Government by contract and the structural constitution.

AuthorBrown, Kimberly N.

Although private parties have performed government functions throughout most of Western history, mainstream administrative law scholarship is dotted with concerns over the extent to which modern federal government activities are outsourced to private contractors. Federal contractors routinely exercise authority that is classically "executive" in nature. They write regulations, interpret laws, administer foreign aid, manage nuclear weapons sites and intelligence operations, interrogate detainees, control borders, design surveillance systems, and provide military support in combat zones. Administrative law places few constraints on private contractors, and prevailing constitutional principles--the state action and private delegation doctrines, in particular--are either inept at holding private contractors to constitutional norms or utterly moribund. A common theme that appears in the vast literature on privatization, therefore, is accountability. There is no recognized constitutional theory that meaningfully prohibits Congress or the President from transferring significant amounts of discretionary governmental power to wholly private entities that operate beyond the purview of the Constitution, and there is relatively sparse scholarly analysis of the subject. This Article searches for a constitutional principle that could be employed to address hypothetical outsourcing arrangements that go too far for the American appetite. In that pursuit, it looks to the law governing independent agencies as a natural starting point for evaluating the propriety of outsourcing relationships from the standpoint of the structural Constitution. It then introduces two ideas with an eye toward sparking fresh thinking about the constitutionality of privatization: first, the notion that all actors exercising federal government power should be viewed along a constitutional continuum and not as occupying separate private/public spheres; and, second, that a democratic accountability principle may be derived from the Supreme Court's recent decision in Free Enterprise Fund v. Public Co. Accounting Oversight Board, as a constitutional hook for addressing government-by-contract gone awry.

INTRODUCTION I. THE CONSTITUTIONAL DISCONNECT A. Private Contractors: The Problem B. The Shortcomings of Current Constitutional Doctrine II. BRIDGING THE DEVINE A. An Overlooked Constitutional Continuum B. Outsourcing and the Constitutional Text III. GOVERNMENT BY CONTRACT, INDEPENDENT AGENCIES, AND DEMOCRATIC ACCOUNTABILITY A. Independent Agencies and Private Contractors: A Comparison B. Free Enterprise Fund v. Public Co. Accounting Oversight Board C. Accountability and the Constitutional Continuum CONCLUSION INTRODUCTION

"If the founding fathers were to return to observe the organizational landscape of the [modern] national government ... they would undoubtedly conclude that their constitutional design had been scuttled entirely.... [S]urely a revolution must have occurred." (1)

Of course, in the most common sense of the term, no American revolution--no overt unwinding of the tripartite political regime created by the United States Constitution--has succeeded in the history of our constitutional government. (2) No President or Congress has been overthrown by a popular movement. No segment of the historical American populace has fallen subject to an extraconstitutional form of national government. The constitutional provisions establishing the core levers of power--Articles I through III--survive in virtually identical form to those that were ratified in 1789. (3) Yet scholars have expounded on a "drive to shear the federal government of power" (4) that might qualify as a revolution of sorts. Over the last century, the American populace and its national political institutions have come to tolerate a steady transfer of important government functions from the Congress, the President, and his cabinet, (5) to a vast hodge-podge of quasi-governmental and private actors that evade the oversight mechanisms that bind the political branches of government. Under a broader definition of revolution, therefore--one that encompasses efforts "to transform the political institutions and the justifications for political authority in a society" (6)--this massive reshaping of government is historic.

The term "privatization"--or "the range of efforts by governments to move public functions into private hands and to use market-style competition" (7)--covers a broad spectrum of public-private relationships, from the mundane to the extraordinary. The use of common procurement and service contracts for routine supplies and maintenance is uncontroversial. But government contracting is much more audacious, encompassing some of the most highly sensitive functions within the core responsibilities of government. For example, since September 11, 2001, the federal government has hired the Rand Corporation to create a national emergency management strategy for the entire federal government; (8) entered into billions of dollars in no-bid contracts with the Halliburton Corporation to conduct logistical planning and other support for the U.S. invasion of Iraq; (9) injected private military contractors into CIA paramilitary units hunting Al Qaeda in Afghanistan; (10) outsourced flood water drainage and the building of 300,000 temporary shelters after Hurricane Katrina; (11) and approved the wholesale replacement of Transportation Security Administration (TSA) personnel by private contractors at sixteen U.S. airports. (12) The federal government routinely hires private contractors to find and supervise other private contractors. (13) At the state level, (14) criminal prosecutions, prison management, and police authority are regularly outsourced in many jurisdictions, (15) while a private firm runs the entire city government of Sandy Springs, Georgia. (16)

The annual federal dollars spent on government contracting are also rapidly increasing. The Office of Management and Budget (OMB) reports that federal contracts accounted for more than one-sixth of all federal spending in 2009, or in excess of $500 billion a year, which is "more than double the amount that was spent in 2001." (17) Today, there are 1,931 private companies working in national security fields, including counterterrorism, homeland security, and intelligence--approximately twenty-five percent of which were created in the past ten years. (18) General Dynamics alone collected $31.9 billion in 2009 for intelligence contracting with the federal government, which outsources approximately twenty-nine percent of all U.S. intelligence jobs at a cost of fifty percent of its intelligence personnel budget. (19)

The burgeoning federal contracting business is so impressive that it has attracted substantial venture capital. (20) In the words of one investor: "Every fund is seeing how big the trough is and asking, How do I get a piece of that action?" (21) In 2005, Fortress America raised $46.8 million in an IPO--with "no product, no revenue, and certainly no profits" (22)--merely promising to become a holding company for homeland security private contractors, with former Congressional Representative Tom McMillen at the helm. (23) McMillen raised another $100 million on the same premise for a firm he founded in 2003. (24) Other start-ups are doing the same thing. (25)

Taken together, such anecdotes signal a shift in the very structure of the "federal government" as we know it. If the outsourcing trend were to progress to its logical extreme--if Congress and the President were to cede the majority of their respective powers to a parallel "private" government designed to operate beyond the purview of electoral accountability, constitutional constraints, and judicial review--complacency with government outsourcing would likely falter. Under this scenario, private lawyers employed by a "Justice Corporation" would operate with different incentives than Department of Justice (DOJ) attorneys who take an oath to support and defend the Constitution in their enforcement of the federal criminal laws. (26) A private Justice Corporation would be self-directing--able to perform more efficiently, unencumbered by presidential oversight and bureaucracy. Yet its lawyers might well feel duty-bound to compromise the public's interest in criminal law enforcement if it conflicted with the corporation's primary objective: maximizing profits. (27)

Many Americans would likely assume that the Constitution would have something to say about whether our federal government could be outsourced in toto--that, to some degree at least, the government must perform certain core governmental tasks and, if it fails to do so, "We the People" could hold our leaders constitutionally accountable. But the Supreme Court, in "its role as protector of the constitutional design," (28) has failed to develop a doctrinal framework for meaningfully scrutinizing transfers of governmental power to private parties. There is no accepted constitutional theory that prohibits Congress or the President from handing off significant swaths of discretionary governmental power to wholly private entities that operate beyond the purview of the Constitution. And despite prolific scholarship on the topic of privatization, (29) there has been relatively little contemporary analysis of whether the structural Constitution--the "use of structural devices" such as "[c]hecks and balances, separation of powers, and federalism" to enable government "by men and over men 'to control itself" (30)--restrains Congress and the President from handing off powers to private actors with impunity. (31)

This Article begins a dialogue about how one might draw support from the structural Constitution for confining the ability of Congress and the executive branch to pass government powers on to extraconstitutional actors. It rejects the sharp public/private divide that shapes prevailing law and unveils a new way of...

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