Obama Takes On Market-Based Government

Obama Takes On Market-Based Government. By Thomas Frank
The GOP fetish for outsourcing deserved to be repudiated.
WSJ, Mar 11, 2009

In a little-noted passage of a mostly ignored speech, President Barack Obama said last week that the government faced "a real choice between investments that are designed to keep the American people safe and those that are designed to make a defense contractor rich."

It was notice, amid all the caterwauling over Mr. Obama's stimulus package, that the president meant to put the kibosh on the GOP's favorite method for spreading the wealth around. A prize ox of the conservative ascendancy was about to be gored.

Under the administration of George W. Bush, you will recall, federal spending grew pretty significantly. At the same time, the number of people directly employed by the federal government shrank. One of the factors that explained the difference was contracting. Guided by Mr. Bush's dictum that "government should be market-based," federal operations under his administration were encouraged to outsource wherever they could.

Indeed, agencies were graded on how many of their duties they opened to private-sector competition. By 2005, according numbers published by Paul C. Light of New York University, contractor employees outnumbered federal workers four to one.

The new system was supposed to save money; it almost certainly hasn't. It was supposed to deliver quality; instead we witnessed the most spectacular government failures in years.

Politically, though, it did its job. For government workers, a class of citizens despised above all others in conservative mythology, the results were predictably dispiriting. For favored contractors and their lobbyists, on the other hand, the Bush years were a boom time like no other. Certain branches of the government, as per Mr. Obama's description, seemed designed merely to shovel money into contractors' pockets, and the revolving door between government and the companies that did its work spun like a giant roulette wheel.

Until they were bumped off the front pages by the unfolding economic disaster, the many failures of government-by-contractor made for riveting stuff. There was the 22-year-old accused of selling lousy munitions to our allies in Afghanistan. There was also the contractor feeding frenzy in the aftermath of Hurricane Katrina.

But things have changed. These days it doesn't even look like banks can be "market-based," much less government. Republican leaders have rediscovered their distaste for wasteful spending. Contractor bad-boy Blackwater has renamed itself "Xe," perhaps on the theory that it will be more difficult for the media to criticize their doings when readers confuse them with the symbol for the element xenon. And Mr. Obama announced his plan to reform the contracting system.

To judge by his rhetoric, the president was declaring the end of the era of government-by-contractor. "Far too often, [government] spending is plagued by massive cost overruns, outright fraud, and the absence of oversight and accountability," he said. "In some cases, contracts are awarded without competition. In others, contractors actually oversee other contractors."

In an accompanying memorandum, Mr. Obama called for new rules specifying exactly when contracting is appropriate -- since "always" is no longer an acceptable answer -- and also for a "review" of "existing contracts," by which we can only hope he means a thorough and public examination of the most outrageous contractor misconduct of the last eight years.

If so, it's easy to get an idea of where to start. The Senate's Democratic Policy Committee, which has been investigating contractor misbehavior in Iraq since 2003, has unearthed important details about the failure of Parsons Corp. to complete more than 20 of the 150 medical clinics it was hired to build in Iraq. The same committee heard from Bunnatine Greenhouse, a whistleblower who charged the Army Corps of Engineers with an unseemly affection for KBR, the company that manages military logistics in Iraq; and it also furnished a platform for Charles Smith who once oversaw one of KBR's big contracts and who asserted that, after KBR had turned in a billion dollars worth of "unsupported charges," the Pentagon blew by his objections and paid up.

This last fellow eventually concluded from his experience that "The interest of a corporation, KBR, not the interests of American soldiers or American taxpayers, seemed to be paramount." It could be the epitaph for an era.

There have always been government contractors, of course, and no doubt there always will be government contractors. But the way Washington manages its contracting isn't static or eternally unchanging. During the last administration, in particular, it was soaked in ideology, from the right's frothing against the federal work force to its cult of outsourcing.

As we embark on the greatest spending program since World War II, getting away from all that is a form of "post-partisanship" that even I will welcome.