Book Discussion “Outsourcing War and Peace”: The Clash of Market and Civic Values and Its Implications

by Allison Stanger

[Allison Stanger is Russell J. Leng ’60 Professor of International Politics and Economics and Chair of the Political Science Department at Middlebury College. She is the author of One Nation Under Contract: The Outsourcing of American Power and the Future of Foreign Policy.]

This is the first day of our book symposium on Laura Dickinson’s book Outsourcing War and Peace: Preserving Public Values in a World of Privatized Foreign Affairs. Related posts can be found below.

Laura Dickinson has written a compelling and thoughtful inquiry into the larger implications of the “profound shift in the way the US government projects its power overseas.” Her focus on the enormous threat that contracting poses to public values highlights an important consequence of this transformation that has too often gone unacknowledged.  Her discussion of the four potential mechanisms of accountability and control frames that core challenge in a highly fruitful way.  While Professor Dickinson is well aware of the potential obstacles to effective functioning of these mechanisms, I wanted to use my post to highlight one that is all too easy to overlook: the impact of excessive contracting on governance and public values themselves.

Decades of privatization mean that the business of government is increasingly in private hands, both in our foreign policy activities abroad and in domestic operations at home.  The basic pattern is striking.  In 2000, the Department of Defense spent $133.4 billion on contracts.  By 2010, that figure had grown to $367.8 billion, an almost three-fold increase.  In 2000, the State Department spent $1.3 billion on contracts and $102.5 million on grants. By 2010, contract spending had grown to $8.1 billion and grant spending had grown to $1.4 billion. In 2000, USAID spent $19.3 million on grants and $535.8 million on contracts.  By 2010, those figures had climbed to $8.9 billion and $5.6 billion, respectively. These explosive growth patterns are not confined to the national security realm.  For example, in 2000, the Department of Health and Human Services expended $4.1 billion on contracts. That figure had risen to $19.1 billion in 2010, a 366 percent increase.[1]  Contracts and contractors were also essential to both the Troubled Asset Relief Program [TARP] and the stimulus package. The operative rule of thumb for Republican and Democratic administrations alike has been to turn execution over to the private sector whenever possible.

This shift in and of itself does not disastrous consequences make.  But when it is combined with general public distrust of government, Pandora’s box opens.  One additional statistic speaks volumes on this transformation. The number of people on the federal government payroll today is roughly the same as it was in 1966, yet the federal budget in that same time period has more than tripled in real terms.  Contractors, in part, fill that enormous gap. The result is that our government is today but a shadow of its former self.  It is big in terms of the amount of money it spends but small in terms of the number of people it employs to oversee that spending.  Government has effectively been hollowed out.

There are obviously consequences for public values in this transformation.  As Professor Dickinson summarizes on page 10 of her book, “One of the core points of this book is that these public values ought to govern even when those acting are not governmental employees or representatives.”  One might legitimately ask, is this a realistic aspiration when government’s default option is to privatize whenever possible, often outsourcing oversight as well as implementation?  It is surely more challenging to uphold public values when government’s actions themselves undermine the public’s faith in the very legitimacy of public sector activity.  Moreover, do we really want to treat public servants and private employees as functional equivalents, or do we instead lose something very dear in blurring that line?  Who is to ensure that the public interest is upheld under such arrangements?

When public values collide with market imperatives in a privatized world, the demands of the market typically triumph, and the logic for this outcome seems iron clad.  Put another way, it may be easy to coax public servants to adopt a market outlook and think more like businessmen to uphold common values.  But getting businessmen to think like public servants?  That conflicts with the private sector’s raison d’être, which is to ensure the profitability of any given enterprise on a day-to-day basis.  There are competing values at work, and when the profit motive leads one direction and the common good in another, why should we expect private sector employees to act against their own self-interest? When market values collide with public virtues, we cannot and should not expect the market to uphold the common good.

While I agree with Professor Dickinson that the horse is out of the barn, and we cannot turn the clock back on outsourcing but must work within its confines, I wonder whether we might get more robust mechanisms of compliance by acknowledging that private and public interests do not coincide nearly as often as many assume them to do.  This so often seems like the crux of the matter to me.  There is an enforcement problem because there are competing authorities, the biggest of which are market versus civic values.

So how does the hollowing out of government affect Professor Dickinson’s four proposed mechanisms of accountability and constraint?  To review, she proposes in both her book and her first blog post:  (1) using litigation (both criminal and civil) to hold contractors responsible for malfeasance; (2) reforming the language of the government contracts themselves to mandate compliance with public values and providing for better contract monitoring to ensure this new contractual language is effective; (3) creating better transparency mechanisms regarding outsourcing decisions; and (4) creating a web of formal and informal constraints by tweaking the organizational structure and institutional culture of the contract firms themselves.  Interestingly, all remain viable, but the reduction in government capacity is itself an impediment to meaningful reform.  Put another way, when government is wholly dependent on the private sector to conduct its daily business (the essence of hollowed out government), the constraints working against the promotion of public values only grow commensurately.  Strong public pressure to use litigation to hold contractors responsible, reform the language of government contracts, promote transparency, and build a web of better constraints is unlikely to emerge when it is seen as a disruption and derailing of day to day operations.  I have argued elsewhere that the first casualty of government by contract is the transparency on which our very capacity for self-government depends. We have together created a system that no longer functions as the founders intended.

Professor Dickinson herself acknowledges on page 20, “There are, of course, potential difficulties with all four mechanisms…It might be suggested that any of the reform proposals I recommend regarding privatization are inherently unrealistic because one of the main reasons governments privatize is precisely to avoid the kinds of constraints I seek to impose.” All true, but it bears mentions that motives are only part of the story here. My basic point is that government can privatize with the best of intentions and still wind up with the huge unintended consequence that public values have inexorably been undermined in that process. Add in the shortage of government personnel for contract oversight that excessive privatization has facilitated and outcomes can be sub-optimal without deliberate attempts on the part of leaders to manipulate and end-run the public.

In many ways, our current fiscal challenges may move matters in a more positive direction.  For example, the innovative public-private partnerships that Professor Dickinson notes we are seeing for security contractors can in part be viewed as a last-ditch effort on the part of firms to stay in the game and continue to win contracts when demand is drying up.  Genuine competition for government contracts might be creatively deployed to incentivize more public-spirited behavior. Dickinson’s fourth chapter “The Unexplored Promise of Contract,” includes imaginative and valuable thinking on how contracts themselves might be better structured to promote public values.  Viewed in this light, coming to terms with the myriad ways in which government’s dependence on outsourcing can undermine the public interest is a necessary condition for “preserving public values in a world of privatized foreign affairs.”

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1 All figures pulled from USAspending.gov on May 14, 2012. The careful reader may note that 2000 aggregate numbers sometimes do not match those I have used elsewhere, and the differences can be dramatic.  This is because the USAspending.gov database is a live stream (continually updated) and aggregates are hence a moving target, sometimes even years down the road.

http://opiniojuris.org/2012/05/15/book-symposium-allison-stangers-comments-on-outsourcing-war-and-peace/

3 Responses

  1. Establishing effective public accountability for privatized/outsourced public functions adds largely uncaptured costs to those considered in the outsourcing decision.  Thus, not only are there disincentives to costly accountability mechanisms within the private firm seeking to maximize profits, but disincentives also exist for the public agencies that outsource.  They will not undermine their outsourcing decision by adding the infrastructure necessary to establish accountability because to do so increases their costs of administering the contract and runs counter to their initial justifications for outsourcing.

    As a colleague and I explained in a paper that we presented but ultimately never published, process accountability — the precise manner by which public functions are accomplished — was never a part of outsourcing theory.  Outsourcing in public administration theory began with the idea that accountability would come from the customers — “the public.”  If one outsources trash collection, “the public” will tell you if it is not being properly done because they will complain when their trash isn’t collected, or when the services provided are something less than generally desired. 

    Of course, “the public” doesn’t always know whether the contract is complied with in all its particulars.  It wouldn’t necessarily know, for example, whether the trash collected is being properly disposed of under the terms of the contract, unless evidence of improper disposal is observed and becomes generally known.  Thus, the end result, or “product” produced by the outsourcing contract may also escape public accountability.

    This is all to say that when “the public” is not direct beneficiary/consumer of an outsourced function, as is almost always the case in foreign affairs, especially combat zones, this outsourcing model catastrophically fails.  “The public” remains largely unaware both of the relative success at which an outsourced function is performed and the manner by which it is performed.  In the lexicon I prefer, there is no “product” or “process” accountability unless provided by the government agency that let the contract in the first place.  For that matter, government agencies have also sometimes outsourced the contract management function itself.  In either case, but especially the latter (outsourced contract management of outsourced government functions), there is a strong disincentive to establishing accountability for public values given the costs associated with achieving it.

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