Responding to Roldo's Selling Selves Out...
By David Akers

Roldo's article defining the concept of utilizing experts to manage government assets as a sop to the rich is sadly off-base. Forget the narrow lenses of Republican vs. Democrat and rich vs. poor. Let's talk about a novel concept: effectiveness. If we, as taxpayers, really care about 1) the cost of managing government assets, and 2) the effectiveness with which those assets are managed, then we have a responsibility to evaluate every viable option for managing assets and choose the best option based on a combination of cost and effectiveness. Unfortunately from Roldo's perspective, governments aren't always the best option. Sometimes they are, but not always.

Has anyone really considered why it is that we are spending $1.5 billion (give or take) to rebuild or replace the Cleveland Public School buildings? Maybe it's because schools focus on education. They don't specialize in maintaining buildings. And buildings fall down from disrepair as a result.

Who does focus on real estate? Real estate professionals. You can go to a Class B building in downtown Cleveland, sign a 15-year lease for $15 per square foot, and know that 15 years from now, the building will likely be in a very similar state, with similar quality, as it is today. Why? Because it is in the landlord's best interest to maintain that Class B service level and keep you happy so that you stay. So why do we keep demanding that the school system spend time and energy doing something that they don't specialize in, thereby reducing the focus on what is most important: educating our kids?

Roldo, I encourage you to become familiar with the concept of a Service Level Agreement (or "SLA"). By way of illustration, I read a story a few years ago about a bridge that was constructed between the South of France and Northern Spain (over the French Riviera). The objective in building the bridge was to eliminate most of the truck traffic that, before the bridge was built, was forced to drive down the mountains, through the beautiful French Riviera, across a small bridge over the river, and back up the mountains on the Spanish side in order to continue their journey. The French government came up with the idea of building a bridge over the French Riviera, from the mountains on the French side across to the mountains on the Spanish side. However, the French government didn't want to put up the money to build what would become one of the highest and most expensive bridges in the world.

Their solution was ingenious. The government contracted with a private company to build the bridge. The company had to bear the cost of building the bridge and, in return, received a contract to operate the bridge for 75 years. As part of the management contract, the company was empowered to set the toll rates for vehicles crossing the bridge and collect all the funds. However, there was a fascinating caveat in the contract: while the company would collect revenue for 75 years, it is responsible for all maintenance of the bridge to certain minimum standards (an SLA) for 100 years. What is the company's incentive? To build a bridge of sufficient quality that it will last for 100 years and 1 day, fully 25 years AFTER THEY STOPPED MAKING ANY MONEY. That's how you align public and private interests.

The point I'm trying to make is that we have numerous opportunities to align interests and provide value to tax payers while enabling private industry to generate profits (which fuels tax revenue, which enables governments to provide more services, etc.). The key is to stop paying companies simply for providing a service, regardless of the quality of that service. Rather, the opportunity is to pay companies to provide a certain level of service for a pre-defined period of time. Some examples:

Why do governments usually own their own buildings? Are they in the property management business? Are they good at it? Are they better at managing their own buildings than real estate professionals who manage buildings for a living? Why do we repave our roads every few years? Instead of simply paying contractors to perform specific work at a certain period of time (which inevitably needs to be replaced every few years. Why don't we begin to buy service levels instead? Give us a road that won't crack for 8 years, and if it does, all you have to do is call the contractor to fix it (no fuss, no muss, and no charge). Pay a flat fee every month for a guaranteed level of service and STOP WORRYING ABOUT IT. Save money and get a higher value out of the work performed. Bridges are another example. Why do governments maintain bridges, which it often seems fall into a state of disrepair, when they can pay someone in the private sector to maintain a bridge to a certain level of quality for a given number of years, guaranteed?

Let's move past the things that aren't working and begin paying for quality of service. Let's free up government employees to perform other, more important tasks, like educating our children and keeping us safe. (:divend:)