2003 Finalist
City of San Diego, California
Innovations in American Government Awards
Innovations in American Government Awards

Like many American cities in the 1990s, when faced with high budgeted costs and shrinking revenue, San Diego turned toward the privatization of government services. But as the city considered options for allowing private companies into fields previously reserved for government bureaucrats, many stakeholders worried about possible negative consequences. Employees of the Metropolitan Wastewater Department (MWWD) feared for their jobs if wastewater management went private. City residents faced interruptions in service while the transition was being made, and local politicians were hesitant to go on record as transferring over 1000 jobs provided by the department to private hands.

In 1997, the MWWD proposed a novel solution to the privatization woes called the Bid to Goal Project. Instead of switching the city's services to the private sector, the MWWD sought to capitalize on the efficiencies of competition, while avoiding many of the problems of privatization. Under the program, a third-party consultant submits a realistic and competitive "mock bid" based on private sector rates for the services provided by the department. The mock bid is presented to the unions that oversee labor in the MWWD, who then team up with city management to create a plan that meets or exceeds the savings and service of the mock bid. If the union is unable to make such an offer, the city is free to seek offers from the private sector.

Bid to Goal was designed to measure city costs against private sector benchmarks, while preserving existing jobs. The program has created a more realistic picture of what wastewater management should cost, forcing public sector workers to bring their efficiency up to private standards. In its initial form, the project aimed to save $77 million dollars within six years, while creating a good relationship between management and workers and maintaining a good record of compliance with environmental regulations.

Over its first five years, the Bid to Goal program has wildly exceeded expectation, saving almost $100 million already. Furthermore, the bid process has required union officials to work closely with city management, resulting in fewer labor problems and a much better working relationship between management and labor. In fact, union officials report that labor grievances are down by 75 percent.

The Bid to Goal program is easy to replicate in other areas, requiring only a credible third-party consultant to draw up reliable mock bids. It is much less contentious for stakeholders than full privatization, and much more efficient than unexamined government provision of services. The International City/County Association has identified Bid to Goal as a nationwide leader in successful sensitive privatization efforts. San Diego now uses the model in other city departments; outside observers confidently predict that Bid to Goal's model of managed competition will soon be picked up by other cities across the county.