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Internal Data Fails To Justify State's Outsourcing Plan

Tennessee Has The Highest Sales Tax Rate In The Nation
Posted at 3:57 PM, Sep 14, 2015

New documents obtained by NewsChannel 5 raise a critical question: is the Haslam administration trying to fix something that's not broken?

Administration officials recently acknowledged that they are considering the possibility of outsourcing the operation and maintenance of every Tennessee college and university building to a big corporation.

But NewsChannel 5 Investigates discovered that when administration officials crunched the numbers in an attempt to justify the move, they did not get the answer they wanted.

"The initial undertaking was, if we can show using best-in-class information that there is cost savings, then it's a done deal -- now, in fact, it doesn't," said Mike Ledyard, an outsourcing consultant hired to oversee the Haslam administration's effort.

Across the state, college and university employees are now facing the possibility that their jobs could be outsourced. It comes two years after the Haslam administration turned control of state office buildings over to the Chicago-based corporation, Jones Lang Lasalle.

While the governor has insisted no decisions have been made, NewsChannel 5 obtained a strategy document that fully exposes the thinking behind that effort.

It suggests that, by outsourcing all state facilities "to a single vendor," the UT system might be able to cut costs by more than $23 million a year.

The Tennessee Board of Regents schools, it claims, could cut another $40 million.



NewsChannel 5 Investigates recently asked Gov. Bill Haslam, "Are university buildings being poorly managed?"

"That's what I say," he answered, "we'll find that out."

But NewsChannel 5 obtained data that had already been compiled by state officials, comparing the operation of those buildings to a key industry standard from Whitestone Research.

For UT Knoxville, the Whitestone numbers suggest it should cost $7.54 per square foot to manage its buildings.

But UT spends just $5.

At UT Chattanooga, Whitestone suggests $8.08, but the real cost: just $6.20.

Across the state, the standard suggests $7.59 for the University of Memphis, but it comes in at just $4.26.

Whitestone puts Middle Tennessee State University at $7.27, but it only spends $4.59.

And Austin Peay blows out the standard of $8.69 with its $4.67 per square foot.



"I hoped," Ledyard said, "that the numbers would reflect a business case."

"For outsourcing?" we asked.

"For outsourcing," the consultant acknowledged.

"And it didn't?"

"No, it didn't. Because I'm comparing limes and bananas. This isn't even apples and oranges."

Ledyard argued that the standards presume that the buildings have been well maintained, while Tennessee's colleges and universities have hundreds of millions of dollars in deferred maintenance for work that needs to be done but hasn't.

"Are they wasting money today? No. They are doing the absolute best they can with what they've got. Are there people out there who capable of getting more for less? We believe there are."

Ledyard also claimed that the Whitestone numbers only represent the top tier of facilities nationwide because "only the best tend to respond to these surveys. So what you are looking at in the Whitestone data is best in class. These are the people doing it really, really well."

A spokesperson for the research company disputed Ledyard's description of its methodology.

"CBRE Whitestone does not use building owner surveys, but instead estimates maintenance & replacement costs based on a schedule of maintenance and replacement tasks determined by the average service life of individual components," said spokesperson Robert McGrath.

State Rep. John Ray Clemmons, D-Nashville, said that, while he believes the Haslam administration's determination to sell out state government is out of control, the data proves that college and university spending isn't.

"It tells me that we've got university officials doing everything they can to meet tight budgetary constraints, and they're doing a good job," Clemmons said. "So are we going to cut even farther? If we are already at bare bones and we are at almost half the national standard, what else is there to cut?"

With those stats, he asked, "How do you save money? You cut jobs, you cut services -- all in the interest of profits."

In fact, an email from Haslam's general services commissioner, Bob Oglesby, shows the mindset.

He writes that he begins with the "premise" that "the state ideally wants to have the private sector provide all of these services."



On top of that, Oglesby wrote that "at least one (vendor) suggested we consider including additional services they offer their clients, including but not limited to postal, printing, copying, food service (and) warehousing."

Ledyard, the Haslam administration's outsourcing consultant, said that he is "talking to other educational institutions who have outsourced to find out what their results were before and after."

While the data didn't show what he had hoped, Ledyard said he hasn't stopped looking for the "opportunity" for savings.

"All this work is done under the assumption that the decision will be made to go forward," he said.

"To outsource?" we asked.

"To outsource," he responded. "But it's an assumption because this is still an opportunity assessment."

The strategy document also reveals that the Haslam administration may have even more dramatic ideas for higher ed -- figuring out ways to cram more people into less space and potentially demolishing older buildings that may be expensive to maintain, possibly even some buildings that might be considered historic.

View the internal documents here