Contractors Cozy Up to Feds in Explosion of Outsourcing

February 6th, 2007 - by admin

Scott Shane, Ron Nixon / New York Times – 2007-02-06 23:37:05

WASHINGTON (February 4, 2007) — 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 itself 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 federal 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, but also by a philosophy that encourages outsourcing almost everything government does.

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 (and is famously difficult to use).

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

Government Of, By, and For the Contractors
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 allowing CACI workers to review other contractors captured in microcosm “a government that’s run by corporations.”

• Agencies are hobbled 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. One federal contractor explained candidly in a conference call with industry analysts last May that “one of the side benefits of the contracting officers being so overwhelmed” is that existing contracts are extended rather than put up for new competitive bidding.

• The most successful contractors are not necessarily those doing the best work, but those who have mastered the special 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 Singer, who wrote a book on military outsourcing. “They’re not really companies, they’re quasi-agencies.”

The biggest federal contractor, Lockheed Martin Corp., which has spent $53 million on lobbying and $6 million on donations 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.

Companies, unlike agencies, are not subject to the Freedom of Information Act. 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, whose new Democratic chairman, Rep. Henry Waxman of Los Angeles, added the word “oversight” to signal his intentions, 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 Waxman, who got an “F” rating last year from the Contract Services Association, an industry coalition.

The man he succeeded as chairman, Rep. Thomas Davis, R-Va., earned an “A.”

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.

And it is no secret that some government executives favor contractors because they find the federal bureaucracy slow, inflexible or incompetent.

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

“I don’t happen to think the system is fundamentally broken,” he said. “It’s remarkable how well it works, given the dollar volume.”

Soloway argues that the contracting boom has resulted from the collision of a high-technology economy with an aging government workforce — twice as many employees are over 55 as under 30. To function, Soloway said, the government must turn to younger skilled personnel in the private sector, a phenomenon likely to grow when what demographers call a “retirement tsunami” occurs over the next decade.

“This is the new face of government,” Soloway said. “This isn’t companies gouging the government. This is the marketplace.”
But Paul Light of New York University, who has long tracked the hidden contractor workforce to assess what he calls the “true size of government,” says the shift to contractors is driven in part by federal personnel ceilings. He calls such ceilings a “sleight of hand” intended to allow successive administrations to brag about cutting the federal workforce.

Light said the government has made no effort to count contractors and no assessment of the true costs and benefits.
“We have no data to show that contractors are actually more efficient than the government,” he said.

Meanwhile, he said, a potent coalition keeps contracting growing: the companies, their lobbyists and supporters in Congress, and many government managers, who do not mind building ties to contractors who may hire them someday.
“All the players with any power like it,” Light said.

That is evident wherever in Washington contractors gather to scout new opportunities.

There is no target richer than the Homeland Security Department, whose Web site, in a section called “Open for Business,” displays hundreds of open contracts, including “Working with selected cities to develop and exercise their catastrophic plans” ($500,000 to $1 million) and “Conduct studies and analyses, systems engineering, or provide laboratory services to various organizations to support the DHS mission” ($20 million to $50 million).

$207 billion spending on federal contracts in 2000

$400 billion spending on federal contracts in 2006

©2007 San Francisco Chronicle

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