The Department of Public Health has taken privatization to a bizarre new level
› firstname.lastname@example.org 
Low-income tenants cheered late last year when the San Francisco Department of Public Health ended its housing contract with the John Stewart Co. But no one expected the alternative would be a secret $5 million deal between DPH officials and a preferred vendor.
In fact, the DPH has opened a new chapter in privatization by creating a dubiously accountable, quasi-independent nonprofit while paying someone else to operate it with a sole-source contract.
The health department leases several single-room-occupancy hotels in San Francisco that house mental health and substance-abuse patients through a program called Direct Access to Housing, part of a laudable nationwide trend toward deinstitutionalizing such medical clients and changing how the formerly homeless receive services.
The Camelot on Turk Street and Le Nain on Eddy Street were among those managed by John Stewart until last autumn. Mercy Housing oversaw two more. But there were problems; tenants complained about the Stewart company's management, and political organizers last year charged that desk clerks at some of the buildings prevented them from registering tenants to vote.
"If you're part of a larger company that just sees themselves as a more generic property-management company," said Marc Trotz, director of the health department's housing office, "there isn't necessarily the training and skills development that needs to be there to handle the complexities that come up on a daily basis with the population we're dealing with."
So the health department's answer was to broker an exclusive $5 million contract with a nationwide nonprofit based in San Francisco known as the Tides Center. Tides doesn't do any of the heartwarming outreach we tend to associate with nonprofits. Instead, the outfit handles the boring administrative functions like payroll and human resources for community projects created by others.
The project in this case is Trotz's brainchild Delivering Innovation in Supportive Housing, which essentially exists as a nonprofit only on paper. There's no board of directors. There are no federal tax forms outlining expenses and revenue. And Tides doesn't itemize projects like DISH in its annual financial statements. So there's no easy way for the public to track the money that goes into the project.
Yet DISH has so far never been forced to compete for property-management contracts like any other nonprofit wanting to do business with the city. That means the DPH gets the best of both worlds, paying someone in the private sector to manage its books and not having to subject its pet project to the competitive atmosphere of contract bidding.
Further, since Tides is technically the employer of record for DISH's 60 or so employees, they exist in an ethereal world where they don't fall under the city's salary and benefits structure, but unions can't reach them unless they're willing to organize all 200 projects managed by Tides nationally.
Needless to say, none of this is sitting well with the nonprofits and unions that insist they weren't informed of the plan until it was off and running.
"I feel like at union nonprofits, the turnover's much lower, the training's higher, and if a manager is abusing a tenant, for instance, a union worker can make a complaint to a city agency, write them up, do something without being afraid for their jobs," said Sarah Sherburn-Zimmer, a former organizer for the Tenderloin Housing Clinic. "And we just give better care."
The THC, whose workers are represented by Service Employees International Union Local 1021, says it was never formally invited to bid on DISH, despite the fact that it does extensive work with the city and manages more than 1,500 units of low-income housing.
"All they had to do to find out was send a letter or call us.... The fact that they made the effort to set up their own entity kind of shows that's what they wanted to do," THC director Randy Shaw said.
The Tides contract so annoyed Board of Supervisors president Aaron Peskin that he drafted a resolution pointing out that Mayor Gavin Newsom signed an executive order in 2004 calling for maximum competition in city contracts.
"This Board of Supervisors has been on record for years in wanting to make sure contracts are competitively and fairly bid," Peskin told the Guardian. "This whole thing seems rather bizarre. The government was in essence contracting with itself."
The health department's Trotz dismisses this criticism, saying sole-source contracts were designed in the first place to allow for agreements like the Tides deal, which he calls a pilot project. Next time, he promises, the department will open the contract to bids. Trotz added that Tides is responsible if a DISH employee screws up, and it faces an annual monitoring probe by DPH staffers, just like any other contractor.
"I know now that THC and the union seem to be upset by this," Trotz said. "What we're saying is we've heard that and we are doing what we always intended to do, which is run a two-year pilot and put a [request for proposals] out on the street and ready for people to apply to prior to the start of the next fiscal year."
Of course, no one's suggesting Tides and DISH will necessarily do a poor job handling supportive housing. Shaw said lefties were the first to argue nearly three decades ago that nonprofits could address public health much more sensitively than did Dianne Feinstein's mayoral administration of the 1980s. Last year the health department did $174 million worth of business with nonprofits. While unions have been slow to organize nonprofits, the trend is growing, but Tides and DISH seem structured to stiff-arm them when covert, sole-source contracts haven't done that already.
"This obviously was a secret decision," Shaw said. "[The DPH] never consulted with anybody. They just did it. I don't want to comment on the health department beyond what I've said. But this experience has left people very cynical about dealing with the health department [and] the way they handled the whole thing."