He began tentatively, scouting cities for contracts that National Serv-All would find manageable and for competitive situations that did not unduly favor another bidder (situations, for example, in which another bidder controlled the landfill and therefore the disposal rates). There was no grand strategy, he says. The goal was simply "to broaden our base."
That was not an easy task. As Walbridge soon discovered, contracts that were manageable for National Serv-All were also manageable for the giants of the industry, and -- when he started actively bidding on contracts in 1981 -- he found himself losing time and time again to more experienced companies. He says now that the process taught him "everything you need to know about the way the big boys bid contracts." At an average of $30,000 per bid, however, it got to be an expensive education.
On the other hand, Walbridge also learned a lot about the market, about how cities structure bids, and about their motives. Cities that invite bids, he discovered, don't always want privatization. "Lots of cities invite you to bid, then they take your ideas, say, 'Thanks a lot,' and do it themselves," he says. "They use the bidding process to keep themselves honest."
Then there are places like San Diego, where National Serv-All and the other private contractors found themselves underbid by the county on a landfill contract. Noting that the department's bid was also lower than what it had been charging previously, the county commissioners threw it out.
More often, however, Walbridge came up against the sheer incompetence of the governments he was dealing with. Many had no idea of the real costs of the services they were contracting out, and therefore had no way to do a realistic evaluation of the bids. In some cases, the specifications were so vague that the government found it impossible to come up with a satisfactory formula for determining who had won. Alternatively, the government might deliberately use the vagueness of the specifications to leave open the option of retaining the contract, or giving it to a favored contractor.
With experiences like these under his belt, Walbridge was all the more impressed with the situation he encountered when he returned to Phoenix in 1982.
There had been changes since his first visit seven years earlier. For one thing, the city had begun inviting bids for city contracts, largely in response to the budgetary constraints arising from the tax revolt of the late 1970s. That was a situation faced by government officials all over the country, but, unlike many others, the city fathers of Phoenix viewed the fiscal crisis as an opportunity rather than a problem, a chance to make government more businesslike. "Privatization was part of a larger program to get more productivity . . . more results for the dollars," says Marvin Andrews, Phoenix's city manager. "And so we did a lot of programs to stimulate efficiency and employee involvement. Privatization was just one of the things we tried."
Fortunately, Phoenix had a relatively efficient -- and honest -- government to begin with, having switched to the council/city manager system following a period of rampant corruption in the 1940s. This has made life difficult for local reporters, who complain that the city administration is a colorless, unaccountable technocracy. But the citizens don't seem to mind.
The center of privatization activity in Phoenix has been Ron Jensen's Public Works Department, which began inviting bids on garbage-collection contracts in 1978. From the beginning, the city stipulated that the Phoenix Sanitation Division would hold onto 50% of the business, to ensure that garbage collection would continue in the event that a private vendor proved unable to deliver service for one reason or another. The other 50% was put out for bidding, with the sanitation division competing against private vendors for two of the four available five-year contracts.
To keep the department's bids honest, Phoenix arranged to have them prepared by the city auditor, who made sure that they represented costs fairly on a basis comparable to those used by the private contractors. This task was easier in Phoenix than elsewhere because the city uses cost accounting. Thus, for example, the city's equipment fleet is centralized in one division of the Public Works Department and then "rented out" to various departments at a per-mile or per-hour rate calculated to reflect overhead. Management overhead is likewise apportioned among the department, right down to a fraction of the city manager's salary.
All of these systems were in place in 1982 when Walbridge returned to Phoenix, this time to attend a conference. He took the opportunity to study changes in Phoenix's automated refuse-collection system. He liked what he saw. "I have never encountered or read a more detailed set of specifications," he says. "We would always prefer to bid in a city that knows what it's doing. The smarter they are, the better off we are."
"Whoever in Phoenix had the foresight to say, 'You guys don't know what your costs are, so we're going to make you bid,' did the city a real service," adds Walbridge's son, Kevin, who is now in charge of the company's Phoenix operation.
