Accountable Strategies blog

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

Posts Tagged ‘hollow state’

How government can regain the capacity to control and manage environmental disasters

Posted by David Kassel on June 11, 2010

On a recent segment of MSNBC’s “Morning Joe,” the folks around the table were discussing the federal government’s seeming inability to get BP to act with urgency and effectiveness in stopping the oil leaking into the Gulf of Mexico.

Much of the discussion, of course, concerned the damage to the environment that is being compounded daily by the spreading oil.  But there was also frustration expressed by just about everyone at the table at the government’s “loss of capacity” to do anything about it. 

It does seem that we used to be a “can do” nation that could win wars unambiguously, land men on the moon, and respond effectively to disasters.  But it seems we have lost much of our capacity in recent years, not only to accomplish great public undertakings, but even to manage the growing number of private sector actors that have moved in to fill the vacuum. 

Why is this?  Have we, in fact, become a “hollow state” in which public agencies have little ability left to do anything other than rubber stamp corporate activities, many of which seem irresponsible if not downright destructive?  From the reconstruction of Iraq to the Big Dig in Boston, we no longer seem to be able to control spiraling costs or ensure top quality in the results. 

In fact, the related managerial trends of privatization, decentralization, and deregulation have combined in the past couple of decades to reduce government’s capacity to act effectively in these instances.   The Government Accountability Office reported that while the amount of federal contracting rose by 11 percent between 1997 and 2001, the size of the federal workforce devoted to managing contracts decreased by 5 percent.   This phenomenon has certainly been true at the state and local levels as well. 

The late academic scholar Larry Terry pointed to a loss in “institutional memory” in government due to the departure of “institutional elders–those individuals who possess extensive knowledge, expertise, and valuable information about an organization’s history…”    Some of this governmental loss in capacity is the result of downsizing trends in government that took root in the Reagan years and continued during the Clinton years and during the presidencies of Bush 1 and 2.  The New Public Management, which was promoted by the Clinton administration, promoted “market driven management,” which advocated increased privatization of government services and the use of private sector practices and technologies within government.  

Meanwhile, countless politicians, from state legislators to presidents, have built their political careers on criticizing government as too big, bureaucratic, and ineffective.  The result, however, is that we now have a government in this country that may be a little less big, but still seems bureaucratic and even more ineffective. 

But that doesn’t mean we can’t undertake great projects anymore or that government is doomed to impotence in controlling  oil spills and other disasters.  Take the oil spill in the Gulf.  Government still has the capacity to act effectively in situations like that.  It simply has to act smarter. 

First, political leaders and public managers must resist the temptation to muddle through these crises with ad-hoc decisions that seem to change each day on the basis of news reports and polling.  The president needs to establish an environmental crisis team that can respond immediately to situations such as the oil spill, similar to the crisis team that advises him during national security emergencies.  

When an environmental crisis occurs, the president and his team must immediately develop a coherent plan for dealing with it.  That process must involve a careful analysis and definition of the problem the team is facing.  The president and all team members must constantly question their presumptions about the problem and its possible solutions.  From day one, such a team could have held a series of meetings in which they asked themselves: what methods of stopping the oil leak are likely to be the most successful and to stop it the fastest?  BP engineers and executives as well as outside oil industry and environmental experts should have been called in to the meetings. 

Many collateral issues should have been explored in the meetings as well, including the best options for cleaning up the already-spilled oil, the safety of the chemical dispersant being used by BP, and how the oil-capping and cleanup activities would be financed. 

The project plans that emerged from that process would have clear scopes of work for BP and others to accomplish as well as clear penalties for failure to meet the specifications.  Then, once the plans had been put into effect, the president and his crisis team would be well-positioned to monitor and assess the project activities in accordance with the plans. 

Both public and private-sector organizations have always suffered from a lack of systematic approaches to dealing with complex projects and sudden crises.  It’s all the more imperative that such approaches be developed and used by our current downsized public sector in our increasingly fragile world.


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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.

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

Are we letting our government watchdogs become toothless hounds?

Posted by David Kassel on August 4, 2008

Continual downsizing in the federal government since the 1990s may have saved us money in federal salaries, but it has apparently also impaired our ability to track the taxpayer dollars feeding our military contractors.

Consider a July 2008 Government Accountability Office report about another key government watchdog agency, the Defense Contract Audit Agency , which has failed to do its job properly in auditing Defense Department contracts, apparently partly due to downsizing.  According to the detailed GAO report, downsizing has affected not only the DOD’s ability to manage its own growing universe of contractors, but audit staffing within the DCAA itself has been sharply cut in recent years. 

In its report to key members of Congress, the GAO noted that Department of Defense contract management continues to be vulnerable to fraud, waste, abuse, and mismanagement.  The report stated that downsizing of DOD contract oversight staff in the 1990s coupled with hundreds of billions of dollars in increased contract spending since 2000 “has exacerbated the risks associated with DOD contract management.”

The DCAA has a critical oversight mission regarding DOD contracting.  Despite that, auditing staff at DCAA dropped from almost 6,000 in 1989 to 3,500 in 2007, according to the GAO.  That is a 42 percent decline.   DCAA’s 3,500 auditors annually perform about 40,000 audits of approximately 10,000 contractors.

In one office, two DCAA supervisors, who approved and signed 62 of 113 audit reports, said they did not always have time to review audit working papers.  In 18 of those 62 cases, they assigned trainees  to complex forward pricing audits as their first assignments.  

DCAA contract audits are intended to be a key control to help assure that prices paid by the government for needed goods and services are fair and reasonable and that contractors are charging the government in accordance with applicable laws, regulations, and contract terms.   In performing its audits, DCAA states that it follows generally accepted government auditing standards (GAGAS).

GAO opened its investigation after receiving hotline complaints that DCAA was failing to comply with GAGAS on 14 agency audits.  The GAO found that in an audit involving a major areospace company, DCAA management threatened the senior auditor with personnel action if he did not delete findings from the report.  In addition, the management made an up-front agreement with the contractor to limit the scope of work and basis for the audit opinion. 

In another case involving a contractor that produces and supports military satellite sytems, a draft audit report identified six significant deficiencies, one of which led the contactor to overbill the government by $246,000 and another which may have led to $3.5 million in overbillings.  According to the GAO report, two auditors who wrote the draft report were replaced by other auditors who dropped the findings and changed the draft audit opinion from “inadequate,” to “adequate.”  In addition, DCAA managers took actions against staff at two locations, attempting to intimidate auditors, prevent them from speaking with investigators, and creating a generally abusive work environment.  Downsizing alone may not fully explain these issues at DCAA, but it may have been a necessary precondition for them.

The sad fact is that while the Bush adminstration may have hastened the downsizing process, it isn’t solely responsible for it.  One comment on the the Project on Government Oversight blog noted that much of the DOD’s contract management workforce downsizing took place during the Clinton Administration.  In a compelling paper in 2005, Larry Terry at the University of Texas at Dallas  linked government downsizing to the New Public Management (NPM)–a global public-sector reform movement that was embraced by the Clinton administration and implemented by then Vice President Al Gore.  The NPM’s zeal for downsizing was matched only by its enthusiasm for privatization and deregulation.  Terry argued that:

…NPM philosophy and practices have contributed to an increasingly hollow state with thinning administrative institutions.  …thin administrative institutions are fragile.  Fragile institutions lack the integrity and, in turn, the capacity to effectively serve the public good.

It shouldn’t be a surprise that we’ve now arrived at a state of affairs in which we can no longer adequately control the contractors who are increasingly running our government.

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