Accountable Strategies blog

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

The mystery in the online procurement of nonprofit consultants

Posted by David Kassel on December 8, 2009

[Cross-posted from the CharityChannel website]

As a management consultant to nonprofit organizations, I’ve become interested in how managers of those organizations go about the process of searching online for members of my profession.

The more I’ve thought about it and looked into it, the more of a mystery it seems to be.

 On the one hand, many nonprofits need help with strategic planning and other managerial functions; and there are many management consultants out there willing to help them.  Yet,  nonprofits rarely seem to post online advertisements for management consultants– or consultants of any type, for that matter.   Moreover, there seem to be few, if any, websites available, in this country at least, on which nonprofits can post RFPs  for consultants, for instance.

 At the same time, there are many websites available on which nonprofits post advertisements for full-time jobs in their organizations.  That’s the mystery.  If nonprofits need and want management consultants, how do they go about selecting them?  Do they depend primarily on word of mouth or networking?  And, if so, why do nonprofits post online advertisements for full-time personnel? 

You may wonder why it would be a problem for nonprofits to use different methods to look for full-time staff than they do for consultants.  I think it is a problem because, as many observers have noted, nonprofits may well be wasting their money or worse when they hire consultants that are poorly suited to perform the work.  If nonprofits are more careful and systematic in the way they search for full-time staff than for consultants, the potential for problems seems obvious. 

Many experts in nonprofit management have weighed in on the need for care in the selection of consultants.  Todd Cohen writes on the Philanthropy Journal website, for instance, on the importance of “due diligence” in choosing consultants.  Cohen provides advice to nonprofits on the need to examine the past experience and expertise of consultants, on how to interview consultants, and on how to draft contracts for them. 

 Other experts, such as Hildy Gottlieb at The Community-Driven Institute, have taken a critical look at  whether RFPs are helpful in the selection process  and how to develop alternatives to RFPs.  But there has been much less emphasis on how to find consultants in the first place.  If RFPs are not appropriate, for instance, how do you find the consultants to participate in the alternative selection process. 

Cohen writes that nonprofits looking for consultants can go to websites that list consultants or they can check with organizations such as the Association of Fundraising Professionals  to identify consultants with expertise in their fields of interest.  But those organizations generally don’t post specific consulting opportunities.  Thus, while nonprofits can often locate consultants through those sites, they cannot, or don’t, generally post specific consulting opportunities on them. 

In a Listserv discussion I started recently on CharityChannel, Jane Garthson commented that in Canada, nonprofit websites such as Charity Village (at http://www.charityvillage.com/cv/main.asp) and the Association of Cultural Executives (ACE) (at http://www.acecontact.org/) do post RFPs for management consultants. 

I went on the Charity Village  and the ACE sites, which do, indeed, have RFP postings on them.  However, the day I checked, there were not many such postings on either one.  There were only two RFPs posted on the Charity Village site on October 30, when I last checked.  There was only one current RFP posted that day on the ACE site.  That site did have a series of tips for writing an RFP.

 In Ireland, the public procurement site for central and local governments at www.etenders.gov, often has RFPs of interest to nonprofit management consultants, according to John Everett of Smith Everett & Associates in Dublin.  Everett also mentioned a link dedicated to the community and voluntary sector in Ireland — www.activelink.ie.  

But in the U.S., government and private-sector websites do not generally list nonprofit consulting or job opportunities.  At the federal level for instance, Federal Business Opportunities at www.fbo.gov,  is the government’s point of entry for federal government procurement opportunities over $25,000.  There are no nonprofit opportunities posted there. 

A privately run RFP site that caters to both public and private-sector organizations is The Request for Proposals Database at http://www.rfpdb.com/.   This site has a section for RFPs posted by government agencies and a separate section for RFPs for business services.  But that site also does not appear to have any solicitations for nonprofit consulting services.  

As mentioned, there are a myriad of websites that list full-time positions at nonprofit organizations.  Sites such as  www.opportunityknocks.org , www.idealist.org, the Philanthropy Journal (at http://www.philanthropyjournal.org/), and CharityChannel list jobs available at nonprofits around the country.  You can search for contract positions as well on those websites.  But when I did a search on Opportunity Knocks on October 15  for contract positions throughout the U.S., I came up with only five results, and none of them were for management or strategic planning contract services.  One was to undertake a database migration project, another for accouting services, a third to implement a technology training course, another to oversee a preschool pilot program, and the fifth was to manage corporate giving and sponsorship programs for a nonprofit. 

CharityChannel, similarly lists few contract opportunities among its posted nonprofit-sector jobs.  Stephen Nill, founder and director of CharityChannel, acknowleged that “we have a gap.” 

So, what is the reason for that gap?  Why the mystery?  I decided to ask some nonprofits directly how they go about searching for both consultants and full-time staff.  I randomly selected 20 nonprofits in Massachusetts out of a listing of more than 4,000 organizations on Idealist.org.  I only got two responses from my admittedly small sample. 

One of the two that responded– the Massachusetts Land Trust Coalition — advertises infrequently for consultants; and when they do so, they advertise in their own e-newsletter or on their own website.   On the other hand, that same organization places ads on a wide variety of environmental and other websites for full-time staff positions.  I followed up, asking the reason for the difference, but I didn’t get a response from them.

 The other respondant to my survey reported that it never uses consultants. 

I’ll conclude with three recommendations: 

1.  Nonprofits should look for management and other consultants in the same systematic way that they look for full-time staff.  In other words, they should post advertisements for those consultants on the same websites that they use to seek full-time staff. 

2. Websites that post full-time, nonprofit job opportunities should also actively seek postings for consultants. 

3.  Those websites referred to in Recommendation 2 above should also post RFPs or alternative descriptions of consultant services needed by nonprofit organizations. 

My hope is that implementing these recommendations will help standardize the process of selecting both full-time staff and consultants in nonprofit work and thereby improve the quality of the work that gets done.  That may take some of the mystery out of procuring consultants in the nonprofit arena.

Posted in Nonprofit, Public | Tagged: | 1 Comment »

The outcome of our public records saga

Posted by David Kassel on November 12, 2009

[Cross-posted from Blue Mass Group.  Disclosure:  Written on behalf of The Fernald League for the Retarded, Inc.

The Massachusetts Public Records Division in the office of Secretary of the Commonwealth Bill Galvin has denied our appeal seeking records on the administration’s plans to renovate the Wrentham Developmental Center.

Let me explain why we think this denial is both a very poor decision by Galvin’s office and an indication that the Patrick administration’s efforts to close the Fernald Developmental Center may well be in disarray.

The Fernald Center is the nation’s oldest state-run facility for persons with mental retardation.  I’ve been helping the Fernald League, a family-supported, nonprofit organization, in its battle to prevent the  administration from closing the Center, sending most of its residents to Wrentham, at least temporarily, and ultimately privatizing its services.   The League contends that the administration has not taken a number of costs, such as the Wrentham renovations, into account in concluding the state will save money in closing Fernald.

In a letter to me dated November 3, Public Records Supervisor Alan Cote said the Division of Capital Asset Management (DCAM) can withhold the Wrentham records because they relate to a “policy decision” that has still not been finalized.

NOT BEEN FINALIZED?  I thought the Patrick administration had finalized its policy of closing Fernald and transferring most of its residents to the Wrentham facility.  That, in fact, was what Nick D’Alusio, the director at Wrentham, thought as well, when I called him on November 6.

D’Alusio told me that his understanding was that DCAM and the Department of Developmental Services were both on track to renovate two buildings at Wrentham and have them ready to accept as many as 60 Fernald residents by May.  But he acknowleged that the project still hasn’t gone out to bid.  The design is complete, he said.  But the bids were supposed to be solicited in September.  The cost of the renovations is reportedly $1.6 million.

As I noted in a previous post, I had filed a request with DCAM on July 9, seeking the feasibility study and a documented cost estimate for the Wrentham renovations.  Under the state’s public building construction bidding statutes and policies, those feasibility documents should be completed and approved before the design is done.

But after first writing to tell me I should make an appointment to come in and review the records, Peter Wilson, DCAM deputy general counsel, wrote to me on August 21, denying my request.  Wilson’s denial letter cited an exemption to the Public Records law relating to those ongoing policy deliberations.

The exemption, however, says that it does not apply to “resonably completed factual studies or reports.”  The same day I received Wilson’s denial letter, I also received a letter from DDS Commissioner Elin Howe, stating that bidding on the Wrentham project was scheduled for September, with a contract award scheduled for October.  If that was the case, any feasibility study on the project would have had to be completed by the time Wilson was denying my request.

The Public Records Divsion took more than two months to decide my appeal.  Yet, their attorney never talked to me about the case, never asked for Elin Howe’s letter, which I had offered to provide him, and never called D’Alusio or apparently anyone else to verify DCAM’s exemption claim.  The Public Records attorney also apparently never asked DCAM for a copy of the feasibility study for the renovations to decide for himself whether it was reasonably complete. 

In his letter to me on Tuesday, Public Records Supervisor Cote stated that Wilson had stated in an October 30 email to his office that there were “ongoing discussions…as to whether ‘the building [slated for renovations at Wrentham] can be used’ for the contemplated purpose.”

“That’s totally new to me,” D’Alusio said, when I read him the passage above from Cote’s letter.  “I have no information that there are still discussions over the use of the buildings.”

So, here we are.  It’s already November, with seven months to go until DDS’s announced June deadline of closing Fernald, and six months to go until its announced deadline for having Wrentham ready to receive some 60 Fernald residents.  A design for the renovations is complete; yet, DDS and DCAM have apparently not even decided that the buildings in question at Wrentham can even be used for “the contemplated purpose.”

Meanwhile, DDS is laying off staff at Fernald and letting conditions deteriorate there — a situation which is putting pressure on remaining family members and guardians of the residents to get them out quickly.  No wonder those folks aren’t getting much sleep at night these days.

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Why didn’t we learn from the last swine flu debacle?

Posted by David Kassel on October 28, 2009

The Obama administration may be facing a credibility problem due to its apparent inability to anticipate the current shortage of vaccine to inoculate millions of Americans against the swine flu. 

As the Washington Post noted,  the Obama administration officials had projected in July that companies would make 80 million to 120 million doses of the vaccine by this month. They outlined an aggressive response to the current flu pandemic and promised to inoculate every American.

But only about 16.5 million doses have become available so far, putting the administration in the uncomfortable political position of appearing unprepared for what President Obama declared last week was a national emergency.

The Associated Press reported that federal Health and Human Services Secretary Kathleen Sebelius was blaming the manufacturers, who provided “overly rosy” numbers on the amount of vaccine that would be available.  It seems the Centers for Disease Control, however, did not anticipate the slower-than-expected growth of the virus in eggs in the manufacturing process for the vaccine.

Why are these things such a surprise?  Why didn’t the administration assume that the production might be slower than initially projected?

In Thinking in Time, their book on presidential decision making, historians Richard Neustadt and Ernest May analyzed the Ford administration’s mistakes in the previous swine flu fiasco of 1976.   It makes for interesting reading today.  After I re-read their account of the fiasco, which is one of several case studies sprinkled throughout the book, it seemed to me at least some of the Ford administration mistakes  may have been repeated this time around.

There were, to be sure, many differences between the situations then and today — the main difference being that in 1976, the flu refused to appear outside of 13 cases in a crowded Army camp.  Today, the flu is spreading rapidly, of course.  Compounding  the credibility problem resulting from the lack of the flu in 1976 was a severe neurological side effect that was statistically associated with the vaccine.  The mass immunization program was stopped.  So far, no side effects have shown up associated with the new vaccine.

But Neustadt and May contend that had a flu pandemic actually occurred in 1976, the supplies of the vaccine would have been inadequate to cover anywhere near all Americans, as Ford had promised.  Had that been the case, the Ford administration’s credibility problem could have been far worse than it was.  Sound familiar?  

In March 1976, David Sencer, the head of the then Center for Disease Control, had recommended that a new vaccine for the swine flu be developed, produced, tested, and distributed in the next three months, according to Neustadt and May.  His projection was that innoculation efforts would begin after Independence Day and that everyone would be reached by Thanksgiving.   President Ford agreed to the program after he received an endorsement from an ad hoc panel of experts.

Sencer and other Ford administration officials failed to ask many hard questions, Neustadt and May contended, including questions about tradeoffs between side effects and flu, distinguishing severity from spread, and stockpiling.

Neustadt and May maintained that a key reason why the Ford administration’s loss of credibility may have been far worse had swine flu erupted in this country or abroad had to do with the limitations at the time on the supply of the vaccine.  The Ford administration had managed to inoculate 40 million Americans — an amount apparently far higher than what has so far been accomplished today.  Yet, in what now sounds prescient, Neustadt and May wrote:

For down at the low level where shots actually were given, everything depended on the ingenuity and skill with which state plans had been prepared and local services enlisted…all those would have intersected wth supplies of vaccine insufficent to inoculate adults once and children twice if the demand ran high…

Unfortunately, that appears to be exactly the situation we are finding ourselves in today.

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The saga of a public records request

Posted by David Kassel on October 21, 2009

[Note: Cross-posted from Blue Mass Group.  Disclosure:  Written on behalf of The Fernald League for the Retarded, Inc.]

More than three months ago, I requested documents from the state of Massachusetts on the projected cost of renovating the state-run Wrentham Developmental Center to accomodate residents of the Fernald Center, which is slated to close in June. My request was made on July 9. 

The Fernald Center is the nation’s oldest state-run facility for persons with mental retardation.  I’ve been helping the Fernald League, a family-supported, nonprofit organization, in its battle to prevent the Patrick administration from closing the Center and privatizing its services.   The League contends that the administration has not taken a number of costs, such as the Wrentham renovations, into account in concluding the state will save money in closing Fernald.

From what I understand, there are only two documents involved in my records request: a feasibility study and a documented cost estimate for the renovations.  The state Division of Capital Asset Management (DCAM) was reportedly scheduled to award a contract to undertake the renovations this month.

At first, it looked as though I was going to get the records I’d requested.  Although it was long past the required 10-day response period, Peter Wilson, Deputy General Counsel at DCAM, wrote me on July 21, saying I should make an appointment to come in to review the records.  I contacted Wilson’s assistant, who told me she was attempting to track the records down.

Weeks went by, and I checked in periodically. Then, on August 21, I received a one-paragraph letter from Wilson, this time denying my request.  In his letter, Wilson stated that the requested records were exempt from disclosure because they “relate to policy positions being developed” by the state.  Wilson’s letter added:

The purpose of this exemption is to allow government offices to deliberate and form policy by engaging in free and frank exchange of options and ideas, which would be inhibited by public scrutiny.  [emphasis added]

Does the Massachusetts Public Records Law really have an exemption that talks about promoting the “free and frank exchange of options and ideas” and preventing that from being “inhibited by public scrutiny?” 

I didn’t think so.  Here’s the exemption in question.  It states only that exempt documents include “inter-agency or intra-agency memoranda or letters relating to policy positions being developed by the agency.”  The exemption says nothing about feasibility sudies or estimates of the cost of state construction or renovation projects.  It seemed to me that a  feasibility study and cost estimate for a specific construction project does not involve the development of policy.

Moreover, the law states that this exemption shall not apply to “reasonably completed factual studies or reports.”  In late August, I received a letter from Department of Developmental Services Commissioner Elin Howe, stating that bidding on the Wrentham project was scheduled for September, with a contract award scheduled for this month.  If that was the case, any feasibility study on the project would have had to be completed by the time Wilson was denying my request.

My appeal to the state Public Records Division has been pending since August 27.  This would seem to be an open-and-shut case.  Yet, it took me weeks to get through to the Public Records attorney who has been handling it.  Yesterday, he apologized for the delay.  But one has to wonder, what the hangup is here.  The attorney, by the way, has not requested Elin Howe’s letter to me.

I’m not optimistic about ever getting these records, given the findings of a CommonWealth magazine article last year about the routine flouting of the Public Records law by agencies throughout state government.

The Wrentham records are one of two public records requests that DCAM has denied the Fernald League.  I’ll write about the saga of our second request in a future post.

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Following the AIG money

Posted by David Kassel on October 8, 2009

U.S. taxpayers have pumped more than $180 billion in bailout assistance to the American International Group (AIG) because, as we all know, the company was too big to fail.

It’s not surprising that the GAO reached a similar conclusion  in a comprehensive report released last month on why the bailout occurred.  The GAO also looked at where the money actually went and whether or not it actually helped the company.  After slogging through the GAO report, I’ve come to the conclusion that the GAO has concluded that:

  • The company was indeed too big to fail.
  • The money was provided to AIG in the form of loans and equity investments, contingent on the company’s winding down its AIG Financial Products Corporation and divesting itself of other businesses. 
  • It’s too early to tell whether all of the bailout money will enable AIG to survive in the long term.

Not real comforting news to taxpayers.  But the report doesn’t really seem to take a position on a key criticism of the bailout, which was that the government shouldn’t have paid AIG to clean up the credit default swap mess.  Rather, it could have infused funds directly to the banks that bought the derivitives, letting them take haircuts.

Another question I’m now left with about AIG has to do with something that perhaps inadvertently stood out in the GAO report.   On pages 6 and 7 of the report, the company’s organizational chart is reproduced (it takes 2 pages to display the chart).   As the GAO notes, AIG comprises at least 223 companies and has operations in over 130 countries and jurisdictions worldwide.  In addition to its financial products division, the AIG organization includes the largest domestic life insurer and second largest domestic property and casualty insurance company in the U.S.

Couldn’t the Federal Reserve Bank of New York and the U.S. Treasury Department have ordered AIG to cut say 100 or 150 of those 223 divisions loose before pumping in all of that bailout money?

According to the organizational chart, AIG also owns the AIG Bulgaria Insurance Company, the American Fuji Fire and Marine Insurance Company, the New Hampshire Insurance Company, something called American General Finance Services of Alabama, the American General Consumer Discount Company,  and much much more.   AIG is a company that clearly spent years acquiring other companies all over the world until, yes, it finally achieved its goal — it became too big to fail.

Or did it?  Had the company begun shedding the AIG Bulgaria Insurance Company, the American General Consumer Discount Company and some of those other firms early on,  mightn’t it no longer have been too big to fail when the federal government began considering the bailouts? 

According to the GAO report, that divestment is only happening now.  The GAO stated that the Federal Reserve expects the disposition of assets to be the principal way by which AIG will repay the government loans and allow the Treasury to recoup equity investments.  The report added that AIG’s plan, according to its former chief executive officer, was to sell off about 65 percent of the company.  However, the current chief executive was reportedly re-evaluating that plan.

Meanwhile, until all of that debt is repaid and the equity interests repurchased or sold, U.S. taxpayers remain exposed to those credit and investment risks, according to the GAO.   The watchdog agency notes that “the sustainability of any positive trends of AIG’s operations and repayment efforts is not yet clear.” 
       
Compared to the scrutiny that Congress is now giving to efforts to finance the administration’s health care reform proposals, it seems the bailout of companies like AIG a few months back went through with few questions asked. 

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Tracking the stimulus money

Posted by David Kassel on September 24, 2009

In the name of transparency and accountability, a lot of people are putting a lot of effort into tracking the federal economic stimulus money now flowing into cities and states.

The question is how effective and valuable are the results of those tracking efforts?  Are the federal government and the states getting a real handle on the funding under the economic stimulus bill, also known as the American Recovery and Reinvestment Act of 2009?

In May, the Washington Post reported that the White House supported tracking site, Recovery.gov, was providing little useful information about where the money was going under the program.  Moreover, the reporting requirements on public agencies didn’t extend to the contractor level, according to The Post.   The site now lists contractors, but the results, as noted below, may not always be accurate.

On the other hand, Recovery.org, a privately operated site by Onvia, posts stimulus-related, government bid solicitations, which identify specific stimulus projects in individual states.  This appears to involve much more detailed information than that available on the government site.  To be fair, Onvia, as the Post pointed out, has spent more than a decade developing its search technology.  Recovery.gov is only been around for a few months.

The first quarterly reports from the states are due October 1, and will be posted on the government site.  Under the Recovery Act, states and localities must report quarterly on the use of the funds and provide estimates of the number of jobs created and retained.

I went onto both the federal and the private-sector websites and tried to see for myself what was going on.  I chose my home state of Massachusetts.

As of September 18, 60 stimulus contracts in Massachusetts were displayed on the government’s Recovery.gov website.   I couldn’t find a total for the value of all of those contracts.  In at least one case, something seemed to be wrong.   According to the information displayed on the site, the Columbia Construction Company of Reading, MA, had recieved a $57 million contract from the General Services Administration for a roof replacement of a Veterans Affairs Center in Philadelphia, PA.  The project location was listed as Andover, MA.  Why would a roof replacement of a federal building in Philadelphia be listed as a Massachusetts project and why would it cost that much?

I went to the private-sector, Recovery.org site.

As of September 20, Recovery.org listed 537 projects totalling $1.8 billion in Massachusetts.  There was no listing here of the Philadelphia roof replacement project under Andover, Massachusetts.  However, this site did list a $57 million project to modernize the IRS Service Center in Andover, MA.  The Columbia Construction Company was listed there as the winner of the contract.  That made more sense.  

Recovery.org also lists projects voted by viewers as the most and least worthwhile, and most expensive.  For instance, the most expensive project listed on September 20 was a $270 million project to build a tunnel and building in Alameda and Contra Costa counties in California.  The most unnecessary project was a tiny $7,000 project to purchase solar bus stop signage in Weirton, W. VA.    The second most unnecessary project was a $100 million task order contract to pre-selected contractors to support construction activities in the National Park Service in New Mexico, Oklahoma, and Texas.

Meanwhile, there are other problems in tracking the federal stimulus money that have nothing to do with these two websites.   One of them is that the Single Audit mechanism for state and local governments doesn’t work well in assessing the economic stimulus program, according to the Government Accountability Office.

The Single Audit Act requires state and local governments and nonprofit organizations receiving more than $500,000 in federal awards in a year to obtain an audit.   The GAO reported that Single Audit reporting deadline is too late to provide audit results in time for the audited entity to take action on deficiencies noted in Recovery Act programs.  The GAO recommended that Congress put more money into Single Audit activities.

Clearly, close and accurate tracking of this funding is needed, not only to satisfy the public that the money is being used for the right things, but to help stem the inevitable waste, fraud and abuse.  As of September 2, according to the GAO, the agency had received 80 allegations of fraud and other ethics issues related to stimulus funding that were considered credible enough to warrant further review. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

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On polls about government and health care

Posted by David Kassel on September 8, 2009

The trouble with basing political decisions on polls, as many elected officials and politicians do these days, is that most polls don’t seem to be very good at measuring people’s real opinions. 

The reason may be that those opinions are likely to be mixed–even among the same people on the same issues.

For instance, a New York Times  poll in July found “a nation torn by conflicting impulses and confusion”  about health care reform.  In the poll, 75 percent of the respondents said they were concerned health care costs would skyrocket if the government didn’t step in to provide a health care system for all Americans.  Yet the same poll also found that 77 percent were concerned costs would go up if government did create such as system.

How do you base political and policy decisions on results like that?

That same confusion and ambivalence appears to characterize American’s feelings about government in general.   PA Times, a monthly publication of the American Society for Public Administration,  reported that 79 percent of Americans say they would encourage young people to work for the federal government.  This finding came out of a George Washington University Battleground Poll, conducted in July.  

Yet, according to the same poll, only 21 percent of the respondents had a great deal or a lot of confidence in federal civilian employees.

But before getting too discouraged about government, big business, newspapers, and HMOs fared as badly or worse in a similar poll conducted by Gallup in June, according to PA Times.  In June, Gallup asked a similar question about confidence in employees of several professions.  Among the following institutions, the level of confidence held by respondants was:

Newspapers (25 percent), TV news (23 percent), banks (22 percent), organized labor (19 percent), HMOs (18 percent), Congress (17 percent), and big business (16 percent).  On the other end of the spectrum were the military (82 percent), small business (67 percent), the police (59 percent), and organized religion (52 percent).

The question Gallup asked was:  “Thinking about the civilian employees of the federal government and your view of them, would you say that you have a great deal of confidence, a lot of confidence, some confidence, or very little confidence in these employees?”   The George Washington University poll excluded the military, which tends to draw higher public confidence than other institutions.

This type of question and the responses to it illustrate some inherent weaknesses in polling.  People’s feelings and beliefs about these issues are clearly mixed.  They are based on presumptions that may not always be examined or questioned.  On the one hand, the George Washington University poll shows that people have little confidence in the federal workforce.  Yet, they endorse it as a profession for young people.

Similarly, polls, such as the Gallup poll, show people hold Congress in the lowest esteem among practially all institutions.  Yet, late last month, we saw an  outpouring of public emotion at the passing of Senator Ted Kennedy,  albeit a famous and unusually productive member of Congress.

Like statistics, polls can be made to say just about whatever you want them to.  We should pay far less attention to them than we do.

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Dysfunctional oversight in Iraq and Afghanistan

Posted by David Kassel on August 20, 2009

The two wars we’re fighting in Iraq and Afghanistan are causing enough of a drain on our economy as it is.  We shouldn’t be making things worse by permitting billions of dollars to be lost due to waste and fraud over there.

Since 2001, according to the Commission on Wartime Contracting, a panel appointed by Congress, some $80 billion has been appropriated by Congress for reconstruction efforts in Iraq and more recently in Afghanistan.  That is only part of the work being done by hundreds of thousands of contract employees operating in those countries, who are also transporting supplies, guarding military bases, managing dining halls and more.

One key problem is that all of that contracting has been subject to little effective oversight.  In particular, there are too few government personnel who are qualified and in place in the region to oversee the contractors and subcontractors, both large and small, that are undertaking the work.

Moreover, the Commission alleges a dysfunctional relationship between the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA), two of the key oversight agencies involved.

DCAA is responsible for auditing contractors’ purchasing, cost estimation and other business systems.  But DCAA only has the authority to make recommendations for improvements based on its audits; and it is the DCMA that ultimately decides whether to withhold payments or disqualify contractors from contract awards based on shortcomings in their business systems.

In a hearing last week, members of the Commission accused the DCMA of ignoring recommendations from DCAA with regard to the business systems of logistical support contractors Fluor Corp., KBR Inc. and DynCorp International.

An interim report  issued in June by the Commission noted an inadequate number of qualified contract management personnel in Iraq and Afghanistan.  It also pointed out that there were only four DCAA auditors in Afghanistan.
 
The report stated that an “absence of continuing audit surveillance at high-risk remote locations is exacerbated by DCAA’s limited travel to  these locations.”   It’s a serious issue because of the large amounts of money incurred and billed on cost-reimbursement contracts.

The Commission report noted that federal regulations require contracting officers to consider withholding a percentage of future payments when it is determined that contractors’  business systems contain significant deficiencies.  The report stated that DCAA field auditors have been reluctant to recommend withholding those payments.  Given the lack of such recommendations, the report concluded that contracting officers often do not hold contractors accountable for the adequacy of their business systems.

In May, DCAA Director April Stephenson told the Commission that the DCMA sustains or upholds the DCAA  in about 65 percent of the amounts it questions.  A briefing by DCAA to the Commission, however, indicated that less than 40 percent ($1.3 billion of $3.4 billlion) of DCAA questioned amounts related to the contingency efforts in Iraq and Afghanistan were sustained through August 2008.  

The DCAA itself has been the subject of criticism of its own auditing practices.  As the GAO noted last year, DCAA’s auditing staff has been sharply cut in recent years.  In addition, the GAO reported instances in which DCAA auditors were allegedly intimidated or replaced by upper-level managers in the agency for including critical audit findings in reports about military contractors.

Unless we improve oversight of our nation-building efforts overseas, we will continue to waste billions of dollars that could have gone to productive uses.

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Terrorists, bureaucrats, and the Coase Theorem

Posted by David Kassel on August 3, 2009

Terrorists may not be happy to know this.  But many of them are….well…bureaucrats.

In an article in the current July/August issue of the journal Public Administration Review, Scott Helfstein maintains that bureaucratic theory may be overlooked as means of explaining what appears to be two divergent trends in terrorism today.

On the one hand, there has been a tendency toward “leaderless jihad,” in which terrorists operate almost autonomously and use only the Internet for information.  At the same time, there has been  “a high level of organization and bureaucratization” among  certain groups, such as the Taliban in Pakistan and al-Qaeda in Iraq.

Helfstein, who teaches at the Combating Terrorism Center at West Point, argues that terrorism is,  in a fundamental way,  like any other commodity or service that gets transacted or exchanged in society.  At one end of the exchange spectrum is the pure market, which operates with a minimum of organizational constraints.    At the other end is complete bureaucracy. 

Without any apparent sense of irony, Helfstein maintains that a characteristic of bureaucratic terrorist organizations is “the tendency to adopt similar (and perhaps best) practices from similar organizations.”   The purpose of these “best practices” is to minimize the groups’ exposure to counterterrorism.

In order to explain why terrorists choose different points on the market-to-bureaucracy spectrum, Helfstein turns to the Coase Theorem in economics.  Coase contended that individuals forego the efficiency of the market when certain “transaction costs” become too high. 

Transaction costs for terrorists include costs of communicating with other terrorists and recruiting them.  Counterterrorism aims to increase these costs by tracking and intercepting those communications, planting spies inside terrorists organizations,  increasing border security etc.  Helfstein theorizes that when the transaction costs of the terrorism marketplace get too high, terrorist organizations move away from the pure market and adopt bureaucratic alternatives.  Those alternatives include such things as centralized planning, training, and recruitment, and formal or informal contracting mechanisms.

Many terrorist groups, such as al-Qqeda and Hamas, have organizational structures that look like any bureaucracy, Helfstein says.  They are staffed with financial, operations, and strategy officers, and even public relations personnel.  Computers and hard drives seized by counterterrorism officials often contain bureaucratic forms outlining standard operating procedures.

Where I would differ from Helfstein is when he attempts to describe what the “terrorism marketplace” looks like and, in particular, the “supply and demand” aspects of it.  He notes, for instance, that one conception of the terrorism market is analogous to the employment market. 

In this conception, a government’s policies may be so disliked that they create a demand among the population for terrorist acts.  The terrorist group responds to this demand by recruiting terrorists from members of the public, who represent the supply of people available for employment as terrorists.

I’m no expert on terrorism; but it seems to me that terrorsts do not respond to a perceived demand among the public.  In fact, they often target the public in their own countries with their terrorist acts.  Is the public really demanding that?  In fact, terrorists are not interested in the public’s demand for change in government policies.  One might go so far as to argue that terrorists  seek power for themselves, not societal change; and their method lies in instilling fear–not fear in government officials, but in the public itself.

Helfstein concludes that the two divergent trends noted above in terrorism were a response to the post-September 11 counterterrorism efforts, and are likely to continue to evolve.  Counterterrorism experts “will probably need every tool in the social science arsenal to predict, analyze, and understand the next evoluationary cycle.” 

True enough.  Until we understand what truly motivates terrorists as well as how they operate, we can never hope to eradicate them and the fear they have instilled in us.

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Chipping away at the government-can’t-do-anything-right myth

Posted by David Kassel on July 29, 2009

Sometime ago on this site, I wrote about a battle  going on in Massachusetts over privatizing the Fernald Developmental Center, the nation’s oldest state-operated facility for persons with mental retardation.

This is a battle that has been playing out in state after state.   The argument for closing these Intermediate Care Facilities (ICFs) is that the private sector can provide this care better and cheaper.

This same myth that government can’t do anything right or efficiently is behind the opposition to President Obama’s public option in his health care reform package.  None other than Karl Rove has sounded the alarm that allowing government to complete with private health insurers will drive them all out of business and turn us into European socialists.

But shouldn’t competition from government simply bring down the rates the private insurers pay and, in turn, force the providers to cut their costs and generally operate more efficiently?  As efficiently as, perhaps, the public sector operates?

When it comes to the delivery of human services to some of our most vulnerable citizens, it is also often overlooked that government can in fact do the job as well or better than the private sector.  ICFs, for instance, must meet higher federal staffing and treatment standards than does the community-based group home system, which is primarily operated by private human service vendors.  So, while it’s true that many states want to eliminate ICF-level care because it tends to be expensive, it’s just not logical to assert that the care provided to the mentally retarded under lower standards will be better.

And as is the case in the management of health care, the public sector is capable of managing programs just as, if not more, efficiently than private-sector providers.  As the Truthdig blog noted, Medicare has far lower administrative overhead rates than private insurers (2 to 3 percent versus rates as high as 40 percent in the private sector).

And look at the CEO salaries of nonprofit human service and health care providers.   These salaries far outstrip their counterparts in the public sector.

Also, while we’re on the subject of efficiency, consider the lease-purchase plan that the Patrick administration is pursuing to develop group homes for persons with mental retardation in Massachusetts.  It will cost $257,000 per bed over 20 years to lease these group homes from developers.   The developers themselves can obtain low-cost state mortgages for the homes and then charge the state to pay back the loans.

Unfortunately, the folks who argue that government can’t do anything right and that the private sector should be running everything have had the upper hand in recent years.  Government administrators themselves are often hired for the sole purpose of fobbing off the functions and responsibilities of their agencies to the private sector.

And it’s not only state governments that are shedding their public responsibilities.  Consider federal public advocacy organizations such as the Disability Law Centers.   Our federal tax dollars fund these organzations, many of which have taken it upon themselves to file “class action suits” to close primarily state-run ICFs, whether the guardians of the residents want those facilities closed or not.

The National Voice of the Retarded, Inc. lists 28 lawsuits filed by protection and advoacy organizations in 19 states to close institutions.  The irony is that many, if not most, of the families and guardians of those facilities are involuntarily represented in these suits.  They cannot opt out of them even if they want to. 

In the name of their civil rights, facility residents are being evicted from their long-time homes under these lawsuits.  U.S. Rep. Barney Frank has proposed legislation which would give individuals and guardians the right to opt out of the suits.

All of this isn’t to say that private companies should get out of the business of providing human services or that private insurance companies should not be providing health coverage in America.  I’m not arguing here for a government-run single-payer plan. 

What I am arguing for is including government in the choice that prople have in obtaining human serivces and health care.  As President Obama said in reference to health care, the public option will keep the insurance companies honest.  It will force them to keep their premiums down and, in turn, will put pressure on hospitals and other health care providers to keep their costs down.

Similarly, in the delivery of human services, a public option is needed to provide a full range of choice in care to those most in need.  And, contrary to the long-standing myth, that public option may well be the most cost-effective one.

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