In recent decades, the federal government has relied more and more on contractors, private businesses, to perform public services. The federal government issues more than $260 billion in government contracts each year, with few restrictions on the employees of those contractors.
Government ethics expert Kathleen Clark, JD, professor of law at Washington University in St. Louis, has written extensively about this issue in the last year with three papers: "Ethics, Employees and Contractors: Financial Conflicts In and Out of Government"
; "Fiduciary Standards for Bailout Contractors: What Treasury Got Right and Wrong in TARP"
; and "Ethics for an Outsourced Government"
Clark also recently made a presentation to the American Bar Association’s Ad Law Section’s Council advising the group on a proposal that government adopt ethics restrictions for contractor personnel.
She talks about the issue:
What kind of work is performed by government contractors and what work is performed by government employees?
The federal government hasn’t yet outsourced the job of Cabinet secretary, but almost all tasks that government employees perform are also performed by contractor personnel. Contractors perform jobs that are mundane or menial, such as hauling trash, but also tasks that are sophisticated and require discretion, such as providing advice about how to respond to climate change. Over the course of 25 years, the federal government increased its spending on service contracting by 85 percent in inflation-adjusted dollars.
Are there any particular sub-groups, such as defense contractors or financial contractors, that are more susceptible to the need for regulations?
While the government has increased its spending on service contracting, it has actually decreased the number of government employees who supervise that contract spending. So much so that now the government actually outsources to contractors the function of supervising and evaluating the work of other contractors. That is of the areas where the government is at highest risk for ethical misconduct by contractors: where contractors can influence how the government spends money but are not subject to rigorous government ethics standards. Last year, the government adopted a new regulation to impose some ethics standards on some of these individuals, but it is not yet clear how the government and contractors are implementing that regulation.
Can you give a recent example of a problem with the current set-up?
Back in 2008, the Department of the Treasury used a contractor as the point person for its bailout of AIG. That contractor was a former employee of Goldman Sachs and owned a substantial amount of Goldman stock. He advised the government to handle the AIG bailout in a way that benefited Goldman Sachs — and himself, as a Goldman shareholder. If he had been a government employee, he could have gone to prison for this conflict of interest. But as a contractor, the conflict of interest law didn’t apply to him.
Aren’t there national groups such the Professional Services Council that oversee the industry? Why then, do we need more laws?
The Professional Services Council advocates for its members and protects the interests of its members. It is the government that needs to step up to the plate and protect its own interest in its dealing with contractors.