The Consequences of Federal Contractor Government

Paul R. Verkuil

doi:10.1017/9781316817063.004

4 - The Consequences of Federal Contractor Government

Published online by Cambridge University Press: 15 June 2017

Paul R. Verkuil

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Type: Chapter
Information: Valuing Bureaucracy
The Case for Professional Government
, pp. 60 - 74

DOI: https://doi.org/10.1017/9781316817063.004 [Opens in a new window]

Publisher: Cambridge University Press

Print publication year: 2017

4 The Consequences of Federal Contractor Government

Who's on first?

Bud Abbott and Lou Costello, The Naughty Nineties (1945)

Contractors and government have a long and often productive relationship. Think again of Bechtel leading a consortium of contractors to build the Hoover Dam in 1931, an amazing achievement to this day. So any attempt to evaluate that relationship must look at benefits and costs, in both their direct and social dimensions. Obvious cases for contractors are when assignments can be described clearly and costs are competitively determined.Footnote ¹ In these situations, costs that self-interested agents (contractors) can impose on the principal (government) are minimized.Footnote ² We don't need civil servants to mow the White House lawn nor the Federal Emergency Management Agency (FEMA) to produce and stockpile trailers, food, or busses for the next major hurricane. Every agency has an extensive list of those services that can and should be contracted out in order to maintain flexibility and save money.

Indeed, many other functions, Donahue's “commodity” tasks, would seem to be prime candidates for contracting out. At a White House garden reception for agency officials a few years ago, one example came to me. We were entertained by the President's own Marine Corps band in bright red uniforms playing jazz. They performed well, but not better than musicians that play in the French Quarter, for example. So it hit me, why not contract for some talent from the Big Easy for occasions like this? Why not privatize jazz bands, I naïvely thought, and save the Marine band for those occasions of state where they are justified? But when you look into the matter of military bands the challenge grows. Each of the services has them (the Marines have 12) and they are fully trained soldiers with career ambitions.Footnote ³ Agencies can call upon them at no cost for official events, just to keep them busy, which is something we took advantage of at ACUS (string quartet, not combo). Despite attempts to reduce their budgets, this “sacred cow” plays on. Their numbers are significant (6,500 worldwide), equal in size to the Foreign Service.Footnote ⁴ And their costs annually are three times the budget of the National Endowment for the Arts, which has music in its mission.Footnote ⁵

This colorful and half-serious example is enough to make the point. There are many situations where contractors could do the job of government employees as effectively and at lower cost. The key is defining the product or service, costing it out and bidding it competitively. Sometimes, however, limitations on the contracting process are not captured by direct cost comparisons. Behind many government contracts are public sector values that are hard to quantify and are often hidden from view, yet they are real nonetheless.

A. The Hidden Costs of Contracting Out in General

One hidden cost of contracting can be the confusion it produces on policy and management decisionmaking in government.Footnote ⁶ When contractors do work involving discretion and judgment at senior levels, management problems arise. By analogy, it may be acceptable to contract out management of bands but not their conductors. This is the steer, not row, concept for government that gained popularity during the Clinton/Gore reinventing government era as discussed in Chapter 1. But when managers do the same work, sit next to each other, and can't be distinguished, except by IDs or paycheck, confusion results over mission and execution as well as identity.Footnote ⁷

1 The “Who's on First?” Problem

This can create an Abbott and Costello “Who's on first?” situation. Excuse the digression. The skit worked because there was a first baseman named “Who,” so the confusion became a hilarious entanglement.Footnote ⁸ For a whole host of important reasons set out here, we need to know the “Who” who is running our government.

The policy influence of contractors over senior civil servants is complicated territory. Government policymaking is a non-outsourceable responsibility. The exercise of judgment is inherently governmental. Yet advice from outside sources, including contractors, may lead to better decisions (this was the case with USAID discussed in Chapter 3). So the question is, when does advice cross the line into decisionmaking? In Outsourcing Sovereignty contractor assistance with the rulemaking process at EPA was outlined.Footnote ⁹ Presumably all agencies who do rulemaking face the same problems: deciding how much to use contractors in formulating rules. Summarizing comments, which can be voluminous, may make sense (although the agency loses direct contact with the submitters). But drafting the statement of basis and purpose which derives from the comments is another matter altogether. One assignment is a species of advice; the other is a decisionmaking function. Measuring how much influence contractors have over policy usually derives from anecdotes because so much goes on below the surface. In some agencies, from impressions I have received, the government officials are demoralized (or intimidated) by the extensive use of contractors and make little attempt to claim (or preserve) their management territory; in other agencies they fight back.

However, a recent study conducted by Professor David Lewis of Vanderbilt University sheds light on how much policy influence contractors have.Footnote ¹⁰ Agency respondents were asked about the influence various groups had over their policy decisions. As to contractors, the influence ranged from “a good bit” to “none.” Some of the agencies highlighted in Chapter 3 as contractor-dominated (DOE, CMS, and DOD) were highest on the list, which is set out on the next page.

“In general, how much influence do you think the following groups have over policy decisions in [your agency]?” Contractors

Note: Lines denote the 95% confidence intervals. Limited to cases with at least 10 respondents excluding responses of “Don't know” and at least 30 potential respondents in the target population. Responses are “A great deal,” “A good bit,” “Some,” Little,” “None,” and “Don't know.” Responses are coded 0 (“None”) to 4 (“A great deal”), and “Don't know” is coded as missing.

This may be viewed as good news to the extent that “none” exceeds “some”; and even “some” is better than “a good bit.” Lewis summarizes the responses in the footnoted chart.Footnote ¹¹

The result is that 32 percent of respondents say contractors have no influence over policy, but 68 percent say “little,” “some,” or “more.” Importantly, these percentages go up slightly in the subsequent chart,Footnote ¹² when the influence question is limited to those respondents whose jobs deal directly with decisions about procurement and contract management (74 percent say “little” to “a great deal”).

Since these are particularly sensitive government functions, highlighted as agency weaknesses by GAO, these responses are of greater concern.

2 Oversight Failures

In addition, when policy and management assignments are delegated to contractors, agencies often do not impose adequate controls. GAO has determined, for example, that, while agencies often rely on contractors to operate computer systems and process information, they frequently fail adequately to oversee these contractor-operated systems.Footnote ¹³ While OMB has developed guidance on how to oversee contractor-operated systems, GAO found that five of six major agencies failed to implement the guidance or establish security and privacy protocols.Footnote ¹⁴

The oversight of contractors is a large problem for agencies because they lack capable personnel to perform that role. It is one of the main reasons shown in Chapter 3 that the Affordable Care Act website rollout had such a difficult time. When government, in desperation, hires contractors to oversee contractors, the “Who's on first?” dilemma is in plain view. Who in government oversees the contractors who oversee the contractors? This was the key policy issue emphasized by the Harvard Conference discussed in Chapter 2 and it only seems to be getting worse. To contain it, as John DiIulio says, we need to bring back the bureaucrats.

3 Unknown Cost Comparisons

The direct costs of contractors can also be “hidden” in other ways – they are simply not available for comparison. It is sensible to think that contractors can often do jobs for government more efficiently, if they are short-term and competitively bid. The direct overhead government assumes for its employees (health care, retirement, etc.) is costly (over 26 percent of an average salary) and the indirect charges, for facilities, training, etc., can, if properly allocated, exceed that total. Even if they charge more on a per-hour or -month basis, contractors can come in below the fully costed government total. But these comparisons are rarely made because the information is hard to collect, maintain, and update.

Some information on contractors’ costs has been developed by the Project on Government Oversight (POGO), a public interest group. POGO has studied DOD contracting costs and concluded in a letter to then Defense Secretary Chuck Hagel that “DOD expends on contracted services nearly three times what it would cost were those services performed by civilian personnel.”Footnote ¹⁵ Since DOD is required by statute to develop a cost-effective mix of public and private services, this is a troubling report, backed up by others with similar conclusions.Footnote ¹⁶ These estimates are subject to challenge, but so far DOD has not acted to rebut these conclusions. They are direct evidence of economic waste.Footnote ¹⁷

Contractor services are more likely to be competitive with government alternatives when the bidding process is properly invoked. In theory, professional services contracting can be done three ways: full and open; competed (two or more options); or sole source.Footnote ¹⁸ But true competitive bidding may be on the decline in government, where “repeat players” means entrenched suppliers have a renewal edge with the agencies for whom they work.Footnote ¹⁹ On the equipment side, weapons systems are usually sole sourced.Footnote ²⁰ On the services side, in the $250 billion contractor market described earlier, competition in bidding can be affected by the complicated nature of the duties, the capacity of contractors to deliver, and the urgency of the mission. Certainly the ACA rollout fiasco at CMS is an example of cost-plus contracting producing problems. And there is one other factor to consider: the burden on the government's contractor workforce. Competitive bidding takes time and expertise, which is in short supply. The contractor specialist workload is so high that one leading expert observer compared them to legal aid lawyers with too many cases to manage.Footnote ²¹ This may be one reason why the Lewis chart in footnote 12 above shows a higher degree of contractor influence in procurement and contracting officer responses.

When contractors secure favored status from competitive renewals due to their prior performances, the value of contractor efficiency can be further compromised. Established and repeat players have created an asset in their status. This status becomes a protectable interest with the agencies involved. It may not amount to a property right, but contractors’ relationships to government are valuable commodities. The value is both on existing and future contracts. This is where the “revolving door” helps provide continued access. Generals and Flag Officers, for example, frequently find a home across the contractor–government divide. President Eisenhower's famous concern over the military–industrial complex made the connection between established players, military hardware, and government procurement.Footnote ²² Today the issue has been extended to professional services contracts as well. As contractor services have grown, military hardware companies like Lockheed Martin and Boeing have become big services providers.Footnote ²³ And contractors like Booz Allen see their national security business grow even in the face of security failures by their employees, like Edward Snowden.

B. Hidden Costs of Regulatory Capture

Regulatory capture is a phenomenon with a long history. It began with a concern about overt corruption in nineteenth-century regulatory agencies,Footnote ²⁴ became associated with the “maturing” process in old line regulatory agencies in the 1950sFootnote ²⁵ and was assumed as largely inevitable by the 1970s.Footnote ²⁶ After the deregulation movement and the curtailing of industry-specific economic regulation, interest in the subject waned.Footnote ²⁷ But it has recently returned to both political and academic attention. Led by Senators Sheldon Whitehouse, who said “regulatory capture assaults democracy,” and Mike Lee, who called it a “moral issue of our time,” regulatory capture came to Capitol Hill in 2016.Footnote ²⁸

A major book on regulatory capture theory appeared just before the Senate program.Footnote ²⁹ Daniel Carpenter and David A. Moss introduced the Preventing Capture volume by describing the “mechanisms of capture.” The first, characterized by the deregulation movement, is labeled “corrosive capture,” which seeks to dismantle regulation “in the absence of public support or a strong public welfare rationale for doing so.” The second mechanism is called “cultural capture,” which describes more subtle interference with the public good, like “campaign contributions, pressure on politicians, and perhaps the ‘revolving door.’”Footnote ³⁰

1 Agency Lobbying and the Revolving Door

The revolving door is the concept most applicable to agency use of contractors, since it is harder to lobby agencies (and impossible to give them political contributions). But there are often times when agencies can be approached. One is before the notice of proposed rulemaking has officially issued when lobbyists for interested parties (like drug and insurance companies in connection with rules promulgated under the Affordable Care Act or banks in terms of Dodd–Frank rules) are able to contact agency officials. Moreover, during the rulemaking process through contact with OIRA, the OMB arm that oversees executive agency promulgation of significant rules, is also permitted, although contact lists are published.Footnote ³¹

Sometimes, when lobbyists cannot approach the agency directly, Congress is urged to legislate specifically against agency rulemaking authority. This seems to be what happened with the FDA where Congress, in a bill written by cigarette lobbyists, was urged to take away its jurisdiction to regulate e-cigarettes.Footnote ³²

The revolving door has a mixed reputation in capture theory. It assumes that industry officials, or their lawyers, will serve in government and then return to their private jobs and lobby their agencies, after appropriate waiting times. This is a form of influence that is traded upon regularly by the lobbying and law firms who symbolically reside, at least in DC, on “K Street.” The negative view is that these former officials “peddle influence” and shape agency agendas for their clients’ benefit. This is why lobbyists were banned from serving in the Obama Administration.Footnote ³³ But there were numerous loopholes in this ban, from registering as lobbyists in the first place to finding ways to reach former agencies after leaving government.Footnote ³⁴ The positive spin is that government service makes former officials better able to shape private clients’ activities in a public interest direction. Eric Holder, now at Covington & Burling, presumably fits this category. Either way, the revolving door keeps turning, with some of its negative dimensions monitored mostly by transparency requirements, conflict rules, and cooling-off periods.

2 Contractors and Rent Seeking

But what of government service contractors? They are repeat players in the government and private sector whose ranks are populated by former government employees, retired military, or political appointees. McKinsey and Booz Allen Hamilton are long-term standouts, and large manufacturers, like Lockheed and Boeing, have now joined them. Do they engage in cultural capture? The question is highly relevant to the hidden costs of contractor versus professional government. The public choice and Stiglerian viewpointsFootnote ³⁵ assert that government officials maximize their welfare by seeking rents, which consists primarily of preserving their jobs. But if that is true for career officials, the rent-seeking potential for contractors who work for government is far greater. Indeed, over time they achieve what is called an “expertise rent” consisting of superior knowledge gained from their repeat assignments.Footnote ³⁶ And as Chapter 3 showed, at agencies like USAID, contractors sometimes go over the agency heads to Congress in order to preserve their programs from demise or modi-fication. On the Buchanan and TullockFootnote ³⁷ public choice chart of regulatory self-interest, the incentives for contractors to preserve and grow their jobs should weigh more heavily than the civil servants’ desire to keep their jobs. Indeed, on a relative basis, government employees’ self-interest is far less than a contractor's, simply because of the numbers involved. Government employees, for example, might be able to preserve salaries, but contractors have a large field (now exceeding $250 billion) to play in.

3 Political Contributions by Contractors

Another cultural capture situation concerns the role of political contributions by contractor entities. There is presently no comprehensive way to know the amount of political expenditures by government contractors. According to Public Citizen, in 2014 barely more than a quarter of the top 15 contractors disclosed their contributions to dark money groups.Footnote ³⁸ The Sunlight Foundation stated:

Between 2007 and 2012, 200 of America's most politically active corporations spent a combined $5.8 billion on federal lobbying and campaign contributions. A year-long analysis by the Sunlight Foundation suggests, however, that what they gave pales compared to what those same corporations got: $4.4 trillion in federal business and support.Footnote ³⁹

Whether there is a connection between campaign contributions and the awarding of federal contracts is not established, but a disclosure requirement for federal contractors could provide transparency necessary to know the answer. Legislation on this issue has been defeated,Footnote ⁴⁰ but there was pressure on President Obama to issue an executive order to require federal contractors to fully disclose money spent in politics.Footnote ⁴¹

Since many federal contracts are awarded without competitive bidding,Footnote ⁴² the potential for influence from repeat players is evident. And one study has found a connection between contributions and contracts awarded.Footnote ⁴³ There is a long-standing statute that prohibits political contributions directly to a candidate or political party during the time when contracts are being negotiated or performed.Footnote ⁴⁴ This statute has been upheld by the DC CircuitFootnote ⁴⁵ against challenges posed by Citizens United, since it dealt with quid pro quo corruption, a subject left in place by the Supreme Court.

The theory of regulatory capture also seems to apply to these situations. In addition to revolving door issues, “cultural corruption” covers political contributions of the “pay to play” or quid pro quo variety. Many states also prohibit political contributions for state contractors, especially in noncompetitive bid situations.Footnote ⁴⁶ Given their potential to cause direct corruption, it is understandable that reformers would suggest banning federal contractor political contributions altogether.Footnote ⁴⁷

The case against political spending should be made first through the transparency requirements. Transparency is one way to reassure the public, which Chapter 1 shows increasingly believes that government is corrupt. Congress has so far been unwilling to enact the DISCLOSE Act, which would require all corporations to reveal political contributions, and the Securities and Exchange Commission (SEC) has been unwilling to act as well.Footnote ⁴⁸ The White House can act by Executive Order to fill this void, having in mind that information about political contributions must be kept away from contracting officials who are required not to be influenced by such information.Footnote ⁴⁹

C. Private Prisons as an Object Lesson

The confluence between government contracting and political influence may be best viewed in terms of the private prison industry. This industry serves both federal and state governments and provides a product (“carceration”Footnote ⁵⁰) that has long been thought to be an inherent function of government.Footnote ⁵¹ Early on, John DiIulio questioned whether private prisons violated the government's “duty to govern”Footnote ⁵² and Sharon Dolovich, in an article discussed in Chapter 1, decried the “comparative efficiency” analysis that permitted private prisons to prevail in cost debates that leave out social consequences of carceration.Footnote ⁵³ The 2016 Nobel Laureate in Economics, Oliver Hart, and his colleagues had earlier determined that a private contractor's incentive to engage in cost reduction outweighs nonquantifiable quality of service considerations.Footnote ⁵⁴

Private prisons certainly “significantly affect the life, liberty, and property of private persons” under OMB's definition of inherent government functions (see p. 19). Still the growth in the use of private prisons continues, as contractors have utilized the political process to secure and expand their business. This industry is the poster child for regulatory capture. Private prison companies are expert lobbyists. The leading ones (GEO and CCA) have spent nearly $25 million in lobbying efforts since 1989 at the federal and state levels.Footnote ⁵⁵ Their share of the prison market (which includes immigrant detainees) has grown dramatically during this time and annual revenues are about $3.3 billion.Footnote ⁵⁶ The Justice Policy Institute lists three strategies of private prisons to increase revenues: campaign contributions, lobbying, and relationships and associations.Footnote ⁵⁷ These techniques, familiar to the regulatory capture literature, are in greater demand now that federal and state initiatives to reduce the prison population (legislation that the private prison companies opposed) are taking effect.

And there is increasing evidence that the industry's main asset, more efficient service, is being compromised. A recent report by the DOJ's Office of the Inspector General concluded that “in most key areas, contract prisons incurred more safety and security incidents per capita than comparable Bureau of Prisons institutions.”Footnote ⁵⁸ This report led DOJ to reduce and ultimately end the use of privately operated prisons.Footnote ⁵⁹ Following suit shortly thereafter, Secretary Johnson of the Department of Homeland Security announced that DHS would be reviewing its own arrangements with providers of private immigration detention facilities.Footnote ⁶⁰ It remains to be seen whether this action at the federal level will carry over to the state prison setting, where the industry's regulatory capture techniques have been even more effective.Footnote ⁶¹

It is hard to reconcile private prisons with the duty to govern and supervise principles that emanate from both federal and state constitutions. It is impossible to do so when the quality of service that they promise is not there as well. Efficiency principles alone should not mask the social cost dimensions of the problem, but if they are absent, then the industry can only survive on its ability to capture the public interest. Unfortunately, private prison companies are well on the way to doing that after raising a record $100 million for Trump's inauguration.Footnote ⁶²

Footnotes

¹ See John Donahue, The Privatization Decision: Public Ends, Private Means (1990).

² See Oliver E. Williamson, The Economic Institutions of Capitalism 27–30 (1985); see also discussion in Outsourcing Sovereignty at 150–52.

³ See Walter Pincus, Military Funds to Spare?, Washington Post (Dec. 19, 2012), available at https://www.washingtonpost.com/world/national-security/military-funds-to-spare/2012/12/19/25facd7a-4951–11e2–820e-17eefac2f939_story.html.

⁴ See Walter Pincus, House Puts Squeeze on Military's ‘Musical Arsenal’, Washington Post (May 18, 2012), available at https://www.washingtonpost.com/blogs/checkpoint-washington/post/house-puts-squeeze-on-militarys-musical-arsenal/2012/05/18/gIQAs1WiYU_blog.html.

⁵ Military bands are not cheap; their costs are into the billions. See Dave Philipps, Military Is Asked to March to a Less Expensive Tune, N.Y. Times (Jul. 1, 2016), www.nytimes.com/2016/07/02/us/military-bands-budget.html?_r=0; see also John T. Bennett, Analyst: Military Bands to Cost Pentagon $50B over Next 50 Years, The Hill (May 18, 2011), available at http://thehill.com/homenews/administration/161837-analyst-military-bands-to-cost-dod-50b-in-50-years.

⁶ It is important not to draw an artificial distinction between policy and operations, as one informs the other and leaders should be able to work in both directions. See Steve Kelman, ‘Policy’ and ‘Operations’: Don't Choose One over the Other, FCW Blog (June 20, 2016), https://fcw.com/blogs/lectern/2016/06/kelman-policy-ops.aspx (recommending that top bureaucrats work in both arenas).

⁷ See the quote from the GAO official in Chapter 3, note 26, who didn't realize for months that the agency official they were dealing with was in fact a contractor.

⁸

ABBOTT:: Strange as it may seem, they give ball players nowadays very peculiar names.
COSTELLO:: Funny names?
ABBOTT:: Nicknames. Now, on St. Louis Who's on first, What's on second, I Don't Know is on third—
COSTELLO:: That's what I want to find out. I want you to tell me the…fellows on the St. Louis team.
ABBOTT:: I'm telling you. Who's on first, What's on second, I Don't Know is on third—
COSTELLO:: You know the fellows’ names?
ABBOTT:: Yes.
COSTELLO:: Well, then who's playing first?
ABBOTT:: Yes.
COSTELLO:: I mean the fellow's name on first base.
ABBOTT:: Who.
COSTELLO:: The fellow playin’ first base.
ABBOTT:: Who.
COSTELLO:: The guy on first base.
ABBOTT:: Who is on first.
COSTELLO:: Well, what are you askin’ me for?
ABBOTT:: I'm not asking you – I'm telling you. Who is on first.
COSTELLO:: I'm asking you – who's on first?
ABBOTT:: That's the man's name.
COSTELLO:: That's who's name?
ABBOTT:: Yes.

⁹ See Outsourcing Sovereignty at 45–46.

¹⁰ See David E. Lewis, Vanderbilt University, Center for the Study of Democratic Institutions, Policy Influence of Senior Civil Servants Less the Policy Influence of Contractors (2016).

Data from the Vanderbilt-Princeton 2014 Survey on the Future of Government Service.

Data from the Vanderbilt-Princeton 2014 Survey on the Future of Government Service, www.princeton.edu/~psrc/SFGS/

¹³ Gov't Accountability Office, Information Security – Agencies Need to Improve Oversight of Contractor Controls, GAO-14–612 (Aug. 2014).

¹⁴ See id. The agencies were DOE, DHS, State, DOT, EPA, and OPM. Only DHS met all GAO criteria.

¹⁵ Paul Chassey & Scott Amey, POGO Highlights GAO Report and Documented DoD Failures in Hiring a Cost Efficient Workforce 1 (Oct. 17, 2013), available at www.pogo.org/our-work/letters/2013/pogo-highlights-gao-report.html, criticize DOD for not developing proper overhead cost models which it is required to do under 10 U.S.C. § 129.

¹⁶ See POGO, Bad Business: Billions of Taxpayer Dollars Wasted on Hiring Contractors (Sept. 13, 2011), available at www.pogo.org/our-work/reports/2011/co-gp-20110913.html.

¹⁷ Megan McCloskey, As the Military Cries Poor, It Wastes Billions in Afghanistan, The Fiscal Times (Jan. 21, 2016) (regarding questions raised as to the effectiveness of spending by DOD in Afghanistan: “The readiness subcommittee of the Senate Armed Services Committee didn't get many answers. ‘That's the big question, and it's the right one,’ was all Brian McKeon, principal deputy undersecretary of defense for policy, could offer. During two hours of questioning, he provided few specifics, allowing, ‘It's a little early to say’ whether the now-defunct Task Force for Business and Stability Operations had been successful”).

¹⁸ Personal interview with Stan Soloway, May 18, 2016 (Stan Soloway is the former President and CEO of the Professional Services Council, which represents the government technology and professional services industry).

¹⁹ See Matthew Nussbaum, How Elon Musk Exposed Billions In Questionable Pentagon Spending, Politico (Apr. 28, 2016), available at www.politico.com/story/2016/05/elon-musk-rocket-defense-223161 (discussing the breaking of the Boeing–Lockheed joint venture, United Launch Alliance, ongoing monopoly of bidding for GPS satellite launches by SpaceX).

²⁰ See Government Accountability Office, DOD's Use of Class Justifications for Sole-Source Contracts, GAO-14–427R (Apr. 16, 2014).

²¹ Interview with Stan Soloway, supra note 18.

²² Farewell address of President Dwight D. Eisenhower on January 17, 1961.

²³ Lockheed was the biggest government contractor in 2015 at $36.2 billion and Boeing was second at $16.6 billion. This total consists of military weapons like the F-35 and “services programs too numerous to list.” See Aaron Mehta, Lockheed Martin Biggest U.S. Government Contractor in 2015, Defense News (May 9, 2016), www.defensenews.com/story/defense/policy-budget/industry/2016/05/09/lockheed-biggest-government-contractor-2015-defense-industry/83961520/.

²⁴ See William J. Novak, A Revisionist History of Regulatory Capture, in Preventing Regulatory Capture 25, 41 (Daniel Carpenter & David A. Moss, eds. 2014) (hereinafter Preventing Capture). Novak quotes Charles Francis Adams in 1871 saying: “Who will guard the virtue of the tribunal?”

²⁵ See Marver H. Berbstein, Regulating Business by Independent Commissions (1955).

²⁶ See George J. Stigler, The Theory of Economic Regulation, 2 Bell J. of Econ. & Mgmt. Science 3 (1971) (regulation was a commodity purchased by a regulated industry).

²⁷ See Richard A. Posner, The Concept of Regulatory Capture – A Short, Inglorious History, in Preventing Capture 43.

²⁸ See ACUS Regulatory Capture Forum (Mar. 3, 2016) (agenda and overview available at https://www.acus.gov/meetings-and-events/event/regulatory-capture-workshop).

²⁹ See Preventing Capture, at 16, 19.

³⁰ Id., at 27. A leading voice on money in politics belongs to Professor Lessig. See Lawrence Lessig, Republic, Lost – How Money Corrupts Congress and a Plan to Stop It (2011).

³¹ See Wendy Wagner, Administrative Law, Filter Failure, and Information Capture, 59 Duke L.J. 1321, 1380–82 (2010) (showing how industry makes many more contacts pre-NPRM than public interest groups do).

³² See Eric Lipton, A Lobbyist Wrote the Bill. Will the Tobacco Industry Win Its E-Cigarette Fight?, N.Y. Times (Sept. 2, 2016), www.nytimes.com/2016/09/03/us/politics/e-cigarettes-vaping-cigars-fda-altria.html.

³³ See Exec. Order 13,490, 74 Fed. Reg. 4,673 (Jan. 21, 2009).

³⁴ See Josh Gerstein, How Obama Failed to Shut Washington's Revolving Door, Politico (Dec. 31, 2015), www.politico.com/story/2015/12/barack-obama-revolving-door-lobbying-217042.

³⁵ See Stigler, supra note 26.

³⁶ See Nolan McCarty, Complexity, Capacity, and Capture 119, in Preventing Capture (recommending that government strive to reduce the expertise advantage of firms by refining skills and raising pay of government workers).

³⁷ See James M. Buchanan & Gordon Tullock, The Calculus of Consent: Logical Foundations of Constitutional Democracy (1962); see also Reeve Bull, Combatting External and Internal Regulatory Capture, ProMarket (Aug. 23, 2016), https://promarket.org/combatting-external-internal-regulatory-capture/.

³⁸ See Public Citizen, An Executive Order on Contractor Political Spending Disclosure Would Reach 70 Percent of Top Companies (Apr. 27, 2015), available at www.citizen.org/documents/Fortune-100-contractors.pdf. Dark money groups are 501(c)(4) and (c)(6) organizations that do not have to disclose their donors. See Kathleen M. Donovan-Maker & Steven L. Greenspan, Why Dark Money is Bad Business, N.Y. Times Op-Ed, May 10, 2016, at A23 (discussing pending Securities and Exchange Commission (SEC) rule on political disclosure).

³⁹ Bill Allison & Sarah Harkins, Fixed Fortunes: Biggest Corporate Political Interests Spend Billions, Get Trillions, Sunlight Foundation Blog (Nov. 17, 2014), available at http://sunlightfoundation.com/blog/2014/11/17/fixed-fortunes-biggest-corporate-political-interests-spend-billions-get-trillions/.

⁴⁰ The Democracy Is Strengthened by Casting Light On Spending in Elections Act, commonly known as the DISCLOSE Act and also known as H.R. 5175 (S.3628-Senate), was a bill introduced in the US House of Representatives by Chris Van Hollen (D-Maryland) on April 29, 2010 and in the US Senate by Charles Schumer (D-New York) on July 21, 2010. After a cloture vote failed 59–39 on September 23, 2010, the bill was essentially defeated.

⁴¹ See Letter from Sen. Sheldon Whitehouse and 25 senators, “Executive Order on Political Spending by Governmental Contractors” (June 23, 2015).

⁴² See Majority Staff of H. Comm. on Oversight and Govt. Reform, 110th Cong., More Dollars, Less Sense: Worsening Contractor Trends Under the Bush Administration 1 (Comm. Print 2007), available at http://democrats.oversight.house.gov/sites/democrats.oversight.house.gov/files/migrated/More%20Dollars%20Less%20Sense%20Final%2006–27–07.doc.

⁴³ See Christopher Witko, Campaign Contributions, Access, and Government Contracting, 21 J. Pub. Admin. Research & Theory 761 (2011).

⁴⁴ See Act of July 19, 1940, ch. 64 § 5(a), 54 Stat. 772.

⁴⁵ See Wagner v. FEC, 793 F.3d 1, 37 (D.C. Cir. 2015).

⁴⁶ See Karl J. Sanstrom & Michael T. Liburdi, Overview of State Pay-To-Play Statutes (May 5, 2010), available at https://www.perkinscoie.com/images/content/2/1/v2/21769/wp-10–05-pay-to-play.pdf.

⁴⁷ See Naila Awan & Liz Kennedy, The Racial Equity Impact of Secret Political Spending by Government Contractors, Demos.org (2015), available at www.demos.org/publication/racial-equity-impact-secret-political-spending-government-contractors (“Federal contracting, which should be based on a level playing field, is riddled with cozy relationships, back room deals, and pay to play arrangements”).

⁴⁸ A number of petitions from law professors and the Brennan Center for Justice have requested the SEC require disclosure by rulemaking of political contributions by publicly traded corporations. See Disclosing Money in Elections, The Sunlight Foundation, http://sunlightfoundation.com/policy/disclosingmoney/ (last visited Jul. 8, 2016).

⁴⁹ See 10 U.S. Code § 2335, which bans agencies from requesting that political information be included in bids.

⁵⁰ See Marie Gottschalk, Caught: The Prison State and the Lockdown of American Politics (2015) (describing the growth of the “carceral” state).

⁵¹ The use of force is an inherent responsibility of government. See Outsourcing Sovereignty, at 37–41.

⁵² See John DiIulio, Jr., The Duty to Govern: A Critical Perspective on the Private Management of Prisons and Jails, in Private Prisons and the Public Interest (Douglas C. McDonald ed.) (1990).

⁵³ See Dolovich, supra Chapter 1, at note 11.

⁵⁴ Oliver Hart, Andrei Shleifer & Robert W. Vishny, The Proper Scope of Government: Theory and an Application to Prisons, 112 Q. J. Econ. 1127–61 (1996).

⁵⁵ See Michael Cohen, How For-Profit Prisons Have Become the Biggest Lobby No One is Talking About, Wash. Post (Apr. 28, 2015), https://www.washingtonpost.com/posteverything/wp/2015/04/28/how-for-profit-prisons-have-become-the-biggest-lobby-no-one-is-talking-about/?utm_term=.8858624a5153 (noting that Marco Rubio is the largest Senate beneficiary and was also a big recipient when he was in the Florida legislature).

⁵⁶ Id. There are about 130 private prisons in the United States, with 157,000 beds, about 20 percent of the total prisoners.

⁵⁷ Justice Policy Institute, Gaming the System: How the Political Strategies of Private Prison Companies Promote Ineffective Incarceration Policies (2011).

⁵⁸ Review of the Federal Bureau of Prisons’ Monitoring of Contract Prisons, Evaluation and Inspections Division 16–06 (2016).

⁵⁹ See Matt Zapotosky & Chico Harlan, Justice Department Says It Will End Use of Private Prisons, Wash. Post (Aug. 18, 2016), https://www.washingtonpost.com/news/post-nation/wp/2016/08/18/justice-department-says-it-will-end-use-of-private-prisons/?utm_term=.c5d3c4380f58 (quoting Deputy Attorney General Sally Yates that the goal is “reducing – and ultimately ending – our use of privately operated prisons”).

⁶⁰ See DHS Press Office, Statement by Secretary Jeh C. Johnson on Establishing a Review of Privatized Immigration Detention (Aug. 29, 2016), https://www.dhs.gov/news/2016/08/29/statement-secretary-jeh-c-johnson-establishing-review-privatized-immigration.

⁶¹ Not that the state prisons don't have problems. For example, a private prison in Kansas has been caught spying on constitutionally protected attorney–client conversations. See Dahlia Lithwick, Leavenworth's Spygate, Slate (Aug. 22, 2016), www.slate.com/articles/news_and_politics/jurisprudence/2016/08/the_leavenworth_inmate_spying_scandal_is_intensely_troubling.html.

⁶² See Fredreka Schouten, Private Prisons Back Trump and Could See Big Payoffs with New Policies, USA Today (Feb. 23, 2017) (noting the growth in private detention centers to hold undocumented immigrants).

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