Outsourcing 101

Outsourcing 101

Imagine a system where you can hire a team of experts and save your district money. If managed right

The purpose of a school is simple: to educate children. A school district's purpose, however, involves not only the education of children, but getting the children to and from school, maintaining the school buildings, and feeding the students, all in adherence to a limited budget. With so many extra-educational duties, it is not surprising that many districts across the country choose to hire out some or all of their non-educational tasks. This is called outsourcing.

At it's simplest, outsourcing is the contracting of some or all services to an outside company. Think of big American companies "outsourcing" their production overseas to take advantage of cheap labor, or technology companies "outsourcing" their helpdesk functions for the same reason. Negative connotations aside, outsourcing can save schools money by allowing a company that specializes in a particular service to provide that service for the district, rather than the district trying to create the same service from scratch. It makes a certain amount of sense to let a food service company provide food, and to have a transportation company drive the buses. Need a new building? Of course you hire a specialist, a contractor who has built schools before.

But where does the common sense of outsourcing end? Which services are essential to keep under the direct command of a school district, and which are best handled off-site? The answers vary, of course, depending on who you talk to. But it's clear that outsourcing is a bottom-line boon that many districts would be loathe to give up.

Feed Me

In New Haven, Conn., in the early 1990s, the school district had its own food service capabilities in-house. The district provided free breakfast to any student who wanted it and between 14,000 to 15,000 lunches every day to the approximately 20,000 students. When Frank Altieri was hired as a financial consultant to the district's superintendent in 1992, his task was to find ways to streamline the district's non-teaching obligations while cutting costs. One of his first recommendations was to outsource the food service.

While acknowledging the impor-tance of well-fed students, Altieri argued that the burden of a food service department was a "distraction from the main mission of education." The district could focus better on education if it relieved itself of the obligation of providing food. Besides, outsourcing provided key benefits. With food service provided by a professional company, the district had access to better food at a lower cost. "Food service is what they do," says Altieri. "They're better at it."

The district used a competitive bid process to select a company (in this case, Aramark), and has set up a system where the bid is re-opened every year. "You can't hire an outsource company and just ignore it," says Altieri. "It's a new responsibility for the district to monitor. Aramark has to re-bid for the district's business every year, and the district can negotiate different terms annually.

If You Build It

School buildings are often the victims of budgetary shortfalls. Money that would be spent on upgrading the heating system or patching the roof gets routed to simply keeping the schools running. The problem with deferred maintenance, though, is that eventually the buildings have to be repaired or they become unusable. That means demolition and new buildings. And while some districts may be capable of handling their own construction projects, most do not have the capability to build a new school.

That's when you bring in the experts. "When we hired Heery to do an assessment, they found the buildings had all been run into the ground," says Bill Lewis, executive director of facilities improvements in South Carolina's Charleston County School District. The district had done no capital work and no building, which, says Lewis, is far from unusual for a school district. With Heery's recommendations, the district began a $430 million, five-year program to renovate and build more than 76 schools, a total of approximately six million square feet.

"The only facilities people we had at the time were maintenance people," says Lewis. "We had no staff to manage a building project and no money to hire one. Engineers cost more [than teachers do], and we would never have been able to recruit the people with the skills" because the district couldn't offer a competitive salary. "We would have had to build an entire department."

The benefits of outsourcing were immediately apparent. "You're not just hiring individuals, you're hiring a package of experts," Lewis says. "You're hiring the capabilities of the entire firm." Heery's central staff provided deep technical expertise, and Lewis says the flexibility of having an entire company at his disposal helped keep the budget under control as well. There was no need to hire and then lay off workers, either; an outsource company can "boom out to where the work is, and then when the work leaves, [it] leaves."

Lewis was clear that it was time for the district to think like a corporate entity. "We're the largest business in the Charleston area, and we were operating like 78 mom-and-pop stores. Outsourcing clearly gave us the capability we needed in a very quick fashion" to meet the needs of a growing and changing district.

Heery International manages building projects big and small across the country. For John May, a Heery vice president and regional manager, his biggest market is schools. He's currently overseeing a $1.5 billion building project for the Cleveland City School District; Heery was hired there in 2002. "Facility work is performed by the district," says May, "but with this size project, the district knew it needed help to make these city-wide decisions." The company helped develop the master plan of what to do, how, and when; what to renovate, what to replace, and what to build on. Heery took the project through district approval, then state approval, and it was hired as the district's representative to oversee the 13 overlapping two-year programs scheduled for completion by 2013.

"All the urban districts are doing something similar," May says. Even big districts with their own construction arm bring in Heery to oversee and manage bigger projects. "Districts aren't in the business of building buildings. It's our job." Heery starts at the beginning, working with districts to plan how big the project's bond package should be. "There's nothing worse than getting the voter's approval to build and then coming up short," May says. It makes sure the district has answers ready to all the potential questions in a public forum or from the district's own management. Rather than try to work from scratch, the district gets a huge boost in experience and expertise.

Improving Service

Outsourcing isn't only about food and buildings. Frank Altieri, when he was consulting with the New Haven school district, noticed the copiers in all the district offices and schools were often idle, with "out of order" signs on them. Since the district owned the copiers, the service technicians not only charged plenty to come out and service the copiers, but they were slow to respond to service requests.

Altieri recommended the district outsource its copying needs. Instead of buying copiers, they leased the machines and paid by the copy. The machines still break down as much as they ever did, but now there is no trouble getting service, says Altieri, "since the copier company isn't making any money if the machines aren't running." That kind of incentive for good service is another potential benefit of outsourcing.

When the business of running a district can be economically and efficiently outsourced, the real business of teaching and learning can proceed unhampered.

Elizabeth Crane is a freelance writer based in San Francisco, Calif.

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