On the GSA Imbroglio

by Reihan Salam

Last night, I appeared on a Erin Burnett’s OutFront on CNN. One of the topics raised was the recent imbroglio at the General Services Administration. Lisa Rein and Joe Davidson of the Washington Post report the following:

The chief of the General Services Administration resigned, two of her top deputies were fired and four managers were placed on leave Monday amid reports of lavish spending at a conference off the Las Vegas Strip that featured a clown, a mind reader and a $31,208 reception.

Administrator Martha N. Johnson, in her resignation letter, acknowledged a “significant misstep” at the agency that manages real estate for the federal government. “Taxpayer dollars were squandered,” she wrote. At the start of her tenure in February 2010 she called ethics “a big issue for me.”

Public Buildings Service chief Robert A. Peck, a fixture in the Washington area real estate community on his second stint running the department, was forced out, along with Johnson’s top adviser, Stephen Leeds. Four GSA managers who organized the four-day conference in October 2010 have been placed on adminstrative leave, officials said.

The leadership collapse came hours before GSA Inspector General Brian D. Miller released a scathing report on the $823,000 training conference, held for 300 West Coast employees at the M Resort and Casino, an opulent hotel in Henderson, Nev., just south of Las Vegas. From $130,000 in travel expenses for six scouting trips to a $2,000 party in Peck’s loft suite, event planners violated federal limits on conference spending.

I understand why the Obama administration reacted swiftly to this “significant misstep,” and I imagine a Republican administration would have done the same. But I think the reaction to the GSA’s spending on team-building reflects a deeper problem with how government works.

The GSA has roughly 12,600 employees and it is in charge of federal procurement. If the GSA does its job well, it can save taxpayers enormous sums of money. Rather than focus on the alleged waste of $823,000, we should pay closer attention to whether the GSA is doing its job as well as possible.

In New Zealand, for example, the governance of public sector organizations is often separated from the management of public sector organizations. Basically, government ministers set out the goals and objectives for their departments, in accordance with Parliament; so-called crown entities are then assigned a budget and the responsibility to achieve the various goals and objectives. These crown entities have wide autonomy in terms of how they go about their work.

Back in 2004, Robert Buchanan and Colleen Pilgrim offered insight into devolved service delivery in New Zealand:

Until the mid- to late-1980s, operational functions of government were embedded in the divisions, and performed by the staff, of government departments. What was done, and expected standards of performance and conduct, were controlled by public service regulation by the State Services Commission and in the operating manuals and instructions of the departments themselves. Branch offices of the departments provided the local presence, controlled through the same centralised mechanisms.

Machinery of government reforms changed the structures, the accountability arrangements, and the underlying paradigm of control. The State Sector Act 1988 dismantled the system of central control and left government departments as discrete entities in all but constitutional form. Policy and service delivery functions in departments were separated. The Public Finance Act 1989 provided the foundation for a contractual model for government service delivery, underpinned by agency theory:

• A central policy department advised the responsible Minister on the services required by the Crown.

• The Minister purchased the required services as “outputs” from the department itself, or from a third party – which could be a public entity or an NGO.

• The policy department monitored the delivery of the required services under a purchase contract.

This model didn’t work perfectly, as Buchanan and Pilgrim acknowledge. And it has evolved considerably over the intervening years. Yet it had the salutary effect of empowering departments to deploy resources more intelligently and effectively. Though it would be very difficult to replicate the New Zealand model in the U.S., I’d like to see experimentation in this direction. Imagine if public agencies were given X to spend with the understanding that if the agency achieved its mission for (X-n), workers in the agency would receive some fraction of n with the rest returned to general coffers. This could go terribly awry, particularly if oversight is ineffective. But it might also change incentives in a healthy, constructive way.  There are, of course, problems with introducing the profit motive into bureaucracies. Rigid civil service rules emerged for a reason. My sense, however, is that we haven’t struck the right balance, and that we tend to focus on the sensational but ultimately trivial rather than the mundane but profoundly important.

While we’re annoyed (understandably enough) that the GSA hired mimes, do we choose an automobile based on whether or not the manufacturer spends huge amounts of money on team-building exercises or lavish birthday parties? No, we don’t. We choose an automobile based on whether or not the automobile meets our needs, and we leave everything else to the managers of the firm in question. The problem with the GSA is not the fact that it spends money on team-building exercises — if the GSA did its job extremely well, it could spend ten times as much on team-building exercises for all I care. Rather, the problem is that the GSA is ill-equipped to do its job well, mainly because it is burdened by civil service rules and expectations that punish initiative and that don’t adequately reward top performers.

Consider the value of an extremely effective government procurement officer. Then consider the value of an extremely ineffective government procurement officer. Is it reasonable that the effective officer, who saves taxpayers millions of dollars, earns roughly the same amount as the ineffective procurement officers, just because they’ve both worked for roughly the same period of time? That is an oversimplification, but I’d argue that there is a strong small government case for paying the best procurement officers far more than we do at present and firing the worst of them. Moreover, there is a strong case for putting the GSA under the purview of an effective manager and giving her the autonomy to run her organization as she sees fit, provided she yields significant results, e.g., she dramatically reduces the cost and/or improves the quality of procurement. If this means investing in team-building activities, that’s just fine — but of course she’d have to shave other expenditures, e.g., by firing weak performers or economizing elsewhere in the GSA budget. 

None of this is to defend Martha Johnson. She may well believe that hiring mimes was not just a bad idea on grounds of “optics,” but that it was a bone fide waste of money. But she should really be judged on the basis of how well GSA did its job of reducing administrative expenditures across the federal government without compromising the quality (such as it is) of government work under her tenure.