Private firm contracted to find $500 million in government savings

Alvarez and Marsal’s price tag for finding savings across state government on Gov. Bobby Jindal’s behalf computes to roughly $1 million a month.

The Jindal administration signed a three-year contract with the New York global management firm in early January. However, the firm is expected to complete its initial work in four months and receive $4.2 million in payment. Any work performed beyond April will require additional dollars.

The administration released the 26-page contract and attachment this week.

The Democratic Party of Louisiana was quick to criticize the Republican governor for entering into the contract amid the state’s financial constraints. Earlier this week, Jindal retorted, “I’m glad we can entertain the Democratic Party.”

The governor said Alvarez and Marsal has a proven track record of identifying savings. He said the firm pointed to how $20 million could be saved at New Orleans’ interim public hospital.

Jindal said Alvarez and Marsal will be paid upon performance.

Commissioner of Administration Kristy Nichols said Friday that Alvarez and Marsal is tasked with finding $500 million in savings for state government during a span of four months. The firm will examine health care, transportation, public safety and debt collection, among other areas.

The targeted savings are not listed in the contract. Nichols said the savings benchmark was included in the original job description.

Alvarez and Marsal will receive $4.2 million for four months’ work. However, the contract extends to 2016, allowing the firm to request more dollars for work performed past the initial four-month period.

“What’s unique about it ... is we are taking in our sixth year the opportunity to invest in an exhaustive analysis. We’re not going to spend the latter days of this administration doing anything other than being aggressive,” she said.

Jindal leaves office in two years. The contract ends 12 months after his successor takes the oath of office. Jindal cannot seek a consecutive third term as governor.

Alvarez and Marsal assessed the state’s tax structure for the governor’s failed tax overhaul last year. The current contract calls for the firm to submit monthly reports on products delivered, problems encountered, a plan for resolving them and work to be accomplished.

The schedule entails 30 days for data analysis and review followed by 30-day increments for best practice and benchmarking; savings identification and presentation; and performance measurement and management. The work should be completed before the end of April.

The contract mentions that Alvarez and Marsal might, by chance, handle tax returns. The contract also calls for the firm to assess the skills, competencies, experience and job functions of existing state workers.

Nichols said the language about tax returns was included as a precaution because of federal guidelines. She said the firm will not look at every single staffing position across state government.

During the governor’s first term, the Legislature created the Commission on Streamlining Government to identify ways to save money. The commission estimated it produced more than $780 million in savings ideas through 238 recommendations.

State Rep. Brett Geymann said he does not understand why it is necessary to hire a New York firm when existing staff and legislators could find savings without spending taxpayer money.

“The good news is we are looking for savings and efficiences that will hopefully allow more funding for the important issues we need to address,” said Geymann, R-Lake Charles.

Nichols said Alvarez and Marsal will not waste time and money by exploring what the Commission on Streamlining Government already studied. She said the firm brings a different expertise and perspective.

“The contract will pay for itself,” Nichols said.