Center report finds $362 billion in no-bid contracts at the Pentagon since 1998

Introduction

No-bid contracts have accounted for more than 40 percent of Pentagon contracting since 1998, the Center for Public Integrity revealed today in an exhaustive report on Defense Department contracting.

Over the past six years, the Pentagon has awarded some $362 billion to companies without competitive bidding. In fact, of the top ten contractors, only one, SAIC, won more than half its dollars through full and open competition. All the others won a majority of their dollars through sole source and other no-bid contracts.

The report, which covers the period 1998-2003, also documents the extent to which the Defense Department has become dependent on outside contractors, finding that every annual increase in defense spending has been matched by an equal increase in contracting. Fully half the Defense Department budget—some $900 billion since 1998—has gone out the door to contractors rather than paying for direct costs such as payrolls for the uniformed armed services.

And yet the Pentagon lacks the most basic information on its service contract workforce, including the number of contract employees it uses. When, in 2002, the Secretary of the Army declared that the Army lacked “visibility” over its service contract workforce, he called for its collection. By mid-2004 the data gathering had still not begun. The Defense Department, which during the 1990s reduced by almost half the number of officials who oversee procurements, ended up hiring firms like Booz Allen Hamilton, Jefferson Solutions and the Rand Corporation to help manage its contractors.

Some 737 contractors won $100 million or more in contracts during the six year period, the study found. Many were generous political donors, and President George W. Bush was by far the top beneficiary of their giving. Bush has received $5.4 million from those top contractors since 1998. Sen. John Kerry, his Democratic opponent, collected just under $2 million—the great majority of that coming in 2004.

Among the major findings of this unprecedented study:

• 80 percent of all defense contracting dollars were won by 1 percent of defense contractors (737 out of nearly 100,000 contractors).
• The 50 biggest contractors got more than half of all the money; the top ten got 38 percent.
• Lockheed Martin topped the list at $94 billion over six years; Boeing was second with $81 billion; Raytheon was third (just under $40 billion); then Northrop Grumman and General Dynamics with nearly $34 billion each. Those totals do not include the extra billions these companies collected as partners in joint ventures.
• One-third of the dollars awarded to the top 737 contractors came in cost-plus contracts – three times the proportion awarded to smaller contractors.
• Nearly 100 of the top 737 contractors are foreign entities.
• The 10 biggest defense contractors all spent heavily on both campaign contributions (a combined $35.7 million) and lobbying ($414.6 million). But the return on their investment was staggering: $340 billion in contracts.
• Despite winning at least $100 million in Pentagon contracts over the past six years, some 189 of the top contractors were classified as small businesses. Some companies continued to win small business contracting dollars even after they’d been acquired by much larger companies.
• While the Pentagon still buys plenty of expensive hardware, it now spends more money for services than products, a dramatic turnaround from 20 years ago, when almost two-thirds of the Pentagon’s contracting budget went for products. By 2003, some 56 percent of Defense Department contracts paid for services rather than goods.
• Defense Department contracting records are not always accurate: the ultimate corporate parent was misidentified in more than $35 billion worth of contracts that the Center examined.

In all, the Center’s study reviewed more than 2.2 million contract actions over the past six years. Every company collecting more than $100 million in contracts is profiled in detail on the Center’s Web site, with breakdowns of each company’s total contract dollars, the types of contracts they won, the competition they faced, a list of their key subsidiaries, analysis of their lobbying and campaign contributions, and a list of the chief products and services they sold to the Pentagon.

The massive study also gives an in-depth accounting of how contracts are awarded, how many and which kinds of contracts are competitively bid, and the discrepancy between contracts for the largest contractors and all the others. The report also breaks down the various categories of the Pentagon procurement budget, enumerates lobbying expenses and discusses the way that some companies use the small business loopholes in contracting procedures.

This is the Center’s second major report in less than a year examining the Pentagon contracting process. Last October the Center published the first ever report on contractors for Iraq and Afghanistan.