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The relationship of government to the private sector is very much in flux these days. Pressures are building to outsource more and more government functions. At the same time, the federal civilian bureaucracy is shrinking in alarming proportion to its oversight responsibilities. The number of private contractors doing the work of government has accelerated, while the number of federal employees needed to supervise them has eroded. This imbalance has negative consequences for public management generally, but it specifically makes surveillance of privatized activities an urgent matter. When combined with the loss of key government personnel, this lack of oversight and control becomes an inevitable consequence of privatization, producing an imbalance between those in government who should oversee and those in the private sector who are meant to be overseen.

The ratio of private contractors to public employees is now almost 10 to 1, but the more significant deficit is in the reduction of toplevel government officials, such as contracting officers and the Senior Executive Service, who have seen their numbers drop as their contracting oversight responsibilities have grown. The Government Accountability Office (GAO), for example, has reported that Department of Defense oversight was insufficient in about one-third of its contracts, a deficiency it attributes at least partially to declining personnel levels. This accountability gap is really a byproduct of two converging forces: the deregulation movement, which renders many government regulatory programs unnecessary, and the privatization movement, which transfers government activities to the private sector. Deregulation critiques the economic role of government over the economy. It seeks to end programs that are inefficient or counterproductive. Privatization plays a different role. It accepts the need for a government activity, but sees efficiency advantages in shifting it to private hands.

In the United States, at least, privatization, unlike deregulation, is concerned less with the amount of government expenditures than with where to place responsibility for the activity. The size of government, viewed as a percentage of the gross domestic product, could well grow in a privatized environment, as it has during the Bush administration.

Proponents of privatization and deregulation share a belief that the market will improve the services provided by a monopolistic bureaucracy. Privatization was a cornerstone of the reinventing government movement during the Clinton-Gore administration. It has thrived during the Bush administration. President Bush’s vision of an “ownership society,” which advocates private accounts as an alternative to Social Security, further highlights the private sector’s role in the provision of traditional government services. Privatization is a presumed good in this setting. And the reality is that our government could not function without contracting out some of its services. Privatization has been part of government management since the post–World War II period, but its acceleration to the limits of accountability is a relatively recent phenomenon. Today, the degree and level of those delegations has become a central issue of public policy. In addition, stating a preference for private over public solutions, as the “ownership society” suggests, can have unintended consequences. By endorsing the view that private enterprise provides a superior organizing principle to government monopoly, privatization forces the public sector to defend itself. Thus, the central question of the privatization movement is whether the term “public sector” continues to be a viable social concept. Stated alternatively, is the publicprivate distinction, which has demarked law and political theory from the earliest times, still meaningful in an era of transcendent privatization?

For anyone who has studied the administrative state here and abroad, the most complicated question is understanding where the line between public and private is drawn. Often the effort is abandoned as unproductive. Yet when confronted with the phenomenon of privatization, the question becomes irresistible; one is compelled to discover whether a line (or some approximation of it) can be drawn. Identifying the continuing role for the state in the context of privatization implicates the public-private distinction and its connection to democratic political theory.

The words “public” and “private” are so commonplace in American law and society that they almost defy definition. In society generally, these words are politically charged. To take but one example, they have been invoked to separate public discourse from private conversation in an effort to foster civic engagement. Inevitably, the line between them remains ambiguous and contested. Calling an activity “public” has served to legitimate governmental action since society was formed. Indeed, from the time of Justinian, “public law” and “private law” have defined the relationship of the individual to the state. In Continental jurisprudence, which traces its roots to Roman law, public law carries with it substantive obligations of the state to the citizen. In the Anglo- American legal tradition, public law has similar, but less well articulated connotations.

There is a long historical, political, and legal tradition that supports the public-private distinction, its role in our society, and the essential question of who runs the government and for what reasons. This distinction is at the core of those functions of government that are labeled “inherent.” Such functions are performed by officials who exercise discretion and are accountable for the important actions of government.

The privatization movement’s success has placed these functions and the actors who perform them increasingly at risk. Protecting the public sector means placing some functions beyond the reach of privatization. Our goal here should be to balance the two positives of the private and public sectors—efficiency and accountability— in ways that confirm rather than threaten our legal and political traditions.

Giving the public sector an independent value does not undermine the private sector. This is not a zero sum game. Indeed, in terms of democratic theory this is a positive sum game where both sides can win. If the public sector is given independent value, the private sector benefits from clearer rules and better oversight. Our tradition of political liberalism keeps the public sector from usurping the essential role of private enterprise. But our notions of civil society require that the public enterprise operate effectively as well.

It is difficult for the courts to implement the publicprivate distinction under the Constitution. But if Congress replaces the Office of Management and Budget’s Circular A- 76, which sets a competitive process that allows government employees to challenge rampant privatization, with a better defined statute that guarantees objective consideration of the larger issues, these questions can be resolved.

An expanded administrative process could be led by GAO, which can help ensure that the government remains in charge of those functions that are crucial to our functioning as a civil society. Its role as an objective decider and honest broker gives it enormous credibility. There is also no substitute for the public’s voice on these matters, as expressed both through public-private competitors and a broad range of interest groups. Should GAO’s role expand, congressional interest will be heightened. Congress must evaluate what society is losing when the private-public distinction is subordinated to the privatization movement. At stake, of course, is the degree of accountability and credibility necessary to make our government and society work effectively.

Privatization need not be the enemy. Many functions of government can be performed better and more effectively with competitive sourcing. But the higher up the policy ladder the process goes, the closer one gets to inappropriate delegations. What is lost is not just the position, but the credentials of the official involved. As Justice Scalia noted in his Webster v. Doe dissent, government officials take oaths of office to uphold the Constitution. But they also subscribe to stringent conflict of interest and ethics rules, and work for more than money. Oaths and badges are not merely symbols or formalities. They accompany the defining qualities of authority and credibility.

In our post-9/11 world, government officials have earned renewed respect from the public. The credibility of a public sector employee is not easily transferred to the private sector. The public’s perceptions matter. As we have seen in connection with Congress’s creation of public officials to provide airport security, the public often prefers to have government officials in charge. The public is both demanding and respectful of government officials. Admittedly, credibility is hard to measure, and we are entitled to be skeptical about it. Still, the values behind public service that help animate the public-private distinction can also energize public decision making. When private contractors perform inherent government functions, they weaken government’s capacity to do the common good.

The goal is to grant privatization its due while protecting public sector values. Boundaries are admittedly hard to draw, but locating them has become an imperative exercise in public law and government management. This is not just a matter for the courts. All three branches of government take oaths to uphold the constitution, and each has a stake in ensuring that this exercise succeeds.