More than 40 percent of all Pentagon contracts, a total of $362-billion, have been awarded on a no-bid basis over the last six years, according to a report issued Wednesday. It showed that the biggest companies won the bulk of their contracts without going through a competitive process.
The nation's largest military contractor, Lockheed Martin Corp., received the most Pentagon business on a noncompetitive basis. Seventy-four percent of Lockheed's $94-billion in Pentagon contracts since 1998 were awarded without competition, according to a report from the Center for Public Integrity, a Washington nonprofit group that studied 2.2-million Pentagon contracts totaling $900-billion.
"Competitive bidding at the Pentagon happens less often than we think, and the no-bid controversy surrounding Halliburton in Iraq actually is, unfortunately, not an aberration," said Charles Lewis, the center's executive director. Lewis' organization was one of the first to study contracts won by Halliburton and other companies in Iraq and Afghanistan. Wednesday's report grew out of that earlier work.
At Boeing, the nation's second-largest contractor, 60 percent of the $81-billion in Pentagon contracts since 1998 were awarded without competition, as were 67 percent at the third-largest contractor, Raytheon Co., which received $39-billion in contracts over the same period. Of the nation's top 10 military contractors, nine won more than half of their Pentagon contracts through noncompetitive awards.
Thomas C. Greer, a Lockheed spokesman, said that because of "the substantial investment and lengthy development cycles followed by limited annual production quantities," it is often not cost-effective for the Pentagon to have competitive bidding. Greer added, "It is important to note that sole source awards still mandate contractor performance."
In addition, the report said that because of military industry consolidation, 80 percent of all Pentagon contracting dollars were won by the top 1 percent of all contractors. It found that the Pentagon has become increasingly dependent on military contractors for work that had previously been done by soldiers and Pentagon civilian employees.
Currently, for instance, half of the defense budget is outsourced to contractors, while oversight of these contracts has declined, the report said. The Pentagon has reduced the number of government officials who supervise contractors, instead hiring contractors themselves to oversee and manage others, according to the report, which said that the Pentagon hired a contractor to determine how many contractors it had employed.
"There is an even more fundamental problem underscoring our entire investigation: the stunning lack of accountability," said Lewis, who added, "This is a Keystone Kop situation where no one is monitoring the monitors. This is a very serious situation and the Pentagon is treating it like a hair in the soup."
Glenn Flood, a Pentagon spokesman, said that the center's "accusations have been made before." Flood added that much of the Pentagon's business is so specialized, it is impossible to find more than one supplier, and industry consolidation has accelerated the noncompetitive trend.
"Where do you go if you want need a sub or a joint strike fighter?" said Flood. "The mergers of the 1980s have taken their toll. You have only five or six major contractors. Where do you go?"
But the center's report said that the great growth in outsourcing is taking place in providing services, not in the making of weapon systems. This includes everything from interrogations at Abu Ghraib prison in Baghdad to helping write the Bush administration's defense budget and devise strategic plans. At the same time, military contractors have become skilled at Washington politics and often provide employment for Pentagon officials after they leave the government.
The leading recipient of campaign donations from military contractors has been President Bush, who has received $5.4-million from the industry since 1998. Military contractors, however, began stepping up contributions to Sen. John Kerry after he won the Iowa caucuses. Before the caucuses Kerry had received $332,000 from the industry, and he has received just under $2-million since then. The Republican Party has received $62-million from the industry since 1998, compared with $24-million for the Democratic Party, according to the report.
Richard Aboulafia, a military industry analyst at the Teal Group, a consulting firm in Fairfax, Va., said that Pentagon outsourcing is often neither the cheapest nor the most efficient approach.
"I think it is time for a comprehensive rethink of this trend," said Aboulafia. "A lot of it is done to produce short-term numbers that reduce the size of government and that always is pleasing to voters. But I'm not sure it's the best strategic decision. There's a terrific emphasis on cutting the numbers, and to do that you need outsourcing to make the numbers look good. But how much of that is just window dressing?"
THE BIG THREE
Companies that got the most no-bid Pentagon contracts over the last six years:
LOCKHEED MARTIN CORP.: 74 percent of its $94-billion in contracts.
BOEING: 60 percent of its $81-billion in contracts.
RAYTHEON CO.: 67 percent of its $39-billion in contracts.