With the nature, scope, and pace of public sector contracting accelerating significantly during the Bush administration, and with the Obama administration promising to curb the contracting excesses of its predecessors, it is useful to take stock and ponder the consequences of this movement to date for human resource management. This article puts public sector contracting and its effects in a larger historical, political, and demo- cratic context by (a) reviewing the american propensity for market-based solutions (including contracting) to government problems, a disposition rooted in american exceptionalist values; (b) chronicling how that predisposition has manifested itself in four successive and now overlapping expansions of contracting (from products, to services, to core governmental functions, to human resource management functions); and (c) showing how these developments have had significant consequences not only for the future of the public service but also for the values associated with democratic constitutionalism in the United States.

Keywords: administrative history; contracting; human resource management; public service careers; American exceptionalism

One of the most heralded aspects of contemporary reform movements in the public sector over the past three decades is the worldwide turn to markets. Scholars have explored empirically and with increasing insights what market-based “best business practices” (BBPs) such as privatization, contracting, competitive sourcing, public–private partnerships, and cross-sectoral networks have meant for the management of public agencies (e.g., agranoff & Mcguire, 2003; Lynn, Heinrich, & Hill, 2001; Meier & O’Toole, 2006). Scholars have also assessed the normative and constitutional implications of these market-based prescriptions and variants of the new public management (NPM). Some have seen in these prescriptions, among other things, a threat to democratic constitutionalism (Bozeman, 2007; Rosenbloom, 2007; Rosenbloom & Piotrowski, 2005); corruption, immorality, and the commodifying of citizens (adams & Balfour, 2004; Frederickson, 1997); a shift to a hollow state (Milward & Provan, 2000); and an intentional undermining of the state (Suleiman,

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2003). Others, however, dispute the hollow-state notion by pointing to the residual powers that government agencies maintain in the “contract” or “networked” state (Mcguire & agranoff, 2003). although an interactive interdependency has emerged within networks crossing many boundaries, public agency–nongovernmental organi- zational connections seem to overlay the hierarchy rather than act as replacements for government action and authority (agranoff, 2007; agranoff & Mcguire, 2003; Mcguire & Silvia, in press).

These disagreements notwithstanding, one thing was clear as the Obama admin- istration turned its sights on reducing noncompetitive contract bidding, reassigning previously contracted work to federal agencies, and rebuilding administrative capac- ity within government agencies. The “true size of government,” taking into account both civil service and contractor positions, had been driven primarily by contracting over the previous three decades. In 2002, more than 5 million contractor positions supplemented 1.7 million federal civil servants and 1.5 million military personnel (Light, 2003). Contract employees comprised 62% of the combined contracting, civil service, and military positions—the true size of the federal government. More important, nonmilitary civil service positions continued to be reduced as contract positions grew significantly.

estimates also suggest that by 2007, 60% of federal procurement spending went to service contracts as opposed to tangible goods (Barr, 2007). at the same time, all types of combined contracting accounted for significant and growing portions of federal budgets. according to David Walker, then U.S. Comptroller general, “acquisition of goods and services from contractors consume[d] over one-fourth of discretionary spending government-wide and [was] a key function in many federal agencies” (U.S. government accountability Office [gaO], 2006, p. 1). Similar trends existed in states and local governments where social service delivery, prison operations, public school systems, and information systems, as well as other traditional public functions, were “privatized” or contracted out.

In the human resource management (HRM) area per se, one of the most stunning aspects of marketized public administration prior to the Obama administration came in those states—most notably Florida, georgia, and Texas—where “radical civil service reform” (henceforth, RCSR) commenced (see, e.g., Battaglio & Condrey, 2006; Bowman & West, 2006; Coggburn, 2006; Condrey, 2002; gossett, 2002; Hays & Sowa, 2006; Kellough & Nigro, 2002; Kuykendall & Facer, 2002; Lasseter, 2002; West, 2002; Wilson, 2006). Couched in the neomanagerialist tenets of the NPM, RCSR grew popular among government reinventors and resonated as a populist theme among the general public (Barzelay, 1992; Condrey & Battaglio, 2007; Durant & Legge, 2006; Pollitt, 1990; Terry, 1993). Indeed, by 2006, Hays and Sowa (2006) found that at-will employment influences had diffused to a majority of state governments (56%). additionally, of the 28 state governments reporting at-will policy expansion, 25 also reported some degree of decentralization of their person- nel systems to agencies.

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as Condrey and Battaglio (2007) observe, “The result of this decentralized, at- will environment has been the substitution of agency-specific, manager-centered HR systems for the conventionally centralized, rule-oriented systems that once charac- terized these state personnel systems” (p. 427). But all this was just a prologue to an accompanying market-based phenomenon that also was premised on the image of government’s being hamstrung by, among other things, overly bureaucratized civil service systems. In this case, however, it was aspects of the HRM process itself that were “marketized,” privatized, or contracted out.

Research on the impact of market-based reforms on HRM, including research in this symposium, has begun to appear. But is the market-based HRM reform agenda just the latest “flavor of the month” in administrative reforms with a short half-life or is it likely to be an enduring approach to HRM in the years ahead? Foretelling the future is always a risky business, and we eschew predictions in this article. Instead, we seek in this introduction to the symposium to put the impact of privatization on the prac- tice of public sector HRM in politico-cultural, operational, and normative context— perspectives that will nonetheless inform the “What next?” question to the extent that the future tends to at least rhyme with the past if not necessarily repeat it exactly.

Our arguments are fourfold. First, america’s philosophical tension between clas- sic economic liberalism and civic republicanism offers nongovernmental solutions to public problems—and especially market-oriented administrative reformers—a decided rhetorical advantage in reform debates. Second, and relatedly, a variety of socioeconomic, political, and policy factors have increased the allure of nongovern- mental market-based approaches such as contracting to governments at all levels. Third, despite the lack of evidence that private HRM outsourcing provides effi- ciency gains in the private sector, or that it is a viable long-term strategy, the public sector continues to borrow HRM and other BBPs from business without fully vetting the evidence or the implications of outsourcing. Finally, the evolution of the four major components of contracting out—first for products, then for services, then for core government functions, and finally for components of the HRM function itself— has profound and sometimes paradoxical consequences for personnel management in public agencies. This is true not only for public sector HRM but also for the allure of public sector employment more generally. If public services can be provided everywhere—in government, for-profit, and nonprofit organizations—what allure does public sector employment hold for the most talented in our society?

American Exceptionalism, Administrative Reform, and the Romance of Markets

any review of administrative history shows the clear perdurability of the appeal of nongovernmental solutions to public problems—and especially of market-based administrative reforms—at all levels of government in the United States. Moreover,

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as we discuss further below, this remains the case even in some of the direst eco- nomic crises, when failures of markets would suggest a move away from them. arguably, the sources of the allure of market-based administrative reforms lie firmly within the cultural history of america. at the center of americans’ attitudes since the nation’s founding has been an enduring approach-avoidance conflict with govern- ment, one rooted in the nation’s historical tensions between classic american liberal- ism and civic republicanism.

The former embraces american exceptionalist values such as minimal-statism; faith in markets, technology, and rationality; and egalitarianism based on individual rather than group responsibility (Lipset, 1996). The latter, as Morone (1990) explains, is more community oriented than individual oriented: “In the [civic] republican view, the colonial and Revolutionary ideal lay, not in the pursuit of private matters, but in the shared public life of civic duty, in the subordination of individual interests to the res publica” (p. 16). Some social historians go even further than civic republicanism, arguing that the ideas of democracy and capitalism became linked in americans’ minds during the first three decades of the 19th century to create an enduring “myth of national identity.” appleby (as cited in Wood, 2008), for example, concludes that americans “eager to shed the aristocratic past” (p. 259) of the Federalist era “con- vinced themselves that government had little or nothing to do” (p. 257) with the rising prosperity the nation experienced. adds Wood (2008), no matter its accuracy, the image of the “liberal, individualistic, commercial, and interest-ridden world of early nineteenth century america” remains today “part of the nation’s understanding of itself” (p. 255).

granted, periods arise in american history when governmental solutions are per- ceived as vital at the macro-level, most especially moments animated by national security concerns (e.g., World War I) and crises (e.g., the Depression in the 1930s and the recent Wall Street meltdown). at these points, governmental entities and programs may blossom (e.g., during the New Deal and the Cold War). Yet even then the allure of market solutions and tools remains strong, bridling a full-blown com- mitment to european-style statism and spawning a hasty retreat to normalcy after the crisis passes. Moreover, even when government agencies or budgets grow (e.g., in the wake of the Depression), either the structures created to deal with problems enhance the access, power, and influence of nongovernmental actors (e.g., through subsystem politics) or they must be relied on as key components of implementation structures (e.g., state and local governments, private sector, and nonprofit actors). The reliance on those third-party actors, in turn, is also a function of american exceptionalist values related to fears of concentration of power in Washington.

Consider, for example, the 2009 financial crisis in the United States and the gov- ernment’s response to it. a major administrative component of the first round of financial reform launched in america during the george W. Bush administration was consonant with the path-amplifying momentum toward classic economic liberalism (Landler & andrews, 2008) expected by american political development theorists

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(Orren & Skowronek, 2004). Created within the Treasury Department was an orga- nization that contracted out the bulk of its asset-management functions to 5 to 10 large private sector asset-management firms. also, only a “bare-bones internal staff of about two dozen people” (rather than career bureaucrats) were hired to oversee how these firms spent the first $250 billion of the recovery plan (Landler & andrews, 2008, p. 1).

In turn, much of the Congress’s $787 billion economic stimulus package (the american Recovery and Reinvestment act) passed in the early weeks of the Obama administration involved money for pass-through funding to states and localities and private sector subsidies, albeit with line items for some capacity rebuilding in the federal government. For instance, nearly $87 billion was routed to states and subna- tional government actors, which are often heavily partnered with nonprofit and pri- vate contractors overseen by state and local contracting officers. Relatedly, Treasury Secretary Timothy geithner’s plan relied heavily on public–private partnerships to buy up toxic bank assets.

Importantly, “normalcy” in america, especially since the end of World War II, turns out to be a riff on a largely overlooked minority position in the early 20th cen- tury Progressive Reform Movement called associationalism (see Durant, in press, for an in-depth discussion of this movement’s and its ties to contemporary management reforms). associationalism originally melded the classical liberalism and civic repub- licanism of american impulses as an important “third-way” alternative to laissez- faire and collectivist administrative reform prescriptions in the 1920s. For associationalists, the role of federal agencies was solely to “stimulate the private sec- tor to organize and govern itself” in the public interest (Clements, 2000, p. 128). “Decentralization, voluntarism, and localism” (p. 96) was the mantra of this move- ment. Rather than regulate, technoscientific experts in the federal government would serve only as sources of research and information, coordination, and national guid- ance. They also would stay out of the actual production and distribution of services, leaving these functions to states, localities, and private associations (Hofstadter, 1989). as Hart (1994) writes, in the “shadow of the welfare state and the warfare state, the associative state has survived,” and “advocacy [has occurred] on its behalf in virtually every administration” since Roosevelt’s (p. 30). In the process, access and influence by organized interests (especially corporate interests) is privileged over less well organized and politically powerful interests (Lowi, 1979; Orren & Skowronek, 2004; Pierson & Skocpol, 2007; Thelen, 1999).

Other researchers have found similar secular reform trends consonant with american exceptionalism in the realm of regulation, as traditional command-and- control regimes gradually give way to market-based approaches. This shifts the responsibility for determining the best means of compliance from the bureaucracy to the individual firm. It also changes the requisite skill set for employees in government agencies; they must become adept at structuring the rules of the marketplace rather than just monitoring and enforcing them. Meanwhile, corporate interests and their

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allies have rushed toward voluntary, nonstate, market-driven self-regulation by trade associations—ideas again consonant with american exceptionalist values. and much of this has been done with agency support as regulators seek relief from responsibilities that they no longer have the resources (personnel and financial) to pursue adequately.

But as recent research has demonstrated, cultural explanations alone do not account for the predilection of governments at all levels to turn to market-based reforms at both the micro- and macro-levels of administrative reform. The move to hiving off, privatizing, or contracting out traditional and core government functions, for example, is clearly driven in part by budgetary pressures. This makes it partially cyclical, as the economy inevitably recovers. an increasing share of the U.S. public budget, however, is already consumed by entitlements, defense spending, and spiral- ing interest on the national debt because of recent borrowing to stimulate the econ- omy. One way to stretch the public dollar, as this likely enduring secular trend in the environment continues, is to privatize, to place public functions in the hands of pri- vate parties who can profit by charging user fees. and the gradual accretion of these tides of reform (Light, 1999a, 2006) cumulatively represents a tectonic (Koppell, 2006) shift in the form and contours of government employment.

This may seem odd to argue, with some estimating that the scope of President Obama’s stimulus plan and 3.6 trillion-dollar budget will require adding anywhere from 100,000 to 250,000 federal employees to the workforce (Rucker, 2009). although additions to the federal workforce have already begun, however, they may yet not materialize on the scale predicted. Nor do raw numbers of additional federal employees mean much unless related to spiraling responsibilities and needs. at the Internal Revenue Service, for example, “there are hundreds of thousands more tax- payers today than there were 10 years ago, and there are 27,000 fewer employees” (Rucker, 2009, p. a1). In addition, some agencies are reluctant to go too far in direct hiring because of the long-term costs of hiring permanent employees. Moreover, because some skills require higher salaries and involve seasonal fluctuations in need, contracting is a permanent feature.

at the same time, a convergence of forces is likely to continue to put downward fiscal pressure on the discretionary budgets of agencies in the United States (see Durant, 2000, for a summary of these trends). For example, the globalization of markets puts downward pressures on both traditional tax revenues and the visible size of the public sector (thus enhancing the allure of contracting and other forms of third-party government). Simultaneously, the graying of america means fiscal strain as far as the eye can see on Medicare, Social Security, and Medicaid, as well as appeals for government support for vastly underfunded public and private sector retirement programs. Defense intellectuals also tell us that military operations in failed states will continue to put substantial strains on the federal budget.

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For example, President Obama’s first budget was premised partly on reducing taxes for 95% of U.S. citizens, albeit by increasing taxes on the top 5% by not renewing the Bush tax cuts scheduled for expiration in 2010. But those increases brought taxation rates for those individuals only slightly above where they were dur- ing the Clinton years. also, those dollars were tapped initially as a down payment for Obama’s health care plans. Budget savings also were partly predicated on a bud- getary sleight of hand and questionable assumptions that involved legislation that was by no means assured. The former is illustrated by assuming $100 billion annu- ally in savings through 2019 by ending the war in Iraq, even though all U.S. troops are to be withdrawn by 2011. The latter is illustrated by assuming that tax cuts would be offset by auctioning off pollution allocations to industry with the passing of a controversial and difficult to implement cap-and-trade program. Falling short on any of these estimates makes even more problematic the administration’s goals of halv- ing the trillion-dollar annual budget deficits now projected. But perhaps the most significant sign of the continuing downward pressure on the visible size of the fed- eral government was the Obama administration’s effort to assure voters and the financial markets that it projects reducing federal spending to 22% of gDP in a few years, after a spike of federal spending this year to 27% of gDP (Brooks, 2009).

Nor do arguments regarding the theorized efficiency of private over public service delivery alone explain the persistent allure of contracting to american governments. as we shall illustrate in this article, the savings proponents claim for contracting are dubious, often because they fail to incorporate the administrative costs of contracting. Hiring private firms to deliver public goods may be cost-effective relative to govern- mental production under the right conditions (e.g., competitive bidding and rigorous enforcement of standards). However, savings are hardly a sure thing; contracting often takes place in the absence of these conditions at all levels of american govern- ment. Moreover, repeated financial scandals involving contracting were common over the past three decades, a state of affairs that only heightened citizen skepticism about government capacities. Ironically, agencies more than contractors took the rhetorical heat for failures. and yet the response has been to do it better rather than to halt it.

This suggests, again, that something more is at work in making contracting so alluring to americans. The motivation for government outsourcing seems also to involve secular ideological and electoral trends. In terms of ideology, Ronald Reagan’s famous declaration that government is not the solution but rather the prob- lem to policy problems signaled a remarkable change in attitude from the era of the New Deal. Fewer than 50 years before Reagan delivered these words, government was indeed seen as the solution. and there was no political liability associated with the advocacy of a public program as a response to a public policy crisis.

In post-Reagan america, the same could not be said. Bill Clinton’s well-known rhetorical flourish that the “era of big government is over” was seen by many as the

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symbolic exclamation point on Reagan’s declaration. Moreover, although george Bush’s “big government conservatism” belies that statement, as does Obama’s aggressive first-year legislative agenda, the political virtues of contracting remain operative in both Republican and Democratic administrations. If Roosevelt used the administrative state to build a supportive coalition of public employees for the Democrats (Milkis, 1993), the rise of contracting-out efforts under Bush, as well as the Republican’s K Street strategy of placing loyal Republicans in “patronage jobs” in the private sector, were tantamount to the same end. Meanwhile, as Light (1999a) notes, the allure to members of Congress of bringing contracts and jobs back to their districts is insatiable. Nor will the substantial “infrastructure” investments promised by the new Obama administration stanch these trends. as noted, President Obama has talked about reducing and bringing back in-house contracts previously let during the Bush administration, especially no-bid contracts. Yet even the Clinton adminis- tration engaged heavily in no-bid contracting, and the political economy surrounding contracts already in districts makes cutting contracts difficult.

at the same time, adroit issue framing by proponents of market-based reforms has helped their political cause by making extensive use of appeals to the values of american exceptionalism. Operations within the traditional administrative state were framed widely as stifling innovation and individualism, reducing flexibility, compro- mising boundary-spanning capabilities (across programs, agencies, jurisdictions, and disciplines), reducing the speed of decision making, and alienating trust in govern- ment among citizens—all attributes that are unsuitable for dealing with today’s policy problems. Instead, what Nye and Keohane (1998) call “networked minimalism” favoring the partnering with for-profits and nonprofits and the privatizing of govern- ment functions was said to be more conducive to success.

Finally, and directly related to these developments, researchers have identified “interpretive effects” of policy, policy tools, and policy implementation (Mettler, 2005). Indirect and market-based tools of government such as contracting make it seem that government is “receding” from the things that matter in citizens’ lives. In the process, citizens’ support for government solutions to societal problems wanes, as does their concern about supporting capacity building in public agencies. This in turn makes government agencies less able to meet the responsibilities they have (e.g., protecting food), which further provokes nongovernmental solutions, and so on in a vicious circle.

Going, Going, Gone? Markets, Contracting, and Public Sector HRM

as the preceding suggests, contracting out government services is nothing new and is almost hardwired into the american psyche. But as public administration scholars and professionals have noted, the reliance on contractors has accelerated in

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the past 30 years at every level of government, as has the type of contracting pursued changed. The precursor to today’s large-scale contracting movement was the reli- ance on private firms to provide goods and services to government agencies, a reli- ance predating the nation’s founding. The role of contractors providing food and supplies (with varied levels of competence and quality) to the Continental army, for example, foreshadowed the contemporary efforts of private contractors supporting american deployment in Iraq (Keeney, 2007). every president since george Washington has relied on contractors to furnish the government with necessary goods. equally lacking novelty are the procurement scandals accompanying these recent trends. Contracting is well known historically as a source of graft, and con- tracting throughout our history has been accompanied by price gouging, bribery, fraud, and shameless disregard for standards of quality (Keeney, 2007).

But whether for good or ill, the rise and evolution of “contracting out” alters the nature, form, and contours of the american bureaucracy. Over the long term, such evolution literally has changed “the shape of government,” with government bureau- cracies rendered top-heavy as actual service providers are increasingly in the employ of private firms (Light, 1999b). In the process, this reshaping of government has had profound consequences for public sector HRM. arguably, the best way to appreciate these impacts is to summarize the progressive evolution of contracting in four suc- cessive yet now overlapping major trends and how they have affected HRM in public agencies. The four are contracting for products, contracting for services, con- tracting core government functions, and contracting HRM services themselves. Because the focus of the symposium is on HRM issues, we will provide briefer synopses of the first three types of contracting.

Contracting for Products

government purchasing traditionally has been concentrated in products—mostly specialty items produced in relatively small quantities. Included are defense equip- ment and materiel; heavy machinery for federal, state, and local public works; build- ings; equipment for public hospitals and clinics; and supplies and other tangible goods. Markets for asset-specific goods have tended to be less competitive than those for more widely used goods. as a result, governments typically have forged close working relationships with producers of these items, relative to the more “arm’s-length” transactions used for supply purchases. This gives rise to the stan- dard stories about friendly defense department–defense contractor dealings.

In general, however, contracting for products historically has been heavily regu- lated with an eye on the potential for graft. For many of the most expensive items, huge amounts of capital are invested by the vendor, with both the government and the vendors sharing financial risk. examples from defense contracts, including suc- cesses such as the B-52 bomber or failures such as the Comanche helicopter (Reuters, 2004), are illustrative of the mixed results. In the case of the B-52 bomber,

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which has been a mainstay of the air Force since the 1950s, a long-term contract with Boeing delivered a low-cost, superior-performing, and truly durable product. By contrast, in the case of the Comanche helicopter, “21 years of escalating costs, technological glitches and redesigns failed to produce a single operational aircraft” (globalSecurity.org, 2004, p. 1), and the project was cancelled in February 2004 (Reuters, 2004).

Thus, although the public resources allocated to product contracting have been significant, the results have varied. Moreover, the analyses of proponents of product contracting (as well as the other three types of contracting covered in this article) and in-house analyses by practitioners are usually based on cost information that is disas- trously incomplete and tilted toward showing contract benefits. Indeed, when transac- tion costs that are typically ignored are subsequently incorporated in analyses, cost savings tend to disappear (Brudney, Fernandez, Ryu, & Wright, 2005; Stein, 1990; U.S. Department of Health and Human Services, 2007). Sclar (2000) even found paradoxical evidence of greater inefficiencies through contracting across a range of contracting venues. But the vagaries of vendor markets for large-ticket, asset-specific items, together with a general sense that government both is ill-suited to producing such goods and generally reaps benefits from most product contracting, promote public acceptance of the occasional cost overruns and costs of graft involved in these contracts. For the HRM arena, the implications are that the described inefficiency problems will inhibit the effectiveness of outsourcing. With the exception of a few areas, such as information technology equipment, the asset specificity features that support product outsourcing are absent in HRM. Consequently, the rationale for HRM outsourcing will be less clear than for product contracting.

Contracting for Services

These problems notwithstanding, and consonant with american exceptionalism’s romance with markets, enormous growth in contracting for services has subsequently been layered atop product contracting over the past two decades. Two widespread trends underlie this development. First, the rising importance of “knowledge” work- ers and policy expertise in government, combined with the growing difficulty of acquiring and retaining knowledge and expertise, stimulates the movement to service contracting. For instance, competition with private sector salaries hinders government capacity in the area of information management. Information technology—an area requiring considerable expertise and in which government is at a disadvantage in terms of understanding the final product it intends to purchase—is not unique. Second, shifts in developed economies from manufacturing to services have gener- ated large supplies of service-oriented organizations—for example, firms and non- profit organizations—that are eager to tap into “government work.” examples range from Booz allen Hamilton’s current contracts for consulting services across the federal government, to tailoring of data management services for expansions of

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social welfare programs beginning in the 1960s by electronic Data Systems, to MaXIMUS’s domination of contracts related to welfare reform in the states, to recent expansions of defense-oriented service contracting in Iraq and afghanistan.

Federal, state, and local governments now rely on nongovernmental organizations for a wide array of services, ranging from the management of corrections facilities (Donahue, 1988; Price & Riccucci, 2005), to the delivery of discrete social services to vulnerable populations (Van Slyke, 2003), to case management for such populations (Johnston & Romzek, 2008)—a critical function that includes the dispensation of benefits and the design of comprehensive treatments funded through highly regulated intergovernmental programs (Medicaid, child welfare, and Temporary assistance to Needy Families). elementary and secondary education—the largest items in aggregate state–local budgets—now involve contracts for services ranging from bus transporta- tion to the actual management of districts and schools.

The consequences of this move for HRM management can be profound. These contracted services—which in effect outsource direct encounters with individual citi- zens (often captive in the system), as well as daily judgment calls about the allocation of benefits—are not just more complex to implement and monitor than product con- tracts (Chen, 2009). They also raise serious questions about the distribution of power across sectors and the accountability of government to its primary citizen constitu- ents. They can also stimulate a brain drain from the public sector. For example, Defense Secretary Robert gates has become “troubled by security contractors’ prac- tice of luring soldiers out of uniform by offering them higher salaries . . . [and is] looking for ways to put legal limits on that practice” (Burns, 2007, ¶ 2). Indeed, in all service areas, government staffs are buffeted by conflicting forces. Public ser- vants are subject to appeals from nongovernmental organizations to leave govern- ment, attracted in part by core missions that have been shortchanged within public agencies and also by better compensation. In the process, government employees are asked to shift from program work—work to which they often are devoted through professional commitment—to generalist contract work, which they often find far less rewarding (gaO, 2006). also, if they choose to stay in the public sector, they face the prospect of remaining in government agencies that confront regular “bureaucrat bashing,” decreased funding levels, and continued pressure to contract out even more of what they do.

Meanwhile, there is a clear toll on the capacity of government to oversee contracts and to ensure that public resources are used effectively. Whether inadvertent or inten- tional, most observers agree that oversight capacity is woefully inadequate and diminishing quickly (Chen, 2009; gaO, 2006; O’Harrow, 2009). For some, the fault lies in the unattractiveness of the task of contract management, as well as in a lack of stature and mobility for contract managers in most agencies. In contrast, Miller and Whitford (2006) posit that the government/principal’s “moral hazard constraint” creates perverse incentives toward the “inefficient use of [public] monitoring and oversight” of contracts (p. 213). Rationale aside, and despite significant growth in

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contracting activity, the federal government acquisition workforce has remained level at 106,000 since 2000 (gaO, 2006). HRM and contract management are therefore closely intertwined. The protection of government’s human capital in the wake of these forces and in light of the graying of our bureaucracies is increasingly difficult.

at the same time, and related to service contracting, a chronic and nonempirically justified preoccupation with pay-for-performance—built on the myth of its success in the private sector—creates additional perverse incentives in many public services. Indeed, a recent meta-analysis of studies of contingent pay in public and nonprofit agencies from 1977 to the present by Perry, engbers, and Jun (2009) finds little to support its efficacy (also see, Baker, Jensen, & Murphy, 1988; Condrey & Kellough, 1993; eisenberg & Ingraham, 1993; Perry, Mesch, & Paarlberg, 2006). a recent salient example involves the popularity of performance bonuses for public school teachers whose students outpace norms in standardized testing. Yet these perfor- mance strategies are not up to the task of building in appropriate adjustments for noncontrollable factors such as home-based student deficits (Radin, 2004; Rubenstein, Schwartz, & Steifel, 2003). Thus, they reflect the problems inherent in the tendency of governments to adopt nongovernmental solutions for fundamentally public prob- lems and to shortchange public values (Bozeman, 2007; Frederickson, 1997; Rosenbloom & Piotrowski, 2005).

Contracting for Core Government Functions

Further layered atop these first two developments is an increasing tendency to contract core government and governance functions to nongovernmental actors, including the actual design of policy and the monitoring of contract performance. This tendency is due in part to two interrelated trends proliferating across american government levels and program areas. First, and as noted earlier, political pressures on direct government service provision, combined with increased public service demand, have led to growth in contracting, and these forces contribute to diminished administrative and operational capacity for core functions. as a result, governments now regularly use contractors to craft government policy, even in sensitive areas such as defense and diplomacy, and to perform critical and discretion-laden func- tions such as interrogation of suspected war criminals and determination of client eligibility for crucial social safety net programs.

Second, President george W. Bush’s Office of Management and Budget, emulated to some extent by states and local governments, attempted to redefine “inherently governmental functions” in ways that left nearly all government responsibilities ripe for contracts. In tandem with this dynamic, governments now even outsource con- tracting. Contractors now provide contract design, product and service procurement, and contract oversight (Johnston & girth, 2008). In fact, nearly half of the army’s current procurement specialists are contractors, a figure nearly double the level of 3 years ago (gaO, 2008).

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as a consequence of these developments, and consonant again with the minimal- statist rhetoric of american exceptionalism, the administrative capacity and institu- tional history critical to program design have clearly weakened throughout the recent 30-year reform period. Moreover, governments are now also losing both the responsibility and the expertise necessary to handle core governmental functions. Thus, contrary to the BBP rationale of reformers, agencies are increasingly hiving off vital functions that successful businesses would never consider doing and that those found guilty of financial mischief have routinely violated. as a result, govern- ment’s position in the contracting relationship is seriously threatened. Its reduced capacity to make sound judgments about appropriate contracting and to implement and oversee contracts—especially in core areas—reduces its ability to maintain the authority critical to ensuring contractor accountability and maintaining or improving service quality. It also further erodes the affective allegiance of citizens to the state that we discussed earlier.

Contracting HRM Services

Finally, and layered atop the other developments and consequences of contracting for HRM management, are recent moves to contract—in whole or in part—HRM responsibilities themselves. Consistent with the broader trends toward the marketi- zation of public services that we discussed earlier, the outsourcing of HRM services is among the latest developments in applying market theory to government opera- tions across our federal system. american exceptionalist values are reflected in this trend and in related market-based reforms, many of which implicitly view bureau- cracy as undesirable.

Just like the contracting of other government products, services, and core functions, outsourcing HRM services generates cascading effects that are unforeseen and unde- sired. Ultimately, reduced service quality and weakened accountability become real threats, and arguably, the contracting of HRM functions comes at the expense of orga- nizational culture, bureaucratic neutrality, and democratic accountability. This is not to suggest that outsourcing of HRM functions is novel or ultimately destined for risk. It is to say, however, that the comprehensive nature of today’s HRM outsourcing is unprecedented and that care must—and can—be taken to ameliorate its downsides.

HRM contracting is becoming decidedly less incremental and more extreme as pressures mount to outsource functional roles beyond routine tasks and toward critical HRM services. The logic of reformers is straightforward. Consistent with NPM and RCSR reforms, and underscoring liberation and market management, proponents of HRM outsourcing contend that freeing human resource staff from low-level transactions can increase the responsiveness of the organization and allow managers to focus on charting a strategic course (Coggburn, 2007; Cooke, Shen, & McBride, 2005; Fernandez, Rainey, & Lowman, 2006; Hays & Kearney, 2001; Lawther, 2003; Maranto & Condrey, 2001).

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Thus, public agencies are outsourcing a number of traditional HRM services, ostensibly to achieve greater efficiencies, organizational flexibility, and discretion. Lower-tier, transactional activities such as benefit and claims processing, payroll activities, and training are routinely outsourced (Battaglio & Condrey, 2006; Chi, arnold, & Perkins, 2003; Coggburn, 2007; Cooke et al., 2005; Fisher, Wasserman, Wolf, & Wears, 2008; Kosnik, Wong-MingJi, & Hoover, 2006). Proponents contend that outsourcing these functions allows for more emphasis on higher-tier, strategic activities such as workforce planning and implementing performance management systems. Yet these higher-tier activities, along with other HRM functions such as recruitment and hiring, are increasingly outsourced to consulting firms and decentral- ized through self-service applications (e.g., where employees can update/change personal information online or managers can conduct performance reviews; Coggburn, 2007; Fernandez et al., 2006).

Public sector HRM outsourcing is a natural extension of deregulated personnel systems and borrowed private sector BBPs. HRM outsourcing was implemented in the private sector primarily to introduce efficiencies, increase flexibility, and strate- gically refocus internal resources on mission-oriented activities (Cooke et al., 2005; Fisher et al., 2008; Kosnik et al., 2006; Lawler & Mohrman, 2003; Roberts, 2001). Deconstructing the rationale, increased flexibility is accomplished through institu- tional decentralization and the ability to manage contract workforces based on fluc- tuations in need. efficiency gains are theorized to emerge through the introduction of competition (i.e., a competitive bidding process) and economies of scale through contracting with specialized human resource firms and shifting cost structures from a fixed to a variable metric.

The logic of this theoretical rationale aside, its implementation is complex and can be problematic. Resource constraints can drive HRM outsourcing decisions, especially in public agencies with aging HRM infrastructures and technologies. For example, the need for large-scale human resource information system (HRIS) imple- mentation and regular technology upgrades impels resource-constrained public agencies toward private sector solutions. governments can use this strategy to avoid large capital outlays for HRIS platforms (Lawther, 2003). Yet there are significant dangers in outsourcing for these services. governments run the risk of vendor oppor- tunism, especially in contracting for technology and capital expenditures, because it is difficult and cost prohibitive to change vendors once organizational commitment is made to a specific product (Lawther, 2003; Siegel, 2000). Furthermore, this type of outsourcing can compromise the security of sensitive, confidential, or proprietary information as it is under the control of another firm’s personnel (Kosnik et al., 2006; Roberts, 2001).

also not unlike private firms, governments often outsource HRM to reduce the number of public employees. at the federal level, the Departments of Homeland Security and Defense have expansive HRM outsourcing initiatives. at the state level, Texas and Florida have engaged in the most comprehensive HRM outsourcing

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initiatives (Battaglio & Condrey, 2006; Coggburn, 2007; Condrey & Battaglio, 2007; Nigro & Kellough, 2008). In Florida, many of the HRM transactional func- tions were outsourced to Convergys, a publicly traded global HRM provider. The reforms aimed to make HRM services more market-driven but also were focused on reducing public employees and their protections (Bowman, West, & gertz, 2006; Nigro & Kellough, 2008). Convergys also was awarded a contract to provide HRM support for Texas’s Health and Human Services Commission in an effort to achieve cost efficiencies and to provide a technology-driven solution (Coggburn, 2007). Yet, again, misfeasance and nonfeasance arose. The State auditor’s Office in Texas found that inaccurate cost data were used in the decision to privatize the HRM func- tion. Failing to include these relevant costs resulted in zero cost savings for the state. It also found that the commission did not provide adequate monitoring and oversight of the Convergys contract (Coggburn, 2007).

In short, compared with in-house HRM, outsourced HRM does not necessarily deliver cost savings, greater effectiveness, or superior performance. although some HRM functions might be viewed as ideal for outsourcing, experience tells us that in practice implementation often exposes flaws in the original rationale. One salient example involves the outsourcing of background security checks for new federal hires (Johnston & girth, 2008). Despite expectations of a competitive provider mar- ket and cost savings, significant public resources are in fact devoted to “building an industry” to compete for these contracts, to nurturing weak contractors, and to main- taining a healthy number of vendors (mostly unsuccessfully). Fifteen years after the inception of this federal HRM reform, its effectiveness is questioned, despite the fact that the service is one that we would expect to be a prime candidate for successful outsourcing.

In addition to documented problems with the implementation of public sector HRM outsourcing, researchers studying private sector efforts offer empirical evi- dence that many of the perceived benefits of contracting fail to materialize (Cooke et al., 2005; Fisher et al., 2008). Despite the growing trend toward HRM outsourcing, for example, economic benefits and gains from economies of scale for private com- panies are elusive (Cooke et al., 2005). Like government, firms often fail to consider issues related to the costs of contract oversight and performance. Most contract man- agement requires “enormous resources and expertise” (Cooke et al., 2005, p. 420). Firms that purchase HRM often fail to retain a sufficient number of personnel to perform these functions or to provide proper training in contract management. Furthermore, as systems decentralize and HRIS is introduced to shift responsibili- ties to line management, costs of reallocating these tasks from centralized staff to line staff are rarely factored into efficiency calculations. Line managers are relied on for recruiting, hiring, and training—tasks handled traditionally by professional HRM staff. Costs also may increase if contractors with little information about the home organization are unable to perform specialized HRM functions efficiently. Inexperienced contractors also introduce service quality problems.

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echoing private sector benefits and risks associated with HRM outsourcing, pub- lic sector managers also can lose control of the process and incur transaction costs that reduce the net benefit of the HRM contract (Fernandez et al., 2006; Siegel, 2000). Once again, calculations of these transaction costs rarely are included in evaluations of efficiencies gained from outsourcing public functions, thus typically exaggerating claims of savings (Brown, Potoski, & Van Slyke, 2006; Johnston & girth, 2008; Sclar, 2000; Van Slyke, 2003). The bottom line is that as HRM out- sourcing increases, considerable investment is required to monitor contractor perfor- mance and ensure accountability, and these expenses are seldom taken into account when deciding to outsource or when assessing cost effectiveness.

In addition to weak efficiency gains, HRM outsourcing also presents a number of organizational risks. Tensions between contracted staff and permanent civil servants can cause relational and change management issues within the modified organiza- tion, reducing its performance (Fernandez & Smith, 2005; Fisher et al., 2008). There are broader cultural concerns as well. employee communications, recruitment, and hiring are critical to the organization’s culture (gaO, 2006). Outsourcing these key functions with a resulting shift in culture can alter the performance of both individu- als and the entire organization (Fisher et al., 2008). Furthermore, HRM outsourcing overemphasizes short-term goals, with less attention to the long-term effects of out- sourcing. among these is the loss of institutional knowledge, negative impact on human resource professionals in the organization, loss of organizational distinctive- ness as outsourced processes are standardized, and even the ability to keep the cost of contracting under control (Cooke et al., 2005; Kosnik et al., 2006).

Can these downsides of the contracting of HRM functions be ameliorated? Prior research suggests that the decision to outsource HRM services should not be based on expectations of cost reductions and more flexible work environments. Moreover, public HRM functions are steeped in the democratic-constitutional values expected of public employees but not of their private sector counterparts. Furthermore, HRM is not simply a set of transactional activities; HRM professionals are policymakers, suggesting that, in fact, HRM is an inherently governmental function that should be administered within the governmental sector where the lines of accountability are more tightly coupled. as Klingner and Lynn (2005) note, “HRM is laden with con- tradictions in policy and practice resulting from often unwieldy and unstable combi- nations of values and systems and fraught with the inherent difficulties of relying on competitive and collaborative systems to achieve diverse goals” (p. 55). Relying on market forces to produce “natural” accountability is rarely effective in public service markets (Hodge, 2000). The Obama administration has recognized this explicitly, warning in its recent memo to federal agency heads more broadly that “contractors may be performing inherently governmental functions” and that “the line between inherently governmental activities . . . and commercial activities . . . has been blurred” (Newell, 2009, p. 1). The complexity of HRM outsourcing, the conse- quences of shifting accountability mechanisms, and the lack of evidence supporting the theorized benefits of HRM outsourcing raise further questions regarding the

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implementation of deregulatory efforts and, more fundamentally, regarding the impact of these efforts on the future of public service. It is to those implications that we turn next.

Beyond the “New” Clerical State? Markets, Contracting, and Public Service

Frederick the great—the 18th-century Prussian monarch who transformed his kingdom into the dominant german state—once advised his generals, “He who would defend everything ends up defending nothing.” Clearly, one cannot defend or criticize wholesale the turn to markets generally or to contracting in particular. The issue is not whether but when to contract; not never or always but how smartly to contract. Moreover, as we have argued, reform biases toward nongovernmental solu- tions to public problems have a preferred place in the american creed in all but the most extreme crises or national movements (Durant, in press). even then, nongov- ernmental (especially, market and civic-based) approaches grounded in american exceptionalist values typically have reasserted themselves in the means chosen to address crises. Moreover, proponents of nongovernmental administrative reforms historically have framed their proposals in american exceptionalist ways that lent rhetorical and, hence, political power to their initiatives.

as the synopses of the evolution of contracting in the United States have argued, the implications of these propensities and trends have been profound for HRM at all levels of government in the United States. Less obvious and appreciated, how- ever, is the ultimate impact of these trends and predilections for the future of the public service more generally. Without minimizing the importance of public service motivation (Perry & Wise, 1990) in attracting and retaining government employees, one of the major attractions of public service historically was the trade-off between receiving lower pay than in the private sector in exchange for job security and bet- ter pension benefits. Today, this covenant is strained in many jurisdictions, if not totally broken.

Likewise, the attraction of doing cutting-edge work or research in one’s profes- sional area of expertise to make a difference in society has been a leading attraction for job recruits. Yet too often today, professionals find themselves turned into contract managers and monitors, overseeing the work of other professionals in their fields in the for-profit and nonprofit sectors who are doing the work they love—at higher salaries. The Obama administration’s efforts to bolster the contract monitoring work- force may help by contracting-back-in (Chen, 2009), but scaling up will inevitably lag extant contracting efforts at all levels of government. In this new “clerical state,” too many professionals become check writers, monitors, and dispersers of largesse. What is more, they become exposed at all levels of government to the perverse graft and corruption incentives of the “old” clerical state of the Jacksonian era (see Carpenter, 2001).

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Finally, an important question arises from all this: If public service can be pro- vided everywhere—in government, for-profit, and nonprofit organizations—why would government employment that pays less, has increasingly less job security, and involves contract letting and monitoring of others doing the kinds of professional work one has been trained professionally to do be attractive to the best and the brightest in america? That such a question arises hikes to a new level of quandary perennial HRM questions about how best to make public service entry and retention attractive to outstanding persons.

One alternative is to reduce the number of contracted positions, rebuild in-house agency capacity, and increase pay and benefits for public employees. For the cul- tural, political, sociodemographic, policy, and fiscal reasons we highlight in this essay, the possibility to do so in large enough numbers exists but is likely to be tar- geted at noncompetitive contracts. Moreover, because service contracting, such as that required for HRM, is more complex than product contracting, private supply is not likely to match demand for contracting services. Certainly, the Obama adminis- tration is likely to bring about some retrenchment of nongovernmental solutions to public problems (including contracting) given the crises it faces domestically and internationally. It is hard, however, to see how rebuilding of in-house agency capac- ity with employees guaranteed lifetime tenure and fully funded retirement benefits on the scale attained prior to the Reagan administration can occur in the immediate future, including the capacity of government to serve as a countervailing force to the vicissitudes of impersonal market forces in a dangerous world.

Some have argued that lifetime tenure is not as important to rising generations of young people in america, many of whom already may be employed in public, pri- vate, or nonprofit organizations. evidence from prior research indicates that younger workers in the United States no longer expect to form long-term psychological con- tracts with their employers (Condrey & Battaglio, 2007; Riccucci, 2006; Tulgan, 1997; West, 2005). as one respondent in a recent study stated, “I think that at-will employment is a non-issue for new and younger employees, but a concern for long- term employees” (Condrey & Battaglio, 2007, p. 431). another respondent in the same study observed, “Only classified employees express concern regarding at-will employment” (p. 431). Still these employees may or may not represent the best employees in the workforce, may not be representative of the workforce as a whole, and may be self-selecting.

It might also be useful to raise the status and reward structure for contract managers in the public service. This might improve recruitment for persons interested in this type of work and reduce the pressures for current professionals to be drafted into these posi- tions or to leave the public service for more profitable and challenging private sector work. even here, however, fiscal constraints and the nature of the work itself may mini- mize the full potential of this option, even were it pursued aggressively.

One recruitment and retention option for public agencies that has not been explored with great energy to date is to borrow a strategy so effectively used by pro- ponents promoting nongovernmental alternatives to public problems: framing reforms

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in terms of american exceptionalist values. For example, although public agencies cannot guarantee lifetime employment, they can strive to offer employability for life by investing in training in the professional field of one’s choice. For years, private companies have invested in this approach, especially with the advent of economic globalization, whereas the public sector has been laggard in this effort. apart from reframing this approach in terms of “running government like a business,” raising the prospects for public sector investments in employees by portraying them as invest- ments in entrepreneurs who can make contributions to public service in all sectors (public, private, and nonprofit) might advance this agenda appreciably.

This argument might also reduce fears of paying to train employees only to have the benefits of these investments reaped for free by private companies. Moreover, not all these employees would leave government, especially were contracting loads attenuated, more attractive career paths for contract managers enacted, and public service motivation to endure and be applied by recruiters and managers emphasizing the conscious appeals to civic republican values. These efforts will no doubt face an uphill battle in view of the rhetorical advantage of american exceptionalism invoked by proponents of minimal-state, nongovernmental solutions to public problems. However, not engaging the battle in this rhetorical fashion could put at risk other values we cherish equally as much in a democratic republic.

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Robert F. Durant ([email protected]) is a professor of public administration and policy at american University. His latest book is The Greening of the U.S. Military: Environmental Policy, National Security, and Organizational Change. He is a fellow in the National academy of Public administration.

Amanda M. Girth ([email protected]) is a PhD candidate in the department of public admin- istration and policy at american University. Her research interests include organization theory and public management, primarily in the context of government contracting.

Jocelyn M. Johnston ([email protected]) is an associate professor of public administration and policy at american University. Her work on government contracting has been published in Public Administration Review, the Journal of Public Administration Research and Theory, and other journals and edited volumes.