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July 2008

The City of San Diego is embarking on a managed competition program to privatize many city functions. While the process is new, San Diego already has extensive experience with using private contractors for many similar functions. This report provides a glimpse into the local privatization track record.

Some disastrous service failures and spectacular cost overruns by private contractors have made headlines: the electrocution at an incorrectly wired bus stop, the 300 extra tickets issued when a red-light camera contractor manipulated stoplight times, the Kroll financial report that was bid at $250,000 and wound up costing the city $20 million.

But there have been many more problems with private contracts — and with the city’s system of monitoring and oversight of those contracts — that have not made the news. Cost overruns, change orders, and numerous cases of substandard work that must be redone by city staff have all made private contracts much more expensive to San Diego taxpayers than they first appear. Without stringent monitoring, contractors have financial incentives to cut corners, hire less skilled workers and use inferior materials rather than do the job right.

The City’s current contracting system is flawed and is not serving the best interests of city taxpayers and residents who depend on the services provided. The system must be repaired before the City moves forward with additional contracting.

This report documents examples of the day-to-day contractor failures that go mostly unnoticed except by the affected residents and the city crews who fix the problems. CPI documented the following examples during February and March of 2008.