Saving Money or Jeopardizing Jobs?

One issue these days has been setting most Harvard employees decidely on edge.

The issue is "contracting out."

For top Harvard administrators, contracting out is an increasingly attractive alternative to in-house labor which may increase efficiency and lower costs.

For local union leaders, contracting out is Harvard's weapon for squeezing workers and threatening their livelihoods.

Contracting out is the process by which Harvard replaces its employees in a graduate school dining hall with a private catering service; or exchanges its guards for members of a for-profit security service; or displaces maintenance workers with competitive non-University firms--and often pays lower wages to the outside help.

The most recent, and successful example of this practice occurred five months ago when Harvard terminated many painters, carpenters, plumbers and other workers under an agreement with their unions and with ISS Energy Services Co., which hired many of the former Harvard employees.

As a result of the process, the University can now accept competitive bids from many outside firms for maintenance work.

Edward W. Powers, associate general counsel and Harvard's chief labor negotiator, said that working with outside firms makes it easier to get jobs done.

"We've had great difficulty getting our trades people to cross [job classification] lines--if we send a carpenter to do a job, he won't pick up a paintbrush." Powers said, explaining that since most outside contracting companies are not unionized, no rules prevent them from working at several jobs.

But for the workers, the more relaxed regulations governing non-union labor can mean harder work and lower wages. Also, not all employees dismissed by the University find work in the "real world."

Some of the ex-Harvard workers initially accepted by ISS were later fired from the new positions because they did not meet company standards, ISS officials said.

Powers said that some of the workers ISS fired might have been allowed to continue at Harvard, but added this was just an example of the increased efficiency available under private contracting. He added that no personal contracts were violated.

Still, negotiations for and the execution of Harvard's contracting out to ISS did not prove as warlike as many had expected. Both sides cited similar reasons for the cooperation; much of the work involved was already contracted for by outside firms and ISS is a self-unionized company, so the move could not be interpreted as an outright attempt to circumvent local labor power.

"Historically, outside subcontractors had done work at Harvard in addition to in-house maintenance," explained John Simmons, business agent for the local painters' union, adding that this holds true especially for the painters, almost all of whom Harvard needs only during the summers.

"Harvard manned for the valleys in structural trades [during the academic year], not for the peaks during the summer," Powers said.

The most recent instance of contracting out, however, was less successful. Over the past several years. Harvard has gradually given all but two of its graduate dining halls to catering companies. But in January, when Harvard tried to contract out the School of Public Health (SPH) food services, union pressure forced the University to back down, said Dominic Bozzotto, who heads the food workers' union here. International Hotel, Restaurant and Institutional Employees and Bartenders' Union Local 26.

Bozzotto is probably the most outspoken opponent of contracting out of all local union leaders, and has been the most successful in resisting what some see as an all consuming trend. The food service workers have the only contract which declares that no workers can be laid off or suffer a reduction of hours as a result of Harvard's contracting out.

Bozzotto described the clause as a major victory, adding "contracting out weakens the bargaining unit, it decimated Buildings and Grounds and the maintenance union."

"It's a terrible policy," agreed Edward Childes, Adams House cook and co-chief shop steward for the union. "It's a way to undermine the unions," he added.

Bozzotto said the contracting out clause is one of the victories won during the day-long food workers strike last year. As a result, Harvard's conversion to catering is only possible through attrition Annual turnover at the graduate halls averages about 50 percent, according to Powers, while the College food service turnover is between 10 and 20 percent.

Powers said there is no serious talk of contracting out any of the undergraduate halls because the low turnover would make the attrition process far too costly.

Also, College food services employees tend to be "better workers" and lend something to the house system, Powers added.

Only dining halls at the College, SPH and the Business School are still Harvard-run.

Robert H. Scott, vice-president for administration, attributed the subcontracting of most of the graduate dining halls to the "expansion over the past 10 years of the number of good, high-quality catering firms."

Contracting out is a very important issue, because we have to be careful to do the right thing, the most economical and the most fair," said Scott.

"I guess there's a question in my mind whether a nonprofit institution can ever run these programs efficiently," Powers said.

"We're an educational and research institute. We're not a food services institute." Powers added "Universities should, in the future, more closely examine what they can do well and what others can do for them."

Even when the University does not contract out services, it can improve its efficiency by renegotiating with workers while the threat hangs overhead.

In the mid-70s, the University was concerned that the cost of in-house custodial work was much higher than the cost of outside contractors. Powers said, adding that Harvard determined that it was paying custodial workers several dollars more per hour than most other firms.

"We negotiated with the union for a part-time classification (for its workers), "Powers said, explaining since part-time employees get fewer benefits than full-time employees, the University saved money. "As a result, there was no increase in custodial contracting, we gave them job security and we had a substantial decrease in costs," Powers said.

Powers also said that no custodial or food services employees have ever been laid off as a result of contracting out.

Scott said Harvard conducts studies into possible areas for contracting out and actively solicits advice from the community here and from outside specialists. He theorized the search for alternatives to in-house employment may have intensified after universities were hit by inflation in the sixties.

Scott said he considers contracting out as a good alternative for saving Harvard money, but added that many factors must be taken into consideration before a decision can be reached. He also said that the College has, in some cases, moved from contracting out to in-house work in the interests of efficiency.

Currently, the College does most of its own copying, payrolling and similar work, Scott said.

"It's the kind of thing where we try to minimize costs and make changes and still be sensitive," Scott said.

Besides the variations in union strengths, one reason Harvard only contracts out certain types of work is the variation of the importance of labor costs, Power said. "In custodial work, the cost is basically all labor, but in food services, labor costs make up about 40 percent of the total." Consequently, custodial employees are more susceptible to competitive prices from outside firms.

But if the University does decide to contract out, compensation agreements reached with workers in an area to be subcontracted depend on the specific situations, negotiators said. In the case of ISS, workers were given the choice between a new job with ISS, which in turn was promised a minimum number of contracts, or a large severance award.

Powers attributed some but not all of Harvard's labor inefficiencies to Unions.

"If you look at the steel and auto industries in the U.S. which are union and at their foreign, non-union competition, you'll see there's a major difference [in efficiency]," he said. But Powers added that the University is trying to be as cost-effective as possible. "I don't think it's just the unions--in the structural trades and the custodial services, many contractors are unionized," he said.

Powers added that University unions generally object more when the contracts will be going to non-union companies, but added that the work goes to both union and non-union firms.

While not-all of Harvard's local unions have fought contracting out as hard and as successfully as the food workers, many employees appear to be frightened. Some are trying to convince Harvard not to go out of the business of their particular trade by improving efficiency and demonstrating that they can do the job as well as outsiders could. One union leader who asked not to be identified said his workers were trying to improve. "We're trying to prove it would be worth more for Harvard not to subcontract. We're doing it by example," he said.

Childes said the University's policy "busted up" the trade unions. "It's a direct threat to us," he said. "We have enough staff-that we can serve anything at Harvard and don't need outside help."

"It makes you feel insecure in your job," Childes said. "Unemployment's up and we know it, so they use [contracting] to threaten us."

Contractors, on the other hand, say they are happy with the changes.

Edward W. Owens Jr., ISS project manager said his company recently hired 54 new workers. Owens also expressed confidence in what lies ahead for subcontractors. "It's a trend all right," he said. "I think more institutions are doing it--academic institutions, health care institutions, the government."

"Universities are in the business of trying to educate people, but for other things, they turn to experts like us," Owens said.

"We hope to grow by our performance," said Owens.

As for the workers who left Harvard for the outside, reports are mixed. Those who got fired are understandably bitter, and most of this group blame Harvard for valuing money over principle. Some go so far as to suggest the University could have improved efficiency without contracting to ISS, but did not want to face the responsibility and found it easier to delegate the termination employees. No one, neither University administrators nor union rank and file, denies and Scott's official dual emphasis on efficiency and fairness is skewed toward monetary concerns.

Owens said he found the workers were glad to be employed in the profit sector. "There was a very difficult transition, but after five months we feel morale is high," he said. "Going from an institution like Harvard to a large company with a profit motive is hard, so I'm pleased," Owens added.

What is the future of contracting out? One conclusion many draw is that Harvard has almost run out of important areas in which to delegate responsibility to the outside world. But another, equally reasonable conclusion is that Harvard will go on cutting off pieces of itself for some time to come, as it tends to save the University money.

One thing, however, appears certain. As long as Harvard looks for new ways and new places to subcontract, employees will continue to worry and labor relations will continue to worsen.

But Bozzotto added that at least in his case. "Harvard thought they were in a position to hold bargaining power over us, but they were wrong."