By Loyd Eskildson

The intent of One Nation Under Contract (Yale University Press/ 2009) is to highlight the implications of privatizing government policy, that present practice is scandalous, and that undoing government privatization is not the answer.  Unfortunately, Stanger's overly academic treatise fails in all three missions, though her anecdotes and documentation of some of the numbers involved make the book worthy of a quick skim.
 
The Dept. of Defense is a good place to start. Stanger points out that the Pentagon's acquisition workforce shrank 25% between 1990-2000, while the volume of contracting increased seven times, and that between 2002-2005, the number of its contract employees rose from 3.4 million to 5.2 million. A key point here is that the simplest way to handle increased contracting with reduced staff is to issue giant contracts that allow subcontracting as desired - including evaluations. Thus, we end up with contracts that generate sub-contracts that generate sub-contracts, etc., for as many as five layers - adding costs at every layer. Then there are the missing billions in Iraq.

Another typical problem is that various reports on procurement estimate that at least half of these contracts take place without full and open competition. Thus, there is no need for surprise when Stanger points out that a school costing USAID $250,000 to be built in Afghanistan could have instead been built for $50,000 by local Afghans (and probably generated good feelings for the U.S. at the same time). As for quality - shoddy electrical work by KBR is blamed for the deaths of at least 18 soldiers in Iraq, and Blackwater Security severely damaged U.S. credibility when it killed 17 civilians in Baghdad.
 
Stanger is correct that private contracting weakens control over government policy, but she does not account for some of the major mechanisms by which this occurs. A major source of the problem is that creative people can always find their way around a government contract; this problem is sometimes further acerbated intentionally by government managers, and the fact that government contract positions are not attractive to anyone with high skills and initiative. Then there's the 'revolving door problem.'  A USAToday article (11/16/09) pointed out that 158 retired general officers now consult for the Pentagon, and most also work for private industry - all at salaries far exceeding their former military pay.

Clearly, the potential lure of those jobs can skew thinking of today's active-duty leaders. My own experience with contractors and consultants is that they spend about half their time looking for ways to extend and expand their scope of work, are much harder to get rid of than to bring in, and become a crutch for weak managers to lean on and hide behind - as a result, their advice must always be taken with a grain of salt.

Another problem is that bringing in contractors usually reduces flexibility (eg. the outsourced warehouseman can no longer be asked to pitch in to help with a delivery crisis) and unforeseen changes in technology and/or task requirements create never-ending 'discussions' over who is responsible. Another problem with privatization is that it creates a powerful never-ending incentive too for private contractors to lobby for more government services etc., and a major new source of campaign donations.
 
In another section, Stanger points out that U.S. interests in the Mexican embassy were (and probably still are) promoted by representatives from 32 different agencies, that in 2005 the federal government had contractors in every U.N.-recognized country but Bhutan, Nauru, and San Marino, and we have military bases in 130+ countries.

This gets to an even bigger problem - the size, reach, and complexity of American government. We end up with a spaghetti-like organization and flow charts, never-ending coordination meetings, and obvious silliness such as the Director of Homeland Security giving briefings on the availability of swine flu vaccine. More important, it just doesn't work - both 9/11 and the Ft. Hood shooting took place despite numerous warnings, government's response to Hurricane Katrina was horribly botched, our financial system nearly collapsed last year, and pupil test scores and dropout rates have stagnated for decades,
 
Bottom Line: I doubt that any 'super-manager' (eg. a composite of Peter Drucker, Andy Grove, Steve Jobs, Jack Welch and anyone else you might want) would even want to try managing the federal government as it now stands. Significantly improving government performance requires that we first stop digging holes - the most obvious example is the link between our overly-biased support for Israel and the ensuing increased motivation for terrorism.

A second is staying out of the affairs of other nations - our own 'bought and paid for' democracy is an embarrassment, as well as our financial management, and we need to stop telling others how to run their affairs - especially China and Russia.

A third is reducing our dependence on foreign oil and associated interference in Iran, Iraq, and (formerly) Saudi Arabia.  Fourth, get out of Afghanistan - there is no reason to be there. At that point we need to implement a major government downsizing - eg. at least 50% in the Pentagon (we already spend about as much as the rest of the world combined), 75%+ in Departments of Commerce, Labor, State, and others. Then, reconsider restructuring. Only then does it make sense to consider Stanger's question of "What should be privatized?" Perhaps nothing.

Allison Stanger is Russell Leng '60 Professor of International Politics and Economics at Middlebury College and director of its Rohatyn Center for International Affairs.

Loyd Eskildson is retired from a life of computer programming, teaching economics and finance, education and health care administration, and cross-country truck driving.  He's now a reviewer for Basil & Spice.

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