As we’ve tried to emphasize in this space, public employees are not interchangeable. We lost large numbers of extremely effective procurement officers during the Clinton years, and this has exacerbated defense expenditures. It is very difficult to duplicate the skills of an experienced procurement officer, which is why the federal government should pay the best of them considerably more than it does now. John Gravois makes something like that point in his new article in the Washington Monthly, which is to his credit:

Every year, the Government Accountability Office analyzes a portfolio of major weapons contracts to see how the Pentagon is handling its acquisitions process, and the past decade has seen a staggering trend of increased cost overruns. In 2000, the average weapons system contract ultimately cost 6 percent more than originally projected. In 2009, the average weapons program ended up costing 25 percent more. Cost overruns for that year alone amounted to $296 billion. Among the causes of the problem, the GAO’s 2009 report cited “shortages of acquisition professionals” as well as “degradation in oversight, delays in certain management and contracting activities, increased workloads for existing staff, and a reliance on support contractors to fill some voids.”

After a detailed discussion of procurement and securities regulation (where the problems run much deeper than administrative competence, as Amar Bhide has argued), however, he proceeds to a broader conclusion that doesn’t necessarily follow:

But the truth is, most agencies are, if anything, understaffed. The government has grown tremendously in its spending and scope since the 1960s, and the population of the nation has grown by a margin of 100 million people, but the size of the federal workforce has remained remarkably static at about 2 million.

Have we seen steep increases in the number of administrative workers in other demands? If anything, the back office functions of many firms have seen steep decreases. Fortunately, he then makes a more compelling point:

This is not to say that there aren’t big bureaucratic reforms that need to be made that could lead to people losing their jobs. Many agencies, for instance, exhibit excessive layering in their management ranks (think job titles that start with “deputy-” or “under-”). And if Congress and the administration could agree to lift some of the outdated procedural requirements and redundant reporting demands that are the bane of the average civil servant’s life, it might be possible for agencies to fulfill their mission as well or better with fewer people.
But reforms like this almost never happen. Instead, what you usually get are demands like what we’re now seeing in Congress for across-the-board cuts in the workforce. This is often accomplished through attrition and incentives for early retirement. But the people most likely to walk away in those cases are the ones most confident of their ability to land a job in the private sector—in other words, often the best employees.

That is a real danger.

The paradox, then, is this: if the aim is to reform the civil service in order to put a lid on federal spending, what we really need are targeted increases in the federal workforce. A wise first move would be to double the size of the OMB. More and better staff at revenue-producing agencies like the IRS would also make sense.

Gravois also calls for more employees at the SEC and the new bureaucracies overseeing the new health law. (Interestingly, this reinforces the view that excluding the discretionary costs of staffing new bureaucracies gave us a misleading portrait of the real cost of PPACA.) I agree that devoting more resources to OMB and the IRS makes sense, but of course we could also ease the burden on the IRS by reforming the tax code.

My main takeaway from this very thorough piece is that public sector managers need much more flexibility to meet the objectives set by elected officials. New Zealand, for example, reformed its public sector around a few main features, cited in a rather old Frontier Centre study:

· Budgeting, accounting, and appropriations are now all done on an accrual basis.
· There is a charge for the use of capital. The charge rate is benchmarked to the private sector (adjusted for the impact of taxation).
· All budgeting and management is done according to outputs not inputs.
· Managerial discretion is significantly greater than in other nations.
· Accountability mechanisms have real teeth, with incentive mechanisms more systematic and rigorous than perhaps any other nation in the world.
· The reforms apply some simple general principles across the whole of government to achieve a high degree of internal consistency.

Essentially, cabinet officers function as purchasing agents on behalf of the people of New Zealand, and departments function as firms that meet the desired outputs as cost-effectively as they can. New Zealand has managed to sharply improve the productivity of its public sector while also reducing personnel. It’s worth noting that this approach has flourished under left-of-center and right-of-center governments in New Zealand. There has been a counter-trend to New Zealand’s brand of “New Public Management,” often referred to as “whole-of-government” reform, that places a heavy emphasis on the need for coordination across agencies. It’s far from obvious to me that these approaches are incompatible.

This is the right way to think about delivering public services, in my view, not to look at the number of workers in isolation.