Meanwhile, a much quieter revolution was brewing: The federal government outsourced more and more of its functions to private contractors, a shift driven partly by the free-market ideology of the Reagan era and partly by necessity. There were now too many tasks for agencies to do by themselves. As Paul C. Light of New York University has shown, the "federal government" we all know -- the superstructure of agencies and federal employees -- has shrunk while its actual size, including contract and grant employees and projects, is larger than ever.
Here's the rub: Outsourcing eliminates incentives to perform well and shields contractors from accountability.
From The Can't-Do Nation.
Link to Paul C. Light's work: