BY DAVID N. EMANUELSON
In the early 1990s, the concept of privatization was peaking in popularity in parks and recreation, as it was in other sectors of public administration. This was largely due to Osborne and Gaebler's 1992 book Reinventing Government, in which privatization was offered as a hybrid of the business concept of "out-sourcing." Their assertion was that it was less expensive to out-source than to perform certain functions in-house. And, while this assertion was never supported by evidence, they relied heavily on their assumption that, since business was obviously more efficient than government, anything business did should be emulated.
Whether Osborne and Gaebler were right or wrong is not important. What is important is that Reinventing Government came at the right time for park districts in Illinois. With local governments forced to be even more businesslike in their cost effectiveness—because of their partial loss of ability to capture growth in their EAVs and, initially, their outright loss of their ability to replace non-referendum bonds— many park and recreation professionals were looking for additional ways to save money and maximize their resources. And business management techniques provided a means of adapting.
Program Management
In addition to privatization, a technique offered in the book is the business practice called "program management." Program management involves planning events according to a production schedule, introducing new "inputs" to the produc- tion process at the appropriate times. With the goal being to produce a completed product at a specific time, the challenge of program management is to get resources to the production line just in time to build the product.
Since park districts produce services not products such as automobiles, the advantages of program management may not be readily apparent to some people. Yet, the similarities are fairly simple for park and recreation professionals to understand. This is because program management has been a technique that we have used for more than a century.
For instance, to provide swimming lessons, a dance class, a softball league or any other recreation program, "inputs" must be delivered in the proper order and at the proper time. A site needs to be obtained, equipment purchased, staff hired, lesson plans developed, meeting times set and publicity offered. Everything has to be done in a certain order or the service will not be produced.
Out-sourcing
Osborne and Gaebler suggested that government could be more efficient if it emulated business by using program management techniques and, when appropriate, out-sourcing when it was the most cost-efficient. This, too, is not a new concept for park and recreation profes- sionals. Most park districts have employed independent contractors as athletic program officials, something expressly permitted under the Internal Revenue Service (IRS) code. Others have used private vendors to operate concession stands. Still others have utilized independent contractors to teach aerobics classes.
In short, park and recreation professionals have been employing these business practices for years, which is why it should be no surprise that many park and recreation professionals feel comfortable with business management techniques in general. We've been business managers for a long time.
It is also a reason that park and recreation professionals could be expected to be among the first public administrators to embrace business management practices described in Reinventing Government, not because authors like Osborne and Gaebler told us to do so, but rather because we know it works for us. And is also a reason
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that it should be no surprise that park and recreation professionals can be expected to expand the use of program management techniques in order to increase efficiencies during this new era of fiscal constraint.
Be Your Own General Contractor
One such new application of program management is in park and facility development. Program management— conceptualized as a method—allows park districts to serve as their own general contractor in small and sometimes large construction projects. This gives the district greater control over the project outcome and saves money, while the district continues to out-source most construction tasks. The difference is that by serving as their own general contractors, park districts have more control of the costs and outcomes.
But before the benefits of project management are described, a park district needs to understand the barriers that have caused most park districts to employ turnkey construction practices rather than overseeing the construction of a facility themselves. For one, construction techniques are not typically something in which we are trained. In addition, we do not know much about building codes, development ordinances or urban planning. Also, typically we do not have a staff member available to oversee the construction process, which can be time-consuming and stressful.
Another barrier is that the risks of having a problem during construction and not being able to blame the general contractor leaves us exposed to serious political problems. This leads to the most serious barrier of all: the legal process for constructing public facilities is not designed for park districts or any governmental unit to be their own general contractor. For instance, if park districts are their own general contractors, they are still be obligated to get performance bonds, albeit from the subcontractors, even though there is not general to go bankrupt in the middle of the project.
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Big or small, park districts might consider "reinventing" themselves in order to continue to utilize business management techniques and evolve into organizations that can build facilities as well as they build programs. |
On the other side of the table, there are great benefits for a park district to become its own general contractor, the biggest of which is cost containment during the early stages of the project development. By performing preliminary floor plan designs and determining ballpark costs of construction, park districts can have an idea if a project is feasible in order to avoid the embarrassment of announcing a project only to find out later that it is unaffordable.
Another advantage is that it can be safer to serve as your own project manager and general contractor than to put yourself totally in the hands of your architect and the turnkey general. Just ask the Westmont Library board about the effects of a general contractor going bankrupt during a major construction project. It's a horror story which is not as rare as might seem. General contractors walk or threaten to walk all the time. Many of the low bidders make mistakes in bidding and have no alternatives but to issue threats if change orders or outright changes in their bids are not permitted.
But the most important advantage is it costs less to be your own general contractor than to hire one, for one simple reason: if you bid all of the subs out to the lowest bidder, the total cost of the subs will be less for the park district general contractor than the turnkey general. This is because most generals use the same subcontractors with which they are familiar from job to job. That is why, other than errors and profit motives, there is so much difference in the bid prices between generals. One generals bundle of subs differs from another, sometimes substantially. But since a park district serving as its own general gets the lowest bidders in each case, its bundle of bidders should always be lower overall. If not, there is something wrong.
The counter argument would be that there is an economy of scale upon which a turnkey general benefits that the park district serving as its own general will not. Not true. Not only is there no economy of scale, most generals add a 10 percent profit margin upon the cost of each subcontractor, pushing the total bundle cost higher. It should always be cheaper to be your own general considering the profit motive.
But as mentioned, there is one big barrier to park districts serving as their own general contractors: expertise. Many smaller park districts have far too few staff members or projects in order to justify a full-time project manager. Such is not the case of larger districts. Many have in-house landscape architects who could adapt to such a role quite nicely.
Big or small, park districts might consider "reinventing" themselves in order to continue to utilize business management techniques and evolve into organizations that can build facilities as well as they build programs. It is fortunate that park districts have the autonomy and ability to adapt. It's one of the reasons they have the envy of the nation in leisure services; they can reinvent themselves.
DAVID N. EMANUELSON
is the executive director of the DeKalb Park District.
November/December 1999 /37