WHEN President Obama named Earl Devaney to head up the new Recovery Act Transparency and Accountability Board, the government took an important but insufficient step toward accountability in the implementation of the $787 billion economic stimulus package.
The stimulus package will provide billions of dollars in government contracts over the next several years—and predictable accountability problems need to be controlled now. Many of the proposed projects—from rebuilding roads and bridges to improving information technology efforts for schools and healthcare—will rely on private providers.
We know from the reliance on private contractors in the Afghanistan and Iraq wars, the Hurricane Katrina cleanup, and the first phase of the bailout for financial institutions that emergencies invite carelessness and graft when it comes to ensuring that government dollars accomplish their intended uses. Chains of subcontractors involved in cleanup and reconstruction in New Orleans ran many companies deep; each additional tier made it hard to discover and go after fraud. Congress is still trying to get answers about how money was spent on the Troubled Assets Relief Program. We know the risks; tough oversight accountability measures must accompany the stimulus package and its payout at the state and local levels.
Oversight czar Devaney has a good track record as the inspector general of the Interior Department. He will need to put in place sufficient numbers of skilled personnel to prevent waste and abuse as money is passed out in the coming months.
The scale of the stimulus combined with understaffing in relevant federal, state, and local agencies is a recipe for mismanagement and abuse. After all, a mere 1 percent of waste is $8 billion in the stimulus package. Even though many government contracts run well, contracts generated with a sense of emergency are often awarded under suspicious circumstances, hurriedly, and without competition. Many contracts are underspecified and afford contractors almost unlimited discretion. Even when contractual terms are clear, there can be a failure of government oversight. At times, it seems as if no one in any branch of government has the knowledge and capacity or political will to enforce contractual terms.
In fact, the three accountability regimes of law, markets, and politics often break down in the face of the extensive government contracting. Government agencies lack the capacity to keep up with contractors who know how to exploit gaps in the framework of legal obligations and contract duties. Private economic markets fail to exert meaningful control when the government itself creates the market by generating demand, and then, through devices like no-bid and cost-plus contracts, fails to use market discipline. The stimulus demands fixed-cost contracts that may not work for services and software projects. Political checks collapse especially when one political party controls both Congress and the executive branch. Even when Congress does actively investigate wrongdoing, the hearings and follow-up measures tend to be reactive and superficial, offering relatively little meaningful reform.
No accountability mechanisms can function effectively if basic information about performance, costs, and effects is hard to obtain. The opacity of the contracting process only heightens the risk that serious problems will be identified too late, or never. Large-scale government contracts are likely to lack effective accountability mechanisms, such as systems enabling real-time auditing and guarding against the excessive subcontracting that raises overhead and reduces efficiency and transparency. Large-scale contracts executed under exigent circumstances risk exceeding the government’s capacity to manage and monitor private company performance.
It is not enough to call for more government oversight when the current oversight system has not been effective at addressing problems. Nor is it adequate to demand more of the familiar legal checks if those checks will ossify the contracting system to the point of paralysis.
Minimal accountability for government contracting requires sufficient investment in human capital and deliberate selection of the mechanisms for gathering information, setting the requirements for effective performance, and managing the contracting and oversight process. Government employees need to be able to demand and monitor information from contractors.
As a first step, the costs of adequate supervision must be calculated and built in. Clarity about actual requirements, roles, and responsibilities is the central precondition so that each contracting arrangement specifies who is accountable to whom, for what, through what processes, by clear standards, and with specific consequences. Actually, providing for competent monitoring and oversight, if calculated and paid for, could also add to the basic purpose of the stimulus package by restoring confidence in the system—and by providing jobs for the watchdogs.
Martha Minow, a professor at Harvard Law School, is co-editor of “Government by Contract.”