No business would profit from government example

Let’s imagine a retail franchise that’s run like the federal government. The
franchise operator cannot make product or service changes without central office approval.
Complex plans must be made in anticipation of multiple funding scenarios and
implementation time frames of three, six and nine months.

The corporate office sets the budget each year well after its fiscal year has started.
Each year the board of directors sets the annual budget; organizational and regional
offices allocate funding levels to subordinate offices. Layer after layer of budget
officers program and reprogram funds until at last the lowly franchise operator gets the
go ahead to spend, three or four months after the beginning of the fiscal year.

Meanwhile, the retail outlet must curtail spending until the current-year funding is
allocated to the operation.

Every product mix must be justified and approved by headquarters. Every capital
improvement must be analyzed, documented, authorized and implemented within six months or
the project must start over. Corporate auditors and central managers pore over every page
of documentation, looking for any violation of corporate policy.

Success is greeted with a hearty handshake even as corporate siphons off all the gains
and profits to underwrite the rest of the business. Innovative managers see no profits, no
promotions, no new funding and no bonuses.

Such an organization could have a lot of qualities, but efficiency wouldn’t be
among them. Could government ever be efficient? Perhaps never, according to the meaning of
efficiency used in neoclassical economics.

Government agencies are not permitted to maximize profits, accumulate or invest
capital, manage resources (including people) or otherwise do most of the myriad activities
of the normal capitalist enterprise—or at least they can’t do those things in
the same manner. Instead, we must maximize output against a spending ceiling.

The ceiling typically is approved by Congress well after the year has started. Until
the funding is allocated, all initiatives—that is, any spending above base operating
costs—are held in abeyance. Agency managers cannot make contractual commitments.
Then, sometime during the second quarter, programs receive their authorizations, leaving
agencies with about six months to complete the required studies.

And what a stack of studies. It often includes capital investment plans, requirements
analyses, feasibility analyses, economic benefit/cost analyses, development of
specifications, analyses of alternatives, issuance of statements of work and requests for
proposals. Then come evaluation of proposals and defense against bid protests.

If a contract is awarded after June 30, the award amount is counted as fourth- quarter
spending. Auditors and oversight agencies pounce on these tardy awards to update their
annual diatribes against agencies and what the auditors call wasteful spending habits.

There is a special place in my heart for people who make a living beating up managers
trying to accomplish the impossible.

An even worse practice is failing to commit funds before the start of the fiscal year.
Unspent funds are returned to the general treasury at the end of the year. Top management,
oversight agencies and Congress then hold meetings and hearings to chastise laggard
innovators and whip them back onto the project management treadmill.

Success also is punished. All savings are sopped up by growing operational costs. The
gains achieved by those who innovate successfully go to underwrite those who didn’t
bother to try—perhaps because they knew better from previous years of falling on
their swords. Even if a program is successful enough that the public is willing to pay for
its products and services, the bureau sees not a penny of that money. All revenues and
fees the agency collects are returned to the general treasury.

Those who want the federal government to become a paragon of businesslike efficiency
need to go to the heart of the problem: the complex of Congress, the General Accounting
Office, Office of Management and Budget, the General Services Administration and senior
agency management. Only when these folks are held to explicit performance measures will we
have a prayer of more efficient performance in program offices.  

Walter R. Houser, who has more than two decades of experience in federal
information management, is webmaster for a Cabinet agency. His own Web home page is at

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