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Limits of Competition: Accountability in Government Contracting

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Government contracts with private providers for the supply of goods and services have grown in number and magnitude over the last several decades. Elected officials and other policymakers choose to privatize government functions for a variety of reasons. Politicians may want to appear to decrease the size of government by reducing the number of directly employed workers. Lawsuits challenging the quality of government services can motivate quick change, or private firms might lobby for government business. Some elected officials believe that private-sector provision of services always results in financial savings and better quality of service over public provision. Although in some instances the government unit involved conducts a serious study of the costs and benefits of privatizing, most privatization decisions in the United States result from a variety of motives and do not include serious study.
 
Regardless of the motivation for privatization, the public and the relevant constituency retain an interest in monitoring privatized activities. Traditional legal checks on the procedural regularity and substantive rationality of government functions often do not apply to privatized services. Private contractors do not necessarily need to comply with statutory constraints on government, and even the process of privatizing often does not require formal procedures or reviews.
 
In much of the literature on government contracts and in the views of many policymakers, these accountability concerns are not too troubling because competition for government contracts will provide the solution to these problems. Adherents to this model believe that the market for contracts will promote efficiency and that other methods of accountability are of minor importance, beyond legal enforcement of the contract terms. However, gaps in the existing analyses of government contracting compromise this theory. Studies of government contracting often fail to define accountability–and the structures that can promote or hinder accountability–with the depth necessary for analyzing the complex provision of government goods. Moreover, many of these analyses lack detailed empirical studies of the actual workings of contracting structures.
 
This Note analyzes the accountability structures that do and should exist in contracting for government services and argues that the dominant competition model is extremely limited. The Note does not directly address the wisdom of privatizing as compared to government provision of goods and services. The use of contractors to provide government services is now widespread. This Note does present a caution to decisionmakers who believe that privatization simplifies the functions of government. The failure of a true market that promotes the efficient achievement of government goals requires an involved set of alternate accountability mechanisms that government must structure and administer.
 
To support the claim of the limits of the competition model in government contracting, this Note uses the case of New York City’s recent $800 million in contracts for child welfare services. New York City contracts out 20% to 25% of its production of goods, services, and City infrastructure to private bidders. In fiscal year 2000, the City spent $9.9 billion on just under 7000 procurement contracts. The City’s child welfare agency, the Administration for Children’s Services (ACS), awarded the largest amount of New York City contracts that year, with more than $800 million in contracts awarded for child welfare services.
 
This Note has four Parts. Part II sets up a framework for analyzing accountability in government contracts. This Part analyzes what scholars and practitioners, struggling to shape new ways to hold private service providers accountable, call “multiple” and “overlapping” checks on the regularity and rationality of decisions. The Part presents a definition of accountability using public and constituent input to shape reasonable, timely, and fair decisions leading to reasonably effective service outcomes. It also outlines the competition model in which the market cabins agency and contractor discretion. This Part then reviews other potential sources of accountability including legal constraints, hierarchical requirements, professional norms, public and constituent participation, and political processes. The Part creates a working typology that exposes the redundancy of some of these structures and begins to discuss the ways these structures have worked in other studies, stopping short of drawing conclusions about the operation of such structures in a large, complicated procurement system.
 
After developing a framework for determining accountability, the Note uses the case of child welfare services in New York City to analyze the way these accountability structures do and should work in an actual procurement. Part III of this Note examines New York City’s recent child welfare procurement and attempts to fit ACS’s system into a competitive model. The procurement process at ACS involved an unusually high number of bidders for government contracting and an extraordinarily experienced and knowledgeable bidding community. Even with the presence of formal elements of competition exceeding that found in many other studies of government procurement, the “market” for most of the services solicited by the City remained closed to new competitors.
 
The primary claim of this Note is a challenge to the dominant competition model of government contracting. However, this Note does not abandon the question of accountability in government contracts after making this pessimistic claim. After analyzing the limits of the competition model using a case that contains many of the formal elements of competition, Part III analyzes other potential sources of accountability in public contracting systems and argues for an integrated accountability system that does not depend on any one structure for system-wide accountability.
 
Part IV concludes this analysis by summarizing the challenges that the case of ACS poses to the competitive model of government contracting and by presenting, in a unified manner, the ideal framework of accountability structures argued for in this Note. The Note resists picking one structure of accountability as a cure-all. Such a simple conclusion would repeat the failure of the competition model, which purports to be a closed system without need for other structures of accountability.
 
Rather, this Note argues that an accountable public contracting system must rely on the interaction of multiple structures of accountability. An accountable system would promote professionalism among agency staff and among contractors, create structures for meaningful public input, and engineer measurable evaluations of contracts. Hierarchical and political structures of oversight are necessary in minimal amounts, and are often unavoidable, but would be streamlined and cabined in an ideal system of accountability. The precise implications for law and policy of the ideal framework of accountability proposed here depend on the context of the particular contracting system. The framework argued for in this Note, however, provides a background for structuring systems of accountability that do not depend solely on the dubious promise of competition in public contracts.