The Contractor State
by digby
Henry Farrell had an interesting post last month over at Crooked Timber about the new book by Colin Crouch called Making Capitalism Fit For Society
that's well worth reading. He starts by highlighting these comments by David Auerbach on the health care reform outsourcing:
The number of players is considerably larger than just front-end architects Development Seed and back-end developers CGI Federal, although the government is saying very little about who’s responsible. The Department of Health and Human Services’ Centers for Medicare and Medicaid Services (CMS), which issued the contracts, is keeping mum, referring reporters to the labyrinthine USASpending.gov for information about contractors. … By digging through GAO reports, however, I’ve picked out a handful of key players. One is Booz Allen … Despite getting $6 million for “Exchange IT integration support,” they now claim that they “did no IT work themselves.” Then there’s CGI Federal, of course, who got the largest set of contracts, worth $88 million, for “FFE information technology and healthcare.gov,” as well as doing nine state exchanges. Their spokesperson’s statement is a model of buck-passing … Quality Software Solutions Inc …[have] been doing health care IT since 1997, and got $55 million for healthcare.gov’s data hub in contracts finalized in January 2012. But then UnitedHealth Group purchased QSSI in September 2012, raising eyebrows about conflicts of interest.
… Development Seed President Eric Gundersen oversaw the part of healthcare.gov that did survive last week: the static front-end Web pages that had nothing to do with the hub. Development Seed was only able to do the work after being hired by contractor Aquilent, who navigated the bureaucracy of government procurement. “If I were to bid on the whole project,” Gundersen told me, “I would need more lawyers and more proposal writers than actual engineers to build the project. Why would I make a company like that?” These convolutions are exactly what prevented the brilliant techies of Obama’s re-election campaign from being involved with the development of healthcare.gov. To get the opportunity to work on arguably the most pivotal website launch in American history, a smart young programmer would have to work for a company mired in bureaucracy and procurement regulations, with a website that looks like it’s from 10 years ago. So much for the efficiency of privatization.
I had no idea. If you want complexity, that's one good way to get it.
Farrell makes this connection with Crouch's book
Otherwise put, it’s a good example of Crouch’s critique of neo-liberal efforts to ‘shrink’ government – that in practice it is less about free markets than the handing over of government functions to well connected businesses.
Outsourcing is … justified on the grounds that private firms bring new expertise, but an examination of the expertise base of the main private contractors shows that the same firms keep appearing in different sectors … The expertise of these corporations, their core business, lies in knowing how to win government contracts, not in the substantive knowledge of the services they provide. … This explains how and why they extend across such a sprawl of activities, the only link among which is the government contract-winning process. Typically, these firms will have former politicians and senior civil servants on their boards of directors, and will often be generous funders of political parties. This, too is part of their core business. It is very difficult to see how ultimate service users gain anything from this kind of managed competition.
This is true of our vaunted, high tech surveillance sector as well.
Farrell observes the parallels between this system and feudalism and what he calls "Old Corruption" and it's worth reading the remainder of his post for that discussion.
To me, it seems obvious that the "contractor state" cannot be defended on democratic or capitalistic grounds. It certainly shows that simply outsourcing various necessary functions inevitably leads to corruption --- as any 7th grader should be able to predict. That this concept of "reinventing government" was pushed by certain New Democrats on the basis of gibberish makes it even more astonishing that it's taken so long to be exposed for what it is: patronage for rich (mostly) white guys who all know each other. How sad that health care reform had to be the ultimate guinea pig.
The good news is that we didn't let these incompetent middle men take over Social Security and Medicare. Yet.
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