Extensive Outsourcing Leads to Trouble
Thursday 31 March 2011
by: Paul Krugman, Krugman & Co.
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There’s a new article in the March/April edition of the Washington Monthly making the point that the United States needs federal bureaucrats to manage spending, including spending on private contractors, and that understaffing the government — which we’re doing already, and will do more of if the right gets its way — actually increases the deficit. I agree.
“In practice, cutting civil servants often means either adding private contractors or ... resorting to the belief that industries have a deep capacity to police themselves,” John Gravois writes.
“Strange as it may sound, to get a grip on costs, we should in many cases be hiring many more bureaucrats — and paying more to get better ones — not cutting their numbers and freezing their pay.”
And — perfect timing — we have a new report from the bipartisan Commission on Wartime Contracting, which found that tens of billions of dollars have been wasted on undersupervised contractors in Iraq and Afghanistan. According to the report, “although no estimate captures the full cost associated with this waste, fraud, and abuse, it clearly runs into the billions of dollars.
Yet, for many years the government has abdicated its contracting responsibilities — too often using contractors as the default mechanism, driven by considerations other than whether they provide the best solution, and without consideration for the resources needed to manage them.”
What’s happened in American political discourse is that constant repetition has drilled in the message that government officials are always engaged in pointless activity, and that private is always better — even if you’re hiring private contractors to do government work, which means that there’s no market competition. None of this is true. Federal offices, in my experience, are quite thinly staffed and overstretched, despite having very real jobs to do. And the experience with outsourcing to contractors has been mixed to bad across the board.
The thing is, any private corporation would have no trouble understanding the argument that you need more auditing, more supervision, to keep costs under control.
But when it comes to government, the myth of the useless bureaucrat persists. Of course, that’s the way the contractors like it.