Government contracting growth under fire

Watchdogs call for better oversight of private companies

February 04, 2007|By New York Times News Service

WASHINGTON -- In June, officials at the General Services Administration were short of people to process cases of incompetence and fraud by federal contractors, and they responded with what has become the government's reflexive answer to almost every problem.

They hired another contractor.

It did not matter that the company they chose, CACI International, had recently avoided a suspension from federal contracting; or that the work, delving into investigative files on other contractors, appeared to pose a conflict of interest; or that each person supplied by the company would cost taxpayers $104 an hour. Six CACI workers soon joined hundreds of other private-sector workers at the GSA, the government's management agency.

Without a public debate or formal policy decision, contractors have become a virtual fourth branch of government. On the rise for decades, spending on federal contracts has soared during the Bush administration, to about $400 billion last year from $207 billion in 2000, fueled by the war in Iraq, domestic security and Hurricane Katrina.

Contractors still build ships and satellites, but they also collect income taxes and work up agency budgets, fly pilotless spy aircraft and take the minutes at policy meetings on the war. They sit next to federal employees at nearly every agency; far more people work under contracts than are directly employed by the government. Even the government's online database for tracking contracts, the Federal Procurement Data System, has been outsourced.

The contracting explosion raises questions about propriety, cost and accountability that have long troubled government watchdogs and are coming under scrutiny from the new Democratic majority in Congress.

While flagrant cases of fraud and waste make headlines, the concerns go far beyond outright wrongdoing. Among them:

Competition, intended to produce savings, appears to have sharply eroded. An analysis by The New York Times shows that fewer than half of all "contract actions" - new contracts and payments against existing contracts - are now subject to full and open competition. Just 48 percent were competitive in 2005, down from 79 percent in 2001.

The most secret and politically delicate government jobs, like intelligence collection and budget preparation, are increasingly contracted out, despite regulations forbidding the outsourcing of "inherently governmental" work. Scott Amey, general counsel at the Project on Government Oversight, a watchdog group, said that allowing CACI workers to review other contractors captured in microcosm "a government that's run by corporations."

Agencies are crippled in their ability to seek low prices, supervise contractors and intervene when work goes off course because the number of government workers overseeing contracts has remained level as spending has shot up.

The most successful contractors have mastered the skill of selling to Uncle Sam. The top 20 service contractors have spent nearly $300 million since 2000 on lobbying and have donated $23 million to political campaigns. "We've created huge behemoths that are doing 90 or 95 percent of their business with the government," said Peter W. Singer, who wrote a book on military outsourcing. The biggest federal contractor, Lockheed Martin, which has spent $53 million on lobbying since 2000, gets more federal money each year than the Justice or Energy departments.

Contracting almost always leads to less public scrutiny, as government programs are hidden behind closed corporate doors. Members of Congress have sought unsuccessfully for two years to get the Army to explain the contracts for Blackwater USA security officers in Iraq, which involved several costly layers of subcontractors.

The contracting surge has raised bipartisan alarms. A just-completed study by experts appointed by the White House and Congress, the Acquisition Advisory Panel, found that the trend "poses a threat to the government's long-term ability to perform its mission" and could "undermine the integrity of the government's decision-making."

The House Committee on Oversight and Government Reform begins a series of investigative hearings Tuesday focusing on contracts in Iraq and at the Department of Homeland Security.

"Billions of dollars are being squandered, and the taxpayer is being taken to the cleaners," said the new Democratic chairman, Rep. Henry A. Waxman of California, who got an "F" rating last year from the Contract Services Association, an industry coalition.

David M. Walker, who as U.S. comptroller-general leads the Government Accountability Office, has urged the new Congress to take a hard look at the proper limits of contracting. "There's something civil servants have that the private sector doesn't," Walker said in an interview. "And that is ... the duty of loyalty to the collective best interest of all rather than the interest of a few. Companies have duties of loyalty to their shareholders, not to the country."

Even the most outspoken critics acknowledge that the government cannot operate without contractors, which provide the surge capacity to handle crises without expanding the permanent bureaucracy. Contractors provide specialized skills the government does not have.

Stan Soloway, president of the Professional Services Council, which represents government contractors, acknowledged too little competition in some areas. But he asserted that critics had exaggerated the contracting problems.

Soloway argues that the contracting boom has resulted from the collision of a high-technology economy with an aging government work force - twice as many employees are over 55 as under 30. To function, Soloway said, the government must now turn to younger, skilled personnel in the private sector, a phenomenon likely to grow.

"This is the new face of government," Soloway said. "This isn't companies gouging the government. This is the marketplace."

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