Nearly Two-Thirds of Michigan Districts Contract with Private Companies

Published November 19, 2012

Michigan’s 2012 budget incentivized school districts to solicit bids from outside vendors to provide support services, among other best practices. The Mackinac Center for Public Policy’s 2012 school privatization survey shows many districts took the incentive and contracted for at least one of the three main support services. In 2012, 61 percent of all school districts are contracting out for food, custodial, or transportation services, a 13 percent increase over 2011.

The incentive may have hastened the move to contracting, but this is also a long-term trend. In the Mackinac Center’s first survey in 2001, only 31 percent of school districts used contractors to provide these non-instructional services. A nearly 98 percent increase in the past decade shows the practice has gone from a tool a handful of districts used to a common practice.

Higher Quality, Lower Price
Soliciting bids from private vendors adds an element of competition, providing an incentive for quality services at lower prices. Besides saving many districts money, privatization frees resources, allowing districts to focus on their real mission: teaching students.

Custodial service contracting grew the most, with 46 new districts contracting out. Private providers now clean and maintain school buildings and grounds in 39.5 percent of districts statewide. This is now the most commonly contracted service.

Byron Center Public Schools outsourced custodial services to Grand Rapids Building Services this past year. The district contracted primarily for reasons of quality and efficiency, and reported satisfaction with GRBS. It saved more than $340,000, roughly $100 per pupil.

Contracting of food service grew in 2012 as well, increasing from 33.5 percent to 35.0 percent of districts, with 13 new districts contracting.

Les Cheneaux Community Schools, an Upper Peninsula district, recently privatized its food service director and cafeteria employees through Professional Education Services Group. Over the past school year, the district’s food service fund went from $20,000 in the red to balanced—savings of $71 per pupil.

Transportation contracts grew by 22 districts to 90, a 32.6 percent increase. This is a substantial increase since 2005, when only 3.8 percent of Michigan districts contracted their transportation.

High Satisfaction Rates
Statewide, the new contracts are expected to save districts almost $13 million in the first year alone.

West Bloomfield Schools contracted for both its custodial and transportation services this past year. This 6,523-student district projects three-year savings of $2.8 million on its custodial service and $2.5 million on transportation, a total of $5.3 million in savings from privatization.

Districts report satisfaction on 92 percent of their contracted services this year. This is not surprising since a district contracting out for services can change providers, so vendors have a strong incentive to maintain high standards.

James M. Hohman ([email protected]) is assistant director of fiscal policy and Josiah Kollmeyer is an intern at the Mackinac Center for Public Policy. The Mackinac Center is the nation’s largest state-based free-market think tank.


Image by Joseph Wright.