We have discussed some arguments surrounding the outsourcing industry in the preceding articles, such as the advantages of outsourcing, when should you outsource, and how outsourcing affects the employment rate. Now, let us delve into a new case: The result when you consider that outsourcing may not be favorable for your business growth in the long run.
With business process outsourcing (BPO) penetrating offices and taking over basic functions such as HR, finance, and customer service, most service providers believe they are safe from the business practice’s clutches. But are they? Just ask the school bus drivers.
The disheartened drivers of Saucon Valley
The Saucon Valley School District saw itself in the limelight when its school bus drivers rallied the community for support in a bid to stop the district from privatizing its transportation operations. The district’s in-house busing operation is comprised of 35 vans and 10 buses that functions at $2.1 million for the last four years. This led district officials to find ways to improve the annual budget on transportation. Superintendent Sandra Fellin points out that although drivers are performing exemplary services, the district needs to perform its “financial due diligence.”
This “due diligence” brought about a muddle of criticism from the locals as bus driver Noreen Resetar posted a letter asking the public to support the drivers. Resetar wrote that the bus drivers will be losing their livelihood if SV’s transportation services are outsourced. These would-be displaced drivers are neighbors and friends to the community; they “LIVE and PAY TAXES and VOTE in Hellertown and Lower Saucon Township.” Parents immediately rallied on the page as one user writes that these drivers often have their own children on board and are therefore more careful than any stranger behind the steering wheel could ever be.
Board member Edward Inghrim says that his responsibility is to ensure that the board runs a “financially responsible school district.” He further adds, “I did ask, what [would it] cost to outsource this? I wasn’t looking to fire anyone.”
The grim situation is best summed up by Board Member Bryan Eichfled when he said “If we sell the fleet, we can’t go back.” Yet it remains that the future of Saucon Valley’s transportation is unclear.
More common than you think
However, it seems that Saucon Valley is not the only district looking into private bus companies to oversee their transportation operations. The school districts of Walled Lake, Bethel Park, and Palantine Community are facing the same scenario.
While the talks are still in progress, bus drivers who man these routes are worried that their jobs would be given to someone else who will not be as careful of the kids as they are. Most students are familiar with their bus drivers, and this makes younger students more willing to hop on a bus, provided it is being driven by someone they know.
How effective is it?
While the topic may ignite ire from the community, the fact remains that given the choice between savings and sentimental service, most businesses and school districts would rather choose savings over sentimentality. Though the displaced bus drivers may be put off by the decision, most of them would be absorbed by the private company, if applicable. Yet will outsourcing a district’s busing operations really result to substantial savings?
A study from think tank Keystone Research Center (KRC) revealed that privatizing a school district’s transportation could be a moot point. The data was gathered over two decades that left the study’s co-author and KRC Executive Director Stephen Herzenberg to pronounce “Handing the reins over to the private sector is not always a good bargain for taxpayers…school bus contracting is a poor bargain.”
The report points out that school districts are enticed with the idea of outsourcing as there is a lump sum at the beginning of the contract as the school’s fleet is sold. Also, contractors would initially offer low prices at the start of the bidding, only to increase the price by charging additional services and bargaining for more expensive contract renewal terms. At this point, schools would be double-guessing the merits of returning their transportation needs in-house as purchasing new school buses would be even more expensive.
Similarly, the study revealed that 29 districts that privatized their transportation needs from 1992 to 2001 experienced a 26% increase in expenditure in the last five years, in comparison with the 6% increase it incurred prior to outsourcing. This totals to an increase of about $223,861 per district per year. The state then reimburses the contracted transportation services, which equates to about $231,903 per district. This means more expenditure for the state which it takes from the taxes. And this increase in expenditure would then fall on the taxpayers’ shoulders.
In a nutshell, privatizing a school district’s transportation needs might bring more harm than good since the study reveals that it would only incur more expenses in the future. While outsourcing is typically considered as a cost reduction method that would help organizations focus on core competencies, it seems that schools would be able to save more if they just effectively plot how to utilize their fleet.
Does this mean that outsourcing is ineffective?
The answer to this question is a resounding no. Outsourcing has many merits, but like most business practices, there are instances when outsourcing is not always applicable. In this case, it is more prudent to effectively maintain the buses than to outsource the entire fleet to the private sector.
Outsourcing is an effective business practice that has benefitted countless companies over the years. Yet it can only be effective if the returns derived from outsourcing would complement a company’s savings and improved bottom line. If the expenses would be more than what would be saved, then outsourcing is definitely not the answer. Rather, organizations must look at other solutions in order to cut expenses and improve savings.
Outsourcing can lead you to great potentials should you only learn how to harness it properly. Visit us for more information.
Photo credit: KB35 on Flickr.