Municipal contract corruption: the response is fixing the problem not eliminating oversight

Both the Washington Post ("Curtail D.C. Council power over contracts") and Councilman David Grosso ("Pol protests D.C. Council contract vote" from the Washington Examiner) are wrong about what the problem is with government contracting in the city.

The Post and Councilman Grosso argue--CORRECTLY I MIGHT ADD--that the requirement that all government contracts over $1 million be approved by City Council sets up the possibility for contract steering and other problems.

They say then that City Council shouldn't have the authority to approve contracts. (Note that Councilman Jack Evans is fine with limiting oversight also.)

2.  But that only works if we know that the contracting process by the Executive Branch is completely and fully fair.  We already know that isn't the case.

There are many examples of contracting improprieties with every one of the city's Mayors, Marion Barry especially but there have been problems with most Administrations since, even at times, Anthony Williams.  Mayor Fenty was particularly bad in terms of contract steering and manipulating the contracting process with nonprofit instrumentalities controlled by DC government agencies.

And of course there are thousands of examples of such problems all around the country.  So giving the Executive untrammeled authority over contracting (cf. "absolute power corrupts absolutely") is hardly the proper course of action.

3.  The DC Council is equally bad in that it is exempt from the rules for contracting openness--there is no requirement on Council to have an open tender process/public RFPs.  That's an issue with the no-bid contract--seeking private funds to pay for it, making it even worse--to a law firm to do "education research" for the Council Education Committee (see "Catania hires law firm to help craft D.C. school legislation" from the Post).

4.  The solution isn't less openness and less transparency and less oversight (this pretty much is the Post editorial response to just about any problem with local government--more authoritarianism, not less), but more.

The response then should be to structure the Contract Approval Process in a way that keeps the openness and transparency and reduces the discretion.

5.  Probably the response is (1) a public notice on all contracts as part of the DC Council Agenda process; (2) which are approved in an up or down vote; (3) with the ability to pull out particular contracts through a specific process and procedure.

There are problems with this approach too.  It would be similar to the DC City Council Disapproval Resolution process--but like the filibuster, this process now is set up to aid the Councilmember who initiates the Resolution in extracting extranormal concessions (usually on unrelated matters) from the Executive.

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From "Corruption" by Shliefer and Vishny:

This paper presents two propositions about corruption. First, the structure of government institutions and the political process are a very important determinant of the level of corruption. In particular, weak governments which do not control their agencies would lead to ultra-high corruption levels. Second, the illegality of corruption and the need for secrecy make it much more distortionary and costly than its sister activity, taxation. These results may explain why in some less developed countries, corruption is so high and so costly to development.

While the paper is focused on so-called third world countries, I think it's fully relevant to municipal governments, which often operate with significantly less oversight than is sometimes warranted (see "Five ex-officials from Bell,  California, convicted in corruption trial" from Reuters about Bell, California and "SEC says Harrisburg, Pa., misled bond investors" from the AP about Harrisburg, PA -- but these are just a couple of examples, there are many).

Shliefer and Vishny extended their arguments in a book, The Grabbing Hand: Government Pathologies and their Cures. A review in the Economist states that the book is important because

There is no comparably elaborated body of thought based on the idea that governments are, like individuals, rational and self-interested—in other words, that they are chiefly concerned with winning power, exercising power and hanging on to power. ...

Messrs Shleifer and Vishny are trying to put that right. They believe their “grabbing hand” model is a distinctive alternative both to the “helping hand” (market-failure correcting) model of mainstream thinking and to the invisible-hand paradigm of the public-choice school. It is certainly closer to the second than to the first. But what divides it from the invisible-hand approach is its prescriptive content—its emphasis on tilting the balance of political costs and benefits in order to bring public and private interests into closer alignment, leading, they hope, to better (but not always less) government.

The point with regard to setting up better processes and systems for contracting is to put checks on the power, not to increase power and the ability to be corrupt by removing checks on that power.

Other resources:

-- past blog entry, "More on DC ethics and corruption: intrinsic vs. extrinsic behavior"
-- Corrupt Cities: A Practical Guide to Cure and Prevention (pdf)
-- Chicago and Illinois, Leading the Pack in Corruption, University of Illinois Institute for Government and Public Affairs.  Note that according to this report, DC is one of the most corrupt "states" in the US.