Comparison of Outside Vendor vs. Insourcing

 

   
 

 

In the 2014 Budget, The Milwaukee County Board directed that transit be insourced, meaning that more than 1,000 employees who currently work for a private vendor would become County employees. The plan has raised serious concerns about the fiscal impact of running the system in-house as well as losing the flexibility and expertise a professional outside company brings.

 

Providing service through an external provider allows Milwaukee County to take advantage of:

  • Economies of scale when purchasing goods and commodities for the transit system operations, allowing for the redirection of a greater proportion of tax dollars to service.

  • Specialized management experience, operational efficiencies, technological and logistical improvements and innovations-experiences gained and lessons learned in other systems can be utilized to the benefit of the County.

  • Centralized infrastructure can allow for further redirection of dollars to service. For example, a call center that can be made available for local transit users. It is more efficient for a firm to add marginal resources to an existing function, than for a local provider to create the entire function.

  • Training resources currently not available to Milwaukee County.

  • Competition. Private firms have a reputation to uphold and will want to retain this business line, creating an incentive to manage effectively and provide value to the taxpayers and riders.

  • Flexibility. A transit contractor is not bound by some of the limits that make government less nimble. This means less risk to riders and service.

In contrast, insourcing transit management services has significant risks and drawbacks:

  • Integrating IT, HR, payroll, benefits, labor relations and procurement functions for a 1,000 person organization would be costly and time consuming.

  • Currently, transit has delegated authority to perform certain functions, such as procurement. County Ordinance and County procurement and financial policies would need to be reviewed in conjunction with Transit’s current business operation to determine what changes or exceptions need to be made to keep transit functioning without operational delays.

  • The County has no experience operating a transit system. With this abrupt change, the County would not only have to spend a large amount of money to set up the system internally, but would not be able to realize the savings that an external provider could bring.

 

 

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