In a nutshell:
- Contracting out is a useful tool for governments, but it does not work in all circumstances. Context and motivation matter.
- When governments contract out services, it is essential that they maintain the capacity for diligent contract management as well as stewardship of the public interest.
- Savings to Michigan from privatizing prison food service have not justified the resulting administrative challenges and emergent public health concerns regarding prisoner safety and nutrition.
Governor Rick Snyder has announced his intention for the state to move away from contracting with private vendors for prison food service. The announcement was made in conjunction with the Governor’s annual budget proposal that includes funds to move services back to state workers. The current contract with Trinity Services Group expires July 31, 2018, and will not be renewed.
Budget language approved by the legislature in 2012 had included a required open bidding process for prison food service operations. The state began a contract with Aramark Correctional Services in December 2013 to privatize food service delivery in Michigan’s prison system. Problems associated with Aramark became infamous, ranging from maggots in food, sexual relationships between contract employees and prisoners, smuggling of drugs and other contraband into prisons, and even an attempt at a hired hit.
The contract with Aramark was terminated in 2015 and a new vendor, Trinity Services Group, was contracted. Investigation by the Detroit Free Press uncovered many of the same problems under the new vendor that the state faced under the initial contract, as well as potential conflicts of interest.
The move to privatize prison food services
Privatization might be seen as a way to shrink the size of government and reduce expenses shouldered by taxpayers by purchasing competitively priced goods and services. The move in the 1980s towards the New Public Management was a reaction to the very real problems of bureaucratic inefficiencies in the mid-20th century. The history with privatization—and especially this case—have taught us that no ownership model (public, private, or mixed) is inherently more efficient than another; differences in efficiency emerge based upon type of service and service context.
Michigan’s shift to private delivery of prison food was sold as a way to ensure state savings amid numerous budgetary constraints and pressures. Indeed, the shift met this criteria, saving millions in the first year (and each year subsequently). A report by the state Auditor General found continued savings to the state from the contract with Trinity Services Group of $1.16 per prisoner per day (this amounts to around $11 million per year for the state when accounting for other costs).
Legislators supporting the move also claimed the contract would improve services; the opposite has proven true, as the two private contracts have been the source of almost continuous scandal, embarrassment and administrative difficulty. These prison food service problems are not unique to Michigan, but have emerged in numerous other states, including nearby Ohio and Kentucky. In fact, problems with prison food service performed by Aramark long predated Michigan’s experience. A 2007 audit from the Florida Department of Corrections stated:
Feed rates have declined sharply since the contract’s inception in 2001, creating a windfall for the vendor and reducing the value of the services provided without a proportionate decrease in per diem rates charged to the Department. During the first 24 months following the contract’s inception, the food service master menu was changed repeatedly, allowing the vendor to substitute less costly meat products such as ground turkey for previously required beef products. This cut the vendor’s production costs with no proportionate decrease in per diem rates charged to the Department. These two dynamic changes in the cost/value balance of the contract suggest that the Department’s needs would be better served either by modifying and rebidding the contract to address the above issues, or by restoring food service as an in-house operation.
Given known challenges to privatization in the context of prisons, it seems that the decision to privatize was not purely pragmatic or budgetary, but also at least partly due to ideological preferences for private sector service delivery. Moreover, given that the quality of prison food is a real public health issue (with incarcerated persons suffering a disproportionate number of outbreak-associated foodborne illnesses), current and future policy analysis should consider criteria (like human health and well-being) that may not be directly reflected on a ledger.
Analysis of Michigan’s experience
Context matters and restricting program analysis to budgetary elements might miss important costs and barriers to success. For instance, the success of a contractor may be dependent upon organizational culture, which is often multi-layered and infinitely nuanced with social norms, written rules, and unwritten expectations. It seems clear in hindsight that contracted food service employees were not well-equipped to deal with the cultural complexities found in prisons. Ostensibly, the inability to deal with prisoners was a factor that led numerous employees of both contractors into bad behaviors.
Organizational cultures are also often resistant to change. Moreover, the cultural shock of upending food service in prisons seems to have made important aspects of the work of corrections officers, like behavioral remediation and prevention of recidivism, that much more challenging. Hungry and mistreated individuals are rarely cooperative.
Engaging in privatization—or any other governing decision—for ideological (rather than pragmatic or managerial) reasons is generally inadvisable. Expertise and research suggest that goods or services should not be contracted out merely on the assumption that contractors are better, faster, and cheaper; such assumptions should stand up to objective analysis and testing. While the inefficiencies of bureaucratic supply, lack of competition, and lack of flexibility created by civil service constraints within the Michigan Department of Corrections presented policy challenges, privatization in this case was an imperfect solution with its own challenges and shortcomings.
Even efficiency isn’t a given when contracting out. When public service markets lack adequate competition, the “benefits of competition” can no longer be obtained through privatization. Positing a competitive market for services also assumes the market is sufficiently large that the product is of uniform quality across firms, so that true choice exists for the government. When contractors begin to resemble a natural monopoly, this leads to higher costs than necessary (ironically a common complaint about public, bureaucratic provision of service).
In 2016, only two companies bid for a Tennessee prison food contract–Trinity Services Group, Inc. and Aramark. The state of Tennessee disqualified Trinity, leaving Aramark as the sole option. Problematically then, Michigan has contracted out a service with a limited pool of vendors. Aramark and Trinity are the major providers of prison food service nationwide, and neither has worked out especially well for Michigan. Absent competition, vendors must be regulated through careful contract management to ensure efficient delivery of quality products and services.
Effective contract management is contingent upon the ability of a department or agency to monitor performance and to shape the work being done. Performance measurement and performance management are essential to successful contracting, but private contractors have a clear incentive to resist oversight, and may consider some internal policies or procedures as proprietary information. Beyond initial hiring criteria, it seems Department of Corrections was limited in its ability to exert control and oversight with regard to individual contract employees reporting to an external and independent company.
Contract management requires a variety of managerial tools that must often be enumerated by contract provisions and clauses, such as:
- The ability to define and shape the work of contractors
- The flexibility to make midcourse corrections
- The ability to obtain frequent and audited measures of contractor performance
- Methods for systematically providing performance-based incentives and disincentives—particularly financial bonuses and penalties
- Procedures for developing and maintaining informal communication from government staff and management to contractor staff and management
While this list of conditions may be difficult to satisfy and yet still not exhaustive, it should nonetheless factor in to any “make-or-buy” decision on whether or not to contract out. In other words, the ability of a government agency or department to manage a contract should be a primary concern when considering privatization, rather than just cost or ideological preference. When privatization is pursued, it is incumbent upon the government to balance the private company’s desire to earn a profit with the fact that those who are being served should receive service that is adequate and humane.
In the case of Michigan’s prison food contracts, it is evident that the food service providers sought to improve margins by reducing the quality of service (this has occurred through the company serving expired food, or just less food in general, all while having it served by lower-paid employees). In this case, the service recipients were not only the prisoners, but also a public that relies on the corrections system to provide humane and protective custodial care, rehabilitative opportunities, and reentry assistance for offenders under its supervision.
Price matters, but so do quality, fairness, responsiveness, and the ability to successfully fulfill the mission and objectives of public agencies and programs. Judged on this broad range of criteria, the prison food contractors fell short. Ultimately, the $11 million in annual savings from the prison food contract are a drop in the bucket of Michigan’s $56 billion state budget. These savings do not seem to outweigh the multitudinous administrative and human costs associated with continuing the contract.
Lessons learned and important future considerations
Michigan’s five years of experience with privatized prison food service offers some important lessons, the most obvious being that while privatization is a useful and often successful strategy, it is not appropriate in all circumstances. Moreover, privatization requires considerable energy invested in contract management, creating unique costs and challenges for governments.
Public and private service delivery each offer distinct advantages and challenges, and no delivery model is without trade-offs. Good governance is exemplified when public leaders move beyond personal preferences to carefully consider the best method for meeting the needs of the public in each situation. As a general rule of thumb: There’s no substitute for a fully-equipped tool box and the ability to pick the right tool for the job. No tool is appropriate in every context, not even duct tape or privatization.