Using ESPCs to Finance Federal Investments in Energy-Efficient Equipment
Source: Congressional Budget Office
A variety of laws and executive orders require federal agencies to improve the energy efficiency of their facilities and to pursue a range of other energy-related goals. Because the availability of annual appropriations is limited, the Administration encourages federal agencies to use other types of financing—such as energy savings performance contracts (ESPCs)—to fund investments related to energy efficiency.
Under an ESPC, a private party agrees to pay to design, acquire, install, and, in some cases, operate and maintain energy-conservation equipment—such as new windows, lighting, or heating, ventilation, and air conditioning (HVAC) systems—in a federal facility. In return, the federal agency agrees to pay for those services and equipment over time, as well as for the vendor’s financing costs, on the basis of anticipated and realized reductions in the agency’s energy costs.
Such contracts are examples of third-party financing, in which vendors privately fund investments for federal agencies. In the case of an ESPC, the vendor is usually an energy service company (a business that focuses on projects and technologies to reduce energy use). Similar arrangements exist, called utility energy service contracts (also known as UESCs), in which the services and equipment are provided by a utility. Although data about the characteristics and results of utility energy service contracts are less readily available than similar data about ESPCs, the discussion of ESPCs in this report generally applies to those other contracts as well.
The Short- and Long-Run Effects of Private Law Enforcement: Evidence from University Police (PDF)
Source: Institute for the Study of Labor
Over a million people in the United States are employed in private security and law enforcement, yet very little is known about the effects of private police on crime. The current study examines the relationship between a privately-funded university police force and crime in a large U.S. city. Following an expansion of the jurisdictional boundary of the private police force, we see no short-term change in crime. However, using a geographic regression discontinuity approach, we find large impacts of private police on public safety, with violent crime in particular decreasing. These contradictory results appear to be a consequence of delayed effect of private police on crime.
Private Capital, Public Good: Drivers of Successful Infrastructure Public-Private Partnerships
Source: Brookings Institution
Despite its fundamental and multifaceted role in maintaining national growth and economic health, infrastructure in the United States has not received an adequate level of investment for years.1 Political dysfunction, a challenging fiscal environment, greater project complexity, and the sheer size of the need across different sectors are forcing leaders across the country to explore new ways to finance the investments and operations that will grow their economies over the next decade.
Part of this exploration means new kinds of agreements between governments at all levels and the private sector to deliver, finance, and maintain a range of projects. Beyond simplistic notions of privatization, the interest is in true partnerships between agencies, private firms, financiers, and the general public. Many nations already successfully develop infrastructure in this manner today.
These public-private partnerships (PPPs) are alternately framed as a panacea to all of America’s infrastructure challenges or a corporate takeover of critical public assets. In reality, they are neither. A well-executed PPP is simply another tool for procuring or managing public infrastructure—albeit a new and increasingly popular one.2 The growing interest can be attributed to a number of factors, including tightening budgets, increased project complexity, better value for money, the desire to leverage private sector expertise, and shifting public sector priorities.
However, this surge of interest is not matched by broad public sector understanding of the PPP landscape.
This paper is designed to fill that gap by providing an overview of basic PPP structure, how to consider proper risk and reward sharing, and the purpose and the rationale behind these arrangements. It is based on extensive background research and directly informed by interviews with leading practitioners from the public and private sector.
New From the GAO
Source: Government Accountability Office
Mobile Devices: Federal Agencies’ Steps to Improve Mobile Access to Government Information and Services. GAO-15-69, December 22.
Highlights – http://www.gao.gov/assets/670/667694.pdf
401(K) Plans: Greater Protections Needed for Forced Transfers and Inactive Accounts. GAO-15-73, November 21.
Highlights – http://www.gao.gov/assets/670/667152.pdf
Federal Subcontracting: Further Actions Needed to Improve Oversight of Pass-through Contracts. GAO-15-200, December 22.
Highlights – http://www.gao.gov/assets/670/667715.pdf
Emergency Preparedness: Opportunities Exist to Strengthen Interagency Assessments and Accountability for Closing Capability Gaps. GAO-15-20, December 4.
Highlights – http://www.gao.gov/assets/670/667301.pdf
Education and Workforce Data: Challenges in Matching Student and Worker Information Raise Concerns about Longitudinal Data Systems. GAO-15-27, November 19.
Highlights – http://www.gao.gov/assets/670/667072.pdf
Temporary Assistance for Needy Families: Action Is Needed to Better Promote Employment-Focused Approaches. GAO-15-31, November 19.
Highlights – http://www.gao.gov/assets/670/667050.pdf
Anthrax: Agency Approaches to Validation and Statistical Analyses Could Be Improved. GAO-15-80, December 19.
Highlights – http://www.gao.gov/assets/670/667672.pdf
Ground Radar and Guided Munitions: Increased Oversight and Cooperation Can Help Avoid Duplication among the Services’ Programs. GAO-15-103, December 19.
Highlights – http://www.gao.gov/assets/670/667677.pdf
Federal Food Service Operations: Implementation of the HHS/GSA Health and Sustainability Guidelines. GAO-15-262R, December 23.
1. GAO Makes MACPAC Appointments. December 19.
The Federal Emergency Management Agency: Floods, Failures, and Federalism
Source: Cato Institute
The Federal Emergency Management Agency (FEMA) is the lead federal agency for disaster preparedness, response, and relief. FEMA’s budget fluctuates from year to year, but spending has trended sharply upwards in recent decades. The agency spent $22 billion in fiscal 2013 and $10 billion in fiscal 2014. The main activity of FEMA is distributing aid to individuals and state and local governments after natural disasters, such as hurricanes, floods, and earthquakes. In addition, the agency provides ongoing grants to the states for disaster preparedness, and it operates the National Flood Insurance Program (NFIP).
FEMA’s response to some major disasters has been slow, disorganized, and profligate. The agency’s actions have sometimes been harmful, such as when it has blocked the relief efforts of other organizations. FEMA’s dismal response to Hurricane Katrina in 2005 dramatized the agency’s bureaucratic dysfunction. FEMA’s grants for disaster preparedness are known for wastefulness. As for the NFIP, its insurance subsidies are spurring development in flood-prone areas, which in turn is increasing the damage caused by floods. The NFIP also encourages an expansion of federal regulatory control over local land-use planning.
Federalism is supposed to undergird America’s system of handling disasters, particularly natural disasters. State, local, and private organizations should play the dominant role. Looking at American history, many disasters have generated large outpourings of aid by individuals, businesses, and charitable groups.
Today, however, growing federal intervention is undermining the role of private institutions and the states in handling disasters. Policymakers should reverse course and begin cutting FEMA. Ultimately, the agency should be closed down by ending aid programs for disaster preparedness and relief and privatizing flood insurance.
Pay to Prey: Governors Facilitate the Predatory Outsourcing of America’s Public Services
Source: Center for Media and Democracy
Maggots, drug smuggling, sex with inmates. As if the news were not already bad enough, shocking new allegations of a murder-for-hire plot are emerging from Michigan as the media digs deeper into that state’s failed outsourcing of prison services.
In 2013, Governor Rick Snyder invited the Philadelphia- based for-profit company Aramark to take over food services in the state’s prisons. The action was a 180-degree change in course, as the administration previously rejected all such bids on the grounds that none of the proposals would save the state money. The $570,000 Aramark spent on lobbying surely helped the company persuade the administration to change its mind.
Since Aramark took over Michigan’s $145 million food service contract – eviscerating the stable middle class jobs of some 370 public workers – one stomach churning scandal followed another. The state fined Aramark $98,000 in March for food shortages, “unauthorized menu substitutions” and sexual relations between kitchen workers and inmates, and another $200,000 in August after problems persisted.
All the while, the Snyder administration has stood behind the company and the state prison director secretly waived the $98,000 fine soon after it was imposed. Perhaps Snyder will reconsider this position given new allegations that an Aramark worker has asked a prisoner to assist him with the murder of another inmate.
While Aramark’s failed outsourcing of prison food services is a dramatic example of the harms that can arise from the America’s public services and assets, this report, Pay to Prey: Governors Facilitate the Predatory Outsourcing of America’s Public Services, contains many other cases of outsourcing run amok generating worse outcomes for the public, often higher costs, lawsuits and scorching headlines.
While large corporations are the winners in this scenario, all too often taxpayers are the losers when transparency, accountability and the public interest are sold out to for-profit firms.
The Dead Hand of Socialism: State Ownership in the Arab World
Source: Cato Institute
Extensive government ownership in the economy is a source of inefficiency and a barrier to economic development. Although precise measures of government ownership across the Middle East and North Africa (MENA) are hard to come by, the governments of Algeria, Egypt, Libya, Syria, and Yemen all operate sizeable segments of their economies—in some cases accounting for more than two-thirds of the GDP.
International experience suggests that private ownership tends to outperform public ownership. Yet MENA countries have made only modest progress toward reducing the share of government ownership in their economies and are seen as unlikely candidates for wholesale privatization in the near future.
MENA countries need to implement privatization in order to sustain their transitions toward more representative political systems and inclusive economic institutions. Three main lessons emerge from the experience of countries that have undergone large privatization programs in the past. First, the form of privatization matters for its economic outcomes and for popular acceptance of the reform. Transparent privatization, using open and competitive bidding, produces significantly better results than privatization by insiders, without public scrutiny. Second, private ownership and governance of the financial sector is crucial to the success of restructuring. Third, privatization needs to be a part of a broader reform package that would liberalize and open MENA economies to competition.