The Issue
Indianapolis’ Department of Public Works (DPW) was responsible for the collection and disposal of solid waste in the City. Over time, however, the delivery model had become an uncoordinated patchwork of providers and practices. The City had 27 illogically defined service districts that were divided among four private solid waste haulers and DPW’s in-house team. Contracts had historically been renegotiated year-by-year, and the process had resulted in a de facto service monopoly within each district. Not surprisingly, costs had increased for many years.
The Team
Skip Stitt, then the City’s Director of Enterprise Development, helped lead the City’s efforts to improve solid waste services and reduce costs.
The Strategy
Using a Managed Competition model, the City issued a competitive Request for Proposals (RFP) and solicited proposals from private sector solid waste management providers and the City’s incumbent Solid Waste team. From a policy perspective, the City and its solid waste customers were more focused on high quality services and low prices than private-versus-public sector delivery. As part of that process, the City shrank from 27 to 11 districts by creating new boundaries that made sense from a service delivery perspective. Spurred by the competitive process, the City’s Solid Waste team reengineered its service delivery model and cost structure and submitted one of the winning proposals. The City also created a single contract oversight role within DPW and established a rigorous set of key performance measurements that included customer satisfaction surveys and detailed complaint tracking by district.
The Impact
The DPW Managed Competition model was a success on virtually all fronts. Total cost savings over the first five years were $15 million – a savings of about 10%. The cost per household was reduced by about 15% as the program allowed the City to serve a growing customer base without raising costs. The City decreased expenses in a number of areas including personnel productivity (tonnage collected per employee increased 20%), fleet maintenance and replacement costs, and facilities costs. The service quality for both the public and private providers also improved substantially. The number of citizen complaints fell by 75% as managers were able to use district-based performance data to proactively identify the need for improvement. The project was also a success for the City’s incumbent employees, notwithstanding their initial concerns with the Managed Competition model. Benefits included:
- No employee lost their job as a result of the reengineering effort
- City employees received 25%h of the operational savings generated below their proposal price – $1,750 per employee the first year
- Absences, sick leave, on-the-job injuries and Union employee grievances were all substantially reduced
- After lowering costs and improving service quality, the public employees actually increased their market share
- A new spirit of labor-management collaboration was evidenced by the AFSCME Union President who noted that “City workers are no longer asked to check their brains at the door when coming to work.”