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Government by Contract


Tags InterventionismPolitical Theory

This morning's New York Times reports on the growing trend of outsourcing government activities via contracting duties to private firms. The result is an increasingly common accounting trick, in which the state can expand its activities while both reducing its size and increasing the scope of activities that occur without public scrutiny. And like most every other aspect of government during the Bush II era, spending on federal contracts has almost doubled, from $207 billion in 2000 to about $400 billion in 2006.

An excerpt:

The most successful contractors are not necessarily those doing the best work, but those who have mastered the special skill of selling to Uncle Sam. The top 20 service contractors have spent nearly $300 million since 2000 on lobbying and have donated $23 million to political campaigns. "We've created huge behemoths that are doing 90 or 95 percent of their business with the government," said Peter W. Singer, who wrote a book on military outsourcing. "They're not really companies, they're quasi agencies." Indeed, the biggest federal contractor, Lockheed Martin, which has spent $53 million on lobbying and $6 million on donations since 2000, gets more federal money each year than the Departments of Justice or Energy.

There is little evidence that government by contract will be curtailed anytime soon—the top 20 service contracting firms in the U.S. provided $82 million on lobbying contributions in 2005 alone. Indeed, it has become one of the more popular schemes through which taxpayer dollars flow back to the political class and promote its entrenchment.

But the practice may have a saving grace. The Times article also noted that "[a] just-completed study by experts appointed by the White House and Congress, the Acquisition Advisory Panel, found that the [outsourcing] trend 'poses a threat to the government's long-term ability to perform its mission' and could 'undermine the integrity of the government's decision making.' "

Christopher Westley a professor of economics in the Lutgert College Business at Florida Gulf Coast University and an associated scholar at the Mises Institute.

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