The poor ratepayer now had to purchase a garbage bin and run the risk of losing them to opportunistic thieves if not immediately retrieved after the garbage truck passed by.
Two, again to avoid the nuisance of dogs scattering rubbish, garbage bins had to be kept inside unlocked compounds. If you had a guard dog, it had to be leashed to allow the garbage collector safe access into your compound to access the garbage bin. For those who had nobody back at home after they left for work and school, the compound had to be left exposed to free access by thieves now that both the lock and dog had been effectively disabled. In the meantime, fringe dwellers who were in the habit of leaving their plastic bags of garbage on top of those legitimately left in front of houses simply continued doing the same and the blame fell on the houseowner or tenant.
Unhappy and enraged ratepayers protested this by organising at least one public meeting in Flagstaff (I think). A petition was prepared on the impracticalities of these new and elaborate requirements to simply get the garbage collection service going effectively (forget about efficiently). There was a lethargic response from SCC, but the issue was resolved. I do not wish to push this example too far, but what the private contractor was attempting to do was to pass on part of the responsibility for garbage collection to the ratepayer through a string of requirements. This works well overseas (Australia, NZ, Japan), but our people were not ready for it. Moreover, the prevalence of uncontrolled dogs and lack of parallel services for our fringe dwellers, made the whole exercise practically impossible. In other words, the context was different, and it called for different methods and a different more-appropriate approach to garbage collection. It seems to be working better now after all the learnings from the trials and tribulations of the past.
Private management of a corrections facility
The second example I wish to share here involves the management of a Corrections facility (prison) by a private firm in New Zealand. Located in Auckland, Mount Eden Jail has a long and colourful history. Its management was handed over to Serco, a British outsourcing company in February 2011 for $300m over 10 years.
In a typical “rebranding” exercise, Mount Eden Corrections Facility (MECF) was opened in early 2011 as the main reception prison for newly remanded male prisoners in the Auckland region. Readers will rightfully be agitating by now about the thinking involved in transferring prison management into private hands. In fact, the Labour Party in NZ was dead against this, but with the ascendance of John Key and the national government in 2008, interest in reforms returned with renewed vigour.
Mount Eden Prison was in line and Serco, one of the largest government contractors at the time, was awarded the management contract. By 2014, reports of fight clubs and organised fights involving gangs began to surface openly. An official 2016 report revealed weekly fight clubs, “freely available” drugs and cellphones smuggled in by prison staff, and negligent guards who may have missed violent behaviour because they were playing table tennis and pool within the jail. A number of prisoners revealed that guards failed to provide adequate supervision or to manage the influence of gangs in the prison. In fact, Nick Evans was named as one prisoner who died as a result of this. Another, who had both his legs broken, sued the service for its failure to provide a safe environment.
The 2016 report revealed that inmates at the remand prison went unsupervised in unlocked cells for up to two and a half hours, partly because of a rostering system which wrongly said people were on duty when they were sometimes on leave or had resigned. It also noted an absence of CCTV cameras in prison cells, a regular feature of corrections facilities in NZ.
All these findings clearly pointed to laxity, lack of concern for expected services, and an alarming disregard for contract provisions and expectations on the part of Serco. The cost-profit concern appeared to be very much at play in the decision-making processes involved. After all shortage of guards equals less cost and lack of CCTV cameras points to cost cutting.
A closer look at Serco is highly enlightening.
Serco
Founded in the UK in 1929, Serco was initially involved in providing services to the British War Office during the World War II. Later, during the Cold War era, it specialised in the provision of sophisticated defence services, such as sonar, early warning radar and satellite systems. The company underwent substantial restructuring during the 1980s as it reoriented itself towards broader service provision. During the 1990s, as the public sector reform wave gathered momentum, Serco strategically opted to expand its presence globally seeking out government contracts. By 2013, Serco had become one of the world’s largest government contractors.
The company’s track record, however, has been highly controversial. During 2013, Alastair Lyons, the then-chairman of Serco, resigned from the company after it was found that it had maintained inaccurate records and overcharged the UK Government for electronically monitoring criminals. In July 2015, Serco lost its contract to operate the Mount Eden remand prison in Auckland because of confirmed inaction over organised fighting for money amongst inmates. In 2017, a series of reports called the Paradise Papers revealed that a risk assessment conducted by the legal services firm Appleby observed Serco to have had a “history of problems, failures, fatal errors and overcharging” accompanied by allegations of fraud and coverups. Readers would be interested to know that Serco was involved with Obamacare and runs 11 of Australia’s controversial onshore immigration detention centres on a 1 billion pound contract.
It is clear from both the cases outlined above that the profit motive overrode service concerns that are often the underlying focus when dealing with the provision of services in the public sector. This is captured succinctly in a response from Erin Polaczuk, the national secretary of New Zealand’s Public Service Association at the time when he was asked about the fiasco at Mount Eden. He said, “private prisons are focussed on profit, not on ensuring safety for staff or rehabilitation for prisoners” (NZ Herald, 20/07/2015). That is an everpresent risk that is attendant in outsourcing or contracting-out government services.
We will develop this further next week.