Presentation to the City of Estevan Regarding Proposals to Contract-out City Services by CUPE Local 726
The Canadian Union of Public Employees, Local 726, represents 46 full time and 26 part time employees of the City of Estevan. Our members do valuable work for the city in such areas as: water and sewer maintenance, street maintenance and repairs, responding to public inquires, utility billing, administrative work, upkeep of our beautiful parks and recreation centres, and many other tasks.
Our members play an important role ensuring that our city runs smoothly and that citizens are provided with high quality public services. We are proud of the work that we do. It is also important to note that we are not only employees of the city but active members of our community. Our members participate in many of the recreational and volunteer programs in the city that also contribute to a high quality of life for our citizens.
City Engineer Firoz Kara’s proposals are very drastic: he proposes to reduce the full-time staff positions by 20 percent, eliminate many pieces of equipment that are extremely useful and save the city money, and he proposes to contract out services and rent equipment that would end up costing the city more than if we had used city employees and city-owned and operated equipment.
Our union’s vast experience with contracting-out has proven to us that privatization never provides the same quality of service as publicly-provided services and that it rarely saves costs; in fact, more often than not contracting-out ends up costing more. Furthermore once a municipality contracts-out a service, it has less control over the quality of the service or how it is delivered.
CUPE Local 726 is making this presentation to city council because we are very alarmed by the proposals of the city engineer and are convinced that these proposals, if implemented, would result in poor quality services and more expensive city operations. We are here because we are committed to providing the highest quality of municipal services to our fellow citizens. We thank city council for providing us with this opportunity to present our perspective on these proposals.
Arguments Against Contracting-out
1. False Savings, Hidden Costs
Many politicians and public sector administrators have bought into the myth that the private sector is always more efficient than the public sector. Once we start looking at specific examples, however, we discover that the public sector is much more cost-effective and efficient than the private sector. One of the main reasons for this is that the private contractor needs to make a profit and may cut corners or use lower quality materials in order to win a bid.
There are also many hidden costs that are not included in the price of the contract. For example, the cost to the city for all the administrative and legal work involved in drafting a tender is often not included in the cost of contracting-out. Other hidden costs to the city include the supervision and monitoring of the contractor’s work. As well, there could be future disputes with a contractor that could involve additional legal fees that the city must incur.
An important question to ask when considering contracting out is: who will be responsible for the costs of repairing damage and correcting sub-standard work? Very often in cases of contracting-out, city employees are called in to re-do the shoddy work of contractors at an additional cost to the city.
For example, our city crews often have to clean up after cement contractors who leave a mess after cementing in sidewalks and curbs. Our crews have to go back to the job sites, take off cement forms as well as clean up the hardened cement from the pavement thus charging more money to sewer service and/or water breaks budget. City crews also haul sand in city trucks and deliver materials for contractors, which makes the contractor’s bill to the city smaller because city crews have done some of the work and used city equipment. The city is, in essence, subsidizing the work of the private contractors.
This is a common occurrence wherever there is contracting-out. In the City of Edmonton, private contractors hired to cut grass in city park damaged over 300 large trees in 1996 that was estimated to cost the city $100,000 to replace the trees or do tree surgery. (1) Sometimes municipal governments think they can save money by contracting out, but they don’t always look at the hidden costs involved in contracting out.
2. False Comparison of Costs
Often the comparison between in-house and the contractor’s costs do not present a true picture of the actual costs. Certain overhead costs, for example, might be included as part of in-house costs when those overhead costs would remain the same after contracting-out (for example, heating and electricity costs for a building).
In the report by Firoz Kara, he makes a number of proposals where he claims the city can save money by contracting out. We have examined that report carefully and found that in many of his suggestions the true cost of contracting out is not being presented. For example:
Firoz Kara’s report states that in the year 2000 the city crews repaired 29 water breaks at a cost of $109,400, or at $3,772 per break. He claims that a local contractor could guarantee a fixed contract price of $3,147 per break for a total savings of $22,000 per year.
In the year 2000 two private contractors repaired 26 water breaks for the city. If there were a total of 29 water breaks repaired, as stated in the engineer’s report, then that means that the city’s crews only repaired three water breaks in 2000. City crews repaired few water breaks because our backhoe was not being repaired and sat idle for most of 2000 and all of 2001 to date. The average cost of $3,772 per water break,therefore, more accurately reflects the cost of private contractors, not of city workers.
Our union believes that if the city wants to do a cost comparison then it must do an accurate comparison of who is doing the work and include all detailed aspects of the job. For example, when our city crews fix a water break, there is a considerable amount of extra work that is done that contractors do not do. The city employee must first locate the break, arrange for all equipment and men, put up barricades, notify the public, shut off the water supply, supply the city vehicles with all the parts and supplies, supply the city vehicle with sand and back fill, as well as equipment to accomplish the job. If the ground is frozen, our crews take the time to put frost teeth on the backhoe, something that contractors neglect to do. At times during the repair of a waterline in poor condition, another water break nearby will occur. City crews have to be prepared to deal with all these situations.
After the job is done the city must then remove the barricades, notify the public and so forth. In addition the city crews must tamp the holes and dig OH&S regulation size holes, something that contractors do not always adhere to (in the last two weeks contractors were twice written up for unsafe holes that did not comply with regulations).
When contractors fix a water break and the ground is frozen, it is the city crews that use city equipment to thaw the ground for the contractors. This additional work and the propane costs are charged to the city and not to the contractor. The cost of propane alone comes to thousands of dollars a year. We believe that if the contractors had to do everything to the same extent and standards that city crews do, then their costs would be considerably higher than ours.
Another example of false comparisons is with respect to the cleaning of plugged sewers. In Firoz Kara’s report he states that the average cost to unplug a sewer service is $125 a call for city employees. He claims that the cheapest contract for unplugging sewers would be $90 a call.
Because the city hired private contractors to clean sewers while our union was conducting job action last year, we have been able to review all the bills for the contractors’ work. There were a total of 92 sewers cleaned by private contractors at a total cost of $14,267.30, or an average price of $156.16 per service call. Using Mr. Kara’s own estimates, we have calculated that city employees can do the work at a cost of $31.16 less per household than the contractors. If one multiplies this amount by the 375 plugged sewers that city crews cleaned (as stated in Mr. Kara’s report) then the city would have saved $11,685.00 by not contracting-out.
Sewer Service Replacement
As in the above examples, we believe that if the contractor had to provide the same level of service that the city employees do, the savings proposed by Mr. Kara would not be correct. You cannot compare apples and oranges. Our city crews follow OH&S Regulations when digging trenches, which means that we often take more time to dig holes than the private contractors who do not always follow the regulations. Sometimes when our crews are doing sewer replacements, they find old lead piping in the waterline that must be replaced with copper or plastic pipes. This additional work always gets charged to the sewer break and not the water account, where it should be charged, and therefore the cost of sewer breaks is inflated by thousands of dollars.
3. Quality of Services and Accountability to the Public
Contracting-out also raises serious implications for elected officials in terms of their accountability to the public. When a contractor provides poor quality work, causes damage to city or homeowner’s property, or overcharges the city for its work, there is no direct accountability. It is more difficult for the city to respond to complaints from the public about a contractor’s work. Citizens lose confidence in their elected officials if high quality services are not provided.
In neighbouring Weyburn, recreation services suffered under the management of private companies (RSI, then SERCO). Staff was cut through attrition and user fees went up. The free skates and free swims were cancelled and ice time for minor hockey went from $22 to $34 an hour. In 1999, after four years of private management, the city returned control of recreation services to public managers.
In our city, the repair or replacement of sewer/water lines often causes some homeowner and city property damage. Lawns, hedges and sidewalks often have to be ripped out. It is important that this work be done properly and with the appropriate materials. City crews always do tamping of the sand that fills in the holes to prevent the ground from sinking. Private contractors do not do this and the ground surface water penetrates the excavation trench. City employees have had to return to these sites on many occasions to add more fill.
We also believe that the quality of service to the public would suffer if the city eliminated the switchboard position by introducing a voice mail system. Our receptionist handles a wide variety of calls and inquiries from the public, and those calling or coming to City Hall like to deal with a real person. The switchboard operator is the public’s first contact with the city: the person who helps answer their questions, redirect their call or assist them in obtaining a service.
The switchboard operator also directs calls for all departments, assists the utility billing clerk in the scheduling of work orders and plugged sewers, answers the radio when needed by Public Works, helps with water billing, handles plumbing permits, maintains a daily log book for work orders and plugged sewers and fills in for Engineer Secretary when she is absent, handling mail, payroll and other assigned duties.
If the switchboard position were eliminated, this would put tremendous pressure on the utility billing clerk. The utility billing clerk has pointed out that even with two persons inputting the billing for the utility system, they are falling behind and are not able to keep up and get the bills out on time. She also noted that “one person cannot do the work orders, meter read entry and final billings by [herself] and do an efficient job.” The billing system has changed over the years and has more components to it, which involves more time. Taking work orders involves spending time with the customer so that he is aware of the charges he is responsible for.
We believe that eliminating the switchboard position would significantly lower the quality of services to the public and, additionally, would create unbearable workload for remaining staff. We urge city council to reject this recommendation.
4. Impact on Labour Relations
Mr. Kara’s proposals have not considered the impact on employee morale and on the collective agreement between CUPE Local 726 and the City of Estevan. He makes several proposals to save wage costs including the elimination of sewer and water crews, an assistant stock controller, the switchboard operator, an excavator operator and a maintenance mechanic if the city agrees to contract out these services. Mr. Kara’s proposals would eliminate 9 full-time positions, or about 20 percent of our total full time workforce. We consider his proposals to be an attack on the integrity of employees in the city, especially his comment to create “productivity savings @25%.”
It is also important to note that the engineering department has one management/supervisor/foreman for every 1.6 employees (eight supervisors and thirteen full time employees). This is hardly an efficient management structure.
Furthermore, it is important to emphasize that the city is bound by its legal obligations in its collective agreement with CUPE Local 726 that states:
“Article 3.05: Work of the Bargaining Unit:
Persons whose jobs (paid or unpaid) are not in the bargaining unit shall not normally work on any jobs which are included in the bargaining unit, except in emergencies or except in cases mutually agreed upon in writing by the Parties.”
“Article 13.04: Lay off:
…It is agreed by the Employer that no permanent employee shall be laid off as a result of contracting out.”
The city would be in violation of these two articles if it decided to eliminate certain positions, as proposed by Firoz Kara, in order to contract out the same work.
Our Proposals for Cost Efficiencies
Our union has examined the proposals by Mr. Kara and have developed our own ideas as to how the city could gain cost efficiencies. Whereas Mr. Kara has suggested eliminating positions and equipment, our proposals focus on the better use of equipment and personnel rather than the elimination of equipment. In many instances the equipment slated for removal has already paid for itself and renting similar equipment would cost the city more money. We also believe that there are many inaccurate comparisons of in-house vs. contracted-out costs.
Equipment that saves the city money
Mr. Kara has proposed eliminating the Elgin Sweeper because it not used much. The reason for its lower utilization is because it is used as a back up. We believe that it is an extremely essential piece of equipment, especially during the first six weeks of spring when the major clean up of the city is required. It is used for crack filling, line painting and for the city’s new beautification program. One machine is simply not enough. (Weyburn, in contrast, has two sweepers). Working one sweeper around the clock, as suggested, would cost the city overtime. The sweeper is in excellent shape and is rented to Bienfait and to business parking lots and thus generates revenue for the city.
Mr. Kara proposes to eliminate the JD Loader because of its low utilization. The low hours of use in 1998 were because the engine was being rebuilt. We have noted that the Recreation and Parks Department spent a total of $19,425 last year to rent a loader for 555 hours at $35.00 an hour. This does not make any sense when the city already has a JD Loader available. Instead of eliminating the JD Loader, it could be used more effectively between departments and in this way would save the Recreation and Parks Department over $19,000 in rental costs. Better use of this equipment would also save money so that the city doesn’t rent loaders for snow removal and sand loading. More cooperation between departments is essential.
We believe that this is a very important piece of equipment that should not be eliminated. It is used for back up, at the dump for ground cover, to put out fires and for dust control, for landscaping in the summer, and for clean up every year in the citywide clean up competition with Weyburn.
Our union does not believe that the city should eliminate the sand screener that is used for mixing salt with sand. Our crews use sand to fill holes and every load is purchased separately, as needed, with a long haul each load. Because we recycle all the street sweepings, the screen sweeper can be used to separate the sand and then all that is needed is to add salt. Recycling sand from winter sanding provides tremendous savings for the city because we purchase less sand.
The sand screener is also used for separating pit run gravel into fine sand, gravel, 5/8 screened sand, 3/8 long slot, and ¼ sand. Pit run gravel is much cheaper to buy and separate ourselves at $5.00 per yard than it is to purchase fine sand at a price of $15.00 to $20.00 per yard. We should maintain a stock pile of gravel because running trucks out to different pits is very costly. For example, when we have water breaks after regular work hours we must call up Peterson to get the sand and then we pay Peterson overtime for their men and equipment. They are paid per hour to sit and wait while we complete the job.
We propose that the city could achieve cost savings if it purchased its own loader and developed its own sand pile and in that way eliminate the high costs of purchasing sand. Until recently the city used to have its own sand pile. If we had our own loader and sand pile we could pick it sand as needed which would be more cost efficient to the city.
The cat excavator/backhoe is another important piece of equipment that should not be eliminated. By having a backhoe we have access to other jobs such as ditch cleaning, snow removal, culvert cleaning, covering at the land fill, valve replacements, hydrant replacements and sewer digs. This is an essential piece of equipment that no company of our size would be without. It is important to note that Weyburn has two backhoes.
Mr. Kara, despite the fact that in 1995 he wrote a report outlining the reasons for a backhoe, now wants to eliminate this equipment and an operator. Again, we would point out that our collective agreement states that no permanent employee shall be laid off as a result of contracting-out. We question the figures in Mr. Kara’s report and suggest that the contractor’s quote may be low because it does not include all the extra work and high standards that city crews adhere to.
This truck has low hours of use because it was a piece of junk when it was purchased (the previous owner advised not to buy this truck). We believe that we do need a tandem truck but one in much better condition. If we were compared to a construction company our size the city would warrant several such trucks. We are in constant need of a truck for water breaks, snow removal, sewer digs, hauling sand and gravel, covering at the land fill, and other tasks.
This was a bad purchase and it points out to us is that the city needs to review its purchasing policies. We recommend selling it and purchasing a new one.
Trying to Make Sense of the Numbers
Stock and Materials Management
Mr. Kara also recommended that the city cut the amount of stock by one-half (from $600,000 to $300,000) and that this would justify eliminating one assistant stock controller.
We do not understand the logic of this at all. If the city reduced its stock by one-half, this would create the need for additional staff because so much staff time would be spent running to different places for parts and supplies, or waiting for orders from Regina. Currently we save valuable staff time by having a ready supply of parts and materials. It is also more cost-efficient to purchase materials in bulk rather than on a needed basis.
We believe that efficiencies could be increased if all departments purchased through the “stores.” Currently departments purchase separately. Recreation and Parks and the Engineering departments run as two separate entities which creates an inefficient use of time and equipment.
Eliminating a Maintenance Mechanic
Mr. Kara asserts that if the city eliminates equipment such as the sweeper, loader and excavator, then this would justify cutting the position of one mechanic. The mechanic works 2080 hours a year, doing a wide range of tasks beyond the maintenance or repair of those major pieces of equipment. He fixes mowers, trucks, weed eaters, tractors, cars and all other pieces of equipment that the city owns. He also does oil changes, welding, fabricating, plus numerous other tasks.
In Mr. Kara’s March 23rd report, he quotes the maintenance mechanic’s wage at $22.33 an hour when the actual wage rate is $16.45 an hour. Mr. Kara proposes to contract the services of a mechanic at $55 an hour. How is this cost-efficient? The city would not have control over the hours a mechanic would be needed so there is no guarantee that services would be limited to 150 hours per year. It is important to point out that regular maintenance of equipment can drastically reduce the costs and time involved in repairing equipment. If the city contracts out mechanic services, then we can expect to pay more for repair costs.
Equipment Operational and Rental Costs
We question the accuracy of the equipment rental rates in Mr. Kara’s report. The cost to rent certain equipment varies depending on which of Mr. Kara’s reports you read. For example, in his March 23, 2001 memo it would cost $55 per hour to rent a water truck but in his April 20 report a water truck would rent for between $55 and $87.50 an hour. He quotes $55 an hour for renting a loader when Parks and Recreation rents a loader for $35 an hour. In his first report it would cost $80 an hour to rent an excavator but by the second report inflation has bumped the cost up to $100 to $165 an hour.
Equipment Replacement Costs
Mr. Kara’s proposed savings of $95,000 in equipment operational and equipment replacement costs cannot be substantiated. Most of our equipment has already paid for itself and by continuing to use it, the city saves money.
For example, if you took the lifetime replacement earnings on the backhoe purchased for $156,170, this equipment has already earned $178,573 for savings of $22,403. This has been accomplished with the backhoe being used very little in the year 2001. Along with the backhoe there are numerous lifetime replacement earnings over the original purchase price. If you add up all the lifetime replacement earnings of units 503,504,505, 510, 511, 512, 519, 521, 524, 525, 527, 529, 534, 538, 540, 542, 543, 544, 545, 556, 562, 563, 565, 570, 571, 574, 578, 581, 584 and 590, the total comes to $1,044,193.39. That total of lifetime replacement earnings minus the original cost of the equipment ($704,183) means the city has actually saved $340,010.39 by using its own equipment.
Calculating working hours of equipment
Both of Mr. Kara’s reports use working hours to calculate the use of equipment. This system is archaic and not used in most cities. The error factor in recording hours is very high for several reasons. Some departments do not mark hours because this adds to their budget. Temporary staff are not always told the importance of marking hours. Some departments have not had staff meetings in over ten years so information about marking hours has not been passed along. Numerous pieces of equipment in the report dated April 20th have more than paid for themselves but have not been replaced, indicating a failure of this type of system.
We would hope that city council would look at other cities our size to see what equipment they have. For example, Weyburn has two backhoes, two street sweepers and several payloaders and tandem trucks.
CUPE Local 726 has attempted to analyze Firoz Kara’s proposals to the best of our abilities with limited resources. Many of our members have provided their input into this brief using the knowledge they have from their own work experience and understanding of their jobs. To conduct a more detailed analysis of Mr. Kara’s figures, we would have needed more detailed numbers and a list of the assumptions that went into his calculations. We probably would have required the services of an accountant to decipher his figures.
Nonetheless we feel that there are enough discrepancies, inaccuracies and unfounded assumptions in Mr. Kara’s two reports that city council should not base any final decisions on his figures.
We believe that city council is interested in providing the best services possible to the citizens of Estevan. We have provided you with our ideas on how to maintain a high level of quality services and how to gain cost efficiencies. Eliminating equipment and employees will not contribute to better services and instead will cost the city more in the long run.
CUPE Local 726 Position on Proposals to Eliminate Equipment
|Equipment that is Necessary||Reason|
|Cement Vibrator||Takes air bubbles out of cement. Very useful and inexpensive tool|
|Water Truck||Back up for prairie fires|
|Oil Truck||Used for patching, pot holes. Makes money|
|Elgin Street Sweeper||Already paid for. Needed for spring clean up|
|JD 644 Loader||Has multiple uses. Parks & Rec could use and save money on renting loader|
|Case Vibra Roller||Used a lot for patching holes. Very expensive to rent|
|Cat Excavator -backhoe||Need for ditch cleaning, snow removal, sewer digs, other jobs|
|EZ Pour Melter||Need for crack filling|
|Cement mixer||Can be used for manhole repairs & small jobs. Artist in residence would use for tile bench project|
|Sand Screener||Need for mixing salt/sand. Used when recycling street sweeping. Saves money|
|L1800 Tandem Truck||Need new one. Could use several|
|Equipment that could be Eliminated||Reason|
|Duomat Compactor||Not used much|
|Asphalt Recycler||Not used|
|Drum Sander||Junk, scrap iron|
|Concrete Grinder||Only used a few hours|
|Case Tractor||Old and worn out. We need a new one|
- CUPE Local 30, “Submission on the Reorganizational Review of the City of Edmonton, “October 1996, p.12.