The outsourcing business Carillion has gone bust because its bids for government work have been far too low. The problems raised by such contracts are not new.
The Romans outsourced a great deal of state business. The Bible’s ‘publicans’ were wealthy publicani (lit. ‘men engaged on public business’). No doubt aided by the occasional sinner, they formed powerful and influential partnerships to bid at auction for state work of every hue — collection of taxes and harbour dues, provision of military and civilian supplies, building and repairing roads, bridges and aqueducts, running the mines, waste disposal and so on.
Partnerships raised incredible sums for these operations. One contract supplying an army just with clothing and horses cost the equivalent annual pay of 10,000 soldiers; the funding of the 57-mile long Aqua Marcia serving Rome, that of 375,000 soldiers. We do not know what profit margins were built into these bids, but it was the job of the censors to make a reasonable calculation.
Partnerships also bid to collect tax revenues from the provinces and gave the state the total sum from the whole five-year contract up front. Naturally, they did their best to extort far more than that. This proved awkward for provincial governors. The state depended on publicani and needed to keep them sweet. But a governor who cracked down on them — in order to prevent provincial unrest — feared publicani would refuse to put in future bids, thus compromising state revenues. Again, what if a partnership overbid and asked to be released from the contract? Cicero once had to hold his nose and support such a plea, though admitting in a private letter that their conduct had been ‘disgraceful and reckless’. On another occasion Julius Caesar remitted a third of such a contract, warning the publicani as to their future behaviour.
Outsourcing has been around for more than 2,000 years. It has still not been cracked. But even less has government spending. No doubt the time will come when we outsource it all to that great future panacea, artificial intelligence, obviously so much better than the real thing.