New outsourcing contract gives JLL a bonus if cost-cutting exceeds expectations

Jones Lang LaSalle’s new contract potentially covers work now performed by about 3,000 state employees who are supposed to keep their positions though the pact gives the company a financial incentive to cut costs as much as possible, reports the Nashville Post.

The contract doesn’t specify an actual number the state will be paying JLL to pay other subcontractors for custodial, landscaping and maintenance work at state universities and agencies across Tennessee, as that will depend on how many campuses opt in or out of the contract. And how much JLL will get paid will also depend on the company meeting benchmark goals and customer satisfaction metrics.

However, the contract also includes a clause that awards JLL 10 percent of any cost savings above and beyond its projected baseline savings in the first year. After that, the percentage decreases each year by one percent, down to 1 percent of savings awards in year 10 of the contract. (The five-year contract has the option of being expanded another five years before the state would have to rebid it.)

…”That’s to reduce operational costs. If you look, it specifically prohibits a reduction in force, period. They cannot reduce the force,” said Mike Perry, the state’s chief procurement officer, during a press conference Thursday.

Yet the terms of the contract include multiple loopholes as to who can be considered “transition employees” and continue on with the subcontractors JLL will hire. Employees must have worked for the state for over 6 months at 30 hours a week or more and be considered to “provide services selected to be performed by the Contractor at a minimum of” 51 percent of their job duties. They must pass whatever background checks JLL deems necessary, along with a drug test. Currently the state does not require either for the majority of its positions.

…Even if employees do pass all the required checks, there’s still no guarantee they’ll be offered the same job, at the same campus. The contract only requires a position be offered in a 50 mile radius. Rehired employees are supposed to be given equitable compensation, but in JLL’s own bid proposal, it admits that an employee with a family of four would have their health insurance premiums double and the out-of-pocket max increase by $2,150. Meanwhile, paid time off will decrease. (A single employee’s health insurance costs will go down, the proposal says.) An employee would ostensibly be paid more to make up for the higher health insurance costs and lack of vacation time, but Perry admitted he had no idea how this would work in practice as far as taxes go.

Note: The post has a copy of the contract posted HERE.