News Details

Report shows that the tech work saved about $700 per employee per year, or about $130,000 in a $25-million-a-year pact

By CHRISTIAN BERTHELSEN
Times Staff Writer

April 27, 2007

Dealing a blow to the logic of outsourcing government work to private companies, a new Orange County report finds little savings in a $25-million-per-year contract awarded to a firm that manages the county's technology systems.

The report may be the starting point for an effort to bring work back in-house — which could significantly expand the county workforce — after decades in which outsourcing was a fashionable concept among fiscal conservatives seeking to shrink government.

The report comes at the urging of the county's largest public employees union, which has been championing the cause of returning more work to government workers. The union would see its power in contract negotiations and political campaigns enhanced with an expanded membership.

The idea is finding some surprising allies on the all-Republican Board of Supervisors, whose members say they want work done at the lowest cost to taxpayers, regardless of who does it.

In examining the county's contract with Dallas-based Affiliated Computer Services Inc., officials found the county saved $700 per year per employee by contracting out the work rather than having county employees do it, while sacrificing control over staff and depth of understanding over county functions.

County Auditor-Controller David Sundstrom, who oversaw the review and heads the county's technology working group committee, said the work was preliminary and would require more examination. No immediate action is expected, and county and labor leaders agree it needs more study.

Figures are inexact, but Orange County spent roughly $520 million in 2005 on outsourced contracts for professional services, about a third of the $1.4 billion spent on salary and benefits for county employees.

Many of those contracts were for specialized work, such as medical services or construction. But Nick Berardino, general manager of the 14,000-member Orange County Employees Assn., said at least some of the work could be performed more cheaply by county employees. He said that could translate to as many as 2,000 government jobs.

Berardino said the report showed that promises of significant savings from a reputedly more efficient private sector were illusory and that many of the contracts were awarded because of political philosophy and influence by lobbyists for companies seeking work.

"There needs to be a major concentration on looking at the work that's been contracted out," he said. "The whole justification has been flawed and politically motivated."

Kevin Lightfoot, a spokesman for ACS, the Dallas company on contract, said his firm had not seen the report and that he was unable to respond to its findings.

"Orange County is a satisfied client we have been working with for several years as a technology partner, and we continue to look forward to working with county government to serve the needs of local residents," Lightfoot said. ACS' contract with the county runs until 2011.

The county has 420 employees who work in technology services; ACS provides an additional 185 workers.

Savings is not the only justification for outsourcing the work. Officials say they get more flexibility with staffing levels and a higher degree of specialization when they contract for specific services. But, all things being equal, some say they'd rather have their own staff perform duties if possible, partly because it reduces dependence on outsiders more focused on their own bottom line rather than the county's.

"I've always been an advocate that if we can do it less expensively internally, then we should," said county Supervisor John Moorlach, who has faced fierce opposition from public employees unions in his campaigns. "There are certain services that can be better done by county employees than by outside contractors. The issue is that you have to be selective."

Other county officials are more hesitant, noting that giving public union employees more control over government functions — particularly in critical areas such as computer services — would greatly strengthen their hand at the negotiating table when seeking higher pay or benefits.

If unionized employees "had all the I.T. services and they had a walkout, that's a lot more power than if we were able to hobble by with a contract," Sundstrom said.

County Supervisor Chairman Chris Norby said it comes down to a choice between flexibility or control over the workforce. Still, he added, "the big advantage of contracting out is cost savings. If the cost savings aren't there, you have to re-look at it."