Copyright (c) 2004 American Bar Association Public Contract Law Journal



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Copyright (c) 2004 American Bar Association

Public Contract Law Journal
Winter, 2004
33 Pub. Cont. L.J. 263
LENGTH: 22922 words
THE FUTURE OF COMPETITIVE SOURCING

COMPETITIVE SOURCING POLICY: MORE SAIL THAN RUDDER? *


* This paper and those that follow derive from a September 15, 2003, colloquium at the George Washington University Law School. The law school and the Government Procurement Law Program extend special thanks to Holland & Knight, LLP, for underwriting this event, and to C-SPAN for broadcasting our discussion.
Steven L. Schooner
Steven L. Schooner is Associate Professor and Co-Director of the Procurement Law Program, George Washington University Law School. I gratefully acknowledge the generous support of the Seymour Herman Faculty Research Fund in Government Procurement Law. I also thank Cheryl D. Block, Karen B. Brown, Daniel I. Gordon, Matthew Harrington, Shi-Ling Hsu, Frederick J. Lees, Heidi M. Schooner, and Christopher R. Yukins for their thoughts, helpful comments, and suggestions; and Nazar Altun and Esther Nelson for their diligent research assistance.
TEXT:

[*263] I. INTRODUCTION: THE DOLDRUMS?



On behalf of The George Washington University Law School, let me begin by expressing appreciation to the Comptroller General of the United States, David M. Walker, and Paul Light, of the New York University and the Brookings Institution, for participating in this colloquium. Rather than dispel my initial pessimism, however, our discussion confirms my less-than-optimistic prescription for the future of competitive sourcing. I fear that, without drastic change, the Bush administration's competitive sourcing initiative is doomed to fail. n1 That may seem obvious to those who scrupulously [*264] follow the barrage of assaults--through legislative initiatives n2 and litigation n3--intended to derail the policy. But these pending roadblocks are mere harbingers. Even if the Bush administration succeeds in implementing its newly minted competitive sourcing policy, failure to achieve the policy's aspirations appears imminent. n4
n1 None of this is meant to suggest that there have not been successful outsourcing endeavors. There have been plenty. Military history someday may recall that many key players in the successful overthrow of Iraq weren't wearing uniforms. While critics fretted that we sent too few soldiers to invade Iraq, experts knew that, on today's battlefield, the number of soldiers doesn't tell the whole story. In Iraq, our military relied upon contractor personnel not only for transportation, shelter, and food, but for unprecedented levels of battlefield and weaponry operation, support, and maintenance. Accordingly, defense experts now recognize that, without contractors, our military simply cannot project its awesome technical superiority abroad. But by no means does this suggest that all of the legal issues associated with contractors on the battlefield have been resolved. See, e.g., Keith Hartley, The Economics of Military Outsourcing, 11 PUB. PROCUREMENT L. REV. 287, 290 (2002) (acknowledging that using "civilians to replace military personnel might have adverse impacts on the morale and 'fighting spirit' of the Armed Forces"); Michael J. Davidson, Ruck Up: An Introduction to the Legal Issues Associated with Civilian Contractors on the Battlefield, 29 PUB. CONT. L.J. 233 (2000); Brian H. Brady, Notice Provisions for United States Citizen Contractor Employees Serving with the Armed Forces of the United States in the Field: Time to Reflect Their Assimilated Status in Government Contracts? 147 MIL. L. REV. 1 (1995). Brady was ahead of his time in clearly articulating that "citizen contractor employees . . . in the field hold military status. They are legitimate objects of attack and become prisoners of war when captured. . . . They ought not be surprised about their status when they arrive in the field. . . . The time has come to inform contractors about assimilation and make them part of the total force." See also Todd S. Millard, Overcoming Post-Colonial Myopia: A Call to Recognize and Regulate Private Military Companies, 176 MIL. L. REV. 1 (2003) (to be clear, "private military companies" (or PMAs) is the current, politically correct term for "mercenaries"); THE INTERNATIONAL CONSORTIUM OF INVESTIGATIVE JOURNALISTS, MAKING A KILLING: THE BUSINESS OF WAR (2003).
n2 One of the most dramatic examples was the successful Van Hollen Amendment to H.R. 2989, the 2004 Transportation and Treasury Appropriation, which stated: "None of the funds made available by this Act may be used to implement the revision to Office of Management and Budget Circular A-76 made on May 29, 2003." H. Amend. T.379(A026), 108th Cong. (2003), available at http://thomas.loc.gov/; Christopher Lee, Competitive Sourcing Plan Hits Snag: House Votes Against Rules That Would Speed Up Competition for Federal Jobs, WASH. POST., Sept. 11, 2003, at A21. In late October, this matter went to conference after the Senate approved an amendment by Senator George Voinovich, which imposed a different set of constraints upon the A-76 process. Senate Votes to Allow Federal Workers to Protest A-76 Competitions in Funding Bill, 80 FED. CONT. REP. 389 (Oct. 28, 2003). See also OMB Urged to Halt NIH Job Competitions, 45 GOV'T CONTRACTOR P436 (Oct. 29, 2003) (raising concerns that "this aggressive approach to Circular A-76 is undermining the advancement of science"). See also the Truthfulness, Responsibility, and Accountability in Contracting Act (TRAC), a bill introduced with 190 cosponsors, intended to limit outsourcing until the costs and benefits were analyzed. Consistent with the discussion below, the TRAC bill included findings that

(2) Federal agencies have been increasing reliance on service contracting even though there are no reliable and comprehensive reporting systems . . . to determine whether service contracting has achieved measurable cost savings or improved Government services for taxpayers. . . . (4) Federal employees are being replaced by contractor employees without even knowing . . . if the result is reduced costs or improved services. (5) Federal agencies do not have systems in place to provide for work currently performed by Federal contractors to be performed by Federal employees, even after a determination that in-house performance would be more efficient and more cost effective.


H.R. 721, 107th Cong. ยง 2 (2001).


n3 See, e.g., Complaint for Declaratory and Injunctive Relief, National Treasury Employees Union et al. v. Office of Management and Budget, No. 1:03CV01339 (D.D.C. filed June 19, 2003), available at http://www.govexec.com/pdfs/NTEU.pdf (requesting a judgment declaring the revised circular illegal and directing use of the prior circular).
n4 See, e.g., Competitive Sourcing: Implementation Will Be Challenging for Federal Agencies, Testimony Before the Subcomm. on Oversight of Government Management, the Federal Workforce, and the District of Columbia, Comm. on Governmental Affairs, U.S. Senate, GAO-03-1022T (July 24, 2003) (statement of David M. Walker), available at http://www.gao.gov/new.items/d031022t.pdf. Among other things, the Comptroller General expressed concerns that agencies set appropriate goals rather than rely upon arbitrary quotas. Id. at 5. He also left no doubt that "effective human capital practices will be key to successful implementation of competitive sourcing[.]" Id. at 8.

[*265] Few agencies have the inclination (or resources) to commence any significant number of competitions between civil servants and contractors under the new rules. The competitions that do begin will take time, n5 and aggressive time limits may invalidate some of those. Accordingly, existing civil servants and members of the armed services need not fear that hundreds of thousands of contractor employees will replace them overnight. Nevertheless, the number of government employees will continue to shrink, while the number of contractor personnel serving the Government methodically increases. In addition, more than a decade of experience suggests that the rate of contractor personnel growth will exceed the contraction within the Government's ranks. n6


n5 The revised Office of Management and Budget Circular No. A-76 [hereinafter OMB Circular A-76], available at http://www.whitehouse.gov/omb/circulars/a076/a76_incl_tech_correction.pdf, at Attachment B, PD.1., directs: "A standard competition shall not exceed 12 months from public announcement (start date) to performance decision (end date)" absent a waiver, although a prospective six-month waiver could extend the period to eighteen months. Whether these competitions span a year or many years (the norm under the predecessor A-76) remains to be seen. See also The Notice of Revision to the Office of Management and Budget Circular No. A-76, Performance of Commercial Activities, 68 Fed. Reg. 32134 (May 29, 2003) [hereinafter Notice of Revision]. See generally David M. Walker, The Future of Competitive Sourcing, 33 PUB. CONT. L.J. 299, 308 (2004) (noting that "aggressive timeframes might look good on paper").
n6 A wealth of literature chronicles the accelerating privatization trend. See, e.g., infra notes 69-72.

Despite this cumulative expansion, as the government employee headcount drops, the administration will declare victory. Herein lies the problem. The current outsourcing initiative will achieve little more than a facially attractive duping of the least sophisticated portion of the electorate. Legislators will trumpet their contribution to the contraction of Big Government, and crowds will dutifully applaud. Empirical research will continue to expose the hypocrisy of this policy, n7 but the suffering will remain relatively quiet.


n7 In this regard, it is a pleasure to include not only Paul Light's work, but also that of Dan Guttman. See Daniel Guttman, Governance by Contract: Constitutional Visions; Time for Reflection and Choice, 33 PUB. CONT. L.J. 321 (2004). Guttman was recently profiled for his longstanding work in this area. "Along the way, he became convinced that the Government's increasing reliance on private companies raises basic, even constitutional, questions of accountability. He believes that most agencies can no longer effectively oversee their contractors and that existing oversight tools--such as setting performance standards in contracts--often don't work." Jason Peckenpaugh, Shadow Boxer, 36:16 GOV. EXEC. 41, 42 (2003).

For a host of reasons, the competitive sourcing policy remains fatally flawed. Most troubling is the Government's unwillingness to appreciate the policy's costs. This leads to the corresponding failure to identify, obtain, and invest appropriate resources needed to properly effectuate the policy. Quite simply, the Government lacks sufficient qualified acquisition, contract management, and quality control personnel to handle the outsourcing burden. This insufficiency includes two separate deficiencies: (1) the number of people [*266] available and (2) the qualifications necessary for them to perform a complicated, highly discretionary task over extended periods of time. n8 This glaring problem does not derive from the current vehicle for effectuating the policy: the revised Office of Management and Budget (OMB) Circular A-76. n9 But these deficiencies will impede, if not derail, the policy's implementation. Yet the administration fails to acknowledge this need for resources. The silence on this critical detail leads me to question whether the underlying policy is deviously cynical or simply muddled and ill-conceived.


n8 In addition to inadequacy of the acquisition workforce, discussed at length in Part III.B. below, it seems clear that the cadre of existing government managers lack experience identifying, selecting, tasking, and incentivizing a workforce as it transitions from government to contractor employees.
n9 OMB Circular A-76, supra note 5.

Here, the accompanying articles make a significant contribution. The Comptroller General systematically demonstrates that a competitive sourcing policy (although, arguably, not necessarily this competitive sourcing policy) could be derived from accessible and defensible principles. n10 His article logically tracks the ten principles for a competitive sourcing regime agreed upon by the Commercial Activities Panel. n11 Among his numerous refreshing insights, Paul Light reminds us that this policy has little to do with how many people perform the Government's missions and everything to do with who those "public servants" will be. In other words, the true size of Government cannot be measured by counting civil servants or soldiers. This reminder is imperative if we are to rationally assess the success or failure of either a competitive sourcing or an outsourcing policy.


n10 Moreover, in addition to his primary themes, his article highlights numerous important points. For example, I agree that the ramifications of outsourcing are far too important to regulate informally. Over time, it seems appropriate that OMB Circular A-76 should evolve into, or be replaced by, a regulation (whether or not the Federal Acquisition Regulation, Title 48 of the C.F.R.). See, e.g., Walker, supra note 5.
n11 COMMERCIAL ACTIVITIES PANEL, IMPROVING THE SOURCING DECISIONS OF THE GOVERNMENT: FINAL REPORT (2002) [hereinafter COMMERCIAL ACTIVITIES PANEL REPORT], available at http://www.gao.gov/a76panel/dcap0201.pdf.

Against that backdrop, and supplemented by thoughtful contributions from public policy scholars Dan Guttman, John Forrer, and James Edwin Kee, this introductory article predicts a bleak future for competitive sourcing. Let me be clear. I do not doubt the administration's fidelity with regard to competitive sourcing. Rather, despite a dogged commitment to outsourcing, I fear that the Government is ill-positioned to successfully outsource in a manner that generates higher-quality services, lower prices, greater efficiency, or, ultimately, better Government. Instead, I expect the competitive sourcing initiative to further expose "long-standing problems in service contracting, including poor planning, inadequately defined requirements, insufficient price evaluation, and lax oversight of contractor performance." n12 Implementation [*267] of the current policy will result in poorly structured contracting out. This leads to disquieting expectations for the future nature of the Government. The administration's inclination to act first and plan later propels this article to conclude that the competitive sourcing strategy is a recipe for disaster. n13


n12 Contract Management: Trends and Challenges in Acquiring Services, Testimony Before the Subcomm. on Technology and Procurement Policy, Comm. on Government Reform, House of Representatives, GAO-01-753T, at 5 (May 22, 2001) (statement of David E. Cooper), available at http://www.gao.gov/new.items/d01753t.pdf.
n13 "Downsizing was not guided by strategic planning, nor has adequate consideration been given to implementation challenges, such as the impact of the government's reduction-in-force rules. Overall, the government's human resources policies and practices have not reflected, nor been aligned with, current workforce dynamics and challenges, including demographics, professional development, mobility, and other issues." COMMERCIAL ACTIVITIES PANEL REPORT, supra note 11, at 28.

In the end, this article illuminates an obvious, yet critical, problem. The Government lacks sufficient qualified acquisition and contract management professionals to administer its requirements. Continued outsourcing will exacerbate this systemic weakness. As the Government increasingly relies upon service contractors, the Government exposes itself and the public to greater risks. But before addressing this daunting challenge, this article attempts to explain how we came to this point. Specifically, it seeks to distinguish a principled competitive sourcing policy from an ideological, antigovernment, outsourcing regime.

II. COMPETITIVE SOURCING OR OUTSOURCING?

Competitive sourcing involves determining, prospectively, whether government resources or the private sector offers the Government--as a consumer--the best value in performing certain tasks. n14 Outsourcing, on the other hand, entails replacing existing government personnel with contractors and relying upon the private sector when new tasks arise. Arguably, the policies achieve the same objective--replacing Government with contractor resources--but competitive sourcing dramatically prolongs the transition. n15


n14 Our discussion is limited to privatization--to the extent it will occur--that takes the form of contracting (or contracting out). Thus, for practical and legal reasons, we ignore the parallel grant-making apparatus. In the larger context of privatization, grants and other unrelated vehicles through which the Government delegates authority must be considered. See generally DANIEL GUTTMAN & BARRY WILLNER, THE SHADOW GOVERNMENT: THE GOVERNMENT'S MULTI-BILLION-DOLLAR GIVEAWAY OF ITS DECISION-MAKING POWERS TO PRIVATE MANAGEMENT CONSULTANTS, "EXPERTS," AND THINK TANKS (1976).
n15 In practice, competitive sourcing, however subtly, must eventually converge with outsourcing. In a competition, there are only two possible results: (1) the contractor can win and replace the government organization or (2) the Government can win and maintain the status quo. But the government workforce never gains ground. Because competitive sourcing policy periodically (e.g., every five years) subjects the same tasks or requirements to competition, the contractor ranks continue to swell.

But most people don't really care who supervises or pays the person who determines their Social Security benefits, inspects their meat or produce, audits their taxes, or controls their air traffic. n16 The public simply wants their [*268] benefits (properly calculated) to arrive on time, their families to avoid illness, to be free from harassment, and to enjoy a safe journey. Accordingly, the competitive sourcing debate--determining who would most efficiently provide these services--often fails to resonate with most Americans.


n16 True, after the September 11, 2001, tragedy, a surprising groundswell of support drove a Herculean effort to replace private baggage screeners with government employees. While this makes for great theater, it runs counter to the governmentwide trend. It also exposes the hypocrisy of the underlying policy. Outsourcing reflects the perception that the private sector will outperform government employees. Yet, in the aftermath of a startling and horrific crisis, the public deluded itself into believing, for some inexplicable reason, that it would be safer if federal employees screened baggage. But we should not be surprised. Few legislators would consider it a palatable option to suggest that, rather than mandating who will employ the screeners, a more effective role for Government might be mandating sufficient pay for screeners to attract competent personnel (and, of course, passing on those costs to the flying public).

Yet, for those who do care, the debate quickly polarizes participants into two basic camps. n17 One staunchly advocates the (rapidly changing) status quo: that work currently being performed by government employees should remain in-house. This position idolizes, or at the very least respects, the ethos of both public service and, more generally, public servants. The opposite camp advocates outsourcing. The outsourcing proponents, whether favoring the private sector or discounting the public service, assert that for-profit firms are capable of performing much of the Government's work. Further, they claim, the private sector (if properly motivated) should outperform government employees (in terms of quality of service, price of service, or both). n18 Neither of these extreme positions, distilled into an abstract distinction between proversus anti-government employees (or contractor employees), is uniquely compelling.


n17 Jody Freeman suggests an entirely different perspective, identifying various types of concerns--consequentialist, technocratic, ethical, and administrative law--regarding contracting out. Jody Freeman, The Contracting State, 28 FLA. ST. L. REV. 155, 169-76 (2000). Using Freeman's rubric, the lion's share of my concerns are deemed either consequentialist or technocratic. Freeman perceives that, for most, their "enthusiasm for contracting out . . . [is] motivated solely by a concern about the results . . . rather than whether contracting out conforms to a set of a priori principles of 'moral' action." Id. at 169 (citations omitted). With regard to the technocratic concerns, "to some extent, objections to contracting out may be ameliorated by careful attention to contract design. Contracts could specify tasks more clearly, detail procedures more thoroughly, and clarify responsibilities. . . . For those functions that are easier to specify, agencies may be nonetheless ill-equipped to monitor performance. . . ." Id. at 170-72. See also Harvey B. Feigenbaum & Jeffrey R. Henig, The Political Underpinnings of Privatization: A Typology, 46 WORLD POL. 185 (1994). Feigenbaum and Henig's typology is based upon three perspectives--administrative, economic, and political--leading to three privatization strategies: pragmatic, tactical, and systemic. From this they create an intriguing analytical tool correlating motivation and consequence.
n18 A third faction, populated primarily by scholars and academics, eschews broad positions and instead chooses sides based upon the nature of individual tasks, such as schools, prisons, welfare, etc. See, e.g., infra note 71.

Empirical evidence is scant to demonstrate that government employees are more talented, committed, motivated, or honest than their private sector counterparts, and vice versa. The two groups differ dramatically, however, in at least one regard: their incentive structures. n19 The private sector's exposure [*269] to market forces, and the related corporate purpose of pursuing profit, permits (and, arguably, requires) a more diverse and potent arsenal of employee incentives and disincentives. These tools include compensation (salary, salary increases, bonuses, stock incentives), opportunity for advancement, and, of course, the risk of termination. While the Government can use similar tools, their impact (or the degree to which these tools can influence behavior) is at least perceived as far less dramatic, given a heavily constrained promotion and bonus regime and an impenetrable de facto tenure system. The private sector--government contrast is greatest at the extremes. The private sector offers far greater economic rewards for success and threatens more credible sanctions for less than desirable performance. n20 While some still aspire to reform the civil service system and inject more potent performance incentives, n21 history reminds us that this is a daunting task. n22


n19 Few doubt that, without the type of external pressure exerted by the competitive sourcing initiative, government managers face impenetrable hurdles in attempting to dramatically improve efficiency or service. "Managers face an incentive structure that deters them from making efficiency-enhancing changes. Managers tend to prefer current ways of doing business to voluntary cost-cutting activities. However, the A-76 process changes the manager's choice set so that the status quo is not an option." SUSAN M. GATES & ALBERT A. ROBBERT, NATIONAL DEFENSE RESEARCH INSTITUTE, RAND, PERSONNEL SAVINGS IN COMPETITIVELY SOURCED DoD ACTIVITIES: ARE THEY REAL? WILL THEY LAST? xv (2000).
n20 My experience suggests that government managers covet the private sector's power to more effectively reward excellence. Yet, comparatively, the more pressing perceived personnel system inadequacy lies in the private sector's ability to jettison underperforming personnel. This makes sense. "In outstanding organizations[,] . . . there is a progressive winnowing of talent. . . . Microsoft tries to force out the lowest-performing 5% of its highly screened talent each year. Great organizations are unabashed meritocracies; great organizations that fail are often those that forget the importance of . . . selective weeding." James Brian Quinn et al., Managing Professional Intellect: Making the Most of the Best, HARV. BUS. REV. 74 (1996) (emphasis added).
n21 The Department of Defense continues to lead the initiative to eliminate the civil service system. See, e.g., Shawn Zeller, Smashing the System, 35 GOV. EXEC. 30 (2003) (discussing the DoD initiative and the spearhead effort that resulted in the nascent Department of Homeland Security creating its own personnel system). See also NATIONAL COMMISSION ON THE PUBLIC SERVICE, URGENT BUSINESS FOR AMERICA: REVITALIZING THE FEDERAL GOVERNMENT FOR THE 21ST CENTURY (2003), available at http://www.brook.edu/gs/cps/volcker/urgentbusinessreport.htm ("The federal workforce must be reshaped, and the system that supports it must be rooted in new personnel management principles that ensure much higher levels of government performance."). Pending legislation may permit DoD to engage in a dramatic overhaul of the civil service system. See generally Title XI, Civilian Personnel Matters, National Defense Authorization Act for Fiscal Year 2004, at http://thomas.loc.gov (search the bill text of the 108th Congress for H.R. 1588.ENR) ("the Secretary [of Defense] may, in regulations prescribed jointly with the Director [of the Office of Personnel Management (OPM)], establish, and from time to time adjust, a human resources management system. . . . The human resources management system established . . . shall be referred to as the 'National Security Personnel System.'. . . Any [such] system . . . shall (1) be flexible [and] (2) be contemporary. . . .").
n22 "If the [National Performance Review] made some progress . . ., it proved far less successful in transforming the government's people policies through civil service reform." DONALD F. KETTL, CENTER FOR PUBLIC MANAGEMENT, BROOKINGS INSTITUTION, REINVENTING GOVERNMENT: A FIFTH-YEAR REPORT CARD, CPM 98-1, at 53 (1998), at http://www.brook.edu/dybdocroot/gs/cpm/Government.pdf.

This does not suggest that the Government is not staffed by many able, highly motivated employees. n23 Surely, public service attracts special people [*270] and brings its own rewards. But contractors performing similar public service tasks frequently experience the same unquantifiable, if not ephemeral, benefits as government employees. Aside from characterizations of personnel, however, no shortage of economic and theoretical arguments favors outsourcing. For example, Keith Hartley's succinct introduction to the economics of outsourcing highlights the importance of competition, which "promotes innovation, the application of new management techniques, the introduction of new equipment and methods of working," and flexibility. n24 Graeme Hodge's thoughtful discussion of the theoretical foundations for privatization begins by noting that economics drives most theories that favor privatization. n25 Hodge introduces various schools of thought that tend to favor contraction of government and, accordingly, outsourcing, including public choice theory, n26 agency theory, n27 new public management, n28 property rights theory, n29 measurement issues (which we frequently refer to as "metrics"), n30 and contingency theory. n31


n23 While I can offer no empirical evidence, my (albeit anecdotal) professional experiences in Government, particularly my work at the Department of Justice (DOJ), the Office of Management and Budget (OMB), and the U.S. Army, convinced me that there are a wealth of talented, motivated government personnel that rival any I have encountered in the private sector. At the opposite end of the spectrum, both in Government and in the private sector, I have observed, and at times supervised, an unfortunate number of employees for whom the existing incentive and disincentive structure--encompassing rules and norms--failed to motivate.
n24 Hartley, supra note 1, at 289. He also mentions the "disciplines of the capital market and the incentives and penalties of a fixed-price contract. . . ." Id.
n25 GRAEME A. HODGE, PRIVATIZATION: AN INTERNATIONAL REVIEW OF PERFORMANCE 35 (1999).
n26 "Functions such as regulation, policy advice, and the delivery of services should be undertaken separately. . . . Government organizations are often captured by those who traditionally provide the services . . ., and that in the absence of a profit motive, bureaucrats . . . maximize the size of their own bureau rather than maximizing benefits to customers or citizens. . . ." Id. at 36.
n27 Building on a market model of organizations, agency theory assumes that the owners of the company (here, the Government) are not the managers, and ownership and control are separate. Therefore, "this theory focuses on finding an optimal way of establishing and operating such contracts. . . ." Id. at 38-39.
n28 "The central tenets of this new doctrine . . . emphasize management skills, quantified performance targets, devolution, the separation of policy, commercial and noncommercial functions, the use of private sector practices . . ., monetary incentives, and cost cutting. Importantly, the new public management also emphasizes a preference for private ownership, and the use of contracting out and contestability in the provision of public services." Id. at 40.
n29 This simple theory suggests that "private ownership of the assets of a company [or the Government] results in superior profitability and effectiveness. . . . The major focus is on incentives for performance improvement, principally at the level of the individual decisionmaker." Id. at 41-42.
n30 While conceding that it is extraordinarily difficult to measure government performance, "to the extent that the measurement of agency performance might become a more manageable task, and to the extent that interpretation of performance might become clearer, privatization of an agency may be seen as beneficial." Id. at 43-44.
n31 This theory postulates that "the role of the noneconomic objectives of privatization . . . depends on the influence at any point in time of particular historical contingencies." Id. at 44. It recognizes "the plausible idea that privatization does not have an economic rationale at all." Replacing government employees with contractors may further political ends such as disempowering unions or winning votes during elections. Id. at 35-36. "In other words, it is simply a tool in the political kit bag available for use when deemed expedient." Id. at 44.

Yet it's surprisingly difficult to find a compelling statement of the objectives for the new federal competitive sourcing policy. One of the clearest statements [*271] within the OMB Circular suggests: "The Administration's general policy is to rely on competition to select the providers of commercial activities. This policy is supported by published reports and historical data demonstrating that public-private competition generates significant cost savings, efficiency, and innovation." n32 The first sentence expresses a deference to the competitiveness of the private sector; the latter recognizes the value of salutary competition between the public and private sectors. Nothing reconciles the two competing policy statements.


n32 Notice of Revision, supra note 5, 68 Fed. Reg. 32,134, 32,135 (May 29, 2003). The Commercial Activities Panel reaffirmed that "Competitions, including public-private competitions, have been shown to produce significant cost savings for the government, regardless of whether a public or a private entity is selected. Competition also may encourage innovation and is key to continuously improving the quality of service delivery. . . . Federal sourcing policies should reflect the potential benefits of competition, including competition between and within sectors . . ." COMMERCIAL ACTIVITIES PANEL REPORT, supra note 11, at 35.

The predecessor OMB Circular A-76 more clearly stated the first principle: "In the process of governing, the Government should not compete with its citizens. The competitive enterprise system, characterized by individual freedom and initiative, is the primary source of national economic strength." n33 After that preface, the (classical outsourcing) policy statement concluded: "In recognition of this principle, it has been and continues to be the general policy of the Government to rely on commercial sources to supply the products and services the Government needs." n34 But this general language was diluted by the more specific statement (favoring competitive sourcing) that it was the Government's policy to




Rely on the Commercial Sector. The Federal Government shall rely on commercially available sources to provide commercial products and services. In accordance with the provisions of this Circular and its Supplement, the Government shall not start or carry on any activity to provide a commercial product or service if the product or service can be procured
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