"Been there, done that" is not a trite phrase to Skip Stitt, founder and president of Competitive Government Strategies, Inc. His consulting firm assists cities, counties, states and private-sector not-for-profit organizations on outsourcing and privatization. From experience, he knows it’s vital that government entities base their strategic decisions on best practices, for he was once a buyer. As chief operating officer and senior deputy mayor for the City of Indianapolis for six years in the 1990s Stitt, under the Mayor’s direction, implemented $1.1 billion in outsourcing contracts. "We did about 75 deals, from very small things – like the city print shop – to the largest airport privatization in U.S. history and what was then the largest utility privatization in U.S. history," he recalls.
Now running the entire procurement for his clients, he provides insight and judgment on every aspect of putting a deal together, including the vendor selection process. "Our biggest value-add with our clients – what they tell me – is that we have stood in their shoes," says Stitt. "They know we have made very difficult, large, important, politically charged decisions about whether to proceed with a project and who to proceed with. They appreciate the fact that we have been on the other side. They trust our judgment."
Foremost among his consulting services is the crucial educational process of guiding buyers to an understanding of how they can have confidence in their choice of vendors.
In the Dark
On day one of working on a new deal, Stitt says the buyer’s concerns are always right up-front. "The vendor is here to rip us off." "They’re just here to make a profit." "They don’t care about our citizens." "They’re not in it for the long haul." These are thrown at him by opponents of outsourcing transactions as well as by people who support the transaction but still have these concerns.
He says that most local-level government entities have contracted out to third parties or have been involved in a small level of outsourcing before. His clients, though, face new concerns because entire operations are being outsourced. "They are dealing with a scale with which they are not familiar," Stitt says. "And the closer the service is to a core business for the government, the tougher the questions get." Examples are police functions, infrastructure, health and human services, or something that affects policymaking. Additionally, if there are few vendors to provide a service, questions of trust get even tougher. An outsourcing failure in an instance like managing an airport will become a real problem if there is no other vendor to handle the process.
Trust is the most important criteria in vendor selection, Stitt believes. "By trust, I mean, do I believe that they are going to deliver what they say." Of course pricing and service capabilities of the vendor are important but, in the outsourcing procurements he handled for the City of Indianapolis, he recalls that vendor choices were based on "gut reaction." There were instances where he recommended the City not go forward with particular vendors – even with performance guarantees – because he thought "in the end when push came to shove, the vendor wouldn’t be there in the way we needed." It’s a visceral issue, he says, and it’s tough when there is a CEO wanting to choose a vendor based on cost savings.
In the Know
That gut reaction is not just "a feeling." What he did while in city government at Indianapolis is much the same as what he now advises his clients to do. He recommends spending a lot of time with the vendor’s people and their existing clients and believes it is as important as looking at the vendor’s technology, processes and credentials. "I really want to go spend time with their staff, watch them work, see how they interact with other people and how they interact with their customers." He arranges for his clients to spend time with the top vendors they are considering. "Have a couple of meals with them and talk about their families or their other work experience," he says. "You’re going to build a rapport with one of those folks – a connection, a comfort level. All else being equal, you ought to go with the person that gives you that comfort level. And if neither of them do, then look at another vendor."
Competitive Government Strategies, Inc. assists its clients in flushing out trust issues throughout the procurement process. "Our clients must have a sufficiently high comfort level to do a deal," explains Stitt. "In order to do that, we need to make sure we have done our due diligence on the vendor community." Besides oral interviews and site visits, "we take our clients onsite where the vendors are providing a similarly complex service somewhere else. Our clients talk to people who have made this decision with this outsourcer previously. Are they happy? What happens when they hit a snag – how does the vendor react?"
Stitt says that department and division heads, agency directors and elected officials (mayors or county commissioners, etc) need to be involved in the procurement process and its strategic decisions. Government outsourcing, he points out, is far more open and public than outsourcing in the private sector." Every document we generate is a public record eventually. There’s a much higher level of scrutiny." As they are responsible for looking out for their citizens’ interests, government agencies’ confidence in vendors is of the utmost importance. "I want to know," says Stitt, "that if I call the vendor at 3:00 AM to get something done, they will definitely make the effort to do it."
Lessons from the Outsourcing Primer:
- Trust in a vendor means having a confident belief that the vendor will deliver what it says. It’s the most important issue in vendor selection.
- The closer the outsourced process is to a core business for the government, the more important the issue of trust becomes.