Government Contracts

[HaloNoble6]

Even within the context of laissez-faire capitalism, a nation's military will have to contract out the design and construction of its equipment. My question is with regard to how a proper government should behave under these circumstances. That is, suppose this government is interested in acquiring fighter-bombers and that there are several bidders for such a contract. What rules should govern how the government chooses the winner? Is it just a matter of codifying objective criteria for the government to be guided by (defining what constitutes "the best decision," leaving out the chance for a politician to act arbitrarily)?

Suppose Boeing and Lockheed are the only two major competitors for the fighter-bomber contract, but one small company, FighterX, is also competing. Suppose Boeing and Lockheed decide to unite and present a single bid for the contract, and suppose also that the government, arbitrarily, decides that FighterX can't compete with Boeing and Lockheed (when in fact it very well can). Has FighterX been wronged in any way? Does FighterX have grounds to sue the government for not taking them into consideration?

Given arbitrary guidelines for awarding such contracts, I can see a situation where politicians end up using these contracts as pull in the business community (clearly not a good situation). So, should it be law that the government should be required to take all bidders for a contract into account?

In private business any entity can take (or not take) into account any bidder for any contract and remain within the law (there is no "right to be taken into account"). Since a government is tasked with defending individual rights, I say that objective criteria should be laid out so that it stays true to this goal in awarding such contracts. However, suppose a people grants the power of contract-awarding to the arbitrary discretion of its politicians. In such a situation I don't view a politician's decision to refuse to consider, say, FighterX, as a violation of FighterX's rights nor of the law. After all, the people granted such power to such politicians, and FighterX has no "right to be considered." I hope I haven't been too unclear, so what are your thoughts?

-What is the proper situation? That is, should there be a set of laws governing how a government awards contracts whereby every objectively viable bidder should be taken into account?

-Given an improper situation (arbitrary power in the hands of politicians for such situations), what should a company like FighterX do?

[DavidOdden]

What rules should govern how the government chooses the winner? Is it just a matter of codifying objective criteria for the government to be guided by (defining what constitutes "the best decision," leaving out the chance for a politician to act arbitrarily)?

More or less. It's hard to see how to codify the specifics of the notion "objectively righteous fighter plane" into law; but there are certain basic principles that relate to what government is supposed to do. Basically, you want planes that work well, and you don't want to spend a lot of money on it, and that defines the purpose that you're working towards. The purpose is not to right social wrongs or provide employment for the voters in Smith's district, so such a consideration (which, horrifyingly, is actually invoked in military spending) should be illegal. What would remain then is, "is this a good plane, for cheap?".

Suppose Boeing and Lockheed decide to unite and present a single bid for the contract, and suppose also that the government, arbitrarily, decides that FighterX can't compete with Boeing and Lockheed (when in fact it very well can). Has FighterX been wronged in any way?

Yes, on the assumption that the decision was arbitrary (or, depended on an invalid criterion). Or, suppose that the government arbitrarily decides to not consider the bid by the new megacorp Boeingheed. The point is, whatever the decision, the reason should be objectively justified.

So, should it be law that the government should be required to take all bidders for a contract into account?

All qualified bidders. For example, you might require up-front proof that the contractor might reasonably make good on the contract. That would prevent me from being a pill and submitting a bid which by law the government has to consider, when I haven't the faintest idea how to build a vacuum cleaner much less a hundred fighters. I leave it open whether a foreign company has a right to be considered.

In private business any entity can take (or not take) into account any bidder for any contract and remain within the law (there is no "right to be taken into account").

Yes and no: the board of directors of a corporation are charged with making decisions in the interest of the shareholders. So if it would be demonstrably in the interest of the shareholders to accept a contract with Smithco rather that Jonescorp, then there might be a breach of fiduciary duty to sign with Jonescorp. In that case, we're talking about the rights of the shareholders and not the vendor. While the concept of shareholder isn't applicable in the case of governments and citizens, the concept of "acting on behalf of" is, and at least a US corporation could have a basis for redress.

However, suppose a people grants the power of contract-awarding to the arbitrary discretion of its politicians. In such a situation I don't view a politician's decision to refuse to consider, say, FighterX, as a violation of FighterX's rights nor of the law.

Well, that would depend on whether there existed a law prohibiting capricious and irrational choice under color of law. I would say that there should be such a law. The government has an obligation to protect its citizens, effectively and efficiently. If the government sacrifices effectiveness for saving a bit of money and buys planes that do not work, then the government has failed to protect effectively. If the planes work, but are vastly more expensive than necessary (equivalent planes can be had for much less money), the government has violated its obligation to be efficient. A rationally based government would recognize these obligations and make it a requirement that offers be considered with respect to those two considerations, and none other. For a politician to ignore a contract offer because he hates the owner of the company is a betrayal of that obligation. On the other hand, I also think that a politician single-handedly awarding a major defense contract with no independent review is also a bad idea, so this problem should be nipped in the bud by the nature of how contracts with the government are made.

[dondigitalia]

I think that there should absolutely be a set of standards determining how a government awards contracts to private companies, but the standard should not be based on what is best for the private companies, but what is the best deal for the governement.

I know, from professional experience, that the GPO (Government Printing Office) has some legal restrictions in place regarding how it is to handle bids for print jobs. They are required to consider at least 5 different bids on every single job, and take the one that is offering the greatest value at the lowest price. This ensures that a government print-buyer doesn't make friends with the owner of some company and send him all bids, regardless of how much he charges. It does not guarantee that all submitted bids will be reviewed, nor do I think it needs to.

Imagine the cost involved in reviewing every single bid submitted to the government. If there are contractors (such as Lockheed and Boeing), who have already proven their value to the government (i.e. have provided high-level services, on time, at an affordable cost, and have consistently maintained the required levels of secrecy, etc.), I see no reason that their bids shouldn't precedence for review over a newcomer who has yet to prove himself.

If the newcomer really vies for attention from any customer (including the government), he can prove himself professionally by starting at the bottom and working his way up. If he does a good job, his company will grow, he'll get noticed, and eventually his bid will be taken into consideration, too.

[HaloNoble6]

Yes, on the assumption that the decision was arbitrary (or, depended on an invalid criterion). Or, suppose that the government arbitrarily decides to not consider the bid by the new megacorp Boeingheed. The point is, whatever the decision, the reason should be objectively justified.

I disagree that FighterX has been harmed. I say that the American people, the rights of which the government is contractually obligated to protect, have been harmed. In this sense, I think FighterX could fund a case for why it should be considered for the contract. What do you think?

[JMeganSnow]

The people who are going to use the equipment should be the ones making the buying decisions, NOT an appropriations committee. The appropriations committee can (and must) say "here's the budget we've got, go to it", but for military expenditures the actual military needs to be the group determining what and how many to buy. Part of the reason our military is so messed up is that politicians decide a lot of the minutae (remember the Osprey? Bleh.) and it means that some expensive junk is bought while truly necessary stuff gets ignored.

The politicians have no valid or objective criteria for choosing between companies, but the guys who'll be using the stuff sure do. As with any purchase, having a personal, selfish interest in the outcome produces the best possible result, not an endless ream of rules and regulations.

Additionally, is there a deep and abiding reason why the government can't buy some planes of one design and some of another? I can certainly think of situations where having at least airplanes with slightly different designs could come in handy, unless getting mechanics and pilots trained and parts distributed for both is a real hassle.

[DavidOdden]

I disagree that FighterX has been harmed. I say that the American people, the rights of which the government is contractually obligated to protect, have been harmed. In this sense, I think FighterX could fund a case for why it should be considered for the contract. What do you think?

I'm not actually entirely sure about whether this should be a civil matter involving damages. Basically, the law should say "Here is how contracts are decided", and if a government official violates the law, there should be consequences. A possible consequence is jailing the criminal official; or, invalidating the contract; or, paying damages. Voiding a contract is not such a great idea, IMO. Coupled with my statement about the need for there to be a review procedure in place to begin with (i.e. you don't just have a single bureaucrat who unilaterally decides to give the contract to X), jailing a large chunk of government for violating the law of government contracts would be on the one hand an interesting idea, but on the other hand... oh, never mind. Jail time it is. My primary point is that the violation shouldn't arise in the first place. I really don't have an argument for damages to the company vs. jail for the law-breakers.

WRT Jennifer's point about the end user deciding these matters, the military should absolutely specify what is required of the equipment, and they should be seen as the experts sine qua non in determining whose product is superior, at least if we have a civilian government and not a military dictatorship, the decision needs to be made based on objective law by the government, and not the military.

[Groovenstein]

Yes, on the assumption that the decision was arbitrary (or, depended on an invalid criterion). Or, suppose that the government arbitrarily decides to not consider the bid by the new megacorp Boeingheed. The point is, whatever the decision, the reason should be objectively justified.

Felipe in post #4:

I disagree that FighterX has been harmed. I say that the American people, the rights of which the government is contractually obligated to protect, have been harmed. In this sense, I think FighterX could fund a case for why it should be considered for the contract. What do you think?

______

What the law is, not necessarily ought to be, on the civil end:

In order to bring a lawsuit, you have to have "standing."* Very generally speaking, as best I can recall, this requires some sort of actual injury (leave prospective injunctions out for now, as they don't apply here). There is no such thing as taxpayer standing, so under the current system the "American people" in this scenario have no standing to sue. Only FighterX under these facts.

*As you may recall or be curious to know, the Supreme Court decided Elk Grove v. Newdow (the pledge of allegiance "under God" case) on a standing issue rather than an Establishment Clause one.

[Edit: Added link.]

Edited October 26, 2005 by Groovenstein

[DavidOdden]

In order to bring a lawsuit, you have to have "standing."* Very generally speaking, as best I can recall, this requires some sort of actual injury (leave prospective injunctions out for now, as they don't apply here).

I would have said that SCOTUS failed to decide Elk Grove v. Newdown because of lack of standing, but yeah that point is right. In this (hypothetical) case, the plaintiff was injured monetarily. In addition, the plaintiff was denied justice (objective treatment under the law). Now there is this unpleasant fact that under current law, the government isn't legally obliged to do its job. I'm thinking of the case in spring where a local PD (in Colorado?) chose not to enforce a restraining order, with bad consequences -- death, I think -- and as I recall, it was decided that that was just too bad.

[Groovenstein]

Now there is this unpleasant fact that under current law, the government isn't legally obliged to do its job. I'm thinking of the case in spring where a local PD (in Colorado?) chose not to enforce a restraining order, with bad consequences -- death, I think -- and as I recall, it was decided that that was just too bad.

You're thinking of Castle Rock v. Gonzales, and all your assertions are correct. (Are you trying to make sure I was paying attention in Civil Rights Litigation? ) The issue: "whether an individual who has obtained a state-law restraining order has a constitutionally protected property interest in having the police enforce the restraining order when they have probable cause to believe it has been violated." The three daughters were murdered.

Like in Kelo, they left it open for the states to act, FWIW. (See section III.) Also, for further reading, you may want to check out (if you haven't already, you legal guru, you) DeShaney v. Winnebago Cty. Soc. Servs. Dept. Local officials received complaints and had reason to believe that a kid's dad was beating him but didn't do anything about it. The Court held that this was not a deprivation of his liberty in violation of the DPC. Maybe it wasn't, I don't know, but what the hell are the cops supposed to do if not act on complaints of beatings they have reason to believe are true?

[HaloNoble6]

What the law is, not necessarily ought to be, on the civil end:

In order to bring a lawsuit, you have to have "standing."* Very generally speaking, as best I can recall, this requires some sort of actual injury (leave prospective injunctions out for now, as they don't apply here). There is no such thing as taxpayer standing, so under the current system the "American people" in this scenario have no standing to sue. Only FighterX under these facts.

Continuing with the law as is (as opposed to as ought to be), since you say FighterX has standing, how has FighterX been "injured?" I presume this means that FighterX has had its rights violated, no? So how?

[Groovenstein]

To begin answering your question, I'll quote from your original scenario:

. . . suppose also that the government, arbitrarily, decides that FighterX can't compete with Boeing and Lockheed (when in fact it very well can).

The main possibility I see in a scenario like this is a violation of FighterX's right to "equal protection under the laws" under the Equal Protection Clause. The argument would probably go: FighterX has a right to do business. The government's decision denies FighterX the right to do that but grants it to Boeing and Lockheed. Since you said the decision was "arbitrary," I don't even have to get in to determining whether it meets "rational basis" scrutiny. But just to be fun, I'll assume you hadn't said that.

The court would look at the law under the "rational basis" standard to see if the law was "rationally related" to a "legitimate government interest" (which I'll abbreviate "LGI"). This is a pretty deferential standard. In a case like this one, it's not tough to come up with some possible LGIs. For example, Odden responded to one of your questions with this:

"All qualified bidders. For example, you might require up-front proof that the contractor might reasonably make good on the contract. That would prevent me from being a pill and submitting a bid which by law the government has to consider, when I haven't the faintest idea how to build a vacuum cleaner much less a hundred fighters."

I'd say that preventing quack bidders is a pretty strong LGI. So then you would look at the specific law and see whether that actual law is "rationally related" to that LGI. For example, if the law passed said "All potential bidders must present their bids in tights while performing Riverdance," obviously that is not rationally related to the interest of preventing quack bidders. But if the law said "All potential bidders must have at least 20 years experience," that might work. (It would depend largely on what information the government used to come to the conclusion that requiring 20 years experience prevents quack bidders.)

I hope this has helped.

Two other notes that I'm putting as kind of an afterthought so they don't distract from my main point:

1. There are stronger levels of Equal Protection scrutiny than rational basis, but they don't apply in your scenario. Racial discriminations are analyzed under "strict scrutiny." (See Grutter v. Bollinger, the Michigan affirmative action case). Sex discriminations get an intermediate scrutiny. (See U.S. v. Virginia).

2. Maybe there's some sort of Due Process issue here, but I don't see it. I can't shed any more light on that because I find that whole area of law very confusing.

[Edit: spelling.]

Edited October 26, 2005 by Groovenstein

[Captain Nate]

Truthfully, large government contracts give me the most concern. In a proper system, monetary support of government officials isn't a worry because the government has no economic powers to benefit the supporters...except for government contracts. So there is SOME room for abuse. Significantly less room than today's system, but the flaw is in there.

Of course, we can have the same bidding process that exists today, plus one added protection: payment for such contracts is consentually given by the public, not taxed. If fraud is suspected, people can withdraw financial support of the government.

[softwareNerd]

In terms of checks on corruption, I just want to point out that private companies have corrupt people too. Yes, believe it or not, there are some senior managers who will give contracts to someone or some company for other than business reasons.

[dondigitalia]

In terms of checks on corruption, I just want to point out that private companies have corrupt people too. Yes, believe it or not, there are some senior managers who will give contracts to someone or some company for other than business reasons.

How scandalous!

[mrocktor]

"unless getting mechanics and pilots trained and parts distributed for both is a real hassle"

It is

On topic, most military equpment, in fact most products, can be defined by specification. It is easy to write a "value function" with which to compare competing proposals. In essence, you would have:

1- your submission must provide *basic requirements*

2- your submission will be evaluated according to these parameters *list*

You then receive the proposals, plug in their specs into your formula and voila - an objective technical evaluation of each alternative.

Objectively evaluating services is a lot tougher.

mrocktor

[JMeganSnow]

WRT Jennifer's point about the end user deciding these matters, the military should absolutely specify what is required of the equipment, and they should be seen as the experts sine qua non in determining whose product is superior, at least if we have a civilian government and not a military dictatorship, the decision needs to be made based on objective law by the government, and not the military.

What does "WRT" stand for? (I'm awful with abbreviations . . . you're lucky if I can figure them out for myself.)

How does letting the military decide what to purchase to best suit its functions given the budget that is given to them by Congress amount to a military dictatorship? Their budget is defined, as well as, presumably, their objectives, so why does Congress need to oversee purchasing of fighter jets and office supplies? Anywhere I've ever worked where upper management took a hand in minutae like that always wound up being mercilessly inefficient. "Can I get a computer? I need one to do my job." "Fill out this request form and you'll have to wait 12 weeks until we can schedule an IT person to come in and install it for you." "Um, I can install it myself, really."

Or, the best one: my job sends me to training for new software. After I get back from training I get a request (read, demand) from our CEO that I create a report using this new software by the end of the month to show that the training wasn't wasted. I don't have the software on my machine, so I send an email to IT requesting that they install it. I get an email back saying that they are still "discussing" the expense and I'll just have to wait. I'm thinking the training was wasted. *shakes head*

The purpose of the military is to be good at killing people and blowing things up . . . it's not going to be a profitable or even cost-effective endeavor no matter how you slice it. It's a money sink to prevent damage, like an insurance policy. If you don't get sick or in a car accident (or in a war), it's wasted money.

It is

Doing ANYTHING in the military is a hassle; the question isn't "okay, which delivery service should we use to get this stuff to our branch offices?" but rather "Okay, we need to ship 500 tons of equipment to some godforsaken place in the middle of nowhere where there are no roads, airstrips, or even storage depots, and people are shooting at us. Oh, and it's raining. And dark. Also alligators just ate the control chief."

I meant, is it so much MORE of a hassle that the benefits of having flexible capabilities would be necessarily outweighed?

[DavidOdden]

What does "WRT" stand for?

With respect to...

How does letting the military decide what to purchase to best suit its functions given the budget that is given to them by Congress amount to a military dictatorship?

No, that wasn't the point / claim. I'm saying that given that we have a civilian government and not a military dictatorship, and that it is the government that makes decisions about how, concretely, the rights of citizens are to protected, then it is right that the government (which is civilian) decide who gets the contract. Not in a vacuum, of course. The duty of the military is to implement the policies articulated by the government.

Their budget is defined, as well as, presumably, their objectives, so why does Congress need to oversee purchasing of fighter jets and office supplies?

To ascertain that the purchases do what they are supposed to. The business of the military is to kill the enemy when ordered to do so; the business of the government is to determine who the enemy is, and whether they need to be killed. And, to some extent, how they should be killed. Whether or not to drop a few thousand megatons of nukes on Pyongyang, or a few thousand tons of conventional explosives, is largely a political question, and with a civilian government, the government decides these kinds of issues. The decision should absolutely be made with real consultation of the military, since there are military issues at stake here. Analogously, the decision to arm the military one way or another has a significant political component to it, which is beyond the competence of the military. It is also the responsibility of the government to fund these ventures, which creates a very strong interest in having that money spent well.

Anywhere I've ever worked where upper management took a hand in minutiae like that always wound up being mercilessly inefficient.

You mean that guy? Yeah, for which reason a rational civilian government would not give a rats if the military opts for black ballpoint pens rather than blue. But a contract for a hundred fighter jets would be acres beyond minutia.

[Groovenstein]

The purpose of the military is to be good at killing people and blowing things up . . . . It's a money sink to prevent damage, like an insurance policy. If you don't get sick or in a car accident (or in a war), it's wasted money.

I wouldn't say that if you don't get into a war it's wasted money. The military also serves the purpose of deterring invasion. Did you mean to exclude that? (As an aside, a similar idea goes for illness and accident insurance, except in those cases the additional value is peace of mind rather than deterring invasion.)