Does your agency do business with the 'Fourth Sector"?

A recent study examines the extent of contracting by Illinois park and recreation agencies.

By Regina B. Glover and David Bice

Peter F. Drucker, in his new book, Innovation and Entrepreneurship, Practice and Principles, states:

One additional area of entrepreneurship — and a very important one — is the emerging 'Fourth Sector' of public private partnerships in which government units determine performance standards and provide the money. But then they contract out a service to a private business on the basis of competitive bids, thus ensuring both better service and substantially lower costs.

Privatization, the contracting out of services that traditionally have been run by the government, is considered by some to be the new vogue in government. Yet, private contractors were used at the turn of the century for garbage collection, fire protection and street car operation. However, abuses crept in and the "reform movement" of the '20s returned these services to municipalities.

Reemerging popularity

Today, contracting is returning to popularity as municipalities examine all the possibilities to deal with increasing financial constraints. A 1982 study by the International City Management Association found everything from street repair to public relations under contract. Vehicle towing headed the list with 78 percent of the cities sampled contracting this service.

In parks and recreation, several studies have been done to examine the extent and type of contracting. The U.S. Department of Interior, in a 1979 California study, found more than 25 percent of the 216 responding agencies had become involved with contracting since Proposition 13. In 1981, Warnick studied 106 park and recreation agencies in the northeast United States and found 49 percent utilizing contracts.

In 1985, Crossley and Wilhite investigated cooperative ventures in California, Texas and Iowa. State percentages for contracting facility management ranged from 24 to 29 percent. For program services, the range was 20 to 21 percent. Contracted facility management was used more frequently as the department's size (based on budget and population) increased.

Contracting in Illinois

In 1985 the Administration and Finance Section of the Illinois Park and Recreation Association (IPRA) financed a study to examine contracting in Illinois. Surveys were sent to 225 recreation and park agencies in the State. Of the 225 agencies, 158 responded for a 62 percent return rate. Of those responding agencies, 61 percent contracted services to the private sector and 39 percent did not. The types of services, functions and programs contracted to the private sector can be seen in Table 1.

Of the 91 agencies contracting services to the private sector, the top reasons for contractual arrangements

Illinois Parks and Recreation 23 November/December 1986

were improved services (51 percent), equivalent services at less cost (44 percent), and improved management control and flexibility (44 percent). Top reasons given by the 67 agencies not involved with contracting were potential loss of control (39 percent), negative public feedback (23 percent) and difficulties in monitoring the contract (17 percent).

Most of the agencies (56) involved with contracting have been doing so for 10 or less years. It should be noted, however, that 10 agencies have been contracting for 20 years or more. The majority (56 percent) of the contracting agencies were from the Chicago Metro IPRA region.

Three factors were found to especially affect whether or not an agency contracts with the private sector. The factors were: (1) whether the agency's community supports contracting, (2) whether the agency believes contracting saves money, and (3) whether the agency compares costs between private and in-house services.

Table 1 Services, Functions and Programs Contracted to the Private Sector by Public Recreation and Park Agencies (N=91)

Areas Contracted Percent* Solid Waste Collection 52.7 Sports and Games 44.0 Trips 37.4 Dance 36.3 Building Maintenance 36.3 Accounting/Bookkeeping 28.6 Other Miscellaneous Functions (Programming) 25.3 Food Service Concession 24.2 Security 22.0 Park Maintenance 20.9 Landscape Maintenance 18.7 Training Seminar 18.7 Other Miscellaneous Functions (Maintenance) 18.7 Arts 18.7 Special Events 18.7 Music 16.5 Street Tree Maintenance 15.4 Other Miscellaneous Functions (Administrative) 14.3 Crafts 14.3 Operation of Special Facilities 12.1 Environmental Activities 12.1 Clerical Functions 9.9 Drama 9.9 Social Recreation 9.9 Maintenance of Special Facilities 8.8 Sport Field Maintenance 7.7 Waste Water Treatment 4.4 Fire Fighting 3.3 Parking Lot Staff 2.2 Water-Filtration 2.2 Cemetery Maintenance 1.1 * Multiple answers possible.

Budget cuts

The Illinois study also asked all 158 dealing with a budget cut of 25 percent. Out of the 10 strategies indicated by the respondents, fees and charges would be the most preferred alternative and contracting would be the fourth preferred.

Does this mean Drucker's statement is inaccurate? Hardly! What does seem to be true, though, is that contracting is just one of many techniques available to municipal officials for improving financial management. Contracting or privatization may be the buzzword of the '80s, but that does not mean it is a viable alternative for all agencies.

The seasoned local official will look at the possibility of contracting as just one alternative or option in the consideration of how to provide public services. In fact, 'option' may be the better word, since it is quite possible to find a variety of ways to take advantage of the services which the private sector can offer. (Peter Hames, Director. St. Paul Department of Management and Finance)

Additional information

Further information about the Illinois study's findings on contract length, dollar amount, monitoring process and administration process may be obtained from the Administration and Finance Section, c/o the Illinois Park and Recreation Association, 262 E. Palatine Rd., Palatine, IL 60067.

A contracting bibliography is available from the authors.

ABOUT THE AUTHORS: Regina Glover, Ph.D., is the undergraduate curriculum coordinator in the Department of Recreation at Southern Illinois University in Carbondale. David Rice is the facility coordinator of the recreation/intramural complex at the University of Missouri, Columbia.

Illinois Parks and Recreation 24 November/December 1986