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Monday, June 4, 2012

A time to outsource and time to insource?

I've been a bit amused that those who rally hardest to allow government to buy its things off island to save money, turn blue in the face at the thought of importing cheaper labor, too. It's obviously not a cost-savings mantra that drives such irreconcilable positions. Procurement often lives right at the coal face of social dissonance with economics and politics.

With unemployment everywhere in the Western world, at least, in steep decline, it is not unexpected that organized labor would want its own share of the government pie, like many other contractors just barely getting by. Hard facts can make for bad law.

California government unions move to squeeze out private contractors
With California facing yet another budget crisis that threatens state jobs and pay, employee unions are moving on several fronts to push use of civil service workers instead of private contractors for state government work.

The state historically has had trouble recruiting and keeping high-skill workers in areas such as high-tech, law, science and finance, Yank said, because the state's pay and benefits are less than in local government or the private sector.

"Contracting for those jobs – it's a horrid, vicious cycle," he said. The compensation gap empties the in-house talent pool, which causes the state to spend money on contractors that could be used to make pay more competitive.

Last month, the state attorneys' union successfully contested a multimillion-dollar contract with a private law firm for legal services. Last month, the state's legal professionals' union successfully challenged a multimillion-dollar agreement for services between the California's prison department and a private law firm.

The three-year deal between the Department of Corrections and Rehabilitation and Williams & Associates started in 2009 at $1 million to defend the state against inmate lawsuits normally handled by civil service lawyers. After two revisions, it ballooned to $5 million for the three years ending June 30.

Although state law requires departments to notify the affected unions of such contracts, the attorneys' association learned of the deal after a staff researcher found it by combing through a state expenditure database.

The discovery prompted a union challenge before the State Personnel Board, a five-member panel that rules on a range of employer-employee disputes.

"Our top attorneys make $50 per hour," said CASE's Whalen, a tenth of what contract attorneys can bill. "So by definition you can't save money by hiring out because you already have some of the cheapest attorneys on the planet."

Last month the Personnel Board ruled that the corrections agency had illegally contracted for the work. To avoid harming current litigation, the board said Williams & Associates could continue handling cases until its contract expires at the end of this month.

"We've got a bunch more (cases) in the pipeline," said Patrick Whalen, general counsel for California Attorneys, Administrative Law Judges and Hearing Officers in State Employment, or CASE. "When it's crunch time, you look for every penny you can."

Pepperdine University political scientist Michael Shires said another motive is also at work: "Clearly, the unions are trying to protect their members' jobs."

Sometimes it makes good sense to contract for services, Shires said. "Once someone is a monopoly, the competitive forces of the market won't hold them accountable," Shires said, "including when government grants the monopoly to itself." The unions long have argued that keeping jobs in-house is cheaper than outsourcing. They press their case hardest during tight budget cycles.

"There are instances when jobs should stay in-house and cases when they should be contracted," said Mitch Zak, a Republican strategist whose firm, Randle Communications, works with a number of trade organizations. "But the standard should be what's best for California, not what's best for the unions or for individual businesses."

Read more at the link above.

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