Making Agencies Compete

letters@govexec.com

Though governments are increasingly using competition between private businesses and public employees to get the best price and highest quality service, the playing field is often tilted against the private sector, a new report contends.

In its eleventh annual report on privatization, the Reason Foundation's Public Policy Institute, a conservative think tank, calls for agencies involved in competitive bidding to account for all their costs, be charged taxes or a tax equivalency, and be granted personnel and procurement flexibility. Those changes would make public-private competition fair, the institute says.

Public-private competition, often called "managed competition," has been used in cities such as Indianapolis and Phoenix, and has been endorsed by Vice President Gore's National Performance Review.

Under managed competition, a function that is being performed by a government agency is put out for bid. Private contractors and the agency are encouraged to compete against each other.

The Reason Foundation report argues that in such competitions, private companies must account for all their costs, but agencies don't, because they often do not include personnel and infrastructure costs in the costs of activities. The report recommends bringing in third parties to account for a function's true cost.

In addition, several cities that have tried managed competition allow departments to see private companies' bids before submitting their own. This corrupts the competition process, the report says.

"If private firms believe they are only being used by politicians to obtain concessions from in-house units, they will soon decide it is not worth the trouble and expense of putting together serious contract bids," the report says.

The report also argues that agencies should be relieved from regulations that limit their productivity.

"Unless government units are given more autonomy when governments institute competition, they are being forced to operate in both worlds--the entrepreneurial and the bureaucratic," the report says.

The report also explores the idea of separating policy functions from service-providing functions. The Vice President's performance-based organization (PBO) concept is based on that idea. For example, the Patent and Trademark Office's plan to become a PBO would keep intellectual property policymaking in the Commerce Department but separate the service function of issuing patents into an organization that uses private sector business practices.

To decide if a function should be privatized, decisionmakers must consider several factors. Constituencies with vested interests, including public employee unions, will oppose privatization. Political leaders must decide if privatization is worth the fight. Decisionmakers must also look at how much money they expect to save by privatizing. Functions that are extensively integrated into other government operations are difficult to privatize. The report warns that information technology services, for example, are not attractive candidates for privatization.

"The IT function has tendrils that reach throughout the organization, and adding to the complexity, there are often scattered personnel and equipment budgets within the user departments," the report noted.

The operating principle of privatization should be: "The more competitors, the better," the report argues.

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
FROM OUR SPONSORS
JOIN THE DISCUSSION
Close [ x ] More from GovExec
 
 

Thank you for subscribing to newsletters from GovExec.com.
We think these reports might interest you:

  • Sponsored by G Suite

    Cross-Agency Teamwork, Anytime and Anywhere

    Dan McCrae, director of IT service delivery division, National Oceanic and Atmospheric Administration (NOAA)

    Download
  • Data-Centric Security vs. Database-Level Security

    Database-level encryption had its origins in the 1990s and early 2000s in response to very basic risks which largely revolved around the theft of servers, backup tapes and other physical-layer assets. As noted in Verizon’s 2014, Data Breach Investigations Report (DBIR)1, threats today are far more advanced and dangerous.

    Download
  • Sponsored by One Identity

    One Nation Under Guard: Securing User Identities Across State and Local Government

    In 2016, the government can expect even more sophisticated threats on the horizon, making it all the more imperative that agencies enforce proper identity and access management (IAM) practices. In order to better measure the current state of IAM at the state and local level, Government Business Council (GBC) conducted an in-depth research study of state and local employees.

    Download
  • Sponsored by Aquilent

    The Next Federal Evolution of Cloud

    This GBC report explains the evolution of cloud computing in federal government, and provides an outlook for the future of the cloud in government IT.

    Download
  • Sponsored by LTC Partners, administrators of the Federal Long Term Care Insurance Program

    Approaching the Brink of Federal Retirement

    Approximately 10,000 baby boomers are reaching retirement age per day, and a growing number of federal employees are preparing themselves for the next chapter of their lives. Learn how to tackle the challenges that today's workforce faces in laying the groundwork for a smooth and secure retirement.

    Download
  • Sponsored by Hewlett Packard Enterprise

    Cyber Defense 101: Arming the Next Generation of Government Employees

    Read this issue brief to learn about the sector's most potent challenges in the new cyber landscape and how government organizations are building a robust, threat-aware infrastructure

    Download
  • Sponsored by Aquilent

    GBC Issue Brief: Cultivating Digital Services in the Federal Landscape

    Read this GBC issue brief to learn more about the current state of digital services in the government, and how key players are pushing enhancements towards a user-centric approach.

    Download

When you download a report, your information may be shared with the underwriters of that document.