February 14, 2011 at 2:46 pm #123035
Robert Knauer, CEO TAI IncParticipant
Well, all of this is possible if your city, state or local government agency is willing to use the TBC method. It's better than being laid off, or losing your job, it provides benefits during transition, and can even enable employees to become millionaires in the long-run like the former government workers that now work for USIS in DC. Read this article, ask questions, and then ask your city leaders to investigate the possibilities that TBC can offer.
The TBC Process Explained: How Federal, State and Local Governments can benefit from using a Transitional Benefits Corporation Method to Shed Operating Costs and Continue Services in Difficult Economic Times.
By Steve Sorett, Esquire and Robert Knauer CPCM CPPO
“In difficult economic times governments can rid themselves of non-core operations and still satisfy the taxpayers, operating effectively, with less expense while reaping the true benefit of the TBC process…”
Back in 1996 when I met attorney Steve Sorett talking about OMB Circular A-76 competitions, I only knew him as contracts attorney, but it wasn’t until 2002 when I returned to Washington, DC that I would meet Steve again and get to hear about his new patented concept called “Transitional Benefits Corporation” that would provide government and industry expansion, growth, and functional work continuity in the midst of flux (economic downturns). When Steve was invited to come speak to my office at the Bureau of Engraving and Printing about possible application of TBC to A-76, I didn’t thoroughly realize the full potential it had outside of federal A-76 competitions. Today, I do. I realize more than ever the usefulness of TBC and what it can do for state and local governments struggling to survive, when tax revenue streams are less.
So just what is a Transitional Benefit Corporation? First, it is a patented process. By Steve’s definition, a Transitional Benefit Corporation ("TBC") is a vehicle to promote the transfer of designated, generally underutilized, government assets, such as real estate, equipment, and intellectual property, to the private sector and to enable associated government employees similarly redeployed while allowing them to retain and accrue their public benefits.
The TBC Method delineates a sound legal and business framework for effecting such transition using a non-profit umbrella structure. The TBC Method provides a structured methodology to analyze selected government operations with a view towards enhancing efficiency by reducing costs; redistributing workload; and maximizing asset utilization. Pursuant to the TBC Method, an umbrella organization is created that will facilitate a smooth transition of public sector assets and personnel to the private sector by attracting public or private financing; incubating new business units and creating spin-offs; commercializing government-owned intellectual property. The TBC Method is implemented through the contractual interplay under the TBC for the continued performance of the government activity's functions (chosen for conversion) between any existing government installation transferring functions and related personnel, one or more public sector units, and one or more new business units ("NBUs"), and possibly one or more non-profit corporations organized under the auspices of state or local government, consistent with the corporations laws of the particular state. Under the TBC Method, the TBC enters into contracts directly with the existing government installations and NBUs to achieve the benefits described below. Note that all of these units are necessary in every case to achieve the benefits set forth below.
The unique benefits of the Transitional Benefits Corporation method is designed to be a preferred alternative to outsourcing, managed competition, privatization, or base closures and realignment because of three unique aspects. Because of its uniqueness, the TBC is now a patented methodology.
TBC offers great economic development and savings to governments. The TBC Method provides for growth opportunities in the communities where the generally underutilized government assets now reside. Government facilities that are potential candidates for closure (e.g. Department of Defense or Department of Energy installation), as well as activities such as laboratories or other active operations that have viable commercial markets are ideally suited for oversight by a TBC. State and local government IT or CIO functions are well suited for TBC, as well as, a host of other commercial type government operations including facility management, logistics, auditing, machine shops and other service functions. The TBC Method provides for savings to the government because while the government installation no longer must maintain the assets and the personnel, it continues to have access to them on a contractual basis, thus providing the surge capability mentioned below. The true “Key for Success” in the TBC Method is that it really can create a potential for economic growth by focusing on the government's mission while utilizing the former government employees ("Transitional Benefit Employees" or "TBE") to grow new business opportunities.
Under the TBC Method, the government will realize economic savings not only in non-recurring costs but also recurring costs. It is estimated that a typical TBC transaction can be accomplished within six months, with savings being realized shortly thereafter; by contrast, under other processes such as the A-76 process, the transaction may take up to four years with savings not recognized until the end of the fifth year. Since the time is compressed to conduct a TBC transaction, the costs are necessarily reduced. In contrast, outsourcing and the OMB Circular A-76 process places significant economic costs on the government that they simply cannot afford-especially today.
Another key benefit of the TBC Method is its ability to provide for surge capability, which provides the government with the ability to "reach back" on a temporary basis through the TBC and associated contractual arrangements into the nonprofit, private sector, and/or the NBUs to use the assets and TBEs in the event of an emergency or surge in workload. This seems to be a constant need in America with Katrina’s, floods, and other disasters. In contrast, under the old OMB A-76, the government may have to reduce its workforce by as much as a third to meet its Most Efficient Organization ("MEO") cost reduction goals. By reducing its workforce under the MEO, the government sacrifices mission flexibility in the event of a national security emergency or spike in workload. Under the TBC Method, in the event of a national security emergency or spike in workload, the NBUs not only likely will have the full staffing of existing skilled employees capable of performing the required work, these NBUs have the flexibility to rapidly expand its workforce free from the delays caused government hiring policies and procedures.
TBC provides all Government employees a softer landing than other processes. The TBC Method provides for a "soft landing" for former government employees. Under the TBC, these TBE's are not only guaranteed a job with the new business unit (most likely for one year) in the private sector organization under the auspices of the TBC, but are also able to retain and continue to accrue their government pension, health, and insurance benefits during such period of private employment, which are paid for by the private sector - at a reduction in cost to the government. This agreement is attractive to all of the affected parties: the TBE retains their job and benefits while the governmental body does not need to undergo a reduction in force ("RIF") and thereby avoiding termination costs and internal disruptions due to workforce restructuring, and the private sector entity gains well-trained, knowledgeable, and valuable employees.
Some of the possible outcomes of TBC are reflected in the chart are the very end of this presentation (see last paragraph).
So, considering the plight that many local governments are in today unable to meet payroll, reduced tax revenue, and still the requirement to maintain services TBC can be just the fix a city manager or county government might need. TBC can work at the federal, state or municipal level, and it does not matter whether it involves finance, IT, contracting, program management or what. It does matter than the service be sellable to others.
In Summary, while the TBC Method is innovative, its implementation is supported by organizational and legal precedents that have been developed successfully in the recent past. Some Federal examples include the Naval Air Warfare Center in Indianapolis, the Navy Environmental Detachment in Charleston, South Carolina, the United States Investigative Services (background investigators from the Office of Personnel Management). There are pertinent local government initiatives including the City of Milwaukee's wastewater management services and the County of San Diego's information technology capability. IT probably stands the biggest opportunity cost for local governments to leverage TBC wisely. The one thing that government leaders might want to know is that the TBC Method is very scalable - it can handle a small group of employees or assets as well as entire installations or activities. It lends itself to involving local governments and economic development oriented nonprofit organizations as well as universities and foundations, as former government assets and workers are transitioned into productive non-government work while assuring that legitimate government mission needs are met. Lastly, the TBC Method handles the personnel issues gracefully - providing such TBEs with a "soft landing" while reducing the cost of personnel transition to the taxpayer. Most other forms of outsourcing do not do so well, and cause too much trauma. So, if you are a city manager, council member, chief of contracting, city legal, or functional manager looking for ways out of your current plight—maybe you might want to consider TBC as the unknown opportunity waiting just around the corner to solve your government issue. To learn more about this process, the TBC webinar will be given by Steve on the Acquisition Institute’s website in November.
Robert Knauer is President of the Acquisition Institute, Inc., and is both a CPCM with NCMA, and CPPO with NIGP. He serves as managing director of his firm, and one of the lead instructors teaching contracting and P3 courses. His firm, and his BIO can be found at http://www.AcquisitionInstitute.com Email: [email protected]
Steve Sorett is Partner at McKenna Long & Aldridge LLP in Washington, DC and is a specialist attorney dealing with government contracts, Public-Private Partnerships (P3) processes and promotes his TBC process as a relief to burden federal, state and local governments have meeting their operational commitments. His email is: [email protected]
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