DeConstructing DeMaio – Part Two: Shooting Fish in a Barrel

Editor: This is Part Two of Doug Porter’s series “DeConstructing DeMaio”. Here is Part One. 

The business of reforming government has always been a decent hustle for an alert entrepreneur.  Northern Virginia is littered with the mansions of government contractors who have gotten rich off of deceiving taxpayers into believing that if we outsource to private contractors, we’ll save money.

Similarly, the shelves of the Library of Congress are heavily laden with Presidential commissions’ or non-governmental agencies’ reports on government reform. Ronald Reagan’s Grace Commission report, which stands 10 feet high  (47 unindexed volumes), with 2,478 “cost-cutting’ or “revenue-enhancing’ recommendations is probably the cat’s meow of those studies. Yet, no matter what actions are (or are not) taken, the issues always remain, awaiting the next administration..

After all, the ‘truisms’ about government inefficiency and waste are embedded in the American psyche going back to the progressive era over a century ago. The progressives of that day were conflicted in that their quest for efficiency; the argument was made that trained independent experts could make better decisions than the local politicians was in conflict with their goal of bringing government closer to the people it served.

This inconsistency with their ‘democratic’ tendencies resulted in the creation of the city manager system, in which paid, professional engineers ran the day-to-day affairs of city governments under guidelines established by elected city councils.  Ironically, San Diegans have recently ditched the city manager system—it was deemed responsible for the most recent financial crisis—in favor of a strong mayor form of government.

At the federal level we’ve seen repeated attempts to teach private sector efficiency into government starting with the Planning-Programming-Budgeting System (PPBS) in the Kennedy and Johnson years, Management By Objective (MBO) under Nixon, Zero-Based Budgeting (ZBB) in the Carter administration and the George W. Bush administration’s Program Assessment Rating Tool (PART). While the approaches and rhetoric vary, every administration going back over the past five decades has announced such a plan to great fanfare; the resulting operational issues (and there are always issues) become grist for the succeeding administration’s Next Great Plan.

The Obama administration, for instance, plans to achieve substantial savings by reversing the Bush-era trend toward no-bid and single-bidder contracts. Between 2002 and 2008, the amount spent on contracts not subject to full and open competition grew from $82 billion to $188 billion, an increase of 129 percent.

The point here is to illustrate that the business of reforming government, whether by imparting privatization techniques or executive re-organization, is always a growth industry. And for the aware individual or business organization, opportunities for profit abound. While there may be competition between groups for specific contracts, the fact is that this field provides endless opportunities—reforming government has become a commodity—and demand is always there.

Carl DeMaio was introduced into this field as an intern for the Congressional Institute, which had been established with member fees and corporate support to coordinate the House Republican Planning Conferences. The place was chock-a-block with lobbyists and party loyalists—the perfect place for an ambitious young man to make his mark.  Soon DeMaio, who’d already made an impression on Newt Gingrich as a Georgetown college freshman, was functioning with the title of Director of Planning and Training.

This was during the Clinton Presidency, a heady time for burgeoning conservative wonks and think tanks.  The GOP takeover of the House in 1994 presented them with the opportunity to pursue agendas within the federal government, including reducing the size of government and the privatization of Federal agencies. Ironically it was the fruit of then-Vice President Al Gore’s mandate to “re-invent government” that gave them the tools the GOP needed to take on the Federal bureaucracy.

The Government Performance and Results Act of 1993, ended up on Carl DeMaio’s desk because it had the words “strategic planning” on it, according to a recent article in the Voice of San Diego.  Soon he became the go-to guy on the law, which required federal agencies to set specific goals for their performance and measure those results. It was the perfect tool at the perfect time for the GOP leadership, who pushed hard for its implementation at every turn.  Reluctant bureaucrats were rewarded with subpoenas to appear before House committees who demanded results and heaped scorn freely, especially when reporters were present. Funding was threatened for those who failed to comply and rewards offered for those who did.

Within the government, and away from the political grandstanding, powerful forces of self-preservation took hold: the need for training and leadership within agencies to comply with the House committees became critical. For DeMaio, the opportunity was obvious.  So it was that in 1998 DeMaio, the go-to guy became DeMaio, the compliance guru.  He set up a conference in a Northern Virginia DoubleTree Hotel ballroom for a general overview of performance measures and training and attracted a decent crowd of federal workers. Soon thereafter, the Performance Institute was born, a private for-profit company initially financed with credit card debt.

DeMaio became a known commodity around Washington, both in and out of government.  So when the Bush administration came to power, he and his company were poised to succeed.  As Director of the Reason Public Policy Institute-21st Century Government Project, DeMaio was featured on C-SPAN upon release of his report containing guidance and recommendations about management structures for the incoming administration.

During the early years of the administration he peppered the administration with a steady stream of writings focused around the themes of “performance” and privatization. By the summer of 2002 he declared that “the federal competitive sourcing process is broken,”; The Performance Institute (his company) along with the Reason Public Policy Institute (his day job) even issued a joint 40 page report with 37 recommendations for overhauling federal competitive sourcing guidelines.

The beauty of this scenario was that as he was publicly prodding the administration for policy changes, he was also offering seminars and training courses for implementing those changes.  The Performance Institute was soon put on a special schedule of vendors that competed for Federal contracts against one another. Shortly thereafter the company landed a $2.5 million contract with the General Services Administration for management, organizational and business improvement service. While the long term contracts were good for stability, the big money was always in the short term stuff like seminars and conferences. Business was so good that the American Strategic Management Institute was founded as a spin-off aimed at offering similar efficiency and improvement solutions for private enterprise.

The formula for success during those years boiled down to this:

1. Issue slick research reports setting out the nature of the problem (Problem created if necessary)

2. Highly publicized campaigns to promoting specific proposals

3. Involvement in setting policy priorities for the Bush administration during the transition phase, giving him an insiders edge

4. Involvement in the restructuring policies within government agencies themselves, using the Performance Institute to re-train those government employees to perform to the new standards.

By 2007, when he sold the company to Thompson Publishing, DeMaio’s Performance Institute had grown in an $8.5 million enterprise. It was like shooting fish in a barrel.

This made Carl DeMaio a very wealthy young man and opened the door for him to fully focus on his next crusade — saving the City of San Diego from its fiscal crisis. We’ll look at his efforts in our fair city, and the ideologies that are behind them in the next episode of this saga.