Is the Recovery Act Stimulating Privatization?

October 22nd, 2009 by Phil Mattera

AFSCMEKey portions of the $787 billion American Recovery and Reinvestment Act, especially the state fiscal stabilization fund, are designed to prevent job loss among teachers and other state and local government employees. But what about the rest?

The assumption seems to be that most of the job creation and retention will take place in the private sector. Yet one question that has received little attention since ARRA was signed by President Obama in February is whether the spending will contribute to the process of privatization and contracting-out of functions previously performed by public sector workers.

On October 15 the Recovery Accountability and Transparency Board released the first batch of recipient reporting data covering some $15 billion in direct federal contracts. Although this is a small portion of overall ARRA spending (information relating to the much larger realm of federal grants to states and others will be released on October 30), it begins to shed some light on the privatization question.

My colleagues and I at Good Jobs First have been examining the universe of around 9,000 recipient reports summarized in a national spreadsheet available on the Recovery.gov website. Many of the entries are unremarkable. They involve contracts for functions such as manufacturing and construction that have traditionally been concentrated in the private sector. It is not surprising that the federal government gave an ARRA contract to Chrysler to supply vehicles and one to Clark Construction to build a new headquarters for the Coast Guard.

Yet many of the other entries appear to be part of the contracting-out phenomenon. You can tell this, first, by looking at the names of the contractors: one firm called Federal Contracting Inc. leaves little doubt as to its orientation. There are others that have a reputation for being involved in high-profile outsourcing deals. An example is IAP Worldwide Services, a politically connected firm (former Vice President Dan Quayle is on its board of directors) that got a controversial contract to take over management of the Walter Reed Army Medical Center in Washington.

Or else you can look at the description of the projects. A company called 4W Solutions got a contract from NASA for “administrative activities, configuration management of documents, procurement-related analysis and support for report integration/administrative support for Cross-Agency Support construction contracts.”

To be a bit more systematic in our analysis, my colleagues and I decided to match the Recovery.gov list of contractors to the membership list of the Professional Services Council, the leading trade association for the federal outsourcing industry.

PSC’s members range from large and notorious contractors such as KBR (formerly the Halliburton subsidiary Kellogg, Brown and Root), Xe Services (formerly Blackwater) and CACI International (linked to the Abu Ghraib torture scandal) to small and obscure consulting firms. During its 27-year history, the association has sought to banish the use of the term “Beltway Bandit” to refer to federal contractors and has pushed for legislation that would maximize the amount of federal work that gets outsourced. It has also resisted the recent move toward insourcing.

We found that, of the 382 PSC members listed on the association’s website, about 50 are on the list of ARRA federal contract recipients (name variations make an exact count difficult). In all, these members and their affiliates have been awarded about 250 ARRA contracts with a total value of more than $800 million.

Some of these involve engineering and construction services, but others deal with functions that are more inherently governmental, such as a contract given to Deloitte Consulting to provide “program management oversight” for ARRA grants made by the Federal Aviation Administration.

In an economic crisis such as the current recession, all job creation is to be welcomed. But it would be a shame if some portion of Recovery Act money is being used in ways that do little more than shift work from the public sector to the private sector.

(Thanks to Tommy Cafcas, Caitlin Lacy and Leigh McIlvaine for their research help.)

Update: I should have mentioned that KBR and Xe Services are not among the recipients of ARRA contracts, but CACI has two.

Further update: We spent more time analyzing the spreadsheet and found many more ARRA contracts that can be attributed to PSC members through joint ventures, affiliates, etc.  Our tally is now about 470 contracts worth a total of about $3.5 billion. These include some huge contracts associated with clean-up projects at Department of Energy nuclear facilities.

3 Responses to “Is the Recovery Act Stimulating Privatization?”

  1. […] Reposted from the Dirt Diggers Digest […]

  2. […] of privatization and contracting-out of functions previously performed by public sector workers. Dirt Diggers Digest FL: Florida's own Halliburton? ?This summer, the Juice brought you the troubling tale of the […]

  3. jharry3 says:

    Hopefully privatization is encouraged.
    Anything the government touchs costs way too much.

    We just found out that each Cash for Clunkers grant of $4500 cost the taxpayers $24,000 in government admin costs.

    This sort of overburden is systemic in government run programs.
    Private industry can always do better.
    The argument comes from the progressives who hate the fact that their favorite social programs, which they believe should be covered by their imaginary benevolent government, can be more cheaply run by private contractors.

    Public schools are an example where admin costs end up eating all the money and we end up with horrible schools with per student cost higher than private schools – which produce a better educated student by the way.
    Tutition vouchers are considered hateful by teachers unions and the left but the competition they introduce force, by “the invisible hand” improvements in the school systems which have that option.

    The curriculum control argument is not about curriculum, its about control.

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