Government Contracting

A Public Solutions Handbook

Robert Shick, Robert A Shick, Robert Shick, Robert A Shick

• Publisher: Routledge
• Year: 2015
• Topic: Politics & International Relations
• eBook ISBN:
  9781317414940
• Subtopic: Government & Business
• Index: Politics & International Relations

Government contracting is one of the most important issues facing federal, state, and local governments. As governments contend with lower tax revenues and a growing belief that smaller government is better government, contracting has become a fundamental means of providing goods and services to citizens. This volume, which is geared toward practitioners as well as students, addresses the broad range of issues that comprise government contracting – from the political, economic philosophy, and value of contracting – to the future of government contracting.

Throughout the volume academic theory provides a foundation to address practical subjects, including the contract process, monitoring and evaluating contracts, ethics, and both federal and state local government contracting. Contributors to this volume are both academicians and practitioners, who together offer their scholarly expertise and practical experience, encouraging readers to ask the very question "What is the role of government in American society?" Through this approach, students will acquire the knowledge needed to understand the various aspects of government contracting, and practitioners will enhance their public procurement skills. Government Contracting is ideally suited to MPA students, practitioners in the public sector, and elected officials looking to enhance their understanding of privatization and contracting in order to provide public services more effectively.

Part I

Government Contracting Theory

1

Political and Economic Philosophy and the Value of
Contracting

Lynne A. Weikart

INTRODUCTION

Contracting out is extremely controversial in America. Contracting out usually involves “competition among private companies in a bidding system to perform traditional government activities, such as sanitation and highway maintenance.”¹ The rationale for using another sector (private or nonprofit) to provide government goods and services is that competition will reduce costs and improve quality. It helps to understand the development of contracting out in this country because our political and economic institutions shape the process of contracting out. These institutions are comprised of the formal and informal rules of the game, and the rules have changed at critical times throughout our history.

Three major events in history helped change the rules of the contracting game. The first change began in 1776, when Americans challenged the British to think differently—that all mankind had inalienable rights. These ideas, taken from prominent political and economic theorists such as John Locke and Adam Smith, set the stage for a new kind of government: one of consent. The second change occurred with the near collapse of capitalism and the subsequent election of Franklin Delano Roosevelt (FDR) in the midst of the Great Depression with the people saying, “Do something, do anything.” And FDR proceeded, with the help of the economist, John Keynes, to put into place the 20th-century federal model of a quasi-safety net for Americans. The third change started with the election of President Ronald Reagan (RR), a follower of economist Milton Friedman. Ronald Reagan argued that government was not the solution; it was the problem, and he proceeded to devolve some federal government services to the state and local level.

These historic events carried the seeds of turmoil; in each era, a transformation began that changed the relationship between citizens and their government. Contracting out is an essential part of that relationship. Although contracting out for goods and services by government officials has existed since America’s inception, our views about contracting out have shifted dramatically over time, just as our economic views have changed throughout our history. This chapter examines the ideas behind contracting out and explains why Americans, throughout much of their history, have held the belief that contracting out is much more effective and efficient than government services.

POLITICAL IDEAS

America’s founding fathers were students of the enlightenment. In fact, the portraits of three philosophers from the enlightenment—John Locke, Francis Bacon, and Isaac Newton—hang in Monticello, the home of revolutionary Thomas Jefferson. John Locke wrote about the social contract, the relationship between society and government in which men consented to be governed. Jefferson used Locke’s theories to justify his opinion that Americans had a natural right to rebel against the British and form a new nation. Francis Bacon, the father of the scientific method, informed Jefferson’s study of agriculture on his plantation. At the same time, Bacon’s thesis of religious tolerance had an enormous influence on Jefferson. Jefferson used Newton’s mathematical interpretation of the physical world to understand the non-physical world. Jefferson believed that scientific principles could help create an ordered, predictable, law-governed political world that followed scientific principles.

John Locke (1632–1704), in his theory of the social contract, advocated religious tolerance and man’s reason and tolerance. Locke referenced a specific value system. He believed that the state of mankind’s nature was good, and he argued that the social contract made between government and citizens meant that every man had a right to defend his life, health, liberty, or possessions.² In effect, man could learn to govern himself. And he believed that the government’s duty was to protect the rights of the individual. At the same time, Locke advocated revolution if government became a tyrannical force against its citizens.

Political philosopher Thomas Hobbes (1588–1679) outlined his own contradictory view of the social contract. Hobbes theorized that humans are exclusively self-interested, that people act only their own best interests as they perceive them. Unlike Locke, Hobbes believed that human beings could be rational, that they pursued their desires as efficiently and maximally as possible. Hobbes had a set of values he applied to his writing—the state of nature was brutal and mankind could only survive through a strong monarchy.³

Although Hobbes had his admirers, most Americans turned to Locke’s ideas during the revolution. Distrust in a powerful government and the belief in human progress were influenced by Locke. The American revolution of 1776 was about getting the British government off the backs of a people, a people who wanted to form their own small government. And it stayed small for a reason. Americans believed in laissez-faire, a product of the enlightenment, which called for freedom from government restrictions, and the form of government, which caused them to come to America.

In the 19th century, adding to the laissez-faire approach was the concept of Social Darwinism. Charles Darwin’s On the Origin of Species, published in 1859, created the idea of “survival of the fittest” even though Darwin never used those words. Social Darwinism fit easily into Hobbes’ theory of a brutal society. It did not take long for Darwin’s theory to be extended so that people could rationalize their wealth. After all, if one believed in Darwin’s theory of natural selection, then the strong should see their wealth and power increase while the weak should see their wealth and power decrease. People had to create their own pathways to survival. Social Darwinism fit nicely with the philosophy of Adam Smith—allowing the market to determine success and failure in the business world. In order to survive in the business world, a business leader had to defeat their competitors.

In the 20th century, a different kind of revolution took place in America. President Franklin Delano Roosevelt (1882–1945) took control of the federal government (1933–1945) in the midst of the greatest depression America had ever experienced. Roosevelt (FDR) delivered government intervention in a big way—controlling prices and hiring a large number of the unemployed to work in federal work programs. “Enlightened business is learning that competition ought not to cause bad social consequences which inevitably react upon the profits of business itself. All but the hopelessly reactionary will agree that to conserve our primary resources of manpower, government must have some control over maximum hours, minimum wages, the evil of child labor and the exploitation of unorganized labor.”⁴ He instituted the New Deal and changed the country from a laissez-faire approach to an interdependent one—federal government working with the states and local governments to deliver desperately needed services to the millions of Americans who had been left without work. FDR led the expansion of government. The size and number of government agencies increased enormously for the next 50 years. Large regulatory agencies were created that oversaw corporate impact on banking, environment, and a host of other arenas.

Views about government contracting shifted again during the Reagan era. President Reagan characterized government as the problem. From his presidency (1981–1989) came a renewed cry to eliminate fraud and inefficiencies in government services by contracting out more not less because the business community was believed to be more efficient and less corrupt. The idea behind contracting out in the Reagan revolution was that a “contractual relationship would give the public sector all the advantages of the market without undermining the level of public service.”⁵

ECONOMIC THEORIES

The classic political ideas that underlined a traditional economic model of free enterprise held sway in America until the Great Depression. The free market advocated by Adam Smith (1723–1790) has long held Americans in awe. Adam Smith, the founder of capitalism, held that mankind’s self-interest could lead to better outcomes: “beneficial outcomes are achieved not by an appeal to the benevolence of individuals, but by the direction of the self-interested actions of individuals by an invisible hand” (of the market place).⁶ “It was the inherently selfish and competing interests of individuals that can never be reconciled by an interfering government except through the free allocation of resources and rewards in the marketplace.” Businesses could become quite ruthless in the pursuit of survival. Of course, Adam Smith warned that a business-dominated political system would allow a conspiracy of businesses and industry against consumers, with the former scheming to influence politics and legislation “in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public . . . The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention.”⁷ But Americans paid little attention to Smith’s warning. They were much more interested in Smith’s “invisible hand of the marketplace.” This free-market orthodoxy existed until John Maynard Keynes published The General Theory of Employment, Interest, and Money in 1936.

Keynes wrote at a time of the need to control concentrated private economic power, powers that dominated government and permitted enormous suffering of working people. Keynes’ General Theory introduced that idea that full employment could only be maintained with the help of government spending. Keynes advocated for deficit spending during economic hard times to maintain full employment. Government was a tool to be used to aid the private sector. Keynes emphasized “the role of governmental fiscal intervention in stabilizing the business cycle, thereby improving the economic outcomes.”⁸ Keynes was the economist whom Roosevelt relied upon to use government as a tool to boost the American economy in the midst of the Great Depression, and his theories laid the groundwork for the American quasi-welfare state. Keynes’ view of a prominent role for government may have been revolutionary but it was not to last. In the life of the nation, Keynes economic ideas were very much in a minority. What we need to understand is that Keynes’ theory of government intervention has been the exception not the rule in America’s history. Keynesian theories continued through Presidents Truman, Eisenhower, Johnson, Nixon, and Carter. President Johnson’s Great Society had the same goals as Roosevelt—to use government services to end poverty. And after 50 years those ideas were replaced with classical economics once more.

A number of economists played important roles in the great revival of classical economics between 1950 and 2000, but none was as influential as Milton Friedman, whose views toward Roosevelt’s government intervention were quite stark: “When everybody owns something, nobody owns it, and nobody has a direct interest in maintaining or improving its condition. That is why buildings in the Soviet Union—like public housing in the United States—look decrepit within a year or two of their construction.”⁹ Milton Friedman was reacting to the rise of communism, which advocated for state control of production. He and President Reagan were in complete agreement, and it was Reagan’s election in 1980 that signaled the dominance of Friedman’s ideas and the decline of Keynesian theories. Simila...

Table of contents

• Cover Page
• Government Contracting
• Series
• Title
• Copyright
• Contents
• List of Figures
• List of Tables
• List of Contributors
• Series Editor’s Introduction, Marc Holzer
• Introduction, Robert A. Shick
• Part I Government Contracting Theory
• Part II Issues in Government Contracting
• Part III Government Contracting: Ethics, Management and Governance
• About the Editor and Contributors
• Index