It's Morning Edition from NPR News. Good morning, I'm Renee Montagne at NPR West.


And I'm Steve Inskeep in New York. The economy may be slipping, but some companies are coming off years of solid growth. They're companies that do jobs the federal government once did for itself. No administration has privatized as much government work as the Bush administration. That has reshaped the government that a new president will try to run. So today we add another installment to our series "Memo to the President-elect." NPR's Daniel Zwerdling begins a two-part look at what you could call "Government Incorporated."

DANIEL ZWERDLING: There has been an explosion in government contracts under the Bush administration. They've made history.

(Soundbite of bell ringing)

ZWERDLING: Since President Bush took office, the government has doubled the amount of contracts with industry. They paid corporations more than $400 billion last year to work for everybody from the Forest Service to the CIA.

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ZWERDLING: The administration has given the majority of that contract money to companies who didn't have to compete to get it or there was only limited competition.

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ZWERDLING: There are actually more contractors handling the war in Iraq than American troops. By the way, all these figures come from government reports.

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ZWERDLING: And we're not talking mainly about contractors which make Humvees or computer systems or other kinds of products, the administration is paying most of its contract money to corporations to perform the kinds of services that federal employees normally do. And they've done all this with almost no public debate.

Ms. KATHERINE SCHINASI (Managing Director of Acquisition and Sourcing Management, Government Accountability Office): There has been a very quiet revolution in how the government performs its functions.

ZWERDLING: Katherine Schinasi is one of the top officials at the GAO. That's the Government Accountability Office. It's the nonpartisan watchdog for Congress. It's based in a drab office building in downtown Washington, D.C. And the offices along these marble hallways are filled with very cautious people. They're auditors. They don't speak in hyperbole.

Ms. SCHINASI: I think what worries me most is we are not sure how we got here, and we're not sure why we're here, and most troubling to me, whose interest is being represented? I believe that this is one of the most important issues that the new administration and subsequent administrations have to face.

ZWERDLING: Government officials have been hiring contractors to do some of their work since the United States was born. Congress used to hire pirates to fight America's enemies.

(Soundbite of Ronald Reagan's inauguration ceremony, January 20, 1981)

Unidentified Man #1: Place your left hand on the...

ZWERDLING: But you could say the modern era of contracting began on January 20, 1981.

(Soundbite of Ronald Reagan's inauguration ceremony, January 20, 1981)

Former President RONALD REAGAN: I, Ronald Reagan do solemnly swear...

Unidentified Man #1: That I will faithfully execute the office of president of the United States.

Former President REAGAN: That I will faithfully execute the office of president of the United States.

ZWERDLING: That's the day President Reagan delivered some of his most famous lines.

(Soundbite of Ronald Reagan's inauguration ceremony, January 20, 1981)

Former President REAGAN: Government is not the solution to our problem. Government is the problem.

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ZWERDLING: Reagan said one of the best ways to solve this problem was to turn over government jobs to private industry. Then a Democratic president embraced the same strategy.

President BILL CLINTON: The era of big government is over.

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ZWERDLING: And actually President Clinton did even more to contract out work than President Reagan did. For instance, Clinton made it easier for companies to get government contracts without competing. And then President Bush came to office, and he shattered all the previous records for contracting out.

President GEORGE W. BUSH: I do not believe in big government... America doesn't need more big government... I don't believe in big government... We're not going to go back to the days of big government... Big, big government is not the answer.

ZWERDLING: President Bush has turned to industry, based on a few assumptions, and Clinton and Reagan shared them. Number one, businesses often know better than government how to do things right and cheaper.

Mr. CLAY JOHNSON III (Deputy Director for Management, Office of Management and Budget): I don't think the American people really care how we get it done.

ZWERDLING: That's one of President Bush's oldest friends. His name is Clay Johnson. He's the number two man at OMB, the powerful Office of Management and Budget.

Mr. JOHNSON III: The primary goal for what Congress does and what the executive branch does and what the American people want the federal government to do is to accomplish important things, do it professionally and cost effectively, and then to get what we pay for, to accomplish the desired goals.

ZWERDLING: Since President Bush took office, Johnson has helped shape his campaign to hire contractors. He works in the old executive office building right next to the White House. He says, look, companies don't just perform better sometimes than federal employees do, businesses can handle routine stuff. You don't want to waste public servants on that.

Mr. JOHNSON III: We don't care who runs the computers. We don't care who does the building maintenance. The Department of Interior runs what is in effect the largest lawn-mowing service in the world. Do we want federal employees to be mowing yards, or is it possible that - just possible that in certain situations we might want private companies to be mowing the grass?

ZWERDLING: And almost everybody I talked to agrees with Johnson's general point. But investigators at the GAO say, here's the problem - the Bush administration has gone way beyond hiring industry to trim bushes or process paychecks. They've hired more corporations than ever to help make decisions on behalf of the government. Katherine Schinasi says it suddenly hit her one day a few years ago. She went to a top-level meeting at a military command post. She walked into the conference room and she had no idea who anybody was.

Ms. SCHINASI: And I stopped and went around the table and said who do you work for, who do you work for, who do you work for?

ZWERDLING: And as you went around the table - oval table?

Ms. SCHINASI: No, it was rectangular actually.

ZWERDLING: And what were the answers?

Ms. SCHINASI: Well, there were several people who worked for the military command, but the majority of people sitting at the table worked for contractors.

ZWERDLING: Schinasi's staff has investigated contracts all across the government - at the Interior Department, Homeland Security, the Pentagon. She says, you know what? In many cases, officials of the agency hardly even supervise the corporations they've hired. So they can't answer the most basic questions about what the companies are doing.

Exactly how many contract employees are now doing government work?

Ms. SCHINASI: I can't answer that question because the government can't answer that question.

ZWERDLING: How many contractors did the work well and on budget?

Ms. SCHINASI: I can't give you that information, and I doubt that anyone in the government could.

ZWERDLING: So you're saying that the Bush administration has handed out government work to more private companies than any administration in history, yet they don't know whether the companies are doing a good job or a bad job or saving the taxpayers' money, or wasting the taxpayers' money.

Ms. SCHINASI: In many cases that's true.

ZWERDLING: Schinasi says that's what convinces her that contracting is out of control. And she says the new president needs to do something about it. Daniel Zwerdling, NPR News.

INSKEEP: Tomorrow we'll hear how the IRS uses private collection agencies, even though IRS agents have outperformed commercial bill collectors.

Unidentified Woman: The former commissioner of Internal Revenue testified before Congress and said undoubtedly IRS employees do a better job of collecting the tax.

INSKEEP: So tomorrow we'll explore the obstacles President Obama might face if he tries to have IRS workers, rather than government contractors, collect the nation's revenue.

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