Conservatism Torpedoes the Coast Guard
Paul Krugman’s column this morning, “Outsourcer in Chief,” makes a huge point that every Democratic presidential candidate should pound away at to discredit the conservative ideology that their Republican opponents will surely embrace. Here’s my shorthand version of the argument: everyone knows that conservatives say they believe in a strong defense to make Americans safer, along with smaller, more efficient government. But over and over again, those goals have been undermined by the right’s equally strong commitment to the idea that the private sector is inherently more effective than the public sector. The right’s think tanks have argued for years that when contracting out work, the government should impose minimal oversight because Adam Smith’s invisible hand will see to it that the public will benefit from innovation, high-quality, and low cost. Bureaucratic oversight only gums up the works. But in practice, the inattentiveness of the Bush administration’s agencies to what its private contractors do with the taxpayer’s money – an inattentiveness that conservative ideology insisted would be beneficial to the public, not just the contractors themselves – has demonstrably weakened America’s defense, made us less safe, and wasted many billions of dollars.
Among the examples Krugman cites, and you could fill a book with them, this weekend's outstanding Times story documenting the Coast Guard’s disastrous modernization program is a microcosm that should give pause even to voters who once bought the conservative party line. In this case, everyone can recognize the desirability post-9/11 of upgrading an aging fleet of ships, planes, and helicopters. But instead of managing what began as a $17 billion modernization program directly, “the Coast Guard hired Lockheed Martin and Northrup Grumman, two of the nation’s largest military contractors, to plan, supervise and deliver the new vessels and helicopters.” Delegating that authority to the private sector is not merely a matter of paying off generous contributors to the Republican Party, it’s exactly the approach that places like the Heritage Foundation have argued for years would save money by bypassing bureaucrats and red tape. But the results in the real world couldn’t have been much worse – systematic design flaws leading to such problems as cracked hulls, faulty electronics, and planes that can’t fly in bad weather. Cost overruns were rampant. Reporter Eric Lipton visited the Key West shipyards on a day when six of the eight converted patrol boats were broken down or out of service. Feel safer?
Al Gore’s reinventing government efforts, which were aimed in part at trying to figure out the most effective approaches to contracting out government work, produced a lot of reform ideas that would bore normal people to tears. But by and large, those ideas helped make progress in minimizing the kind of cost overruns and shoddy work that have since become pervasive in the Bush administration. Like so many other ideas that the right has peddled over the years, its arguments about using government contracts to unleash virtuous free market forces sound a lot simpler and sexier than the progressive’s side’s immersion in the complexities of real-world experience. But those conservative ideas are failing in practice.
Democratic politicians need to take on not just Republicans, but conservatism itself.
Well first Northrup and Lockheed should face sanctions of some kind. Maybe a moratorium on government contracts for 2 years. If it were me I would tell Northrup and Lockheed "you said you could deliver "x" number of planes and ships for an agreed upon amount. The goods you delivered are not of satisfactory quality therefore you still need to make good on your contract at no additional cost.".
But to get to the larger point on privatization it is contingent on the government to oversee the process. All-inclusive, no oversight contracts like the one handed out in the Coast Guard example, should NEVER be awarded again. EVERYTHING needs to be opened up to competitive bidding and every penny spent needs to be spent wisely and accounted for...and the only party who can ensure that is the buyer. Contracts need to be competitively bid out and the winners of those contracts should be expected to deliver the goods per the specifications of the contract at the agreed on price or be barred from getting taxpayer funded contracts in the future, no matter how much those company's lobbyists try to influence the process. Because while this is a great example of the need for government oversight it is even a stronger case for making real lobbying reforms.
December 11, 2006 10:36 AM | Reply | Permalink
...because Adam Smith’s invisible hand will see to it that the public will benefit from innovation, high-quality, and low cost.
Funniest line I've seen all day. Thanks for including it.
You're spot on about our weakening defense establishment. I'm a "liberal" who believes in a strong defense. The trashing of our military with the Duke of Nuke's transformation combined with the weak oversite has severely damaged our military for years to come. Yet another tragic blunder by the gang who couldn't shoot straight.
Sam ThorntonDecember 11, 2006 1:36 PM | Reply | Permalink
Al Gore’s reinventing government efforts, which were aimed in part at trying to figure out the most effective approaches to contracting out government work, produced a lot of reform ideas that would bore normal people to tears. But by and large, those ideas helped make progress in minimizing the kind of cost overruns and shoddy work that have since become pervasive in the Bush administration. Like so many other ideas that the right has peddled over the years, its arguments about using government contracts to unleash virtuous free market forces sound a lot simpler and sexier than the progressive’s side’s immersion in the complexities of real-world experience. But those conservative ideas are failing in practice.
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Having worked in the belly of the beast of Federal procurement for many years, I have to say that the Clinton Administration cut the guts out of procurement oversight. Look here:
http://www.census.gov/govs/www/apesfed.html
Most contract administration is done by civilian employees. I can't speak specifically to the Coast Guard, but on the DoD side the people who have the job to supervise contracts were often let go.
Federal civilian employment - National Defense Sector
1993 - 926,000
2000 - 695,000
Those working on defense contracts during the Clinton years saw a marked decrease in the amount of oversight.
December 11, 2006 2:23 PM | Reply | Permalink
So, your point??
Did Clinton expend a half a trillion and thousands of lives losing an unnecessary war, while flushing the US international image, influence and the Constitution, down the commode?
December 11, 2006 4:16 PM | Reply | Permalink
El Campesino,
Among the National Performance Review's reforms was replacing a highly regimented and rule-based procurement process, which involved heavy layers of bureaucracy, with one in which government officials responsible for overseeing contracts focused on results in meeting specified goals. Steve Kelman, who was responsible for implementing procurement reforms, wrote a terrific book about this and the challenges connected to it. The decline in government staffing followed logically from those reforms. But it doesn't follow that oversight declined--just the opposite, actually. And the proof is in the pudding --better bang for the taxpayer buck in contracting results. --Greg
December 11, 2006 5:12 PM | Reply | Permalink
Also, of course, that was the period of the post-Cold War peace dividend, when defense spending and civilian defense employment declined a lot. --Greg
December 11, 2006 6:12 PM | Reply | Permalink
According to the Times article (and there is also a good one at Washington Post), the contract gave more responsibility to the contractors and less to the Coast Guard than usual. But it also says that the Coast Guard failed to exercise the oversight that the contract did allow, sometimes not even staffing positions/committees.
December 11, 2006 6:40 PM | Reply | Permalink
I'm going to dissent from the reigning orthodoxy here and say that there is nothing inherently wrong with private contracting of functions that could also be done by government agencies. It may, under the right circumstances, even be beneficial. The government outsources many billions of dollars of functions and contracts with thousands of firms. As someone who works in the IT services business, I can tell you that the level of oversight on most technology contracts is much higher than in most contracts with business clients. Working for the government is generally LESS profitable than working for businesses.
So the problem with these high-profile contracting fiascos is not the contracting. It's the oversight. All these stories of contractors run amok are the result of the government abdicating its responsibility to provide meaningful oversight. What's interesting is why this should have happened. It used to be that conservatives prided themselves on being sober, tough stewards of the public purse. They made great hay saying that it was liberals who were loose spenders and who didn't believe in oversight. And for a time, they were right.
So what happened?
It seems clear that "conservatism". by which I mean movement conservatism, fell victim to fanaticism. It wouldn't be the first time that a movement or ideology that had some core insights that were true and valuable got hijacked by people who didn't see the limits of their worldview. Thus the market is not only a more efficient allocator or resources in the economy as a whole, it is always more efficient in every circumstance. But even a cursory look at the evidence will tell you that's not true. Medicare, to take an obvious example, is much more efficient than private health care.
December 11, 2006 8:10 PM | Reply | Permalink
Should the government's bottom line be judged for its efficiency or its effectiveness? Governments are not supposed to compete with the private sector, anyway. The government's job is to deliver services effectively, not to make profits.
Take a non-obvious example. A school bus company owned by the private sector is going to hurt its bottom line by driving 20 miles down a dirt road to pick up 2 kids and deliver them to school and back. So what happens if nobody wants to pick up those kids? The government, without a profit motive behind it, will effectively deliver those kids to school.
An effective government can probably only achieve medium efficiency, when judged by private sector standards. Now the conservatives have proven that the private sector does not deliver effectiveness, by anyone's standards. (And I'm not too sure of their efficiency, either, once below the CEO level.)
"I don't want to say that George Bush is a lame duck, but this morning, Cheney shot him". Bill Maher
December 11, 2006 9:40 PM | Reply | Permalink
Take an obvious example. For the sake of experiment, hire a guy to mow your lawn for a season on the cost plus fee basis, and, experimentally, do not bat an eye upon receiving 500 dollar billing for mowing your half acre in the month of May, and offer thanks for hard work and dedicationm plus the required 1000 dollar check after receiving June bill.
Is it conceivable that free market or not, the bill for September will reach 6 digits while the grass will reach the height of several feet (I am assuming a rather rainy summer)?
December 11, 2006 11:23 PM | Reply | Permalink
I'm going to dissent from the reigning orthodoxy here and say that there is nothing inherently wrong with private contracting of functions that could also be done by government agencies. It may, under the right circumstances, even be beneficial.
"Under the right circumstances" Brad? Is that like "in a perfect world"? Are you basing this conclusion on the fact the people who get the functions contracted to them are always going to put the best interests of the contracting party over their own? In the case of the Coast Guard it is quite obvious that Lockheed and Northrup put their own interests before the Coast Guard's and accordingly the American people's. And without oversight that will be the rule and not the exception, costing the taxpayers much more than the so-called "inefficient bureaucracy" would...see, I don't trust corporations to do what is in my best interests. Logic dictates I would expect them to do what is in their best interests. And those interests are almost always at odds on some level...
December 12, 2006 8:58 AM | Reply | Permalink
The thing that strikes me with the Coast Guard story is that Bush has made no bones about hiding the fact he will support big business any way he can. The last six years have seen the administration baldly cater to the business community and the contacts to Halliburton, Carlyle, Bectel and so on are right out in the open. It's like Bush is giving control of government over to the large corporations. Or using government to meet the profit goals of the corproations. With no significant oversight, the bottom drops out of efficiency and standards.
When the bus company didn't want to come down our dirt road to pick up our kids, they told us that they never had done a pick-up on our road. I asked them why there was a bus stop sign on the road and the town had spent 10k putting in a turnaround. No response. What is the response from the companies that are found to be late delivering on contracts, way over budget and doing shoddy work?
December 12, 2006 11:10 AM | Reply | Permalink
This whole argument just shows how there is no practical basis for the conservative unregulated market orthodoxy. Simply put, when there is no bureaucratic oversight of goverment-contracted work, how do we make the supplier accountable for cost overruns and shoddy work? What self-correcting mechanism is in place to ensure delivery of quality products and services? Without self-correction, the entire paradigm breaks down.
But the conservatives know that. They just think that it's better to let greed reign free, even at the expense of our health, our environment, or even our security.
December 12, 2006 11:11 AM | Reply | Permalink
This is all very funny. It is as if you took the right's suggestions for contracting out at face value. Why would you do that?
First, and foremost, contracting out is the "solution" to a "problem" created from 1880 through 1940, the protection of public employees from political manipulation. Such protection rendered old fashion patronage out of reach to the typical politician. When did "contracting out" start? Not, as some people suggest, in the 1960s and 70s. It has ALWAYS been with us, and always been a method of patronage. BUT, it gained new footing at the END of WWII, not long (in the big scheme of things) after the passage of the HATCH ACT (the final slamming of the door on patronage use of personnel).
For the most part, the right doesn't believe in government. The less the government does, the better off they think we are. For god's sake, they are not lightly disguised libertarians, they aren't disguised. They can be divided into US and THEM. From their point of view, US (the right) should not be governed AT ALL, while THEM (you and me) can be rigidly governed by an authoritarian government so long as US stay in power. Crappy incompetent government delivered by patronage awarded contractors who keep the right in power is precisely the point. That isn't a mistake, it is the purpose.
December 12, 2006 8:12 PM | Reply | Permalink
When the ideology of the ruling party is a hatred of government, it's no surprise that they won't be good stewards of private contractors they hired. It's going to take years to recover from the damage done by the zealots brought in by the Gingrich revolution at the legislative level and the Bush junta at the executive level.
In the Cold War we were warned about Communist radical insiders destroying our government but the radicals of the right wing did much more damage in far less time.
December 12, 2006 10:50 PM | Reply | Permalink
One other thing:
Does anyone know if Wal-Mart opposed increasing inspections of cargo containers at our ports?
Y'know, bad for their bottom line.
December 12, 2006 10:54 PM | Reply | Permalink
Just in time for this discussion is a story in the Indy Star on Gov. Mitch Daniels hopes/plans to privatize the Indiana state lottery.
Guess who is not in favor of the idea? Sen. Luke Kenley, Republican chairman of the Senate Tax and Fiscal Policy Committee, was notably cool to the idea and concerned about the teachers pensions if implemented.
Maybe not everyone on the right has been drinking equal amounts of the kool-aid?
"I don't want to say that George Bush is a lame duck, but this morning, Cheney shot him". Bill Maher
December 13, 2006 1:16 AM | Reply | Permalink
With respect to free-markets--
I get the feeling that new-age market-votaries (Ms. Bartriromo of CNBC is a prime example) really don't understand the snake they husband. And it is a snake, subject to long periods of quiescence and docility. When it eats, it eats all at once and we get to watch a lump (bubble) work its way down until it evacuates all at once. It has no conscience to hear appeals. When it's hungry, it's ravenous and will eat your child, and you're powerless not to watch the lump. Some get radical and try to kill it, which is equally as absurd as its worship.
The free market wants everyone to starve so that only the strongest survive to create twenty babies per woman, who get as their reward to be forties something lumps in the market's belly while three or four babies survive to keep the snake fed--a sort of ultimate ROI.
Homo sapiens, clever animal, invented civilization to control the snake to their ends.
I think new-age market-votaries, or NAMVs (pronounced namvee) as I call them, are so deeply imbedded in civilization that they can't see the snake, much less understand the implications of letting it run rampant and control all, until they simultaneously notice a lump and their missing child, that is.
December 13, 2006 2:30 AM | Reply | Permalink
But it doesn't follow that oversight declined--just the opposite, actually. And the proof is in the pudding --better bang for the taxpayer buck in contracting results. --Greg
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I'm sure Mr. Kelman wrote a very nice book, but he was not out in the factories doing the day to day work. With all due respect, sir, neither were you. I worked for two major aerospace contractors (both in the top 10 defense ranking) from 1984-2002, mostly in positions that required interface with government oversight personnel. The amount of review we had from the DoD plummeted in the 90s. We went from a regime of intrusive "waste of time" reviews to virtually none at all. I would have thought there was a happy medium but I never saw it.
From this story it appears that the Coast Guard didn't have the staff to conduct reviews. That didn't start with the Bush administration. This story sounds sadly like the botched procurement programs that have happened in every administration - Clinton's included.
December 14, 2006 12:13 PM | Reply | Permalink
So, your point??
Did Clinton expend a half a trillion and thousands of lives losing an unnecessary war, while flushing the US international image, influence and the Constitution, down the commode?
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So what does any of that have to do with oversight of procurement contracts - the point of discussion here?
December 14, 2006 12:18 PM | Reply | Permalink
Another perspective on the Clinton Administration's plans on procurement oversight here:
http://www.pogo.org/index.html
and here:
http://www.pogo.org/p/defense/do-990920-reform.htm
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Executive Summary
Overpriced spare parts horror stories from the 1980s taught us how to prevent fraud, and led to useful reforms. By the 1990s, however, defense industry interests dovetailed with Vice President Gore's Reinventing Government campaign, and new policies bypassed some of the earlier reforms.
In the name of adopting "commercial" practices, the Administration's defense Acquisition Reform effort has gone beyond cutting red tape into throwing out important protections against contractor abuse that are needed even in a more commercial environment. For example, a new greatly expanded definition for a "commercial" product has exempted many more purchases from normal oversight.
The problem has predictably begun to appear in the form of more overpriced parts stories:
AlliedSignal corporation was found to have overcharged the government for spare parts by as much as 618%. The government overpaid on the overall contract with AlliedSignal by 54.5%.
Prices were inflated by more than 1,000 percent on a variety of spare parts. For example, the Boeing price for a commercially-available $24.72 "spoiler actuator sleeve" was $403.39 - a markup of 1,532 percent. Another contractor charged $714 for an electric bell worth $46.68.
The cause - Acquisition Reform's new policies, including drastic staff cuts to oversight agencies:
The AlliedSignal cases provide examples of the government paying more for spare parts under the new "commercial" rules than it paid under the earlier reforms. As the Defense Department's Office of the Inspector General has noted, the loose definition of commercial items "qualifies most items that DoD procures as commercial items" [Emphasis added].
A Defense Department Inspector General's report indicates how adopting commercial practices has come to mean subservience to contractors and blind acceptance of their claimed costs and prices: "contracting officers shall require information ... when necessary to determine price reasonableness for commercial items, but there is a strong DoD [Department of Defense] preference not to use that mechanism and the Government has not asserted its right to have the data." [Emphasis added.]
Despite highly favorable dollar returns on taxpayer investment in oversight agencies, many of them have been gutted by personnel cuts. For example, the Defense Contract Audit Agency saves almost $10 for each dollar invested, but staff positions have been cut by 19% from Fiscal Year (FY) 1993 to FY 1997. As of 1998 the Administration scheduled it to suffer a total loss of more than 3,000 staffers - a 44% cut - over the period FY 1990 to FY 2002.
December 14, 2006 12:48 PM | Reply | Permalink