The High Cost Of Privatizing Governmental Functions

Before I retired, or rather, was retired by the Great Recession, I spent approximately half my career as an employee and half my career as an independent contractor. In both roles, I spent, again, about half my time working for government entities and half my time working for private corporations. This not only gives me more perspective than usual on both sides of the great government/private enterprise divide, but also leads me to an observation:

I was the same worker, whether employee or contractor, whether working for government or working for private enterprise. In the four possible categories, there was effectively no difference in the quality of my work or the diligence of my approach. And the same is true of the workers I saw around me. There is no basis in typical employee quality to prefer a private enterprise over a public effort.

So it was with considerable interest that I read an opinion piece by Truthout's Ellen Dannin, "Who're You Rootin' for - Team Public or Team Private?" The piece is long enough and well-documented enough throughout that it is almost an insult to call it an opinion piece. Among other things, Ms. Dannin explores OMB's Circular A‑76, the root document addressing government's official position on privatization:

At the federal level, privatization takes a number of forms that are regulated by the Office of Management and Budget's Circular A‑76. Its basic principle is:

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. 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.

What this means is that each federal agency or department must devote time and money to A‑76 competitions, the process that determines whether work will stay in-house or be privatized. The U.S. Department of Agriculture's process, which is typical, is used here to illustrate the process and philosophy of federal privatization.

The key concept of A‑76 is that competition enhances quality, economy and productivity. OMB Circular A‑76 provides procedures to conduct managed competitions between public and private sectors. Such competitions will determine whether it's more efficient for a function to be performed by the private sector, by an in-house government workforce, or through an inter-service support agreement with another government activity. In A‑76 competitions, agencies and contractors are equal and viable competitors.

There is of course an obsession voiced constantly by conservatives that even the most intrinsically public functions of government should be privatized, both for their efficiency of performance and the resultant cost saving to the taxpayer. The implicit assumption... I've seldom seen it explicitly expressed in anything but the broadest handwaving arguments; more typically, it is simply assumed a priori by conservatives... is that privatization intrinsically always results in those efficiencies and cost savings. Ms. Dannin undertakes to examine that typically unstated assumption... and finds it wanting.

Ms. Dannin's conclusion puts paid to the whole conservative position on privatization:

At What Cost?

The goals of increased efficiency and cost savings are not unreasonable. But if the OMB were to identify and consider all costs relevant to deciding who will perform the work, the price of the analysis regularly would exceed any costs saved through privatization.

The Circular A‑76 process does a disservice to the nation by taking such a narrow, adversarial view of the relationships among government, the private sector, public servants and the public itself. By promoting the liberty concept of freedom from government only, Circular A‑76 ignores the government's many roles in promoting unity, justice, domestic peace and the public's welfare, not just for ourselves but also for those who come after us.

In other words, the whole conservative position on privatization is a consequence of pure ideology, having little if any basis in the reality of how work is done and how business is transacted. Even apart from the human costs, and those are not inconsiderable, privatization is an exceptionally expensive approach to those functions that are intrinsically governmental.

Conservatives should just get off their high horse about privatization. Not that I'm holding my breath awaiting their dismount...