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Privatization and accountability--Feds need work

Adrian Moore
June 21, 2006, 9:44am

Rep. Henry Waxman has released a report on the extent of contracting by the federal government and slams the practice as wasteful and mismanaged. See the report here and the LA Times article here Waxman has long been a fan of government employees and opponent of most anything the private sector does, so take it with a grain of salt, but the report makes some good points. The report "reveals an 86% increase in contracts with private businesses, from $203 billion in 2000 to $377.5 billion a year in 2005 – a growth rate nearly double that of federal spending as a whole. At the same time, federal payrolls also have grown: The government now has about 1,874,000 civilian employees, up from 1,738,000 five years ago."
Aside: Ain't it great to have the "party of small government" running Congress? I think I am with Ron Bailey that we need a Democrat president now just to get some gridlock.
Cribbing from the LA Times article, the report argues that:
Poor contract planning and weak oversight have led to government overspending and corruption by companies that have padded their invoices, charged for services not provided and received award fees for jobs that were completed late. In many cases the types and terms of the contracts have made them ripe for abuse: Spending on cost-plus contracts – under which the government bears the risk of cost overruns – has increased from $62 billion in 2000 to $110 billion in 2005. Spending on no-bid contracts – those granted without competition from other companies – rose 110%, to $97.8 billion, during the same period. Spending on monopoly contracts, which allow the government to buy goods and services without defining them in advance, nearly doubled, to $15.3 billion.
As far as the evidence of widespread overspending and corruption, the report pulls together a lot of anecdotal evidence showing way too much of this is going on. And the feds are taking on a lot more contracts that put risks on the taxpayers rather than the contractors. At the same time, the report ignores some key things. Repeated independent studies of federal contracting in the last six years have found a great deal of cost savings have resulted--so the inept or corrupt contracts are a minority. And higher risk contracts like cost plus or no bid make perfect sense under some narrow circumstances, and the Waxman report makes no attempt to distinguish them, just lumps them all together as bad. We should walk away acknowledging that there needs to be a lot more accountability and better management in the federal contracting process. That means we also have to recognize that the Bush Administration and the Congress share blame here. The Administration has been bullish on contracting, but almost utterly uninterested in oversight and policy management--key OMB positions overseeing contracting sat vacant for an eternity. And as federal agencies have shifted to ever more contracting, the issue of how to manage this radically different federal government never rose to the Cabinet level discussions it should have. No Cabinet member has got out front on pushing for a lot more contract management expertise and career path reward and integration into decision making in their agency. And Congress is just as bad. They have seen repeated reports about this transformation in the way agencies are doing business, but as whole Congress hasn't cared about it much, overseen it much, and certainly has not appropriated for a transformed workforce that has to manage a lot more contracts. The best accountability for contracts is that they are results based--easy to measure if you get what you are paying for. But federal agencies can hardly do results based contracts when they don't measure their own results. The Administration has, to its credit, pushed a management agenda to become more results based, but Congress has been uninterested in that as well. Bottom line--lots of bad stuff goes on with contacts. But you are kidding yourself if you think it is any worse that what goes on in federal agencies themselves. Contracting most often helps get the job done and manage costs. We don't need to start by addressing symptoms, but need to get at the root of the problem. As long as there is no performance accountability in the system and no attempt to narrow the focus of agencies on to core missions and goals, there will be plenty of nonsense.

Adrian Moore is Vice President, Policy


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