BOSTON — For two decades, Congress has been engaged in a bipartisan effort to shrink the size of government. But today, although fewer people appear on federal payrolls, more people than ever work for the U.S. government.
This seeming paradox has been achieved by hiring private contractors to perform many of the tasks previously performed by federal employees. And although it may not have resulted in a true downsizing of government, it has radically transformed the way public services are provided.
The war in Iraq has turned the spotlight on the shift. Government contractors are working in Iraq as prison interrogators, bomb defusers and armed bodyguards for U.S. officials. They've landed lucrative contracts to rebuild infrastructure and to feed American troops. And some of them have paid dearly for their service.
Paul Johnson, beheaded last month by Islamic militants in Iraq, worked as an engineer for Lockheed Martin. The four Americans whose bodies were mutilated by a mob in Fallouja worked for Blackwater Security, a "strategic support" firm that, among other things, was responsible for protecting U.S. administrator L. Paul Bremer III. More than 100 other contract employees, including about 40 Halliburton employees, have lost their lives while driving trucks, cooking dinner or cleaning up damaged oil wells. This year, the United States will spend $275 billion -- more than 10% of the federal budget -- buying goods and services from private contractors, often through contracts never fully opened to competitive bidding. Much of this work will be poorly managed and inadequately monitored, and yet private contractors have become indispensable to the workings of the government.
Nobody knows exactly how many contractors the government employs. Paul Light of the Brookings Institution estimates that the federal budget funds a "shadow government" of nearly 6 million contractors, about half of them in defense. That means contractors outnumber civil servants and military personnel by a ratio of 2 to 1.
In Iraq, there are at least 50,000 private security contractors working for KBR (a Halliburton subsidiary), Bechtel, Kroll, Blackwater and others. In some cases, U.S. companies have recruited these workers from the ranks of mercenaries in Chile, South Africa and other countries.
Contractors are so integral a part of U.S. government operations that it is hard to imagine federal agencies running without them. They provide support services, like processing claims and running computer systems. And they do more exotic jobs: gathering top-secret intelligence for the CIA, investigating fraud and abuse, building warships and helicopters and launching weather satellites. It was a government contractor who issued student visas to two Sept. 11 hijackers -- and notified a Florida flight school of the issuance six months after they crashed their planes into the World Trade Center.
The privatization juggernaut was launched by Ronald Reagan, who took aim at what he felt was a bloated federal workforce. The mission has been embraced by every subsequent administration and, in 1998, was codified by Congress with the Federal Activities Inventory Reform Act. The law requires government agencies and departments to publish an annual accounting of which tasks under their auspices "are not inherently governmental functions" and could therefore be put out to private bid. President Bush has made implementation of this law a cornerstone of his management agenda.
But perhaps it is time to stop and ask some questions.
First, how much does it matter that contractors are motivated by different incentives than civil servants? Whether they are giant corporations like Bechtel and General Electric or individual security guards who can earn $16,000 a month in Iraq, contractors are driven by making money. It is unrealistic to assume that they will be motivated by the same concern for the public interest as civil servants or soldiers. The current system relies on civil servants to manage contractors and hold them accountable. But -- as has become painfully evident in Iraq -- few civil servants, even in the military, have the training or skills to do this effectively.
Second, does the taxpayer get value for money? One of the main reasons for outsourcing is that the private sector is widely assumed to be more efficient. But in Iraq, much of the $21 billion being spent on reconstruction is going to high-priced foreign contractors rather than low-cost local labor. As Rep. Henry A. Waxman (D-Los Angeles) has pointed out, non-Iraqi contractors charged $25 million to repaint 20 police stations -- a job that the governor of Basra claims could have been done by local firms for $5 million.