The Embarrassing Story Behind Michigan’s Aramark Contract

How two professors produced a study favorable to privatization — paid for by a private prison vendor, and one Michigan lawmaker convinced the state to sign a disastrous contract.

Fool me once, shame on you, fool me twice, call me Rick Snyder…

Yep, Governor “Relentless Positive Action” has chosen to take no meaningful action in the face of what’s becoming one of the worst policy decisions under his watch — the privatization of Michigan’s prison food system through the scandal-plagued vendor, Aramark.

Instead of dumping the dangerously incompetent company, Snyder opted to deliver yet another flaccid slap on the wrist (the second one this year) with a $200,000 fine, and a tsk-tsk in the media. Claiming the maggots and food poisoning were not the fault of Aramark, because they surely ordered the underpriced food-stuffs with no inkling that the quality might be compromised — the governor swept all other offenses under the rug. After all, in an election year, one mustn’t admit failure.

Shooting the messenger, he further agreed to replace the current state monitors whom he believes are biased against the food vendor because they are sympathetic with the 370 union workers who lost their jobs due to privatization.

Love is in the Air

Little was said of the other breaches of contract, including food shortages, understaffing, unacceptable food substitutions, smuggled contraband, and of course the Aramark crème de la crème — quickie humpity-bumps in the kitchen with inmates.

The cook

Aramark has a rap sheet a mile long, so how did Michigan policymakers fall for this privatization scheme gone wrong?

One Tea Party Lawmaker

It all started with one Tea Party lawmaker who found himself in a place of authority way above his paygrade, coupled with a widely shared “study” funded by a private prison vendor, now under investigation.

When former television weatherman and current state legislator Rep. Greg MacMaster (R-105) was recently stomped in his primary bid for the 37th state senate seat, Michigan should have collectively heaved a great sigh of relief, but his defeat came too late for the state’s Department of Corrections.

In his brief stint as a lawmaker, acting as chair of the House Department of Corrections subcommittee, MacMaster conceived of, and spear-headed the disastrous Aramark prison food contract — a policy boondoggle that conceivably could end-up costing Michigan more than the promised savings. He originally sold the idea as a means to squeeze-out dollars for roads funding.

Seventeen months ago, MacMaster suggested to the Appropriations Committee that finding money for Michigan’s crumbling roads was as simple as privatizing prison food services. By his estimate, more than $100 million could be found through outsourcing to the lowest bidder.

In fact, last year he and his fellow lawmakers were so set on the idea of private bidding that they introduced a bill to prohibit the public sector from competing for bids wherever there was a private sector entity that could perform the task — a legislative initiative that is thankfully doomed to die a quiet death in committee.

Another piece of legislative genius sponsored by the lawmaker, at about the same time, was to revise the request for proposal (RFP) process for privatizing state services, with the intent to completely privatize some prisons. It had a provision allowing private bidders to have access to the state’s actual costs for a service prior to the bidding process. MacMaster trumpeted his bill, voicing a concern for the private sector, and their ability to be a viable competitor:

“Some of the latest RFP’s that have been put out have given a clear indication they have no intent on anybody winning the bid because if any business did they could go bankrupt and that’s not fair to the people of Michigan and those that are paying their money to the state of Michigan in taxes, I want to make sure that the RFP process is fair and it is not fair.”

Fortunately, for the sake of Michigan taxpayers, his bill got a necessary re-write in the House Oversight Committee where they struck-down the stipulation for divulging actual costs. (Conservatives often tout private sector principles as something the public sector should aspire to — by that logic, any business that revealed its cost structure to vendors would be, well, stupid). With the revision, it subsequently passed in the House, and is currently stalled in the Senate Appropriations Committee.

In the meantime, by late Spring of 2013, the RFPs received at the Department of Corrections to privatize prison food services statewide all failed to meet the mandatory 5 percent savings required by the state. MacMaster demanded a second look at the bids, employing a new set of metrics that favored private vendors.

Not to be deterred, Aramark lobbyists lavished lawmakers and state officials with more than $600,000 over the years leading up to the privatization. Aramark proudly proclaimed in their 2014 second quarter report the success of their North American prison food and support services as “particularly notable as new business wins”.

Academia to the Rescue

The whole endeavor to privatize prison food service was buoyed through the sketchy research of two Temple University professors who kept themselves busy writing op-eds across the country espousing the savings to be had under privatization.

A June 7, 2013 op-ed, titled Data Shows Running Prisons for Profit is a Win-winpenned by these purportedly impartial experts was printed in the Detroit Free Press. They promoted the concept of “managed competition” through the bidding process as a panacea for budgetary woes:

In addition to the savings generated by the private facilities themselves, we also found that competition yields better performance for both private and public facilities. As more contractors compete, both groups work to provide lower cost and higher quality service.

Furthermore, the adoption of “managed competition” could foster even greater efficiency in managing state prisons. In this model, public workers and private contractors engage in a competitive process to provide public services. By doing so, both groups have an incentive to search for managerial and technological innovations and offer services at competitive pricing.

The professors went on to reassure that private vendors would provide the highest of quality in services and personnel:

Critics of contractor-operated prisons argue that they generate savings at the expense of quality. Our research, however, found no evidence of this. Private facilities generally met industry standards established by the independent American Correctional Association and, in several cases, private facilities offered more rehabilitation programming than their public counterparts. Michigan, a state that is a leader in reducing recidivism rates, knows well the importance of providing this type of quality programming.

Additionally, in terms of staff quality, we found that private correctional officers are generally paid comparable wages and receive substantially similar training to their public counterparts. Private contractors typically offer workers matching contributions up to 5% of their salaries for their 401(k) accounts, which is in line with other corporate entities.

So, who funded this study and its seemingly wizened advice?

The authors of the research, Temple University economists Simon Hakim and Erwin Blackstone, did not disclose their funding sources as they were submitting op-eds from coast-to-coast. In fact, they failed to include it in their research notes. Temple University is currently investigating the two for possible ethics violations. Cary Nelson, an expert on faculty conflict of interest issues, and the former president of the American Association of University Professors, observed the following:

“It’s quite disingenuous to say the funding source shouldn’t have gone on the working paper.”

The project was partially funded by Corrections Corporation of America — the largest private prison company in the country. When the truth came out after an investigation through the Philadelphia Inquirer, the professors turned to CCA for a statement of support. Spokesperson Steve Owen defended the research:

”It’s very telling that not one person has yet to say one thing critical about the validity of the research and the findings.” 

Not so fast. A researcher at the University of California-Berkley, Christopher Petrella, found their conclusions specious. The report showed suspiciously enormous savings under privatization, particularly for California.

Temple study findings

Those numbers didn’t sit well with Petrella, who told BillMoyers.com:

“Over the past year or so, many organizations have rightly underscored the conflict of interest inherent in the industry paying for a study that it then cites. But I wanted to take a closer look at the study’s actual content — what are its starting assumptions? What methodology did they use? And what I found was striking. If you actually dig into this study, you find that it fails to account for dramatic demographic differences between the adult population housed in public prisons and CCA’s privately operated facilities.”

Petrella discovered that the Temple professors failed to note that a California CCA contract cited in their research had a clause that excluded prisoners with illnesses, mental health issues and behavioral problems. Petrella found the cost of housing healthy, young prisoners is one-tenth that of caring for a sicker, older population. Petrella:

“It’s an exercise that inoculates the company from having to house these high-cost prisoners, which artificially deflates the cost [per prisoner] in CCA’s private prisons, and inflates the costs of those that remain in the public system, which can’t cherry-pick which prisoners it houses.”

In a similar scam, when Aramark sought the Michigan contract, they low-balled their bid, counting on an increasing number of no-shows in the food line due to the poorer food quality. At the time, Nick Ciarmitaro of Detroit’s AFSCME Council 25 said the following of the new metrics used to award the contract to Aramark:

“We’re now allowing an outside vendor to come in and pretend that they’re saving money because not every prisoner eats every meal. They cook the books to show a one-time savings.”

Detroit Free Press article supported Ciaramitaro’s claim:

A 2007 report by the Florida Department of Corrections Bureau of Internal Audit found that a large number of prisoners stopped showing up for meals after Aramark took over the contract, “creating a windfall for the vendor and reducing the value of the services provided without a proportionate decrease in … rates charged to the department.

The Michigan Office of the Auditor General must conduct a thorough audit of the Aramark contract, employing sound accounting practices that were absent in the RFP process. Unfortunately, the only Department of Corrections audits currently in progress are for prisoner education programs and for prisoner healthcare.

And, let’s send MacMaster back to reporting the weather, where he has a better chance of getting it right.

DSCN0444Amy Kerr Hardin

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One Response to The Embarrassing Story Behind Michigan’s Aramark Contract

  1. Pancho says:

    There’s nothing remotely independent about the American Correctional Association which may in fact receive a majority of its secret funding from the for-profit prison industry and subcontractors.

    Hakim and Blackstone have cooked the books on this “study,” as they’ve been doing for decades. They are notorious for “cherry picking,” which means that they ignore legitimate research that goes against their predetermined outcome, or they use other industry-funded, usually non-peer reviewed research to direct the conclusions they need to arrive at to satisfy their funders.

    There’s no reason to believe any of their claims that the for-profit industry has a similar record when compared to public prisons. In fact, if they had bothered to look at all they would have found that the externalized costs for the for-profits, caused by issues such as a hugely higher per-prisoner escape rate, an astronomically higher incidence of riots, thrusts the burdens for cleaning up their messes almost exclusively on the public sector. Hakim and Blackstone are deliberately comparing apples and oranges.

    When they make the claim that for-profit employees are similarly compensated to public correctional officers, they have arrived at that conclusion by ignoring reality. The for-profits, for instance, often pay barely above minimum wage and their turnover rate is prodigiously higher. Claims that the privateers pay “5%” into 401Ks ignore the fact that public employees usually have union contracts and retirement guarantees. Few for-profit employees, living paycheck to paycheck, can afford to contribute to these private pension plans. Those tiny minority that do participate, such as 10% of Florida GEO Group guards, only can use that match up to a low minimum.

    Temple had distanced itself from the “study” done by its profs, who have long put out similar recipes for disaster. I’d take anything they concluded with a very large grain of salt.

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