The Best Deal in Town?

The era of big government is said to be over. But is an era of big government contracting about to begin?

The Bush administra-tion believes that many tasks now performed by federal employees can be achieved more efficiently by outsourcing them to private firms. "The objective is not to move jobs from the public sector to the private sector. The objective is to get the taxpayer the best deal," argues Office of Management and Budget Director Mitch Daniels. It's normal, of course, for Republicans to sympathize with business-world constituents who contend that "commercial" government functions should be purchased in the marketplace. By the same token, Democrats, who have the support of public employee unions, tend to lean in the opposite direction.

The polarity of views was readily apparent at a June hearing held by a General Accounting Office panel that is trying to sort out which functions the government should reserve for itself. John Satagaj, president of the Small Business Legislative Council, complained that "unfair competition occurs when the government conducts activities in-house, which could be obtained from the private sector." But Gary Storrs, an economist for the American Federation of State, County and Municipal Employees, countered that "far from being a universal success, contracting has frequently led to cost overruns, poor performance [and] a loss of government capacity to deliver the services."

Despite the obvious political fault lines, Daniels appears particularly determined to give business greater opportunities to prove that it can do a better job than government in delivering services to the public. Daniels declared at an April conference of federal procurement executives that "the general idea that the business of government is not to provide services, but see to it that [services] are provided, seems self-evident to me."

Accordingly, OMB has initially ordered that roughly 42,500 federal jobs be outsourced to private contractors or subjected to private competition by October 2002. That is the administration's first step in achieving its ultimate goal of putting 425,000 government jobs up for competition.

But conducting the government's business in a more businesslike manner is a lot easier said than done. For starters, there are two sides to the proposition, as stated by Daniels, of getting "the best deal" for the taxpayer. In one sense, taxpayers-like corporate stockholders-stand to benefit if costs can be held down and dividends-in the form of tax reductions-can be paid. But taxpayers also are consumers of government services. They don't want corners cut when it comes to the quality of the services they get in areas as diverse as public safety, national security, health care and retirement benefits.

OMB must try to impose the sort of managerial discipline and efficiency that taxpayers-as government stockholders-demand. But that's only half of the equation. Federal agencies get their marching orders and mission assignments-not to mention their annual appropriations-from members of Congress, who win and keep their jobs by pledging to deliver generous benefits and high-quality services for the taxpaying consumers who vote for them.

Over the years, the thoroughly bipartisan desire on the part of lawmakers to "bring home the bacon" of federal programs and expenditures to their states and districts has resulted in a profusion of agencies with overlapping assignments. Too often, the unofficial "core mission" of federal managers is to cater to the whims of their congressional overseers.

That's why Herbert Jasper, a fellow of the National Academy of Public Administration, pointed out in a May 24 memorandum on contracting for services that simply privatizing a function won't lead to greater efficiency if the function was unnecessary or wasteful in the first place. In fact, it could make things worse. "Contracting for performance of government activities may make it harder to terminate or reorganize them, because the contractors, through their supporters in Congress, become a force for continuing them," Jasper warned.

In other words, if Daniels and OMB are to succeed in their quest to "get the taxpayer the best deal," it will take more than public-private competitions to figure out who can perform existing functions most efficiently and effectively. It also will require a thorough review to identify redundant, outdated or unnecessary activities that need to be eliminated. What will be needed most of all is the cooperation of the lawmakers who tend to jealously guard the programs they have created.

The task is daunting, but Daniels seems well-equipped to take it on. He is nonconfrontational by nature and thoroughly understands how Washington works, having previously held jobs on Capitol Hill and in the Reagan White House. And he's not likely to forget that the bottom line for government, as he puts it, is seeing to it that necessary and legitimate services "are provided."


Dick Kirschten is a contributing editor for National Journal. Contact him at dkirschten@govexec.com.
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