Walter Roban SAGE

Presented by

Walter H. Roban, JP, MP

Privatisation and Outsourcing section are on pages 78 – 114 of the report;

The report states there is ample evidence that in some areas of government functions are inefficiently delivered and there are areas government should not be undertaking the function of in the first place.

There are a number of clear and compelling opportunities to use privatization and out sourcing to reduce the cost of running government.1. Recommend the establishment of a Privatization

and Outsourcing Authority as an independent body. It will consist of 7 appointments by the Minister of Finance, two to be made from members of the Trade Union Congress Charged with reviewing all government activities

and entities to determine whether government operation continues to be justifiable

Will have a sunset provision to expire after 6 years

Airport Operations, Ministry of Tourism and Transport

Civil Aviation, Ministry of Economic Development

Highways Management, Ministry of Works and Engineering

Maritime Administration, Ministry of Economic Development

Public Lands and Buildings, Ministry of Works and Engineering

Waste Management, Ministry of Works and Engineering

Water and Sewage Management, Ministry of Works and Engineering

Conservation Services, Ministry of the Environment and Planning Correction Department, Ministry of Public Safety GEHI and Health Insurance Department, Accountant General and

Ministry of Health and Seniors Human Resources Department, Cabinet Office Marine and Ports, Ministry of Tourism and Transport Parks: Maintenance, Ministry of Environment and Planning Public Lands and Buildings, Ministry of Works and Engineering Public Transportation, Ministry of Tourism and Transport Transport Control, Ministry of Tourism and Transport Youth, Sport and Recreation, Ministry of Community and Cultural

Development Vehicle and Equipment Operations and Maintenance, Ministry of

Works and Engineering

DEPARTMENT EXPENDITURE OPERATING

LOSSES/SURPLUS

STAFF

Airport Operations 19,777,000 (9,441,000) 44

Civil Aviation 10,500,000 13,062,000 39

Maritime Administration 1,904,000 2,246,000 11

Highways 6,325,000 (6,325,000) 71

Public Lands and Buildings 22,869,000 (21,169,000) 169

Waste Management 17,551,000 (12,521,000) 139

Water and Sewage 5,165,000 (299,000) 24

84,091,000 (49,755,000) 497

DEPARTMENT EXPENDITURE OPERATING

LOSSES/SURPLUS

STAFF

Conservation Services/

Environmental Protection

8,825,000 (7,564,000) 84

Corrections 27,469,000 (27,469,000) 251

HID, GEHI 45,076,000 (45,076,000) 23

Human Resources 4,250,000 (4,250,000) 29

Marine & Ports 18,536,000 (12,367,000) 174

Parks Department 10,537,000 (10,537,000) 164

Public Lands and Buildings 22,869,000 (21,169,000) 169

Public Transportation, Ministry of Tourism

Development & Transport

20,945,000 (12,245,000) 258

Transport Control Dept. (TCD) 6,332,000 21,885,000 41

Youth, Sport and Recreation 11,662,000 (10,951,000) 110

Vehicle & Equipment Operations 5,609,000 (5,609,000) 89

182,110,000 (157,237,000) 1,392

The SAGE Commission identified what they believed was the most objective, strategic approach to considering government programmes, services that should be privatized or outsourced:1. Can government afford to provide this service?2. Is this programme or service necessary?

The Commission felt that if these 2 questions are kept uppermost as privatization and outsourcing opportunities are considered, decisions are likely to be made pragmatically and objectively for the greater good.

PRIVATISATION: Process of transferring ownership of a business, enterprise, agency, public service or public property from the public sector to private sector; either to a business that operates for a profit or to a nonprofit organization.

OUTSOURCING: the contracting out of a business processes to a third party – in this case, a public sector function of service to a private entity.

The Commission then, set aside those programmes and services they believed should be owned and provided directly by the government believing they could be provided efficiently and effectively

(NOTE: these are not listed in the report)

They also set aside all departments and activities involved in the formulation of policy and strategy; which are the responsibility of the elected representatives; guided by the Cabinet Offices and senior Civil Service Executives.

Provide net operating savings for Government Provide enhanced service levels to the

Bermuda public Reduce the physical plant required by

government Reduce Government debt and other long-term

liabilities Encourage new small business development

The Commission expects any privatization action to provide reliable and consistently priced long term coverage of public sector requirements.They also looked into the potential to: Absorb current public sector staff in the new

private sector function or entity Monetize Government assets (sale or lease of

land, buildings, equipment)

FOR AGAINSTCurrently competes with private sector

Is essential public service (police, fire, regulators)

Realizes (or could realize) sustainable revenue

Subject to strict confidentiality/national interest

Can be profitable at market service rates

Vulnerable to political legislative change

Can attract private sector investment

Requires substantial ongoing subsidization

Based on a clear business plan

Delivers substantial monetization value

FOR AGAINSTIs currently available at competitive rates in private sector

Loss of government control

Compromise specific project scope/duration(contractable)

Possible significant redundancy

Allows for clearly measureable desired output KPIsHas an available contingencyPotential for performance guarantee

The Commission stated that although policy and strategy are the responsibility of government leaving the execution to be privatized and outsourced government must remain accountable for sustainable provision of required services to the public.The Commission expressed concern about:

1. Seeing no strategic plan for proactive management of government assets or coordinated delivery of public services;

2. Many functions and services that were reviewed tend to reside within operating silos of the civil service;

3. Any attempt to outsource or privatize them within the current structure would almost be piecemeal.

Bermuda 60/40 rule may have to be modified to accommodate the need for foreign investment for large projects;

Great care should be taken in the creation of monopolies since competition should be a key driver of innovation to reduce cost and enhance service;

Where monopoly structures are the best solution government should maintain fair pricing through a regulatory authority;

Assistance should be sought from the UK Government which has a track record of successful privatization and outsourcing;

Create a Privatization and Outsourcing Authority before going ahead with any transactions are started.

There is considerable scope for outsourcing services and a number of functions have already been successfully outsourced;

A government Strategic Planning Process must be implemented within which the Privatization and Outsourcing Authority should continuously review all government business and entities;

Where compelling outsourcing opportunities are identified every effort should be made to transfer government staff currently handling the relevant functions to the outsource partner;

There maybe an opportunity to support ambitious government staff in setting up their own private sector businesses by seeding them competitively priced government contracts