Janine Wedel - Shadow Elite - How the World's New Power Brokers Undermine Democracy, Government, and the Free Market

The Department of Defense is the federal government’s biggest buyer of services. In 1984, nearly two-thirds of the Pentagon’s shopping budget was for products as opposed to services. But by the early 1990s the figure was even. And by fiscal year 2003, the figure was 56 percent, weighted in favor of services over products. In fiscal year 2006, the department obligated upwards of $151 billion to service contracts, an increase of 78 percent since 1996. 15

In recent years, both the Department of Defense and the new Department of Homeland Security, the megabureaucracy cobbled together from twenty-two government agencies in 2003, recorded colossal increases in contract spending (for both goods and services), with Defense accounting for nearly three-quarters of the total federal procurement budget in 2008. Moreover, about 70 percent of the budget of the U.S. intelligence community is devoted to contracts, according to the Office of the Director of National Intelligence, an office created in 2005 that supervises sixteen federal agencies. Contract employees make up an estimated one-quarter of the country’s core intelligence workforce, according to the same office. The director both heads the U.S. intelligence community and serves as the main adviser to the president on national security matters. 16

Joan Dempsey, a former CIA deputy director, has referred to the consulting giant Booz Allen Hamilton, headquartered in McLean, Virginia, as “the shadow intelligence community.” With more than 19,000 employees (13,000 in the Washington area alone), the company is one of the region’s biggest employers and suppliers of services to government. Booz was named 2003 Government Contractor of the Year in the $500 million plus annual revenue category. That such an awards category exists is revealing in its own right. Departments that contract with Booz Allen Hamilton include Homeland Security, the Department of Defense, the Internal Revenue Service, and the Department of Health and Human Services. For Defense alone, during the five-year period from 1998 to 2003, Booz Allen was awarded contracts worth more than $3 billion, 26 percent of them with no open bidding process. 17

In theory, these contracts and contractors are overseen by government employees who would guard against abuse. But as the capacity of government oversight has been diminishing—a lessening that seems to flow directly from the need to maintain the façade of small government—this is less and less true. A look at trend lines is illuminating. The number of civil servants who could potentially oversee contractors fell during the Clinton administration and continued to drop during the subsequent Bush administration. The contracting business boomed under Bush, while the “acquisition workforce”—government workers charged with the conceptualization, design, awarding, use, or quality control of contracts and contractors—has remained virtually constant. In 2002, each federal acquisition official oversaw the disbursement of an average of $3.5 million. In 2006 the workload expanded to $7 million, while also demanding increasingly complex contracting skill. Thus the façade of keeping government small is revealed for the sham that it is, as is that of government invariably being in control. It has too many holes in it for that to be the case. 18

The paucity of oversight leads large procurement operations to be identified by the U.S. Government Accountability Office (GAO) as “high risk” due to “their greater susceptibility to fraud, waste, abuse, and mismanagement.” In 1990 the GAO began periodically issuing reports identifying high-risk areas. The list of such areas has, since 1990 or 1992 (depending on the specific area), included the large procurement operations of the Departments of Defense and Energy, as well as NASA. The high-risk designation means that the agency may well lack “the ability to effectively manage cost, quality and performance in contracts,” according to U.S. Comptroller General David M. Walker, longtime head of the GAO. When these deficiencies play out on the ground, as they have done, for instance, in Iraq, they can lead to serious consequences. In 2006 the GAO found that “problems with management and oversight of contractors have negatively impacted military operations and unit morale and hindered DOD’s ability to obtain reasonable assurance that contractors are effectively meeting their contract requirements in the most cost-efficient manner.” The inspector general of the Department of Homeland Security concluded in 2005 that a dearth of oversight has exposed that department to the proverbial fraud, waste, and abuse in procurement too. 19

Another effect of the trend is ambiguity regarding who constitutes the government day to day. This ambiguity is most obvious in what has come to be called the “blended” or “embedded” workforce: government employees and private contractors who work side by side, often sitting next to each other in cubicles or sharing an office and doing the same or similar work (but typically with markedly different pay scales). Their interactions help forge new institutional forms of governing wherein state and private are, in practice, enmeshed. 20

A class of service contracts, used primarily in the defense arena, called SETA (Systems Engineering and Technical Assistance) furthers this ambiguity. SETA contractors advise government officials as they evaluate contractors’ bids, oversee other contractors, or act as an interface between government and contractors. An individual contractor can actually have a different status (government official or contractor) depending on the entity he’s interacting with at the moment—“flex” is built into the job description. A SETA contractor working for the Department of Homeland Security told me that different entities he deals with on a daily basis treat him differently: To the Department of Defense and the contractors he oversees, he is a government official; to the State Department he is still a contractor, not allowed to represent DHS as an official. Thus is “flex” institutionalized. 21

The shift to contractors and to flex-ability highlights the redesign of governing. This redesign threatens both the accountability of government and the competition of the private sector—all the while hiding behind the grand narratives of democracy and free markets that accompanied the end of the Cold War. Of course, contracting itself, especially of simple services, is not necessarily corrosive and can even be beneficial. For instance, a contractor with access to people at all levels of an organization can correct misimpressions held by people at the top about what is going on at the bottom and vice versa—something a regular employee is ill-positioned to do. But contracting gone wild widens the de facto base of government power in which new institutional forms of governing can flourish. The outsourcing of inherently governmental functions reveals the significance of these new forms—and makes the façade that government is in charge even more damaging.

Government Without Soul

Gone are the days when government contractors primarily provided services such as printing, serving food, or landscaping. Contractors long ago invaded the realm of “inherently governmental” functions—those activities that involve “the exercise of sovereign government authority or the establishment of procedures and processes related to the oversight of monetary transactions or entitlements.” The nineteen “inherently governmental” functions historically on the books include the following eight:

• The command of military forces, especially the leadership of military personnel who are members of the combat, combat support or combat service support role.

• The conduct of foreign relations and the determination of foreign policy.

• The determination of agency policy, such as determining the content and application of regulations, among other things.