Major defense contractors reap billions in no-bid contracts, report finds

By Chris Strohm

Much of the approximately $900 billion the Defense Department has spent on contracts since 1998 has been issued without competitive bidding and effective oversight, according to a new report on Pentagon contracting released Wednesday.

In the report, the Center for Public Integrity found that more than $360 billion worth of contracts - about 44 percent of the total - were awarded without full and open competition.

"Fact is, from running interrogations at Abu Ghraib to writing the president's defense budget, contractors are playing an increasingly significant role, and the Pentagon management of these outside vendors is uneven and inadequate," said Charles Lewis, the center's executive director. "These issues need to be looked at more carefully by the Congress and the public."

The Center for Public Integrity is a nonprofit, nonpartisan organization that conducts investigative research on public policy issues.

The center reviewed more than 2.2 million contracts for 737 companies over the past six years. Topping the list of companies was Lockheed Martin with $94 billion in contracts, Boeing with almost $82 billion, Raytheon with a little less than $40 billion, and Northrop Grumman and General Dynamics with nearly $34 billion each.

The five biggest companies received about $283 billion in contracts during the period in question, which represents almost a third of all defense contracts and 15 percent of all defense spending. The report profiles each company, listing the types of contracts received, the competition faced, key subsidiaries, an analysis of lobbying and campaign contributions, and an inventory of products and services sold to the Pentagon.

The report documents how much the Defense Department spent in several specific areas. The Pentagon's electric bill, for instance, came to $3.7 billion over the six-year period. The department also paid $3.8 billion for fuel oil, $2.8 billion for dairy foods and eggs, $2.6 billion for family housing facilities, and $2.3 billion for custodial and janitorial services.

Additionally, the Pentagon spent $219 million on expert witnesses, or about $3 million a month. The Pentagon even listed a "miscellaneous items" category, through which about $10 billion was contracted over the past six years, according to the report.

Pentagon spokesman Glenn Flood said the department's staff is reviewing the report. According to Flood, Defense conducts about 11 million contract actions each year. He said the individual military services make their own decisions about what kind of contracts to issue, and sometimes award no-bid contracts based on special circumstances.

"Overall, we're doing a pretty good job of monitoring the contracts we award," Flood said. "This is not anything new. These types of accusations have been made in the past and we've started to put things in place to address them."

Larry Makinson, project manager for the report, said the study shows how much money the Pentagon authorized for prime contracts but does not include joint ventures.

The number of no-bid and cost-plus contracts awarded by the Pentagon in the past 6 years has increased proportionally to Defense budgets, the report also shows, indicating that, as the Pentagon received more money, it increased contracting.

Makinson said the Pentagon sometimes has legitimate reasons to award no-bid or cost-plus contracts, especially in circumstances where only one contractor is qualified for a job. But he said more oversight is needed.

The report noted that the Pentagon reduced the number of officials who are responsible for procurement oversight by almost half in the 1990s. And, in order to track contractors, the Pentagon hired companies such as Booz Allen Hamilton and Jefferson Solutions. Additionally, the RAND Corp. has been been hired to analyze some Pentagon contracting practices and the effectiveness of certain types of contracts.

"There's nothing like eyeballs on the contracts, and there needs to be a lot more of them," Makinson said.

In some cases, contracting information was classified. For example, since 1998, about $8 billion went to a contractor the Pentagon would not name and for services the Pentagon would not identify, Makinson said.

The report also found that contracts for services have steadily outpaced contracts for products and hardware since 1992.

"Prior to 1992, procurement of products like tanks, bullets and boots made up the majority of defense contracting," the report stated. "However, money spent on contracting services like maintenance and meal preparation has taken an increasing share of defense spending over the last two decades. In 2003, services accounted for 56 percent of all defense contracting."

Cathy Garman, senior vice president for public policy for the Contract Services Association of America, said private companies are well-suited to perform functions such as meal preparation and information technology support, which allows the military to focus on its primary missions.

"You have the contractor helping in non-warfighting capacities," she said. "That just seems to make a lot of sense to us and our members who provide those services."

Several companies profiled in the study are members of CSA.

"There are very strict laws and regulations for sole source contracts. I would presume that the contracting office jumped through the appropriate hoops," Garman added. "Anybody that is a defense contractor is certainly held accountable, and they are audited heavily."

CSA is reviewing service contracting within the Defense Department and civilian agencies to determine if improvements can be made. Results of the review should be out early next year.

"Services have not had a lot of focus provided on them to make sure that we have all the right rules and regulations in place," Garman said, "and there may be some areas where we might need improvements."