The "Pacheco Law" has been cited as an obstacle to the goal of a more efficient, less costly mass transit system for Boston. As the state official charged with ensuring that plans for having private companies run certain government operations meet the requirements of that law, I find such statements baffling.
If government is to act more like a business, as I believe it should, then long-range planning, effective allocation of assets, and a focus on outcomes should be among management's priorities. Too often across state government, not just at the MBTA, this is not the case. Our audits illustrate that many agencies poorly manage resources and operations and lack the wherewithal to engage in continuous improvement. Too rarely are operational decisions based on rigorous cost-benefit analysis. Sometimes political philosophy or raw politics dictate how agencies serve their public.
The Pacheco Law forces government agencies, unaccustomed to thinking like businesses, to explore alternatives to their current model and base decisions on costs, desired outcomes, competitive bidding, and value. When an agency demonstrates that a private company can perform a government function at a lower cost without compromising quality, safety, or effectiveness, that privatization plan is approved. The process supports the notion of government accountability.
Since the law's passage, 12 of the 15 privatization plans reviewed by the state auditor have been approved. Most recently, I approved a contract for the privatization of a UMass bookstore.
Of the three that didn't pass muster, two plans had been advanced by the MBTA. The privatization of bus shelter maintenance failed because the MBTA did not know how many bus shelters would be covered by the contract. This made it impossible for either the agency or a private contractor to determine a fair price for the work.
Proposals to privatize bus operations and maintenance in Quincy and Charlestown were also turned down because the MBTA could not demonstrate that privatization would actually save money or improve quality, since its plan also called for shifting some work to other MBTA facilities.
When you look at the MBTA's history of privatization and its management of contracts with private companies, you see a record of poor performance. In 1996 the auditor approved the privatization of MBTA real estate management operations. Subsequent audits have questioned millions of dollars of payments to the private company that were either improperly billed or went to projects that were never completed. Further, the company failed to follow state contracting laws. Since no other company has bid on the work, however, this problematic firm still manages the real estate operation.
Other audits have found, for instance, that the MBTA's poor contract management has resulted in a $94 million automated fare collection system that, for five years, could not accurately count the day's receipts, huge costs over-runs and delays in station modernization projects, and $15 million worth of undocumented fuel payments to the private operators of the RIDE program.
When a government operation is privatized, taxpayers are still on the hook. The private company gets paid for doing the work formerly done by state employees. In the interest of accountability, the Pacheco Law ensures that taxpayers and consumers of government services benefit from privatization. With this record and with what we have all learned this winter about other planning, contract, and operational management deficiencies at the MBTA, can we trust it to undertake privatization without the discipline and oversight required by the Pacheco Law? Not if we want better results.
Suzanne Bump is the state auditor.