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GAO Details a Bloated Budget for Government Contracts

By Joe Davidson

Washington Post

January 23, 2009

Federal contracting dollars are jumping like popcorn on the stove.

As a group, federal contractors are quickly getting obese at taxpayers' expense. Uncle Sam spent "an astounding $532 billion last (fiscal) year, shattering the previous year's record of $465 billion" on contracts, Sen. Joseph I. Lieberman (I-Conn.), chairman of the Senate Homeland Security and Governmental Affairs Committee, said yesterday.

He called federal contracting "a black hole for taxpayer dollars" as he released the Government Accountability Office's latest "high-risk" report on Capitol Hill. This biennial update covers programs and policies that the agency says "are at high risk for waste, fraud, abuse and mismanagement or those in need of significant transformation."

Government-wide purchases of goods and services more than doubled during the Bush administration, from $222 billion in 2001, according to Federal Procurement Data System information supplied by the committee. By comparison, Uncle Sam spent $13 billion on contracts in 1978.

During the campaign, President Obama promised to "save billions of dollars by cutting private contractors and improving management of the hundreds of billions of dollars our government spends on private contracts."

The GAO gives him tips on improving contract management, which has not kept up with the explosion in spending.

The Pentagon is the big boy on the contract spending block. It obligated more than $315 billion in fiscal 2007, according to the report. But it could be wasting a chunk of that money because of poor contract management, the GAO found.

"The lack of well-defined requirements, the use of ill-suited business arrangements, and the lack of an adequate number of trained acquisition and contract oversight personnel contribute to unmet expectations and continue to place the department at risk of potentially paying more than necessary," the report said.

This isn't a new problem. The Pentagon's contract management has been on the GAO high-risk list since 1992.

In the Pentagon, these issues can have consequences that go beyond the bottom line. With men and women at war, lives are at stake.

"DOD also faces challenges in supporting operations in Iraq and Afghanistan," the GAO found. It cited a 2007 Army-commissioned study that concluded the Army lacked the military and civilian acquisition staff to support expeditionary or peacetime missions. "Similarly, in 2008, GAO reported that the lack of qualified personnel hindered oversight of contracts to maintain military equipment in Kuwait and provide linguistic services in Iraq and questioned whether DOD could sustain increased oversight of its private security providers," the report said.

The GAO has a list of suggestions for the Pentagon, including adopting "a more proactive approach" to managing contracts and ensuring that the department's "acquisition workforce is adequately sized, trained and equipped to meet the department's needs."

Acquisition problems at the Energy Department also have earned the agency a spot on the high-risk list. The department spends almost all of its energy, and about 90 percent of its budget, on contracts.

With all that practice dealing with contractors, you'd think the agency could get it right. But the department has been on the high-risk list since it was created in 1990. The GAO says "DOE's record of inadequate management and oversight of its contractors has resulted in the high-risk designation for contract management."

Like the Pentagon, the Energy Department is working to improve contract management. It has progressed over the past two years, leading the GAO to narrow its high-risk designation to the National Nuclear Security Administration and the Office of Environmental Management, which account for most of the department's budget.

Yet, the GAO says the department continues to have significant problems. Twelve major construction projects "exceeded original cost or schedule estimates, principally because of ineffective DOE project oversight and poor contractor management," according to the report. "Cost increases on these projects ranged from $79 million to $7.9 billion, with schedule delays ranging from nine months to more than 11 years."

You can find the report at http://GAO.gov.

Contact Joe Davidson at federaldiary@washpost.com.