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size by selling services to smaller agencies to save them money. There are a variety of <br /> ~ reasons that cities of all sizes become particularly good at one specialized service. They <br /> can offer that service to another agency that then doesn't need to staff up for it or <br /> maintain a separate inventory. <br /> i <br /> Each interlocal agreement needs to be carefully evaluated, however. Building an <br /> "empire" by selling service to other agencies can be an unfortunate outgrowth of <br /> governmental managers running their department "like a business". <br /> i <br /> Some work by contract is the most common choice of most cities. Either tradition or <br /> specialization has led to a marketplace in which public employees just don't do some <br /> functions. Most cities use private contractors to build new roads and water and sewer <br /> j lines because there are a lot companies in that business and the competition is healthy. <br /> Other functions like patching and sealing and sidewalk construction are done by contract <br /> in some agencies and not in others depending on local contractor availability and labor <br /> market considerations. The more closely a function looks like new construction, the <br /> more likely it is that there will be a contractor able to provide the service. <br /> i <br /> Phoenix has for many years used competition between staff provided and contracted <br /> service to get the lowest cost. Initially, city employees lost some garbage collection <br /> contracts to the private sector. Later they improved their cost performance and won the <br /> <br /> ~ contracts back. <br /> r <br /> All work by contract is a choice some cities have made. Larger cities simply don't find <br /> l this approach feasible. With this approach, the city staff role becomes that of a contract <br /> administrator. Most cities have the expectation that their government can handle the <br /> occasional odd job such as providing barricades for parades or set up and cleanup after <br /> neighborhood functions. In a contract city each of those special occasions has to be paid <br /> for by the sponsors or by a budgeted amount of money set aside to buy contract services <br /> on an as needed basis. <br /> Selling out has advantages to cities with expensive capital requirements. There usually <br /> aren't such advantages in road maintenance functions. <br /> Franchising and no regulation usually applies to solid waste and utility functions and <br /> only has applicability to road functions if you like toll roads. <br /> Contracting pitfalts are usually associated with a poor understanding of the service in <br /> question. Poor service by a low bidder can be avoided with a well thought out contract <br /> and contract administration process. Frequent contract turnover due to contractors going <br /> out of business can be an indication that the service can't be performed at market prices <br /> or that it's a service the market doesn't want. Private contractors can sometimes lose <br /> money providing a service for a variety of reasons. The low prices they bid can make the <br /> service look more economical than in-house service but further analysis is always <br /> required of a deal that looks too good to be true. <br /> 7 <br /> <br />