Second of a two-part series
While contract spending has increased, the number of federal civil servants has decreased:
Source: U.S. Office of Personnel Management
President-elect Obama has said he wants public employees to take back some of the work that the Bush administration has given to contractors — and he wants to crack down on contractors' abuses. But the president-elect could face huge obstacles.
Bush administration officials have hired corporations to do more of the government's work than ever before — twice as much, in dollars. And even though the government's own investigations reveal that many of those corporate contractors have bungled the job, the new president will confront entrenched interests that could be difficult to shake up.
The Bush administration had barely invaded Iraq before controversies started swirling around its contractors — including allegations that Halliburton bilked the government, and Blackwater security forces killed innocent civilians.
Of course, the military has always hired contractors to support the troops. They make tanks and planes and ready-to-eat meals. But the current administration has gone way beyond that. There are more contractors handling the war in Iraq than U.S. troops. Some are making the kinds of decisions that government employees used to make.
The dependence on contractors in Iraq echoes what's happening at home — for instance, at the Centers for Disease Control and Prevention. More than half the employees in the CDC'S Coordinating Center for Infectious Diseases — which helps coordinate the nation's strategy to fight flu, AIDS and food-borne outbreaks — are corporate contractors, according to a recent report by the Government Accountability Office. The Department of Homeland Security depends so much on contractors, the GAO reports, that officials there have hired contractors to supervise other contractors.
Accomplishing The Mission
"We've always thought of the government as motivated by a sense of service to the people," says Charles Tiefer, whom Congress appointed earlier this year to the new Commission on Wartime Contracting, which oversees Pentagon contracts in Iraq and Afghanistan. "We're getting away from that."
Tiefer says some government employees do a bad job, and some contractors do a great job. But he says federal workers, at least, have to swear an oath to defend the Constitution, just like soldiers do. Not contractors.
"These contractors, they're not under the normal democratic accountability at all," he says. "Contractors are motivated by the dollar."
Clay Johnson, deputy director of the Office of Management and Budget, says President Bush has turned to contractors because it's pragmatic. Johnson says the administration has faced all kinds of crises — the war in Iraq, the war on terrorism, Hurricane Katrina — and it has needed help, fast. Corporations can give it.
"The most important thing is the mission: What are we trying to accomplish?" Johnson says. "And if we're trying to accomplish something and we do not — the federal government does not — have the personnel at that point to do it, I believe it would be appropriate to pull in outside people under the close supervision of government people to accomplish that mission."
A Taxing Example
What mission is more important than collecting income taxes? A few years ago, officials at the Internal Revenue Service hired commercial collection companies to help them. Today, if the IRS thinks you owe it money, you might get barraged with calls from the same kinds of companies that pursue you when you're late on a car loan or a doctor's bill.
Administration officials say the program makes sense because businesses and individuals owe the government billions in back taxes. And the IRS can't track them all down, because it doesn't have enough employees.
Then, why doesn't the IRS just hire more staff? The answer has to do with politics. President Bush and Congress have competed over who is the most opposed to "big government." Not many lawmakers, especially Republicans, have been willing to suggest hiring more civil servants.
So, officials at the IRS turned to industry, telling collection companies that they could keep up to 25 percent of what they collected from the taxpayers they tracked down. That means the IRS doesn't pay the companies out of its budget. But it also means the collection firms have a financial incentive to hound people.
When you talk to IRS agents, they are required to tell you immediately where they work and why they want to speak with you. But recordings of calls from collection companies — which the House Ways and Means Committee obtained last year, during an investigation of IRS contracts — show that the firms' employees left at least one taxpayer worried and confused. The collection workers refused to give their full names or describe why they kept calling him, yet they kept pressing him for his Social Security number — despite widespread warnings from government officials that consumers should never disclose private information to anonymous callers.
Curiously, 85 percent of the people the companies called didn't even owe back taxes, according to a federal report. But the IRS still uses those firms, even though calls like the ones played at the hearing made some officials cringe.
"When I was listening to it ... all I wanted to do was hit my head against the table," says Nina Olson, the national taxpayer advocate — the public's official ombudsman at the IRS. She says industry shouldn't collect the nation's taxes; public servants should do that crucial job. And the IRS's own calculations even show that government employees are more efficient: for every dollar spent trying to collect taxes, government workers collect three times as much as the collection companies do.
A Shrinking Work Force
In the big picture, nobody knows how many contractors working for the government are doing a bad job or a good one. The GAO reports that administration officials don't keep track of that information. But investigations have exposed bungling or scandals in scores of contracts at agencies including the departments of Veterans Affairs, Homeland Security, and Transportation, as well as the Pentagon.
During the campaign, Obama said he wanted contracts to be transparent — and that he wanted to give back some of the work to federal employees. He's worried about the same threats that President Eisenhower warned about three days before he left office in 1961: "In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex," Eisenhower said in a legendary speech. "The potential for the disastrous rise of misplaced power exists and will persist."
As president, Obama will have a tough time trying to control the contracting system. Since 1990, Congress and the presidents have eliminated almost 400,000 jobs from the government. Meanwhile, the amount of contracting has exploded. So researchers say the government doesn't have enough employees to monitor what contractors are doing, let alone take back much work. Given the economic and political realities, nobody's betting the new president will go on a hiring spree.