Thomas Jefferson, as president in 1808, wrote: “I have thought it better for the public to go to market for whatever it wants which is to be found there; for there competition brings it down to the minimum of value. I have no doubt we can buy brass cannon at market cheaper than we could make iron ones.”
While federal agencies no longer make or buy cannons, the question of whether government should perform commercial activities in house or acquire them by contract with the private sector still perplexes Congress and the executive branch. The issue will be front and center once again in the 113th Congress and the Obama administration’s second term.
On one side are private firms, including small businesses, incumbent contractors and those who would like to enter the federal market. They are allied with the Yellow Pages Caucus, a group of Congress members who believe anything the government does that is also found in the Yellow Pages should at least be reviewed for contracting out. The Business Coalition for Fair Competition has identified more than $500 billion in activities that are candidates for divestiture, asset sales, contracting out, privatization, vouchers and other strategies for getting the federal government out of lines of business. By relying on performance by a competitive free market system, or eliminating tax subsidies for nonprofit organizations that duplicate and compete with for-profit companies, or provide “corporate welfare,” BCFC believes Uncle Sam can reduce the deficit, hold the line on taxes and preserve the safety net for the neediest Americans.
Legislation to implement a “Yellow Pages Test” was introduced in the 112th Congress by Sen. John Thune, R-S.D., and Rep. John Duncan Jr., R-Tenn. The Freedom from Government Competition Act (S 785, HR 1474) would require direct conversion, an Office of Management and Budget Circular A-76 public-private cost comparison or other methods for reviewing commercial activities in agencies. The bill was not acted on but is expected to be reintroduced in the 113th Congress, which convenes in January.
Opposing such processes are government employee unions and the Obama administration. The American Federation of Government Employees called the Thune-Duncan bill “extremist legislation” that is ill-timed due to the government “struggling to improve its contract oversight and acquisition workforce.” The Obama administration issued new guidance, finalized in September 2011, “Work Reserved for Performance by Federal Government Employees,” creating two new classes of activities — critical functions and those closely associated critical functions — making it more difficult to contract with the private sector. These new classes of activities are in addition to inherently governmental activities, already off limits to contractors by law.
Government competition with private enterprise occurs in many forms, from health care to insourcing and public-private partnerships to land ownership. We have federal employees who make maps, cook and serve food, mow lawns, paint walls, survey the land, design roads and buildings, write software, create websites, operate buses, provide child care and do thousands of other jobs that are readily available, usually better, faster and cheaper, from America’s small, medium and large businesses. BCFC issued http://www.governmentcompetition.org/uploads/2012BCFCKeyVoteScorecardWeb.pdf">a report card of congressional votes on the issue. The vote analysis shows a distinct partisan difference, with Republicans scoring higher on votes favoring private sector use, while Democrats’ votes support government employees.
Congress has been struggling with the issue of government competition with private enterprise. A moratorium on OMB Circular A-76 reviews has been enacted in appropriations bills for three years, prohibiting agencies from even studying efficiencies that could be achieved through public-private competition. Studies have shown an average of 30 percent is saved through A-76, even if the activity remains inside the government, due to the requirement that an agency subject to competition creates a “most efficient organization,” not its status quo method of performance. At the same time, sequestration, which may take effect in January, requires agencies to make cuts and seek efficiencies banned by the moratorium. Rather than making activities more efficient, some valuable programs will suffer budget cuts that will affect the quality or level of service.
The Senate rejected 41-53 an amendment to the 2013 Defense authorization bill by Sen. Ben Cardin, D-Md., that would strike a provision that requires a specific level of cuts for the Defense Department’s civilian and contract workforce. When the House considered its defense bill this year, it rejected 209-211 an amendment sponsored by Rep. Mike Coffman, R-Colo., to repeal a moratorium barring the Defense Department from putting contracts up for bidding by outside contractors.
Examples of federal programs that were successfully privatized are Conrail, the National Consumer Cooperative Bank, Rural Telephone Bank, Elk Hills Naval Petroleum Reserves and U.S. Enrichment Corp. Faced with a $1.1 trillion deficit in the current fiscal year, a total national debt of $16.3 trillion and an impending need to increase the debt limit yet again, privatization is an idea whose time has come. It must be part of any budget agreement.
John Palatiello is president of the Business Coalition for Fair Competition, an organization composed of trade associations, businesses and organizations dedicated to free enterprise, relief from unfair government-sponsored competition and smaller, more efficient government (www.government competition.org).