SHA contract scandal shows risks of outsourcing government work

July 14, 2011

Recent stories in The Sun regarding contracting out by the State Highway Administration provide some important warnings to those who recommend the privatization of state services. Advocates of privatizing state services are quick to suggest that such actions save money, improve efficiency, and bring more "business sense" to state government. In fact, such activities often end up costing more, creating duplication of services, and leading to corruption.

The American Federation of State, County and Municipal Employees of Maryland provided an early warning to the O'Malley administration of problems in the Department of Transportation through a letter to then-DOT Secretary John Porcari in July of 2007. At that time, our research department had reviewed trends in the Department of Transportation and found that between FY 2006 and FY 2009, contracting out was projected to increase by $196.8 million, or 42.3 percent.

We pointed out that under the Ehrlich administration, MDOT had greatly increased the use of consultants to perform work formerly done by state employees. In SHA, in-house consultants, who were often former state employees, were working side by side with state employees, yet getting paid significantly more money while doing the same job. We requested a review of this process.

Since that time, several AFSCME members contacted the Legislative Audits Hotline with further information about perceived improprieties at the State Highway Administration. Although it has taken time, it is heartening that their courage in raising these issues has resulted in bringing some of these problems to light.

Gov.Martin O'Malley, in responding to the SHA audit, indicated he was disappointed in two long term management-level employees. He should also be proud of several long term employees who brought this problem to light — even though they suffered forced retirement, ostracism and harsh disciplinary measures because of their actions.

Contracting out has a number of hidden costs. First among them is the need to assure transparency and accountability. Additional staff must monitor the procurement process and the effectiveness of the service delivery, and then even the monitors must be further monitored. Even when contracts meet every criterion for integrity, there can be further issues ranging from new opportunities for contraband to enter prisons through private contractors, to increases in error rates for those who need state services as indicated in another story in The Sun ("Privatization's rewards, risks play out" July 5). That story pointed out that the error rate for food stamps in Indiana doubled when the service was privatized.

The bottom line is that contracting out invites a host of ethical, procedural and quality issues. All too often, there is insufficient oversight to ensure that taxpayers are getting their money's worth. The use of state employees as the providers of first resort continues to be the best way to make sure quality, costs and integrity are controlled.

Patrick Moran,Annapolis

The writer is director of AFSCME Maryland.

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