On the private sector
| By TimFernholz - Feb 4th, 2007 at 11:16 am EST |
| Also listed in: Campus Progress Blog |
The best explanation for the failure of government contracts.
I'm rarely in agreement with Matt Yglesias (sometimes I write articles attacking him) but he has a post up today that is the most elegant explanation I've heard for why outsourcing government work to private contractors is essentially the same, efficiency-wise, as having the government do the job itself. The money quote?
The idea is simply that an inefficiently run private enterprise (and there are many) would simply go out of business. An inefficiently run government office, by contrast, goes out of business when it loses political support and sees its budget grow as long as it maintains political support. Thus, you see public sector dollars flowing to whatever there's a strong political constituency for, whereas private sector dollars flow to wherever well-managed firms are meeting demand. ... But you don't actually get that efficiency [with contracting]. It's still a government program. Funding is still being determined by political support. The cash doesn't go to companies that can do a really good job, it just goes to companies that have political clout -- i.e. ones that recycle a share of their profits into campaign contributions. It's essentially the worst of both worlds, since you get the inherent problems of the public sector plus the need for owners to be taking a slice off the top in profit margins.
This is why, incidentally, all Rumsfeld's tooth-to-tail, transformative defense doctrine crap was just that. And why conservative arguments against direct federal funding for student loans fall flat. Capitalism and the free market do something pretty wonderful things, but they aren't a replacement for good-old fashioned activist government.
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While I can see how it'd often end up precisely as Yglesias describes in a lot of cases, it doesn't necessarily have to hold true for any particular case.
There can also be circumstances where a contractor has capabilities that the government simply doesn't, or at least can't develop cost-effectively.
Also, let's not forget that a huge range of government operations are contracted out, including policy work -- usually to shops around DC like Booz Allen, DFI, etcetera.
From what I've seen, DFI does a hell of a job, certainly better than the FedGov would have done on its own.
During a brief pause between O'Reilly's spittle-laden bitch sessions over Franken proving him a liar (also worth watching), he started talking about why he likes lower taxes and got off on a tangent about the lack of oversight from the White House on government spending, specifically within the Pentagon, and called that lack of accountability "the fallacy of the Bush administration." (around 1:15:00 into the show). Two people as polarized as Ivins on the left and O'Reilly on the right both recognized the abject carelessness being displayed by the Pentagon contracting programs O'Reilly used as an example.
But then O'Reilly immediately proclaimed the solution to government waste was to run it
which promted one of those classic Molly Ivins retorts:
I used to have that whole episode on tape (originally because of the great Franken-O'Reilly slugfest). The other day I wanted to rewatch it to see Molly's performance and was distressed to find that I lent it to someone months ago and it never got returned, so I watched it online. It's really funny that I just saw this same discussion, only from late May, 2003.
I'm with you on defense contractors - but I still hold that there's a role for contractors in general to fill, especially in the policy area. DFI and others are the glue holding the highly disfunctional DHS house of cards together at the moment; a nontrivial portion of DHS is staffed by bureaucrats who were sent there because they were the unwanted refuse of whatever agency they were working at prior to DHS's creation. By contrast, the people employed by policy subcontractors like Booz Allen tend to be "best and brightest" types (Though from what I hear, the work environment at Booz Allen is a pressure-cooker that sometimes rivals I-banking).
Case in point: when the text of the "Implementing the 9/11 Recommendations Act" came out on a Friday afternoon a few days back, it was set to be voted on the very next Tuesday, and would go into effect immediately -- changing the way all sorts of departments and sub-departments within DHS do business.
My friend, who works at a contractor employed by DHS, headed into work without being asked and put in eight hours on a Saturday, to have a full summary of the legislation's effects on his client ready to hand over first thing Monday morning.
Why'd he do that? In part because he's passionate about his work, in part because he hopes that sort of dedication will get him promoted -- the forces of the private sector are working their magic here.
I have a hard time imagining your average DHS bureaucrat doing the same with his Saturday.
As to why the contracted firm doesn't get lazy and start slacking? There are enough policy shops around DC that people really do worry about losing clients.
Sometimes, contracting out the work really is>/i> more efficient. It's good to point out the places where it isn't, but don't throw the baby out with the bathwater.