Accountable Strategies blog

A blog about accountability issues in the public, private, and nonprofit sectors

Will government become part of the private sector?

Posted by David Kassel on August 28, 2008

Much of of the current debate over whether government should operate more like private business fails to take into account the growing reality that government is increasingly merging with private business.

Allan Burman at George Mason University maintains that 80 to 85 percent of the federal Energy Department’s workload is done by contract.  As Burman puts it:

Whether it’s cleaning up a nuclear waste site in Washington state or designing a new multi-million dollar scientific device at Oak Ridge, Tennessee, the prime responsibility for getting the job done rests with contractors.

A Government Accountability Office forum report in 2006 noted that the acquisition of goods and services from private contractors consumed over one-fourth of discretionary spending government-wide.  The amount of that federal acquisition spending increased from $235 billion in 2001 to $388 billion in 2005–a 65 percent hike. 

Writer Naomi Klein describes “contract cities” in the U.S., such as Sandy Springs, GA, which has 100,000 residents, and is run by CH2M Hill, an engineering and construction company that received large oversight contracts in Iraq.  Klein maintains that when Sandy Springs was incorporated in 2005, “only four people worked directly for the municipality–everyone else was a contractor.”

Authors such as Elaine Kamark, a former Clinton administration official,  hail “the end of government as we know it” and the New Public Management’s (NPM) call since the early 1990s for the transfer of once governmental functions to private parties and the market.  Others, such as the late Larry Terry, have issued warnings about the dangers of the emergence of the “hollow state.”

Larry Terry, drawing on the work of Milward, Provan, and Else, describes the “hollow state” as a “transfer of power and decentralization of services from the central governments to subnational governments and by extension to third parties.”  He describes the NPM as having introduced “liberation management,” which has called for increased deregulation, and “market-driven management,”  which has called for increased privatization.  Says Terry:

The ideas embodied in both liberaton management and market-driven management, if swallowed whole, may not serve democracy well…There is a great deal at stake, namely the stability of U.S. constitutional democracy.

There’s nothing new about contracting out government services.  Federal policy regarding outsourcing was formalized in 1966 in the then Bureau of the Budget’s Circular A-76.  Among other things, the Circular requires government to classify its work as either “inherently governmental,” which means it cannot be contracted out or as “commercial,” which means it can.

In the July 2008 issue of PA Times (the monthly newspaper of the American Society for Public Administration), Larkin Dudley and Michael DeLor maintain that the definition of “inherently governmental” remains a difficult question that has not been clarified much since 1966, either in revisions to the circular or the courts.

They note that the Circular states that tasks are inherently governmental if they bind the United States to take some action; determine economic, political, or territorial property by military or diplomatic action, judicial proceedings, or contract management, significantly affect the life, liberty, or property of private persons; or exert ultimate control over the disposition of United States property.

Dudley and DeLor maintain there is a need to think through what activities may significantly affect the life, liberty, or property of private persons.  They contend that government should not outsource when doing so would compromise the mission of an agency, when people are incarcerated, when armed law enforcement is done in public places, for military activities in active war zones, and when government requires taking away freedom or rights from citizens.

It’s not clear to me whether Dudley and DeLor are arguing against the private operation of prisons or even the privatizaton of prison-based services—something that has been done widely in the United States.  Also, do they oppose all use of security contractors in places like Iraq?

Federal regulations also have a lot to say out government outsourcing and when it is or is not appropriate.  Federal Acquisition Regulation subpart 7.5 states that functions considered to be “inherently governmental” include, among others, the command of military forces, the conduct of foreign relations, determining agency policy, determining federal program priorities for budget requests, determining what supplies or services are to be acquired by government, approving contractual documents defining requirements, and ordering changes in contract performance or quantities.

As Dudley and LeLor suggest, it is time for more comprehensive guidelines about the meaning of inherently governmental.  This discussion needs to take place before government slides entirely into the private sector.

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One Response to “Will government become part of the private sector?”

  1. SharkGirl said

    I’m curious as to why this is your last post in this blog. Was this blog abandoned?

    I’m involved in a lawsuit against the government because they put a contractor in the place of the government, to act for the government. This contractor was doing the duties that only a contracting officer was authorized to do.

    I believe corporations are becoming the government.

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