Can Government Be Run Like a Business?

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A promise to run government like a business can mean two different things: delivering a public service at lower cost, or deciding whether the public should get the service at all. Business methods can help with the first, and federal purchasing rules encourage sound business judgment.

The second is a different kind of decision when the law requires the service. The U.S. Postal Service must provide efficient service to all communities, and a small post office cannot be closed solely because it loses money. Changing a duty like that can require lawmakers to change the law, rather than managers to improve the operation.

Business methods can help, but they do not choose the mission

The Federal Acquisition Regulation (FAR), the federal government’s purchasing rules, calls for timely best value while maintaining public trust and fulfilling public-policy objectives. Its guiding principles explicitly encourage initiative and sound business judgment, within legal and regulatory limits. Cost control and public service are therefore compatible goals, even though they do not always point to the same decision.

The Constitution’s preamble identifies purposes including justice, common defense, general welfare and liberty. A public program’s financial accounts cannot, by themselves, show whether it has fulfilled those purposes. For a service required by law, a revenue shortfall raises a financing and management problem; it does not automatically erase the obligation.

Businesses are not all alike, either, as one state’s corporate law shows. Delaware corporate law permits corporations to conduct or promote any lawful business or purpose, subject to other state-law limits. Delaware’s public benefit corporations are for-profit companies whose managers must balance shareholders’ financial interests with the interests of affected people and the public benefits identified in their corporate charter. In Delaware, at least, not every business has the same legal instruction to maximize immediate profit.

And some parts of government are set up to operate like businesses. The Congressional Research Service, which provides analysis for Congress, describes a government corporation as a federal agency, established by Congress for a public purpose, that provides a market-oriented product or service and is intended to earn revenue meeting or approximating its expenditures. The useful dividing line is not whether an organization sells something or keeps accounts, but what obligations it has and who may change them.

Who can change what an agency does?

Under Delaware law, corporate business and affairs generally are managed by or under a board of directors, subject to the statute and the corporation’s governing document. For the federal government, the Constitution vests its granted legislative powers in Congress and requires the president to ensure that laws are faithfully executed.

Congressional authorizations establish or define government activities, while appropriations finance them, as the Congressional Research Service explains. Improving an agency’s scheduling or purchasing may fit within managers’ existing authority; abolishing a task set by statute requires identifying what law or other authority must change. The label “businesslike” does not supply that authority.

The Constitution permits money to be drawn from the Treasury only pursuant to appropriations made by law. So a federal manager must ask both whether an activity is authorized and whether the money can legally be used for it.

Under the Tenth Amendment, powers the Constitution does not give the federal government, and does not deny to the states, belong to the states or the people. Federal examples should not be treated as a single management code for every city, county or state; a reform proposal has to work from the rules of the government involved.

A public budget is not a company’s profit statement

Treasury defines a budget deficit as spending exceeding revenue during a defined period, and a surplus as revenue exceeding spending. To pay for a deficit, the federal government borrows by selling Treasury securities; the national debt is the accumulation of that borrowing plus the interest owed on it. Those measures describe public financing; neither one is a direct score for the quality of a particular agency’s work.

A surplus could coexist with a poorly delivered service, just as a deficit could coexist with an effective one. That is a reason to judge financing and service results separately before deciding what success means, not a reason to ignore costs.

Federal appropriations generally may be used only for the purposes for which they were made, unless another law provides otherwise. The Antideficiency Act generally bars federal officials from spending or committing more than the amount available in an appropriation or fund, and from committing the government to pay money before an appropriation is made unless authorized by law. Saving money in one account does not automatically create permission to spend it on another purpose.

The practical financial test has several parts: Was the spending lawful, did it deliver the intended result, and could that result have been achieved at lower cost?

Why some government decisions take longer

Some procedures take longer because they protect people’s rights. The Fifth Amendment forbids depriving a person of life, liberty or property without due process of law. Where that protection applies, saving time is not reason enough to skip it.

When federal agencies make rules through notice and comment, they must give interested people a chance to submit data, views or arguments, consider the relevant submissions and explain the basis and purpose of the rule they adopt. Unless another statute requires notice or a hearing, that process does not apply to interpretive rules, policy statements and rules of agency organization or procedure, or when the agency finds, and states its reasons, that notice and public participation would be impracticable, unnecessary or contrary to the public interest. Public participation can be part of the required decision, rather than an optional customer survey.

The Freedom of Information Act gives the public a right to request federal agency records, subject to exemptions protecting interests such as privacy, national security and law enforcement. Federal purchasing principles also require integrity, fairness and openness.

None of this establishes that every government delay is necessary. The purchasing rules expressly call for minimizing administrative operating costs and providing products or services on a timely basis. A useful reform identifies the step that causes delay, what it protects, and whether the same protection can be achieved with less effort.

The Revolutionary FAR Overhaul, led by the Office of Federal Procurement Policy and the Federal Acquisition Regulatory Council, two federal purchasing bodies, aims to rewrite the FAR in plain language and remove most rules that are not based in statute. On July 1, 2026, the council published updated overhaul guidance for types of contracts and solicitation provisions and contract clauses. Acquisition.gov lists the overhauled parts and agency deviations, so the version in force can differ from one agency to another. The initiative’s stated goal of better results is a reason to measure its performance, not proof that the goal has been achieved.

Measuring results without a profit target

Federal performance law requires the agencies it covers to publish a performance plan each year that covers every program activity in their budgets and sets goals for the year the plan is submitted and the next fiscal year. The law calls for a balanced set of indicators, including customer service, efficiency, output and outcomes as appropriate, and requires a way to compare actual results with goals. An output is the work delivered; an outcome asks whether that work produced the intended result. Counting completed applications, for example, would not by itself establish that the right people received a service. Agencies must also explain how they verify the accuracy and reliability of the performance data, identify its limitations and compensate for those limitations when needed.

Agencies must publish performance updates on their websites no later than 150 days after each fiscal year ends, comparing actual achievement with their goals, with more frequent updates when the data are useful and the reporting burden is reasonable. When a goal is missed, the report must explain why and give plans and schedules for achieving it; if the goal is impractical or infeasible, it must also explain why and recommend action. That gives a reader something more useful than either a vague claim of efficiency or a promise that every cut is a saving.

The Government Accountability Office, which reports to Congress on federal programs, said in its 2026 annual report on duplication, overlap and fragmentation, issued on May 12, 2026, that congressional and agency actions responding to its work since 2011 had produced about $774.3 billion in financial benefits. The same report estimated another $100 billion or more in potential benefits from fully implementing remaining open recommendations and matters for Congress.

The Office of Management and Budget is an agency in the Executive Office of the President that helps prepare and manage the federal budget. One example in the report is the Office of Management and Budget’s category management initiative, which directed agencies to buy more like a single enterprise, beginning in fiscal year 2017. The same report lists approximately $48.8 billion in savings from that initiative for fiscal years 2017 through 2021, according to Office of Management and Budget reporting. Pooling purchasing is a recognizable business method that can be examined through a reported result, rather than a slogan.

The Government Accountability Office cautions that its benefit totals are rough estimates assembled from different sources, periods and methods, and that potential benefits depend on whether, how and when actions are taken. Reported savings deserve scrutiny about their baseline, timing and effect on the service, even when the idea behind them sounds sensible.

Contracting out work does not contract out responsibility

Federal contracting rules generally require full and open competition, subject to limited exceptions. Competition can be a tool for comparing delivery options, but a bid price cannot settle what the government is legally required to provide.

The purchasing rules define an inherently governmental function as one so closely related to the public interest that government employees must perform it, including discretion in applying government authority or making value judgments for government. Functions treated as inherently governmental include controlling prosecutions, determining agency policy and deciding federal program priorities for budget requests. A contractor can be part of delivery without becoming the public decision-maker.

Other contracted services can approach inherently governmental work depending on the function, how the contractor performs it or how the government administers the contract. Contracting officers remain responsible for effective contracting, compliance with contract terms and safeguarding U.S. interests. An outsourcing proposal therefore needs to account for supervision as well as the contractor’s price.

The Postal Service shows both sides of the bargain

The U.S. Postal Service can enter contracts, keep its own accounts and acquire property under its governing statute. Federal postal law also requires prompt, reliable and efficient services in all areas and postal services to all communities. Commercial powers and a public-service mandate exist in the same institution.

Postal law generally requires delivery at least six days a week, with exceptions for weeks containing federal holidays, emergencies and areas where the Postal Service already had a policy of delivering on fewer days when the Postal Service Reform Act of 2022 was enacted. It also requires effective and regular service to rural areas, communities and small towns where post offices are not self-sustaining. The same law says no small post office may be closed solely for operating at a deficit.

The Government Accountability Office explains that the Postal Service was set up in 1970 as an independent establishment of the executive branch and was created to be financially self-sufficient while meeting costly universal-service and other mandates. Better routes, purchasing or processes might reduce the cost of meeting those duties; a proposal to reduce the duties makes a different choice. The debate then concerns what service the public should receive and how to finance it, as well as how well managers do their jobs.

Ask what a promised business reform actually changes: the method of delivery, the service promised, the public’s rights, or who pays. Then ask who has the authority to make that change and what evidence would establish that it worked.