Private enterprise enjoys a widespread reputation that it can do things more efficiently and at a lower cost than government. There are recognized exceptions, of course, like Medicare (at least until they added the privately run Plan D for prescription drugs) and, of course, the armed forces.

But the idea is nearly settled popularly that private business can do a better job of running the railroads, provide health service, produce and distribute electric power and run telephone systems. In many cases, this has been shown to be true. Still, there are those who think that it ain’t necessarily so. And a good example has just cropped up. Pentagon auditors questioned $108 million of Halliburton’s $875 million proposal for importing fuel for Iraq’s domestic private and commercial use.

Part of the discrepancy was in Halliburton’s bill for transportation charges. The auditors found Halliburton’s backup data inadequate, so they compared Halliburton’s pricing with that of the Pentagon’s own procurement agency, the Defense Energy Support Center. Halliburton said it had to pay 40 percent more per gallon than the Defense Department had been paying to the same Kuwaiti trucking company.

A Columbia University economist, Moshe Adler, analyzed the matter in the Los Angeles Times and had an explanation of why the Pentagon’s agency drove a better bargain than Halliburton did: It was a question of incentives. Halliburton had a “cost-plus” contract with the U.S. Army. That is, the contractor is reimbursed for all costs plus a fee that is a percentage of the costs.

Mr. Adler went on: “Even though the contractor’s job is to serve the American taxpayer on such contracts, whenever it can inflate its costs, it will. The paycheck of a government employee, however, is the same no matter what he does. Therefore there is no conflict between his personal interest and his duty to the taxpayer.”

Unfortunately for the American taxpayer, the Army decided to pay Halliburton nearly the entire overall $2.41 billion negotiated, no-bid contract, although the Pentagon auditors had questioned more than $250 million of the charges.

Still, for all the suspicions and technicalities, the incident presents a case where outsourcing fell short and the government drove a better bargain than a private firm. At the very least, the way the government writes contracts with private firms ought to be reviewed.