Bill Looks to Require Districts to Seek Bids on Support Services

Any good shopper knows not to buy a big-ticket item without checking and comparing multiple sellers. Good financial stewardship involves weighing options carefully and acting to cut costs when possible without sacrificing essential quality. House Bill 4306, sponsored by Rep. Dave Agema, would ensure better use of taxpayer money in Michigan school districts in their provision of food, custodial and transportation services. The bill does not require privatization of any service, but requires all districts to at least bid out school support services and compare the bids they receive from private companies with the costs of providing the service through district employees. While not perfect, this bill is a step towards more efficient tax dollar use and school board accountability.

HB 4306 mandates contracting for support services by any district that currently employs district employees to provide said services. The in-house staff may compete on a market basis with any private vendors, and school boards retain the vital local authority to opt for or against privatization following consideration of the bids. According to the Mackinac Center’s 2011 Michigan School Privatization Survey, 295 out of Michigan’s 550 school districts — 53.6 percent — have already privatized at least one of their support services. Of those districts, over 90 percent reported that they are satisfied with the service they have received from outside vendors, and the majority of privatizing districts report significant financial savings.

However, school boards face opposition from current school employees for merely considering competitive contracting — no one wants to see their current job be put under the microscope. This bill eliminates that pressure by taking it from an optional activity to a mandated one.

That is the rub of this bill: mandating school districts to seek bids. Ideally, school boards would find the best way to use dollars in the classroom with no prodding from Lansing. Seeking bids for support services, however, has become as much of a political issue as it is a management issue. Protests, letter-writing campaigns, yard signs and even school board member recall elections have been launched in districts that looked to save money through contracting. While this is legitimate democratic expression, it also makes districts hesitant to look for savings by contracting out.

Management of Michigan’s 550 public school districts gets complex, so the bill provides some exceptions to seeking bids. For instance, a district’s lunch program doesn’t have to cost the district, and a district running its program in the black doesn’t have to look for bids. Likewise, if the service itself costs less than $21,000, the district doesn’t need to bid it out.

In addition, districts with fund balances greater than 10 percent of their operating budgets are exempt from the bill completely. While this could potentially mask potential savings from privatization in some districts, it rewards district frugality and wise management in previous years.

Like many pieces legislation, it contains snippets of social consciousness. The bill includes an “encouragement” to food service companies to act in accordance with the Farm-to-School Procurement Act, which promotes the use of Michigan-grown produce in school cafeterias. Opening up the school food market to broad competition is ultimately the best way to provide high-quality food for our schoolchildren at a reasonable price. This provision could disappear without substantially affecting the bill; it will only cause harm if interpreted by overzealous regulators as an excuse for excluding private food service providers.

Regardless of whether districts are mandated to seek bids, the trend to privatization will continue. From 2010 to 2011, an additional 44 districts began new service contracts and still posted substantial savings from the move. Given that savings from contracting has not declined and that satisfaction remains high, this bill will only increase the number of services contracted, allowing schools to better use the resources they’ve been given.