Grading the performance levels, strategies, and success of government services outsourcing suppliers, MAXIMUS is out front with straight A's. The company was selected by Forbes Magazine as one of the ten Best Small Companies in America for 1999. With over 3,300 employees and more than 110 offices across the US, MAXIMUS provides governments with program management and consulting services.
On state and local levels, MAXIMUS currently specializes in child support enforcement, welfare reform, managed care, and children's health insurance. On the federal level, the company has a contract with the Social Security Administration with the objective of helping disabled youth get back into the work place. It also has a contract with the US Agency for International Development to do systems integration services in Egypt.
MAXIMUS' motto is "helping government serve the people," and what MAXIMUS has learned in doing so presents an excellent primer for those concerned with when and how government outsourcing works.
Primer Lesson 1: The Differences Between State, Local and Federal Government Outsourcing
Often, on a state and local level, contracting out is a determination of poor performance, rather than cost. They tend to outsource old programs, where there are existing workers, only when they are not performing well. New and expanded programs often are outsourced to avoid increasing bureaucracy. San Diego County recently outsourced its entire data processing functions to Computer Sciences Corporation. "But when the State of Connecticut made an award to EDS to do that, it ran into big troubles and withdrew because of backlash and political pressure from the unions. State and local governments tend to outsource new programs where there are no union workers," explains Dr. David V. Mastran, CEO of MAXIMUS.
In some instances, Mastran says, because the government will be rewarding the outsourcer for performance, excellent results may cause costs to increase from what they would have been in-house. When MAXIMUS, for example, performs child support enforcement services, it is paid on a percentage of the collections it achieves. If collections increase, the percentage reward will cost the state more. However, the state benefits with more families becoming independent because of those collections.
Only in rare instances are cost comparison studies undertaken at state and local government levels. The method used involves a detailed cost analysis of what the business unit's marginal costs would be in order to take on the new program vs. what the cost would be to contract it out and monitor the supplier. Mastran says there is a lot of comparative data in state and local government programs; in the federal arena, such data is not available.
Primer Lesson 2: Why is the Private Sector Usually Able to Perform a Function Better?
Mastran cites the government's red tape as the reason for its inability to operate as flexibly, quickly, and on a performance-based rationale as the private sector is able to do. "First, there is the Civil Service system. The presence of the unions also severely hamstrings the government's ability to redefine job titles, reorganize quickly, and to fire people who don't perform well," he says.
MAXIMUS hires displaced government workers when it takes over a poorly performing project. They are given extensive training and computer systems that work better; placed in offices designed to promote efficient operation; not hindered by procurement red tape; and they are motivated to improve performance. Mastran says that, in that environment, employees have a greater incentive to perform and usually improve drastically within two months.
Primer Lesson 3: What Can Be Done To Effect an Increase in Government Outsourcing?
To win a government contract, Mastran explains, an outsourcer must have people resources that know how the government programs work. "They have to know a program at a level of detail that allows the outsourcer to run it more efficiently than the government," explains Mastran. MAXIMUS enjoys the expertise of the best directors of state child support programs and people who ran Medicaid and welfare programs. "We pick people who have notable success at running government programs," Mastran explains, "and then train them on private sector possibilities."
Recently, MAXIMUS went to the UK to study Capita, a company with over 100 government contracts. Capita has managed an extraordinary accomplishment that has yet to happen in the US. It matches the government retirement program for employees converted to the private sector. This makes it easier for the government to outsource without great opposition from unions. The opportunity for a government employee transferred to a private sector job to have that job be considered as part of a career ladder for a return to government later (as a supervisor, for example) is a scenario MAXIMUS has discussed with American government officials.
One of the most enlightened determinations MAXIMUS has made from lessons learned in government outsourcing is the difference between ministerial functions and discretionary functions. "A discretionary function," explains Mastran, "is one where the government worker can determine an outcome for someone, based on the government worker's own judgment. In a child abuse case, for example, a social worker can determine whether to remove the child from the home." A discretionary function is a judgment call, and Mastran states that this is appropriate for government workers.
On the other hand, he says, the government should not be performing ministerial functions. An example of this would be a determination as to whether someone is eligible for a check. When there are specific requirements as to eligibility (certain income, assets, etc.), it simply makes no difference as to who makes the eligibility determination. Any worker would come to the same conclusion, based on requirements for eligibility. "It is these types of government functions that are appropriate for outsourcing," explains Mastran. "The government's job is to make the rules, set policies, and monitor the supplier. It is not the government's job to do the work of delivering the services. If you want the boat to go somewhere," he adds, "the government should steer, and the private sector should do the rowing."