Reliance on Contractors is Likely Here to Stay

Paul R. Verkuil has written a very important book about a dramatic transformation that has taken place in the federal government. As the number of civil servants has remained constant, the number of government contractors has increased dramatically. In Valuing Bureaucracy: The Case for Professional Government, Verkuil observes that the “use of contractors in the federal, state and local governments rose from 6.2% in 2005 to 11.9% in 2015” and that “the current federal services contractor budget is around $250 billion.” Verkuil concludes that we need to be concerned about this trend, because contractors have become the “fourth branch of government” that is taking over missions and decisions that are inherently governmental.

What has led to the creation of this so-called fourth branch? The answer lies in a combination of structure and politics. A lead culprit is the antiquated civil service system. It simply takes too long to hire the kind of people needed in today’s government in which professionals have replaced clerks. The result is growth in the number of contractors, many of whom are doing the same work as civil servants, and growth in the number of positions in the federal government that are exempted from civil service requirements.

But there are political reasons as well. For Republican Presidents in recent decades, especially George W. Bush, having the private sector do public work was a matter of ideology as much as it was a matter of practicality. But even Democratic Presidents worked to avoid the big government label. In his 1996 State of the Union address, President Bill Clinton declared that “the era of big government is over,” a statement that grew out of the so-called reinventing government—or New Public Management—movement that sought to have government do more steering and less rowing.

For Verkuil and others who have addressed this problem, most notably John DiIulio Jr. and Don Kettl, the growth in contracting has contributed to the de-professionalization of government. According to DiIulio, government has become a “leviathan by proxy.” The problems from too much contracting  out range from unknown cost comparisons—or what a given mission would cost if performed by government personnel—to regulatory capture to rent seeking and political contributions by contractors. Verkuil does not see a problem with “using contractors to assist government officials,” but rather with contractors who “displace, or act without adequate oversight from, government professionals—in effect, when they become a branch of their own.”

To address these problems Verkuil advocates “infusing more talent in government itself.” He makes a strong case for civil service reform and for “insourcing” or returning jobs to government, something the Obama Administration advocated.

These are sensible reforms that need to be undertaken. But there is another side to the contractor debate which goes to the question of whether reliance on contractors is inevitable.

Beginning in the late 1990s, the federal government began to catch up to the private sector in the use of information technology (IT). This means that entire areas of government have been computerized—displacing thousands of workers who used to keep paper files or punch cards. To do this the government has had to rely on outside contractors to build the complex IT systems that allow the government to operate in the 21st century. Of course, many of these systems have become case studies of contractors run amok—which proves the need for much more sophistication in contract oversight, as Verkuil argues.

This brings us to a second point. The sophistication needed to oversee the contracting of large-scale IT systems is not available at the prices the government is able to pay. Until Congress and the American people allow civil service salaries to be competitive with the private sector—as has happened in Singapore—the talent that Verkuil wants to bring into government will not go there.

There are also some advantages to contracting out for government services. In certain very difficult policy areas, flexibility and innovation are important. Most social services in the United States are run at the state and local level and contracted out. By definition, social service problems are complex issues for which there are few formulaic answers. In an ideal world, contracting out services such as drug treatment would allow for innovation and learning—and, this sometimes happens. But all too often so-called oversight consists of counting the desks in the office, instead of evaluating effectiveness and rewarding innovation.

For a variety of political and structural reasons, heavy reliance on government contractors is most likely here to stay. The question boils down to figuring out what is “inherently governmental.” The suspicion voiced by intelligent and experienced actors like Verkuil is that contracting out has gone too far and that we have given over the government to private entities.

But, frankly, we do not know if this is a good thing or not. Finding out, however, is a worthy goal. To do so would require something like a presidential commission tasked with looking at every major component of the federal government, identifying what functions are actually being contracted out and which are not, and then judging whether each function is inherently governmental or not.

We may find out that the problem Verkuil addresses is worse than we think, or we may find out that it is not as bad. Given the stakes, however, it is well worth the effort to find out.

Elaine Kamarck is a Senior Fellow in the Governance Studies program as well as the Director of the Center for Effective Public Management at the Brookings Institution and a Lecturer at the Harvard Kennedy School of Government. She also served in the Clinton White House, where she worked on the “reinventing government initiative.”