Smart Contracting Means Delegating, Not Abdicating

Last week The Atlantic published a tough article on cities’ recent experience with privatization—by which they meant making contracts with private organizations to do what public employees previously did. The article gave examples of government contracts that led to lower performance, increased costs to users, and much higher costs to government.

The article was fair—it admitted that contracting out can get great results. But it showed how major screw-ups can give a good idea a bad name. Too often government tries just to offload a responsibility, for example in order to cut staffing, or to arrange a short-term budget fix at the expense of long-term costs. The Atlantic article tells of a disastrous Chicago parking meter management contract that left everyone in the city but the contractor much worse off.

Here’s what we know about contracting out: The government agencies that take contracting for services and goods seriously invest a lot in building their own capacities to make good agreements with vendors and oversee them well. The Air Force, which I studied in an earlier life, sends officers to get PhDs in physics and engineering so they can write good RFPs, enter workable contracts, and communicate competently with the likes of Lockheed. This doesn’t prevent screw-ups entirely—the tasks are complex and contractors are often asked to create new systems (e.g., missiles and fighter planes) by combining technologies never used together before. Those who make contracts can also be corrupted and make sweetheart deals with companies. The Air Force knows it needs to guard against this, but it also knows it won’t get great results if it ties the hands of its contract managers or contractors.

Contracting out is a tiger; you must ride it or it will eat you. The benefits can be tremendous, but the costs and risks are real, and they never go away. Unless government knows enough to choose good contractors and make good contracts—that divide risks appropriately, specify outcomes well, make payments and continuation and renewal contingent on performance—contracting out is just a way to move money from one unaccountable entity to another. Private sector firms with lax contracts will take profits and shortchange negligent buyers, just like public bureaucracies.

Effective government contracting matters in education, especially when it comes to charter (essentially contracted out) schools and replacement of district service monopolies with marketplaces of providers of professional development, advice, and assistance.

Contracting out is easier when the item to be purchased is a commodity and there are lots of competing suppliers. But it still needs serious attention. All the more so when technology is uncertain and government wants to encourage some experimentation with different approaches, as is the case with schools and instructional support services.

Able people have been working on smart government contracting for a long time, but in education we often ignore what they have learned. Ohio charters are a great example of a contracting-out activity where the government invested next to nothing in building its own capacity and let nonprofits authorize schools by any standard they chose. Many of the results are awful and they have set reform back in that state.

Osborne and Gaebler’s maxim, “government should steer not row,” underlies a lot of education reform proposals for charter schools, school districts, and most recently for state education agencies. But, too often, reformers think government’s work is done as soon as it finds somebody who will take money and promise to row. That’s not enough. Government needs to be explicit about what it needs, how it will know whether it is getting it, and what it will do if the contractor doesn’t deliver.

When government is negligent, problems arise and opponents of privatization swoop in with ideas for regulating contractors so heavily they can’t be more effective than government bureaucracies.

Reformed government agencies like portfolio school districts and performance-focused state education agencies need excellent staffing. They can and should be much smaller than they are now, but it does not make sense to say, “the smaller/cheaper they are the better.” It is no accident that the two districts with the best track record for using chartering to improve overall system performance, New Orleans and New York, were staffed and led by extremely experienced, capable, demanding, and highly paid people.

Slogans are useful, but they can mislead. We can’t just “blow up” the old governance system, we also have to build a new one. We need superintendents and board members to “relinquish” old regulatory functions, but we must also design new agencies that delegate, not abdicate, their responsibility to kids, parents, and communities.

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