We’ve heard a lot in recent years about the inherent superiority of contracting out for public services. This approach to privatization is driven by a belief that anyone can do better than the government at just about any job you can name.
In recent days, the Star has published two stories that deserve to be considered cautionary tales, although I don’t hold out much hope. One was an account of the process through which the State of Indiana chose a private contractor to oversee drug abuse programming for addicted nurses. The other dealt with problems at AIDServe Indiana.
We’ve heard a lot in recent years about the inherent superiority of contracting out for public services. This approach to privatization is driven by a belief that anyone can do better than the government at just about any job you can name.
Originally, “contracting out” was supposed to harness the business savvy of the private sector. Businesses that had to make a profit and meet payrolls, customer expectations and deadlines would be more efficient by definition than government agencies. This argument overlooked a couple of factors: private companies must pay taxes, for example, which adds to the cost of doing business; and government often finds itself involved in providing a service precisely because there is no profit potential or market. But in some cases, it makes good sense to use a for-profit provider with a particular set of skills.
It is less clear why it became so fashionable to contract with nonprofit entities. The very arguments made for contracting with business would seem to militate against contracting with nonprofits, which operate under the same general mandate as government. We expect both nonprofits and government to be businesslike—that is, to operate prudently and frugally—but we do not expect them to be businesses.
What the Star coverage has demonstrated is what students of government have been saying for several years: there are real issues of accountability involved when government chooses to use an independent entity to deliver government services.
Before rushing to endorse government contracts with everyone from large corporations to store front churches, we need to ask a few questions. Does this contractor have the capacity to deliver what the contract requires? Does the State have the capacity to monitor performance? If performance is substandard or other problems arise, is the State in a position to terminate the contract and conduct the activity itself? Is the business or nonprofit able to absorb the extra costs of doing business with the government? Is it even aware of the additional constraints, reporting and paperwork required? Do the recipients of the service know that it is being funded by government, and that government is ultimately accountable for it?
Contracting out is a tool, not a panacea. It does not require less government; it requires different government, exercising different but important skills.
According to the Star, the State had a problem even finding someone to conduct the program for addicted nurses. Didn’t the unwillingness of established providers to bid on this contract sound an alarm bell? Or has the State—like the City of Indianapolis under the last administration—become so enamored of “privatization” that anyone who can fog a mirror (or make a campaign contribution) can get a government contract?