The federal government's reliance on private contractors to perform core government functions is not a efficiency reform. It is a governance choice with structural consequences.
The Scale of Federal Contracting
The United States federal government is the largest purchaser of goods and services in the world, contracting annually for hundreds of billions of dollars in products and services from private sector providers. This contracting is not limited to the procurement of physical goods and commercially available services; it extends to the performance of functions that are central to the government's core operations — the development and maintenance of critical government information systems, the management of government facilities, the provision of intelligence analysis, and the delivery of social services that the government is legally obligated to provide. The federal workforce is, in significant measure, a contractor workforce whose members are employed by private companies but perform government functions.
The expansion of federal contracting from routine procurement to core function performance represents a structural shift in how the federal government operates — one that has proceeded across administrations of both parties, driven by the combination of political attractiveness (reducing the headcount of the official federal workforce) and the genuine efficiency cases for contracting in specific domains where private sector capacity and competition are both available and relevant.
The Governance Consequences
The governance consequences of core-function contracting are real and significant. The institutional knowledge that the government needs to manage its contracts resides in the contractor workforce, not in the government workforce — creating the dependency that the contractors can leverage in subsequent contract negotiations. The accountability for contractor performance runs through the contract rather than through the employment relationship, which reduces the government's ability to direct, correct, and hold accountable the people doing government work. And the revolving door between the contractor and government sides of the relationship creates the conflicts of interest that are the structural feature of a contracting relationship where the same individuals and organisations rotate between the sides of the table.
The contractor economy is not a smaller government — it is government work performed by people who are not government employees. Its governance consequences are not the consequences of smaller government; they are the consequences of government that has outsourced accountability without outsourcing obligation.
Discussion