Sandy Springs and the Future of Privatized Government

In 2005, north Fulton County residents decided they wanted their own government, but without all of the hassle. Thus, the city of Sandy Springs was born, where almost all government services are delivered by private sector companies that submit competitive bids for the opportunity to do so. It sounds like something out a Republican fantasy, with the free market wiping out inefficiency, providing more accountability, and, theoretically, saving taxpayer dollars. In a February 2016 visit, Ohio Governor and then-presidential candidate John Kasich praised Sandy Springs’ “Uber-ized” model of government, using it to segue into his own vision of private prisons, veteran hospitals, and military bases.

sandy springs logoBut are the days of privatized government numbered? Last month, Sandy Springs announced that it would extend service provider contracts for three years without a competitive bidding process. This prompted Reporter Newspapers, which covers north Fulton County, to run this article with the headline: Is the ‘Sandy Springs Model’ of Government Changing?” It’s a fair question. Scaling back the competitive bidding process would seemingly hamper the city’s ability to cut costs and hold ineffective providers accountable. It might also inch Sandy Springs closer to providing more in-house services, blurring the distinction between the privatization model and the public sector model used by most U.S. cities.

Sandy Springs Councilman and longtime privatization supporter Gabriel Sterling disagrees that the contract extensions are a step away from the privatization model, saying that the headline was “100 percent wrong.” Instead, he claims that the extensions are necessary for the city to complete current projects, likely saving them money in the long run. Sandy Springs is the midst of a development boom with service providers working on several projects, including a new downtown area known as City Springs.  According to Sterling, the bidding process requires a “herculean effort” that has cost up to $550,000 in the past. The time, money, and effort it takes from both city officials and service providers would likely slow down the ongoing development projects at the taxpayers’ expense. City Springs will be finished in December 2017, at which point the City Council will “take a breath and look at rebidding the contracts again.”

Despite Sandy Springs’ commitment to rebid contracts in the future, its decision to not do so now exposes a potential flaw in the privatization model. The costs of rebidding contracts and switching service providers prevents there from being continuity in government operations. Although Sterling says the same transition costs would be present in a public-sector model, he does acknowledge that the “potential loss of institutional knowledge” held by transient providers might have a negative impact. Other problems with the model include poor implementation (Atlanta Water is a prime example) and, surprisingly, that privatization may not be cheaper.

Jack Feldman, a University of Iowa State graduate student, found that, compared to other cities in north Fulton County, “Sandy Springs does not have the most efficient or effective government in the sample, and was below average across the board.” It actually has relatively high per capita costs, although this could also be due to it having a higher ratio of business commuters to taxpayers than nearby cities. He also found that Milton became more efficient as it transitioned from the privatization model to a public sector model, eventually surpassing Alpharetta, Johns Creek, and Roswell on a performance metric. Feldman admitted that his model was limited in its scope, primarily because he only looked at Sandy Springs when it had just one service provider, CH2M. Today, it contracts with six different companies.

Mike Hassinger, a former communications director for the City of Brookhaven and a political consultant, is skeptical of data indicating that Sandy Springs is less efficient or costlier than similarly situated cities. Without a public-sector cost baseline for comparison, it is impossible to know how much the city either loses or saves through a privatization model. Sterling says that focusing on cost savings misses the point because “at the end of the day, [privatization] isn’t all about saving money. [It] is about getting the highest quality workers in these roles.” He and Hassinger agree that privatization’s main benefit is providing greater accountability. Private companies can remove employees more easily than the public sector and they tend to instill a culture of quality and innovation rather than complacency. Furthermore, the city ensures that the service providers themselves don’t falter by annually renewing no-work, no-pay contracts for losing bidders who can take over from the winning bidders if at any point they are unable to meet a high performance standard.

Many privatization enthusiasts are accepting the no-bid contract extensions as a temporary measure. Oliver Porter, the engineer who originally developed the Sandy Springs model, says that he sees no evidence of the city “backsliding” into the public sector. However, he is wary of moving too far away from a regular bidding process, which, as even Sterling acknowledges, is essential for the privatization model’s long term viability.

The struggle between privatization and the public sector has shifted rightward since the 1980s when the growth of government was stunted by the Reagan Administration’s order to “Don’t just stand there, undo something.” Ever since, privatization has had the upper hand, egged on by calls to “run government like a business.” Governor Kasich was a bit behind the times, as private prisons already house a significant portion of America’s inmates and our foreign wars are increasingly being fought not by the military, but by private companies. In Sandy Springs, privatization has won for now. But its advocates will have to stay vigilant to ensure that the model doesn’t slip into the public sector, especially if it becomes convenient to delay bids again in the future. Their challenge mirrors Benjamin Franklin’s response when asked what kind of government the United States would have following the Constitutional Convention:

“A [privatized government] madam-if you can keep it.”

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there should always be a balance, and certain functions are optimally privatized/contracted out, while others are not. over-contracting leads to what is called a “hollow state” where government retains no institutional knowledge itself, and this poses dangers to service provision and economic security issues. accountability is likely to suffer, not improve with contracting. this is in part due to lack of public access to records, citizens not even knowing who is responsible, or easily finding out, or who to sue if they have to. there are a good number of things that government should be doing, and- with good policy… Read more »