Tuesday, April 24, 2012

Privatization Litigation: the Case of the Outsourced School Maintenance

A new court decision provides an interesting vignette into privatization of government services: Merges v. Aramark Corp., Slip Copy, 2012 WL 1113627 (W.D.N.Y. March 30, 2012), which is a denial of a motion for summary judgment. The case involves a privatization contract between Churchville–Chili Central School District (“CCSD”) in New York and Aramark Corporation for the latter to take over all custodial work, plant and grounds maintenance.  Neither bothered to remove snow and ice from the walkways, resulting in slip-and-fall accidents and serious injuries among the staff.  The School District sued the contractor for not keeping the walkways clear.  Aramark claimed it was merely a consultant and had no duty to do any actual work, and filed a motion for summary judgment, asking the court to rule in its favor without a trial.  Here is an excerpt from the court's discussion:

In sum, Aramark's argues that CCSD agreed to pay Aramark over a million dollars over five years for nothing more than “general oversight and expertise in facility management”and hence Aramark can not be held liable to third parties like plaintiff for any negligence it may have committed in the snow and ice removal processes at the School District's facilities . . . The Court does not find Aramak's argument persuasive. A review of the contract as a whole supports a finding that the intent of the contract was to privatize the management and responsibility for maintenance of the District's facilities during the contract term. In other words, a fair reading of the contract confirms the parties intention to substitute Aramark for the District as being the entity responsible for the overall management and safety of the School District's grounds and facilities. The contract was comprehensive and gave Aramark exclusive responsibility to control and manage the day to day facility maintenance requirements of the School District's buildings and grounds. Pursuant to the terms of the contract Aramark was required to provide and pay for an “Operations Team” Manager to serve as “management of the custodial and maintenance departments of the [School] District,” including the location where Merges fell. [emphasis added]
I applaud the court's decision in this case - government contractors have an income stream from taxpayer funds, and need to be accountable to do their work.  The case must still go to trial, so it is still unclear which way a jury would go in this case - but it is a bit galling for a million-dollar contractor to move for summary judgment on the grounds that it couldn't be expected to actually do anything under its contract besides serve in a "consultative capacity."  We can only hope that cases such as this serve as a warning to other municipalities that imagine privatization or outsourcing will bee a panacea for their budget problems.  CCSD now has litigation on two fronts.

- Dru Stevenson


  1. Someone drafted a maintenance contract for this school in such vague language that the counterparty could raise a serious doubt over whether it had duties to clean things, or only duties to give advice about how to clean things? I was hoping the court would quote the applicable language, which must have been a doozy.

  2. Good contract experts are really expensive, so government entities rarely have them on staff - so they are often a little goofy about the contract terms they permit when they outsource some service...

  3. Oh, now, that may be going a bit far. Expensive contract lawyers may be necessary to dive into complex, specialized high-finance contracts, but any reasonably competent law school graduate ought to be able to write up a contract so that the basic physical duties are clear. If a contract is ambiguous about whether a party is to clean a bathroom or just look over someone else's shoulder and write reports while he cleans them, it was written by a complete dolt who oughtn't even to be hanging out a shingle in a strip shopping-center. A first-year law student ought to be able to handle that, or flunk out.

  4. You should see some of the final exam essays from law students that I have to read... :-)

    I agree that this seems like a rather obvious contractual term. My point is that the advocates of privatization often point to the utter incompetence of government workers as the justification for outsourcing, ignoring the fact that the process of drafting and monitoring a contract will lie with those same people...

    I appreciate your comments, it is nice to have a thoughtful discussion going here about these things, and you raise good points.

  5. It's true that when government workers try to deal with private workers on a level contractual field, they tend to get skunked. They do fine when they can give orders, and not so well when they have to compete on a level playing field. All the more reason why I'd remove many functions from government altogether, rather than have the government control them while contracting them out to private companies. Sometimes there are excellent reasons to keep the government in control of a function, but when the picture gets fuzzy I lean toward eliminating the government role whenever possible.