Asymmetrical Information

Somehow, all of these comments are supposed to be a defense of giving the work to civil service employees who can't be fired no matter how poor a performance they turn in, and use their union dues to help pick the boss they will subsequently negotiate with . . .

Either that or not having government performing these functions at all.

Plus, I see no harm in giving these responsibilities to government civil servants, as long as you combine that with a proper caution in allocating government responsibility for tasks that could be fulfilled by private contracts. The problem is that private contracting is the worst of both worlds if the good can be provided through other means. Civil servants are more directly accountable to their superiors. They can't necessarily be fired, but they are still under more close supervision than a private company operating with limited oversight.

Pure private contracting with no oversight incentive is the worst because it removes the one good--incentives to deliver high quality work at low cost--while fostering the great evil of government beholden to special interests. Accountability often doesn't exist in these situations because even if there is government oversight, the responsible agency can just blame the private contractors. If more of the decision-making authority is on government, the civil servants can't as easily plead innocent to mistakes. If you are going to have private companies interacting with government, there had better be strong oversight, and it should only be for a good that only government can provide. Otherwise, civil servants are better because there is more oversight and maintains a culture free of special interests.

Plus, I see no harm in giving these responsibilities to government civil servants, as long as you combine that with a proper caution in allocating government responsibility for tasks that could be fulfilled by private contracts.

Woodstock,

Re; "Civil servants are more directly accountable to their superiors.

Sorry, but that's simply not true. I say this as a former Quality Assurance Evaluator on a multimillion dollar military services contract. A civil service worker who fails at a task can be fired, but a contract worker can also be fired, and the contractor forced to pay penalties or assesments in accordance with the terms of the contract.

My brother was a defence department civil service maintenance and construction employee. He had many amusing tales to tell about what happens when you go to a contractor to privatise "high priced" labor with lower priced (because it is unskilled) labor. He and his coworkers would go in afterwards and clean things up. He figures that if the goverment wants to waste money, they might as well do it that way then some way that might hurt somebody like in hospitals or something.
He stopped doing it a few years ago and went to a county highway department. It's pretty much the same there, except they are closer to the voters so they are more responsive. The sheriff wants the stop sign back up NOW, so they can get their guy back from directing traffic. Jim doesn't mind coming in off hours to work, so they call him a lot. Feedback is quick and they know what they are doing.

Well, we should clarify which situations we are talking about.

I have no problem with one-off contracts in the several-million-dollar range. Usually these contracts are small enough that it is not worth the private company engaging in a huge lobbying effort to get their horse elected. And in such cases it is also unlikely that the terms of the contract will be violated.

But I am extremely worried about large, recurring, billion-dollar contracts in which the accountability is compromised by the cesspool of private-public collusion. In such cases, I think that there is a huge risk that this type of privatization will actually lead to bigger government as more lobbying goes into procuring larger and larger contracts. Along the way, accountability goes out the door as legislators and regulators are captured by private interests.

The risk of this happening on small contracts is usually minimal as the benefits of trying to capture the overseers are less than the costs.

But anyone who thinks private contracting is a magic cure-all is seriously deluded. It is not always bad, but it can be EXTREMELY dangerous. This has always been one of my concerns about privatization of social security. While it could work in the short run, in the long run the private beneficiaries of the program would work harder and harder to capture the oversight process and expand the amount of tax dollars going to them. It is a recipe for corruption.

Better to re-work the formula for benefits or phase out the entire program.

Contractors are subject to triple damages for fraud (albeit not for mere negligence) under the False Claims Act.

Ah, yes. The evil, always lazy and incompetent government worker. You know, Jane, I know some of these terrible people you put down though I work in the private sector. Not one of them is as bad as the typical red tape producer in most insurance companies. None of them is as bad as many of the incompetents sucking down our tax money in Iraq because of their connections. They're not like the private sector contractors who cut corners to make an extra buck irregardless of the consequences. You know that just as many of them exist as the crap-filled stereotype your last paragraph pushed.

It's telling that you read so much into her last paragraph, when all Jane was doing was talking about incentives.

Woodstock,

You are making the strange assumption that while private contractors are a "special interest", public service unions are not.

"and use their union dues to help pick the boss they will subsequently negotiate with . . . "

I've been a federal government employee for 23 years now. Other than reading about it, I would have no idea that my union exists. It in no way serves civil service employees. It is entirely a construct of management. It in no way resembles a real union. It is not even like the AFSCME unions that serve state and local workers.

Also, federal civil service employees do get fired, laid off, reassigned to lesser positions due to restructuring etc. It isn't as common as in private industry, but it does happen.

Bull shit !!!

Show me where he said anything about giving the work to government employees.

His was advocating holding private companies responsible for the contract they signed.

So why do liberaterians think that is so bad?

OK, I do not believe that but that comment is essentially the same type of argument you are making.

Maybe if you liberaterians were not so fundamentally dishonest in creating strawmen to attack you might win more converts.

> Show me where he said anything about giving the work to government employees.

Okay

>>In fact, the private company will almost surely do a worse job if its political connections insulate it from accountability

I am assuming that "worse job" includes an implied "than govt employees" unless someone wants to argue that the better job was going to be done by elves.

Or, perhaps someone wants to argue that govt employees don't have any political clout.

One of the issues often ignored is that there is no effective way to determine responsibility in government contracting. Who had the design responsibility?

We had a highway construction fiasco in our state which is still not resolved. The new road (and associated sound walls) began to settle and crack even before the road was opened. The politicians called for the contractor's head, but their defense was that they had constructed according to the state's plans and specifications. In fact, the design was done by state workers, and, as far as I know, there were no repercussions for the abysmal geotechnical engineering that lead to the debacle.

But, of course, the taxpayers shell out for the repeated reconstruction.

Contractors should be responsible for their work; but when responsibility is spread so widely there is infinite room for finger pointing. Compounding the insanity is the arcane accounting practices used to allocate costs in large procurement contracts.

Not to change the topic, but have all of you gone to http://2006.weblogawards.org/2006/12/best_business_blog.php
and voted for Ms. Galt's blog? If not, go now and remember you can vote once a day until voting closes on December 15. (I'm assuming our hostess is being shy this year by not mentioning it herself.)

The problem with government contracting is poor discipline on the part of the government. This is not on the part of the contracting officers but on the technical or operational side. Those with influence over the contract, read management, can't seem to take the time to write a clear, enforceable statement of work, and when awarded, can't resist changing the specifications constantly. Eventually, there is delivery but the product isn't up to what was hoped for. But it generally lies within the vague specifications or performance could be enforced but management and the lawyers find it easier to let it go than answer the persistent inquiries. The problem is the drive is to get the contract awarded before the money disappears so no one wants to take the time to develop precise specifications based on a real world assessment in the front end. There are always excuses for poor outcome but there is no excuse good enough to justify not getting the money obligated. In contract award, sooner is better so that senior management can report accomplishment. By the time the failure is apparent, the manager will be promoted or the emphasis will be on something else.

JKB,

Spoken like someone who has been there. I'd just like to add that most of the problems you mention are worked out in a year or two. My experience is that the contracts that have been around for a few years tend to function quite smoothly. Partially because the bugs have been worked out, and also because the actual work force doesn't change much even when the contractor changes.

There is no defense for shoddy work from private contractors. However, it is the buyer's responsibility to see that the contract is well constructed and faithfully fulfilled. In the case of the Coast Guard ships, if the contractor has not met the terms of the contract, then the government managers of the contract bear the primary responsibility. In this case, the managers now have to take action to see that the contract is fulfilled.

Shoddy work is nothing new. It happens even between two private parties, but in the private sector contracts, shoddy work is rarely rewarded (and often leads to breach of contract disputes) as it often is in private/public contracts. One cannot but help conclude that the problem is in the public sector's relative lack of accountability.

Yancey Ward writes:

However, it is the buyer's responsibility to see that the contract is well constructed and faithfully fulfilled. In the case of the Coast Guard ships, if the contractor has not met the terms of the contract, then the government managers of the contract bear the primary responsibility.

You mean, "buyer beware?" Caveat emptor barely applies in modern contract law. A quick perusal of my contracts casebook reveals no legal or policy justification for putting the lion's share of the burden on the buyer. Certainly there is no legal presumption of such. In general, allocation of contractual duties gets worked out in negotiations unless some preexisting statutory/administrative requirement applies.

One cannot but help conclude that the problem is in the public sector's relative lack of accountability.

And one could just as easily conclude the problem is in the private sector's relative lack of compunctions with defrauding the government.

Yancey,

I believe this post is inspired by Krugman's comments a few days ago about the administration's love of outsourcing government. Krugman's point being that outsourcing is subject to corruption.

And it occurred to me that Krugman does have a point, though not necessarily the point he wanted to make. Once resources are removed to the commons, they are subject to the motivations of the commons. Trying to contract the resources back to the private sector will not necessarily work any better than leaving them entirely in the public sector because the contracts themselves are subject to the motivations of the commons.

Immorallist,

You speak like a lawyer, only seeing things after they have gone bad. Mostly in private business, people steer clear of dangerous deals. You never see those cases because the trouble was averted earlier on. I work in international trade and we vet our suppliers with a careful eye BEFROE WE SIGN ANY DEALS.

Note that I mean an actual owner visits the supplier, etc., not some pro-forma inspection company.

Comments are Closed.