Public sector privatization is typically viewed as a means of maximizing economic efficiency--reducing government costs while increasing the scope and quality of service delivery by transferring (or "returning") government functions to the private sector (e.g., Butler, 1985; Savas, 1982; Donahue, 1989). Some proponents even contend that privatization is synonymous with reducing the size and effects of government (see Peters, 1996, 21-46; Wallin, 1997, 12). Although privatization changes the character of public service delivery and government-citizen relations, shifting or even significantly reducing taxpayer burdens, few government functions in America are simply abandoned altogether (so-called load shedding) and left to private markets. Government programs are commonly long-standing, public responses to past inadequacies or outright failures of the market. Citizens and their elected representatives are not eager to forgo such programs. Privatization in the United States is thus more likely to represent a change in form rather than function, i.e., the substitution of a "private" contractor or other nongovernmental designee to act as a proxy for government officials and employees in performing public tasks under the aegis of governmental authority and paid from the public purse (Seidman and Gilmour, 1986; Kettl, 1988; Salamon, 1989).
The dimension of governance most often altered significantly by privatization is that of public accountability. This is particularly the case when the locus of privatization shifts from the governmental provision of goods and services (such as housing, electricity, garbage removal, and transportation) for citizen-"customers" to the performance of government functions requiring that members of the public be treated more like citizen-"clients" with constitutional and statutory rights to complex professional services (medical care, welfare, legal representation, education, and the like) or citizen-"subjects" (in the British sense) with governmentally imposed duties (to pay taxes, obey laws and regulations, defend the state, and so on) (Mintzberg, 1996). When the relationship between government and citizen becomes more complex than that between a mere commodity or service provider and its customers, more than marketplace efficiency is required to hold the government and its proxies and surrogates accountable for their exercise of authority on behalf of the state.
Fundamentally, government officials may be held accountable for action taken on behalf of the state in two ways. First, they are held accountable politically with respect to their exercise of duly constituted authority, either by the voting public (if they are elected officials) or by elected legislative and executive officeholders (if they are appointed). Elected executives, legislatures, and their agents all play roles: regularly urging administrators to politically inspired interpretations of institutional missions and policy mandates; taking them to task for improper understanding of legislative intent; and/or changing the law outright to specify explicit requirements and priorities, reallocate funds, reorganize institutional structures, and otherwise narrow administrative discretion Second, the state and its officers are held accountable legally, either by the constitutive force of a body of law suggesting or demanding appropriate modes of government behavior or by an independent judiciary weighing their actions against constitutional statutory, and other legal mandates and limits.(1)
Because public law is the foundation of government administration, this article focuses upon the legal, rather than the economic or the political aspects of privatization. First, we assess the accountability under American law of nonprivatized and privatized government programs and activities. Second, we review the vacillating judicial treatment of various actions and actors associated with government and its implications for public administration. …