Corporate Government

To be sure, government is not giving over all key tasks to the private sector. In one important area, transportation security, it has substituted federal employees for what used to be a contractor workforce. So the civil service head count rose in 2003, to 1.85 million, up 5 percent since 2000. But the longer-term trend is the other way: 10 years ago, the civil service numbered 2.1 million.

In the meantime, federal spending on procurement, now concentrated in contracting for services, has been rising rapidly. In fiscal 2002, Uncle Sam spent $245 billion on prime contracts, 20 percent more than two years earlier, according to public data. Spending on classified programs boosts the total close to $300 billion. So government is spending more on procurement than on its own payroll (about $200 billion for the civil service and active-duty military).

And it's apparent that government's signal achievements often flow from close cooperation with highly capable institutions in the private sector. A case in point is found in the area of research and development, in which academic and corporate scientists have worked effectively with federal agencies in pursuit of technological advances. One such story finds its way to the cover of this issue-the compelling tale of the smart bomb's emergence over the past decade.

In the first Gulf War, laser-guided bombs accounted for only 7 percent of ordnance dropped by the Air Force-but delivered 75 percent of all damage in the air war. The trouble was that they could not be used in bad weather, and that they cost $100,000 a copy. Air Force Chief of Staff Merrill McPeak set out to address those problems. By the time of the Iraq campaign, teams of Air Force people and contractors had developed a new, satellite-guided system to guide bombs through clouds or rain to targets miles away. The Joint Direct Attack Munition kit proved highly effective in Iraq. And at a cost that dropped as low as $14,000 each, they have given the Air Force an inexpensive way of turning tens of thousands of dumb bombs into smart bombs. The colorful cast of characters that worked the problem over the course of the past decade is described in George Cahlink's story, "Birth of a Bomb."

In the high-profile job of winning the peace, contractors are again at the center of the action, as Shawn Zeller and Shane Harris explain in two articles this month.

Glamorous NASA has always worked closely with the aerospace industry, and today 87 percent of its budget is passed to contractors. The structure of key contracts and the quality of federal oversight is much at issue in the wake of the loss of the space shuttle Columbia. Beth Dickey examines such issues as shuttle contract provisions that allow the contractor to keep 35 cents of any dollars "saved."

Contemporary American politics offers few rewards to those who want to grow government. So those who work in government have been learning that structuring and managing partnerships with the private sector is key to achieving success.