Demanding a federal budget that is fair, responsible, and meets our nation's priorities

Thursday, May 17, 2007

More Deep Thoughts on Contracting

I wanted to revisit a post I did on contracting earlier this week. The point I was trying to make is that it's often assumed that everything government can do, the market can do better. So if it's feasible to outsource something, you should do it, because you'll save the taxpayer money.

So why exactly is the market superior? Well, I went digging through one of my favorite books from college- Charles Lindblom's The Market System. Here's what he says:

That is a core claim for market-system efficiency: efficiency requires efficiency prices, and market systems establish them

I take that as meaning that markets establish the right prices for things that can be traded, so money isn't wasted. But given recent experience with contracting, can anyone in good faith say that the public is paying the right price for the goods it's getting?

Market conditions can't be very strong in government contracting. Government is government, and integrating it with private companies doesn't turn it into a market. It isn't self-evident that the private sector is any better at doing government work than government workers.

There are a lot of different causes here. The main one seems to be that political will and resources are necessary to hold companies accountable for contract performance. And it seems to me that it would take even more resources, and would therefore be more expensive, to hold contractors accountable than it would government workers.

Now, this could be an arguable point. How could I make such a generalized, abstract claim? Well, I think there are a couple of reasons:

• First, there's a greater conflict of interest with contractors, who seek profits, than government workers, who don't. Contractors make money by taking on work they know is impossible to do (good article on this)here; government workers could lose a promotion for failing to complete a task. Contractors get bigger profits for taking shortcuts that reduce quality (good article). Government workers don't get a share of any profits.
• Second, there's nothing legally protecting the privacy of government workers, as far as I can tell. It's pretty easy to find out what they're doing. But there's plenty that protects private companies- so it's harder for the public and public officials to know what they're doing.

So to repeat the conclusion from my last post- efficiency is the wrong reason to turn to contracting. Government needs something immediately, or temporarily? A company has expertise the government doesn't? Sure- all that might require contracting. Just don't expect it to be cheap.