NCPA - National Center for Policy Analysis


April 15, 2005

To improve efficiency, the government is increasingly contracting out work to the private sector, writes Stephen Goldsmith and William Eggers of the Reason Public Policy Institute.

Leveraging private sector assets to accomplish policy goals is in line with President Bush's overall agenda, which already includes Medicare and Social Security reform. This trend shows no sign of abating, say Goldsmith and Eggers:

  • The federal government already spends about $100 billion more annually for contracts than it does for employee salaries.
  • Numerous federal departments -- such as NASA and Energy -- have become de-facto contract management agencies, expending upwards of 80 percent of their budgets on contractors.
  • At the state and local level, areas usually reserved for government such as provision of complex social services, are now being dominated by private contractors.

The authors caution that private provision is not a panacea, noting that government often has difficulties working through third parties.

Source: Stephen Goldsmith and William D. Eggers, "Government by Network: The New Public Governance," Privatization Watch Vol. 28, No. 7, Reason Public Policy Institute, February 2005.


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