Privatizing Washington

By Andelman, David A. | Management Review, April 1995 | Go to article overview

Privatizing Washington


Andelman, David A., Management Review


How do you save $24 billion for your company? Take a hint from the government. The General Services Administration is planning to sell or spin off the parts of its operation that are neither wanted nor needed. Indeed, the federal government is considering privatizing parts of not only GSA, but also the Departments of Energy, Transportation and Housing & Urban Development, among others.

For the Energy Department, this initiative means selling off the huge Naval Oil Fields, the largest publicly owned oil and gas resource in the United States. For the Transportation Department, it means spinning off the nation's entire air traffic control system. For HUD, it means divesting itself of the Federal Housing Administration. And for the General Services Administration, it means privatizing or selling off everything from real estate holdings to building maintenance.

Spinoffs have long been the hot strategy for companies trying to make themselves leaner and meaner--or at least more linear. But Uncle Sam has always wanted to be all things to all people.

Not any more. Now, the government is reinventing itself.

"You have to look at the broader principal--what do you think government should or should not be doing," says Thomas A. Schatz, president of Citizens Against Government Waste. "We want the government to make everything as cost-effective as possible, while still preserving the principles of what the government should be into." That's becoming the theme song, curiously, of both the Republican-controlled 104th Congress and the Democratic-controlled White House.

A Nonpartisan Effort

Republicans point to the decision by Sears Roebuck & Co. to sell off the Sears tower in Chicago and use the cash generated for capital improvements. "They were making the business more linear," says Scott Hodge, senior budget analyst at the conservative Heritage Foundation. "They figured out what business they were in--it was retailing, not real estate. The problem is that no one is even asking that question in government," says Hodge.

Not true, say others. In fact, largely out of political necessity, these kinds of questions are now being asked at the highest levels in Washington. With downsizing-prone Republicans in charge on Capitol Hill, the Clinton Administration at the other end of Pennsylvania Avenue is trying to talk the talk, if not walk the walk, of the small government fad that seems to be sweeping the country.

"The fundamental thrust of this reform is you've got to get government out of the business of doing things," says Hodge, who lectured a spell-bound House Appropriations Committee earlier this year. "On general economic principles it is difficult to rationalize having government control of very much. If we've determined there is a public reason to have government control of something, does it necessarily have to be a manager or provider, why not just a facilitator?"

Curiously, the man in charge of privatizing government believes there's a lot to this point of view---even if it comes from the other side of the political aisle. "This position is plausible in general; the problem is, we deal with specifics," says Robert Stone who directs the National Performance Review, the body chaired by Vice President Al Gore that looks at the entire sweep of government reengineering. "There are things the government does that it's obligated to do, that's our sense. The difference between the political parties and ideologies involves what government should do. [HUD Secretary] Henry Cisneros has plans to reinvent HUD. He was talking today about the insurance part of the new Housing and Urban Development Department. It cannot be just like a private insurance company. He wants to make sure they provide insurance at the low end where private insurance companies might find it unprofitable."

With privatization fever sweeping the Potomac, how is the government to decide just what will become private-and what might the private sector itself learn and profit from what may turn out to be the largest single fire-sale of assets in American history? …

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