IVGID GM’s Corner: To outsource, or to not outsource
May 11, 2016
My March 31 GM's Corner on Public Bidding Procedures and my April 14 write up on Procuring Vendors have generated lots of feedback from members of the community. I've had a number of people ask me to expand on this subject area and talk more about why we need to go out to bid in the first place.
Folks have rightly asked, "why we can't use our existing workforce to accomplish most of our tasks?"
This is a great question, and one that I've been asked at least once a week for most of the 30-plus years I've been working in the public sector. Like most simple questions, there isn't a simple answer, but I will do my best to respond within the word limit the Bonanza puts on this column.
First of all, there is no organization I can think of — public or private, large or small — who doesn't outsource a portion of their work. No company specializes in everything. No company hires an employee to perform a specialized task that only occurs once a year or once every five years.
IVGID, just like every organization, attempts to strike the appropriate balance between what is best done in-house and what work can't be done in-house and what work is more cost-effective if it is outsourced. As a small organization with just over 100 full time employees, we have less capability in-house than an organization with 10,000 employees. In addition, while we may be much smaller than a mid-sized company, we have more business lines than much larger companies. We aren't just "government."
We operate a Wastewater Treatment Plant and a Water Disinfection Facility, maintain hundreds of miles of water and wastewater pipes and pump stations. We collect e-waste, maintain a fleet of vehicles and maintain and repair dozens of highly specialized facilities.
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We have two golf courses, a banquet and meeting facility, restaurants, a ski area, four beaches and a boat launch. We have a Recreation Center, a Tennis Center, child care, recreational programming, parks and play fields and over 1000 acres of open space and trails.
And we provide marketing and communications, finance, accounting and budget, general administration and legal to provide support to all of these operations. We also have the Nevada Revised Statutes to conform to; it's a lot.
We have nearly as many operations as we do full time employees!
Each one of these operations has its own set of laws, policies, maintenance standards, capital replacement schedules, personnel procedures, and best practices to follow. In some operations, such as wastewater and water treatment, it makes sense to have mostly full time employees while for operations such as beaches or ski, it makes more sense to have primarily seasonal employees.
In some operations, it is more cost-effective to outsource the majority of the operations — such as trash collection where a private company already owns the transfer station and the landfill. In some operations, such as marketing, it makes sense to outsource a specific activity — advertising purchases — as an outside company has volume pricing we could never obtain.
A significant portion of our fleet and building maintenance is done in-house, as we've found that we can provide this service at a lower cost per hour than the private sector. However, when the work requires substantial manpower or is very specialized, we will outsource as it would not be cost effective to maintain large scale labor crews or specialty technicians in-house.
The same is true for major construction projects. There are virtually no companies that have in-house design and construction teams. Since your capital facilities last for decades, it makes sense to hire firms which do this work every day, not every 10 years.
The same is true for Master Planning. Since this is done around once a decade, it makes sense to work with a firm that does this work daily. Firms which specialize in Master Planning often have access to critical privileged information that individual companies can't obtain.
For example, SE Group, our Master Planner for Diamond Peak, is able to provide us with industry financial benchmarks and trends which aren't available to the general public — but crucial information to have when plotting out future plans for the ski area. Even the largest ski corporations don't have access to this type of data and also hire SE Group to help guide their future decisions.
Bottom line is that just like every other company, we attempt to manage our operations in the most cost-effective manner possible. Every one of our operations has different characteristics, different industry standards and benchmarks, and so the balance between using our employees and outsourcing is dependent on the task and the operation.
"GM's Corner" is a recurring column from Incline Village General Improvement Distinct General Manager Steve Pinkerton, who will discuss issues and offer updates regarding various district matters. He may be reached for comment at firstname.lastname@example.org.
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