Skip to main content

Here is an interesting example I stumbled upon while browsing the web.  I came across SafeBuilt, a company that specializes in outsourcing building inspection departments from local governments.  One of their posterboys of success is the city of Troy, Michigan.  You may or may not have heard of Troy - they recently recalled their mayor for being an idiot and gained international fame for almost-closing their library.  Anyway, if you read some the stats: average household income over $100k, high proportion of college grads, etc, you'd think this was a smart city full of smart people doing smart things....

... surprise over the squiggle ....

First a little bit on Safebuilt.  It isn't rocket science what they do: You fire your building inspectors, they hire them, they sell you their service.  All of the expertise they boast of is yours that you threw away, so when you read about their seasoned vets, well, you know.  Anyway, they also claim to have saved Troy millions, which is at-first curious because how do you save millions on people reviewing building plans and checking construction sites...???

Oh, it turns out that part is easy - they fired 2/3 of them.  Safebuilt took Troy's building inspection unit of 22 full-time city employees and retained only 8.  Ok, no real rocket science here on the savings.  Now, number of inspections hasn't gone down.  It did dip during the recession but has since returned to pre-recession levels.  So you have 8 people doing the work of 22.  Again, no rocket science.  But this isn't the fun part.

The fun part is when you examine the cost.  Troy's building inspection budget slowly rose from 2002 to 2010 (when the outsourcing occurred) from just over $80k per person to just over $90k per-person.  That is about a 12% rise over 8 years.  Understand that this is budget, not take-home pay, so it includes payroll taxes, benefits, all that good stuff.

Anyway, so what happens when they outsource?  Expenses explode by over 50% to about $145k per-person!  So now do you see it?  Fire 2/3 of the department, reduce cost to the city by 1/3, and bank the difference.  Never mind you have 8 people doing the work of 22, that is someone else's problem.  Also pay no mind to the fact that the 2nd year of outsourcing has already produced a 4.4% increase of cost - or 4x the rate of increase when it was an internal department.  After all, 1/3 less cost is still alot of ground to cover.  Here it is in picture form:

And, did I mention that by all appearances the 8 people that Safebuilt is 'providing' are the same engineers that Troy fired.  It's like you have Larry, Curly, and Moe working for you, so you fire them all and then hire Larry back (through Safebuilt) to do the exact same job he was doing at almost twice what you were paying him.  Rest assured that Larry doesn't see any of the increase, he's probably lucky if he is making 80% of what he had before.  The rest is tribute to Wall Street.

So there you have it - outsourcing made easy to understand:  1/3 the service for 2/3 the price.  If a city with a 55% college graduate adult population can do it, you can too!

PS - the financial numbers are pulled from their two financial reports here.  The 'Popular Annual Financial Report' has a nice graph of costs for building inspections, and the 'Comprehensive Annual Financial Report' has a nice table of head-counts.  Neither has a summary of hours billed for inspection services.  Safebuilt charges a fee-for-service - they get 80% of a building inspection fee, so it is in their interest to make the permits as expensive as possible.

11:25 AM PT: Wow - Community Spotlight!  Cooool!  It is actually hard to diary about this because it is so inane.  They are hiring back the same people, it is like "Fire Larry & Curley because they are idiots, but Moe can magically do 3x the work he was doing!"  Even if that were true, it would cast more than enough doubt on Moe's integrity to make it not worth the trip.  After all, if an employee told you he was sandbagging for the last 10 years, what would you do...???

Originally posted to ban48 on Sun Sep 22, 2013 at 08:35 AM PDT.

Also republished by Community Spotlight.

Your Email has been sent.
You must add at least one tag to this diary before publishing it.

Add keywords that describe this diary. Separate multiple keywords with commas.
Tagging tips - Search For Tags - Browse For Tags


More Tagging tips:

A tag is a way to search for this diary. If someone is searching for "Barack Obama," is this a diary they'd be trying to find?

Use a person's full name, without any title. Senator Obama may become President Obama, and Michelle Obama might run for office.

If your diary covers an election or elected official, use election tags, which are generally the state abbreviation followed by the office. CA-01 is the first district House seat. CA-Sen covers both senate races. NY-GOV covers the New York governor's race.

Tags do not compound: that is, "education reform" is a completely different tag from "education". A tag like "reform" alone is probably not meaningful.

Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.
Rescue this diary, and add a note:
Are you sure you want to remove this diary from Rescue?
Choose where to republish this diary. The diary will be added to the queue for that group. Publish it from the queue to make it appear.

You must be a member of a group to use this feature.

Add a quick update to your diary without changing the diary itself:
Are you sure you want to remove this diary?
(The diary will be removed from the site and returned to your drafts for further editing.)
(The diary will be removed.)
Are you sure you want to save these changes to the published diary?

Comment Preferences

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site