Spiraling Federal Contract Spending

Someone asked me how much of the US budget went to contractors.  It looks like about 1/3, it may have changed since 2012 though.

The total US Budget in 2012 was $3.54 Trillion, so
it looks like about 34% if this source is even close.

Those who advocate for reduced federal spending may be missing the notion that it would result in reduced contracting, reduced (federally funded) private sector jobs. Major employers in the US build weapon systems, fighter jets, cargo planes, warships, as well as IT and other service type companies that build government systems and provide support to government functions.

Some  miss the fact that some of the government 'failures' are also partly private industry failures.  It's government's failure not to detect and cut off the failing federally funded private industry projects, but those who clamor for running the government more like business..... they are placing too much faith and credibility in the private sector where money may trump mission.  The track record of contractors in government is littered with a sufficient history failures and fraud to suggest that contractors are no panacea in providing government services and functions any better than federal employees can, and do.

Privatizing Government Functions: Is it working?

In 1996, under the rubric of ‘reinventing government’, the Clinton-Gore Administration decided that some functions of government that were previously defined as “inherently governmental” were now appropriate to be outsourced to the private sector.  At that time The Office of Personnel Management (OPM) was responsible for conducting security clearance investigations for most Federal agencies.  This function was selected for privatizing.

According to Bloomberg.com:

….The unit, originally known as U.S. Investigations Services Inc., was privatized in 1996 as part of then-Vice President Al Gore’s effort to “reinvent” government by reducing the size of the civil service, according to a 2011 report by the Congressional Research Service.

Contracting out security reviews was designed to help save the government money and secure new work for about 700 investigators who would no longer be needed because of a declining security clearance workload due to the end of the Cold War.

USIS was given a non-competitive, three-year contract for investigative work with the government personnel office and granted free access to federal computer databases that weren’t available to other firms.

The Carlyle Group LP, a Washington-based private equity firm, and New York-based Welsh, Carson, Anderson & Stowe LP invested in USIS. They agreed in 2007 to sell USIS to Providence, Rhode Island-based Providence Equity Partners for about $1.5 billion. ¹

That was then.

Now, it appears that USIS may have been cheating on the investigations².  To meet the contract performance criteria (and to earn executive bonuses), it is alleged (by a whistleblower and the Department of Justice) that they engaged in practices that did not fully complete the work on investigations, perhaps on as many as 600,000 investigations.  They allegedly provided false information to OPM, and to the agencies that made the final decisions about granting clearances to candidates.

It appears that USIS conducted the clearance investigations for the Navy Yard shooter as well as for Snowden.  The Navy Yard murderer of 12 federal employees and contractors, had enough documented derogatory information about his military misconduct, arrests, and mental problems that should have been discovered through a THOROUGH investigation.  The same level of quality work may also have been true for Snowden.  At this point these specific allegations have not been proven, but it will be played out in court in the coming months.  However, there have been proven fraud cases involving USIS and other investigation contractors where employees filed false reports, including one that claimed to have interviewed a person who died 10 years earlier.

So, here we have ‘reinvented government’ using contractor employees and managers who earn bonuses, and investors who earn returns by ‘just’ doing the job that federal employees formerly did ‘just’ for their GS-salaries.  So, it isn’t necessarily CHEAPER. The lure of bonus money and returns on investment for this now - $1.5+ billion dollar industry doesn’t necessarily yield BETTER results either. It seems to me that the only thing that has been achieved are the political bragging rights for appearing to have “reduced the size of government”.

Before we fix or reinvent a dysfunctional thing, we should make sure we understand the root cause of the thing’s dysfunction, before we get on the Road to Abilene³.  Clinton-Gore put us on the road.  I’m not sure if you agreed to go.  I didn’t, but here I am, looking for a way to get back home from Abilene.

1 http://go.bloomberg.com/political-capital/2013-09-19/usis-navy-yard-shooters-background-check-wasnt-ours-others-silent/)

2 http://www.justice.gov/opa/pr/2013/October/13-civ-1158.html

3 http://en.wikipedia.org/wiki/Abilene_paradox