The Human Side of Public-Private Partnerships: From New Deal Regulation to Administrative Law Management

• Author: Alfred C. Aman, Jr. & Joseph C. Dugan
• Position: Roscoe C. O'Byrne Professor of Law, Indiana University Maurer School of Law/J.D. 2015, Indiana University Maurer School of Law
• Pages: 883-937

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883

The Human Side of Public-Private

Partnerships: From New Deal Regulation

to Administrative Law Management

Alfred C. Aman, Jr.* & Joseph C. Dugan**

ABSTRACT: During the New Deal era, Congress created a then-

unprecedented program of economic and regulatory reforms, establishing

independent agencies, and empowering them to shape and enforce pragmatic

industrial policies. Twenty-first century regulation looks strikingly different

from the New Deal vision. While New Deal agencies continue to perform some

regulatory functions, market approaches have replaced many traditional

command-and-control formulations, with private entities stepping in to

perform tasks historically reserved to government.

Though government-by-contract is becoming the new normal, neither the

Administrative Procedure Act (“APA”) nor many of its state equivalents

provide adequate guidance to ensure that individual rights are protected and

democratic values preserved during these changing times.

This Article proposes a practical response to the outsourcing revolution: a new

statutory framework derived from the elements of contract and directed toward

public-private partnerships and contemporary delegations. If successful, our

proposal would address the democracy deficit that inheres in the shadowy

outsourcing processes that are common today; it would invite public

stakeholders into the contracting process; and it would establish an essential

safeguard for individual rights.

I. INTRODUCTION ............................................................................. 884

II. CONTRACTS AND THE ADMINISTRATIVE STATE ............................. 888

A. GENERAL-SERVICE CONTRACTS AND PROCUREMENTS ................ 893

B. HUMAN-SERVICE CONTRACTS .................................................. 896

* Roscoe C. O’Byrne Professor of Law, Indiana University Maurer School of Law.

** J.D. 2015, Indiana University Maurer School of Law. Joseph previously clerked in

federal district court and is currently clerking in the United States Court of Appeals. The authors

wish to thank the editors of the Iowa Law Review, particularly Andrew Stanley, Judy He, and Reece

Clark, for their assistance throughout the publication process. Many thanks as well to Professors

Carol Greenhouse and Yvonne Cripps for their helpful comments.

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884 IOWA LAW REVIEW [Vol. 102:883

1. Private Prisons ............................................................... 896

2. Provision for the Homeless .......................................... 902

3. Private Police and Paramilitary Forces ........................ 905

4. For-Profit Immigration Detention Centers and

Private Repatriation ...................................................... 906

5. Privately Administered Welfare Programs ................... 908

C. CONTRACTING BEYOND THE SCOPE OF PERMISSIBLE

DELEGATION ........................................................................... 912

III. A STATUTORY FRAMEWORK FOR HUMAN-SERVICE CONTRACTS .... 916

A. FORMATION ............................................................................ 917

1. The Decision to Outsource .......................................... 917

2. Competitive Bidding ..................................................... 918

3. Notice and Comment ................................................... 920

B. TERMS .................................................................................... 920

1. Definitions and Standards ............................................ 920

2. Liability .......................................................................... 922

3. Duration, Revision, and Novation ................................ 923

4. Freedom of Information ............................................... 924

C. ENFORCEMENT ........................................................................ 927

IV. COUNTERVAILING CONSIDERATIONS ............................................ 928

A. OPENING THE FLOODGATES? .................................................... 928

B. ELEVATED COSTS UNDERMINE EFFECTIVE DELEGATIONS? .......... 929

C. DUPLICATIVE LEGISLATION? .................................................... 931

V. THE FUTURE OF ADMINISTRATIVE LAW ........................................ 933

VI. CONCLUSION ................................................................................ 935

I. INTRODUCTION

During the New Deal era, Congress created what was, up to that point,

“the most thoroughgoing program of reform in our history.”1 Responding to

massive market failures, monopolistic industries badly in need of oversight,2

1. Louis L. Jaffe, James Landis and the Administrative Process, 78 HARV. L. REV. 319, 319

(1964). Landis was something of an administrative law “renaissance man,” serving in turn as a

member of the Federal Trade Commission (“FTC”), a member of the Securit ies and Exchange

Commission (“SEC”), and, later, as the SEC commissioner. See generally J

USTIN O’BRIEN, THE

TRIUMPH, TRAGEDY AND LOST LEGACY OF JAMES M LANDIS: A LIFE ON FIRE (2014).

2. See ELLIS W. HAWLEY, THE NEW DEAL AND THE PROBLEM OF MONOPOLY: A STUDY IN

ECONOMIC AMBIVALENCE 47–48 (1995) (“It was not competition that caused depressions, but

rather the lack of it, the system of private monopolies that created violent inequalities in the

distribution of income and destroyed the purchasing power of the masses.”).

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and fledgling industries trying to take hold, Congress enacted a plethora of

new statutes, created independent agencies, and imbued these agencies with

the power to shape and enforce pragmatic industrial policies.3 These agencies

represented more than a mere iteration of traditional executive power:

indeed, as one of the primary architects of the New Deal, James Landis,

observed, the administrative process conceived during this era granted

agencies the “full ambit of authority necessary . . . in order to plan, to

promote, and to police.”4

Times have changed. Many if not most of the monopolistic and fledgling

domestic industries that Landis described over 75 years ago have evolved into

complex, decentralized enterprises, often multinational in scope. Most New

Deal agencies continue to perform some regulatory functions, but market

approaches to regulation have replaced many traditional command-and-

control formulations.5 More important, globalization has embedded itself

into the fabric of contemporary society through channels opened, in large

part, by the neoliberalization of global markets. Technology has greatly

enhanced the free flow of capital around the world.6

Transnational corporations can make private “production, financ[ing],

and investment” decisions relatively free of direct state involvement and move

“from location to location” without entrenching in local politics or exposing

themselves to much local regulation.7

Neoliberalism, with its deregulatory bent and its emphases on free trade

and open markets, has typified the “global era” of administrative law that first

emerged in the 1980s.8 A mainstay of this era has been outright deregulation

wherever possible, or the displacement of traditional governmental

regulation with market approaches where deregulation is not possible. Part

3. See Jaffe, supra note 1, at 321.

4. JAMES M. LANDIS, THE ADMINISTRATIVE PROCESS 15 (1938).

5. The environmental and health-and-safety era of regulation, beginning in the late

1960s, added another substantial regulatory layer to what had been created in the New Deal.

ALFRED C. AMAN, JR., THE DEMOCRACY DEFICIT: TAMING GLOBALIZATION THROUGH LAW REFOR M

23–30 (2004).

6. “[T]oday’s financial markets are globalizing rather than internationalizing . . . since, for

instance, the movement of capital has largely become independent of the sovereign control of state

agencies.” Jost Delbrück, Globalization of Law, Politics, and Markets—Implications for Domestic Law—A

European Perspective, 1 IND. J. GLOBAL LEGAL STUD. 9, 10 (1993); see also David Albrecht, More on the Free

Flow of Capital and IFRS, SUMMA (Mar. 7, 2009), http://profalbrecht.wordpress.com/2009/03/07/

more-on-the-free-flow-of-capital-and-ifrs (“Current economic ort hodoxy is based on the

internationalization of financial markets and free flow of capital across any and all national borders.”).

7. See Alfred C. Aman, Jr., Proposals for Reforming the Administrative Procedure Act:

Globalization, Democracy and the Furtherance of a Global Public Interest, 6 IND. J. GLOBAL LEGAL STUD.

397, 408 (1999).

8. Id. at 400 (“Deregulation and privatization [have been] widespread responses to the

global economy throughout the West. On some occasions, deregulation in the United States

involved the wholesale substitution of the market for regulation . . . . In other instances,

deregulation involved the use of the market as a regulatory tool . . . .” (footnote omitted)).