Report refutes arguments against public-private competition

A new report from the IBM Endowment for the Business of Government refutes six common arguments against putting government work up for competition with the private sector.

The report, "Moving Towards Market-Based Government: The Changing Role of Government as Provider," was written by former under secretary of Defense Jacques Gansler. Gansler is now director of the Center for Public Policy and Private Enterprise at the University of Maryland's School of Public Affairs in College Park, Md.

Gansler refutes these typical concerns about shifting the role of the government from provider of services to manager of providers:

  • Deteriorating performance if the private sector wins

  • Higher government costs

  • Unrealized savings

  • Damage to small businesses because of bigger contracts

  • Involuntary separation of large numbers of government employees from their jobs

  • Loss of government control over contracted-out work

  • Case-study results show that performance actually improves with competition, according to the report. For example, when the Navy competitively outsourced its jet trainer maintenance, its "fully mission capable rate" increased by 13 percent while the direct man-hours required for maintenance decreased 33 percent.

    Competitions save money, the report states. For instance, the Department of Defense realized an average cost savings of 31 percent as a result of 2,138 competitions run between 1978 and 1994. The cost savings are not realized by lower salaries paid by the winning bidder, but rather by productivity gains.

    Gansler's finding that small businesses have benefited from public-private competitions "is conditional upon the fact that when the competitions are being conducted there is an explicit consideration of the possible small business impacts," he wrote. Gansler advocates larger contracts with significant small business set-aside requirements, so that the government gets the "efficiency and effectiveness associated with the potential for multi-functioned integration and economies of scale."

    "It does require the small business interests to recognize the value of subcontracts," he wrote.

    That only a small number of government employees are involuntarily separated as a result of competition came as a surprise, Gansler wrote. He cites several examples, including an Army competition to replace an in-house group of 400 workers maintaining a logistics information system written in the COBOL computer language. The Army specified that the private contractor would have to hire all the workers for at least one year, and train the workers in a modern computer language. The former employees testified they were very happy with the arrangement, according to the report.

    Finally, the Gansler found that the government has greater control over competitively awarded work because of new visibility into cost and performance, and greater ability to reward or replace workers based on that performance. This increased control is contingent upon the government assuming full managerial responsibility whether the work is done in-house or by a contractor, according to the report.

    The IBM Endowment for the Business of Government provides grants for research on ways to improve the effectiveness of government at the federal, state, local and international levels.

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