The Need for Enhanced Defense Contractor Cost Management Systems

Technological advances, increasing government regulations, and the structural decline in the size of U.S. defense spending are placing ever-greater requirements on the information provided by the contractor's cost accounting system. A survey of defense contractors reveals that their cost accounting systems are mainly used to provide cost estimation and, accordingly, these systems are not utilized for performance evaluation and managerial decision making. Since the traditional defense contractor's cost accounting systems do not produce the information that management requires, new cost management systems (CMS) must be designed and implemented. The CMS can assist contractors to: (1) obtain financial and operating information to evaluate and improve the performance of contracts, and (2) provide contractors with relevant information to plan, manage, control, and direct contracts. This article examines the effectiveness and efficiency of currently used cost accounting systems by government contractors, discusses the nature and characteristics of the CMS and their relevance for government contractors, and suggests step-by-step procedures for proper implementation of the CMS.     

Alternative Methods of Service Delivery in Small and Rural Municipalities

Data from approximately 1,000 small, mostly rural municipalities in Illinois, New Hampshire, and Wisconsin address local choices on production and contracting arrangements for a wide range of services. The results suggest that the use of both for‐profit contractors and cooperative agreements with other governments correlate negatively with population size. Small municipalities are less likely to use competitive bidding processes, compare costs between production options, or report that privatization produces savings. Median income, rural geography, and ideology show statistically significant associations with contracting decisions. Respondents generally consider themselves “satisfied” with services provided by contract, although satisfaction levels are lower than those associated with self‐provision of the same services. Citizen satisfaction associated with services delivered by other governments is lower than those provided by private contractors, suggesting that no trade‐off in service quality is directly attributable to for‐profit contractors.     

Government Accountability For Outsourced Services*

The effect of outsourcing on government accountability for public services continues to be contested. Analysts point to an accountability deficit while governments insist that accountability is retained (and indeed improved). The existence of an accountability deficit is confirmed, using examples from the Commonwealth Job Network. The government claim, that accountability remains, is best interpreted as rhetorical, as a refusal to shift blame to private contractors, even though some channels of accountability may be weakened. The claim can be seen as evidence of an increasing incorporation of private contractors into the overall structure of government.     

Searching for contracting patterns over time: Do prime contractor and subcontractor relations follow similar patterns for professional services provision?

This paper compares over a 12‐year period (1) patterns of contracting between a state transportation agency and its prime contractors providing engineering design services with (2) patterns between these prime contractors and their subcontractors. We find evidence of different contracting patterns at each level that emerge over time and coexist in the same contracting context. While patterns at the agency–prime level are characterized by repeated contracts, patterns at the prime–sub level indicate fewer repeats and more contractor turnover. Implications for outsourcing practice and theory are discussed. © 2011 by the Association for Public Policy Analysis and Management.     

Monitoring across Sectors: Examining the Effect of Nonprofit and For‐Profit Contractor Ownership on Performance Monitoring in State and Local Contracts

What is the effect of contractors' nonprofit and for‐profit ownership on the scope and nature of performance measurement used by government agencies? Quantitative and qualitative data were generated through semistructured interviews administered to a sample of state and local public agencies and private contractors across five jurisdictions. The findings of this study suggest that monitoring officers working with nonprofit rather than for‐profit contractors are more likely to rely on qualitative performance data and examine equitable access to services, contractors' reputation, and compliance with industry rules and regulations. Although organizational ownership may not be well understood by practitioners, performance appears to be conceptualized differently across sectors. The author calls for a better understanding of the impact of the identified differences in performance measurement on the effectiveness of contract monitoring.     

Toxic waste and public procurement: The defense sector as a disproportionate contributor to pollution from public–private partnerships

Public procurement is a large sector of the economy with most procurement going to the defense sector. Procurement by the defense sector includes purchases made through contracts to private businesses that manufacture durable goods. Manufacturing of these goods results in pollution production with toxic wastes being among the most dangerous pollutants for public health. Despite green purchasing policy goals, most transactions in the United States through defense contracts result in disproportionately high-toxic pollution releases by manufacturers. We find that persistent exemptions granted defense agencies from following green purchasing policy result in a landscape where contractor environmental performance is unchanging with defense contractors persistently polluting in high amounts. Further, we find that defense contractors are linked to most toxic releases from procurement meaning that exemptions may be hindering potential advancements from green purchasing policy. Results can inform the design of new guidance about procurement and expand understanding of environmental inequality.     

Temporary Staff,Contractors, and Volunteers: The Hidden Workforce in Victorian Local Government

Theories of strategic Human Resource Management (HRM) emphasise the need to understand and effectively manage the workforce, and to align HRM practices with organisational strategy. Local government in Victoria was radically revised in 1993–94 with forced amalgamations, and later the introduction of Best Value Principles. Alongside this have been changes to council workforces. This article explores the composition of these workforces, and seeks to understand if strategic HRM practices underpin their management. It reports that in addition to the ‘known’ and ‘managed’ internal workforce, many councils have an external workforce which includes temporary staff, independent contractors, those working for external contractors, volunteers, work placement students and trainees. There is little evidence that theories of strategic HRM have been used to produce workforce planning strategies and policies relating to these staff, or that their management has been strategically aligned and reviewed to align with council strategies and business plans.     

Accountability issues of the resolution trust corporation

Abstract

No other governmental organization ever created can rival the complex patterns of accountability created to manage the bailout of the savings and loan industry. This complexity has, in turn, led to criticism that the bailout structure is too unwieldy to be managerially effective or politically accountable. While the structure does indeed immensely complicate these problems, it is an inevitable product of the political realities that shaped the bailout strategy. The real issues in maintaining accountability to the public for the bailout are: reporting clearly on how the money is being used; improving Congress's ability to track the complex management of the bailout; and using government officials, not contractors, to supervise the government's goals. Indeed, the biggest potential problem of accountability in the savings and loan rescue is not the convoluted political structure at the top but the heavy reliance on private contractors at the bottom.     

Rediscovering Implementation: Public Sector Contracting and Human Services

There is vast literature on how to implement public policies, with endless case studies emphasising a few key lessons. The drive to contracting in the public sector raises familiar threats to coherent program implementation, and adds those of control and incentives. Contracting fragments program responsibility among multiple contractors, and separates policy agencies from service delivery contractors. It raises questions about political control and accountability, and the prospect of gaps between intention and outcome. This paper 'rediscovers implementation' by reviewing the practical difficulties of constructing public-private relationships which can deliver quality human services. After considering broad arguments about the efficacy of contracting, the paper turns to the provision of human services by examining the contracting out of welfare services and the Job Network. Our argument is modest: that public sector contracting fails if the challenges of implementation are not addressed explicitly, since service delivery through the private sector can falter for exactly the same reasons as traditional public bureaucracies.     

Government capacity to contract: health sector experience and lessons

Using case-study material of contracting for clinical and ancillary services in the health care sector of developing countries, this article examines the capacities required for successful contracting and the main constraints which developing country governments face in developing and implementing contractual arrangements. Required capacities differ according to the type of service being contracted and the nature of the contractor. Contracting for clinical as opposed to ancillary services poses considerably greater challenges in terms of the information required for monitoring and contract design. Yet, in some of the case-studies examined, problems arose owing to government's limited capacity to perform even very basic functions such as paying contractors in a timely manner and keeping records of contracts negotiated. The external environment within which contracting takes place is also critical; in particular, the case-studies indicate that contracts embedded in slow-moving, rule-ridden bureaucracies will face substantial constraints to successful implementation. The article suggests that governments need to assess required capacities on a service-by-service basis. For any successful contracting, basic administrative systems must be functioning. In addition, there should be development of guidelines for contracting, clear lines of communication between all agents involved in the contracting process, and regular evaluations of contractual arrangements. Finally, in cases where government has weak capacity, direct service provision may be a lower-risk delivery strategy. © 1998 John Wiley & Sons, Ltd.     

Should Government Go It Alone or With a Partner? A Comparison of Outcomes from a Work Release Program Using Different Policy Tools

This article compares labor market outcomes from two different approaches to a work release program in Illinois: direct provision by a government and a purchase‐of‐service (POS) contract between government and a public charity. Significantly better employment and earnings outcomes were associated with the POS contract. To better understand the reasons for the success of the POS contract, the authors further examined the specific terms of the contract, organizational expertise, and the political context of POS contracts. The results are organized according to the main theoretical assertions. Findings add to the weight of evidence that contractors, like public charities, can be valuable government partners for addressing challenging social policies and programs.     

Intelligence Contracting: On the Motivations,Interests, and Capabilities of Core Personnel Contractors in the US Intelligence Community

In the debate on intelligence contracting, intelligence officers are grouped into two personnel categories characterized by opposing sets of motivations and interests. Government employees are assumed to be motivated by a higher goal related to national security, while intelligence contractors are said to be motivated primarily by pecuniary interests and loyal first and foremost to their shareholders. Contemporary research on human motivation, however, suggests that the two personnel categories are not all that different in that both appear to be intrinsically motivated and loyal primarily to the mission at hand, namely national security. Moreover, comparative research on public organizations and private corporations suggests that there are more similarities between the two than there are differences. This must lead us to re-examine the recent criticism fielded against the practice of intelligence contracting.     

The Promises and Pitfalls of Prime Provider Models in Service Delivery: The Next Phase of Reform in Australia?

At a time of fiscal restraint and reductions in the size of the public sector, governments in Australia are exploring new approaches to delivering public services. One model receiving attention is the prime provider approach. This is an approach where government contracts a lead or prime provider who in turn organizes and manages a group of sub‐contractors. In prime provider approaches, non‐government organizations take on a quasi‐government role and this brings a new complexity into the relationships between the various actors involved in developing and delivering public services. This article provides an overview of prime provider approaches and, drawing on the limited research to date, poses questions that we view as being critical to the current debate. The aim is to provoke further discussion on the potential impact of prime provider approaches.     

Perpetuating the Military Myth – Why the Psychology of the 2014 Australian Defence Pay Deal Is Irrelevant

There is a widespread belief that members of the armed forces have a unique psychological relationship with their institution and their nation, and that it is this relationship that leads to loyalty and self‐sacrifice. Yet this ‘military myth’ does not hold. Many soldiers serve for ‘occupational’ rather than ‘institutional’ reasons, and as the experience of private military contractors demonstrates, this need not reduce operational effectiveness. In this article, we argue that the concern expressed in the recent commentary in this journal by Williamson et. al. (2015) that the dispute over the 2014 Australian Defence Pay Deal may damage the ‘psychological contract’, turn it from ‘relational’ to ‘transactional’, and undermine operational effectiveness is unfounded and seems to buy into this military myth.     

Measuring the effectiveness of competition in defense procurement: A survey of the empirical literature

This article surveys the empirical literature that has attempted to measure the effects of competition in defense procurement. Its focus is on the conceptual underpinnings of the empirical models rather than on the technical aspects of the estimation procedures. While the empirical studies provide some valuable insight, the studies are flawed because they assume an implicit model of the procurement environment that is inconsistent with reasonable economic behavior on the part of defense contractors and seems to be contradicted by the evidence. In general, the predictive power of the empirical models is also limited by a program-by-program estimation approach in which only a handful of data points are available to estimate two or more parameters. These empirical models could be improved by the use of structural models that assume reasonable economic behavior and provide a theoretical basis for cross-program analyses.     

The Future of Civil–Military Intelligence Cooperation Based on Lessons Learned in Iraq

As part of the infrastructure for monitoring the movements of Private Security Companies (PSCs) in Iraq, a unique intelligence interface has been constructed to enhance cooperation between the military and PSCs. Using a wide range of existing intelligence-sharing agreements and guidelines for handling classified information, PSC contractors working with the US military have been able to provide unclassified intelligence products to the wider PSC community. Using lessons learned in Iraq as a contractor building this interface, the author explains how institutional difficulties were overcome and argues that the US military should be better prepared to share intelligence with the wide range of organizations it can expect to work with in future unconventional warfare or nation-building operations. Some of the lessons learned in Iraq can also be applied to the US Department of Homeland Security's Regional Fusion Centers, where many of the same difficulties with intelligence-sharing and integration with commercial organizations are being encountered.     

Bypassing public procurement regulation: A study of rationality in local decisionmaking

Using private contractors through procurement is common in most public sector areas. Despite the benefits of procurement, officials are sometimes tempted to circumvent procurement regulations. The aim of this article is to examine the strategies used by local governmental decisionmakers to bypass procurement regulations and to analyze the rationality underlying these officials' actions. Interviews, court documents, municipal documents, and newspaper articles describing the actions of Swedish municipal officials concerning special transport service (STS) procurements were collected and analyzed. In a case in which rural municipalities lost regular taxi services after STS procurement, we demonstrate how decisions were driven by pressure from the public and local interest groups, making municipal officials deviate from procurement regulations in striving to secure the existence of regular taxi services. One outcome was that local businesses were given preferential treatment, violating regulations and reducing economic efficiency.     

Bad Piano? Bad Music? A Response to Comments on Lowe and Pemberton,The Official History of the British Civil Service,Volume II: 1982–1997

The reforms made to the civil service during the premierships of Margaret Thatcher and John Major were unparalleled in scope in peacetime. Undertaken in the name of efficiency and better management, they served to Balkanise the service, shrink the number of civil servants, subordinate them to the will of ministers, and effectively privatise a swathe of public services. Their legacy, however, was a relatively weak centre struggling to cope with a fragmented and extremely complex governmental machine, an overly managerialist senior civil service sometimes side‐lined from policy making, and a system lacking slack as a consequence of the quest for ‘efficiency’ and dependent on private contractors of sometimes dubious worth. Over the past five years that legacy left the country poorly placed to triumph over the challenges of Brexit and then of Covid‐19.     

Competition in the weapons acquisition process: The case of U.S. warplanes

Consistent with the recent national trend to dismantle or limit the scope of regulatory agencies and controls, the military services are taking increasing advantage of competition to secure low, realistic prices and costs, as well as improved performance and reliability, for weapons and replacement parts. Using the purchase of combat aircraft and related systems as examples, this article assesses the effects of market structure on competition. Although competition can be effective, the unusual incentives flowing from interservice rivalry and the parochial interests of individual legislators often allow contractors to underbid or “buy in” on early development and production contracts and to “get well” on later contracts. Expanding the role of competition within the present institutional framework holds the potential for some improvement in the procurement process. More fundamental change is necessary to alter the role of Congress and eliminate the influence of undesirable rivalry among the services.     

Working Capital Fund Pricing Policies: Lessons from Defense Finance and Accounting Service Expenditure and Workload Data

This article analyzes how service-providing government agencies should set the prices they charge to other governmental customers. Current Defense Working Capital Fund (DWCF) rules generally prescribe use of expected average cost transfer pricing. However, analysis of the Defense Finance and Accounting Service (DFAS), as an example, suggests DFAS has considerable fixed costs. These fixed costs are problematic under present DWCF pricing rules. If customer demand levels fall short of expectations, DFAS revenues fall commensurably, but costs almost certainly do not. It would be more consistent with DFAS's cost structure if DFAS could utilize nonlinear pricing. Such a pricing approach would give DFAS customers more appropriate incentives with respect to how much workload to give DFAS (versus trying to do it themselves or turning it over to contractors). We hypothesize that insights from DFAS may be applicable to other governmental working capital fund entities as well.