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

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. G ENERAL -S ERVICE C ONTRACTS AND P ROCUREMENTS ................ 893 B. H UMAN -S ERVICE C ONTRACTS .................................................. 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. 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. C ONTRACTING B EYOND THE S COPE OF P ERMISSIBLE D ELEGATION ........................................................................... 912 III. A STATUTORY FRAMEWORK FOR HUMAN-SERVICE CONTRACTS .... 916 A. F ORMATION ............................................................................ 917 1. The Decision to Outsource .......................................... 917 2. Competitive Bidding ..................................................... 918 3. Notice and Comment ................................................... 920 B. T ERMS .................................................................................... 920 1. Definitions and Standards ............................................ 920 2. Liability .......................................................................... 922 3. Duration, Revision, and Novation ................................ 923 4. Freedom of Information ............................................... 924 C. E NFORCEMENT ........................................................................ 927 IV. COUNTERVAILING CONSIDERATIONS ............................................ 928 A. O PENING THE F LOODGATES ? .................................................... 928 B. E LEVATED C OSTS U NDERMINE E FFECTIVE D ELEGATIONS ? .......... 929 C. D UPLICATIVE L EGISLATION ? .................................................... 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 Securities and Exchange Commission (“SEC”), and, later, as the SEC commissioner. See generally JUSTIN 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.”). 2017] THE HUMAN SIDE OF PUBLIC-PRIVATE PARTNERSHIPS 885 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 REFORM 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 orthodoxy 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)). 886 IOWA LAW REVIEW [Vol. 102:883 and parcel of this transition has been a dramatic expansion of outsourcing and public-private partnerships. Agencies form contracts with private parties; they specify terms at the outset, and they maintain degrees of supervisory authority. As a practical matter, however, it is the private contractors who deliver many of the services traditionally reserved to government. To be sure, outsourcing is not a novel phenomenon. It is only natural that private contractors are well-suited to perform certain tasks—e.g., build roads, repair bridges, collect trash, and remove snow. 9 We have, however, been witnessing not only a shift in the overall quantity of government contracts generally but also substantial qualitative differences in the kinds of governmental activities and responsibilities governments at all levels— federal, state, and local—are willing to turn over to private providers. 10 Contractors now manage immigration detention centers and private prisons; they disburse welfare benefits and operate utilities; they secure communities and investigate crimes. 11 They have...