Private Contracts Take Beating in Report

Times Staff Writer

The Bush administration has greatly expanded the use of contracts with private companies to provide public goods and services even as the number of government employees has increased, a congressional report has found.

But the administration’s tilt toward doing business with private companies has failed to bring promised savings and has been characterized by “significant waste, fraud, abuse and mismanagement,” according to the report released this week by Rep. Henry A. Waxman of Los Angeles, the top Democrat on the House Government Reform Committee.

Of particular concern, the report said, were contracts related to domestic security, the Iraq war and Hurricane Katrina recovery.

Waxman’s report is described as the first comprehensive assessment of contracting under the Bush administration, which had vowed upon taking office in January 2001 to provide services more efficiently while reducing the size of government.


It reveals an 86% increase in contracts with private businesses, from $203 billion in 2000 to $377.5 billion a year in 2005 -- a growth rate nearly double that of federal spending as a whole.

At the same time, federal payrolls also have grown: The government now has about 1,874,000 civilian employees, up from 1,738,000 five years ago.

“We’ve never seen [private] contracting on the scale that we’re seeing now,” Waxman said. “Nearly 40 cents of every dollar appropriated goes to private contractors, which is a record level.”

Yet, Waxman said, his biggest concern is not the growth in contracts, but the abuse of them.

Poor contract planning and weak oversight, the report said, have led to government overspending and corruption by companies that have padded their invoices, charged for services not provided and received award fees for jobs that were completed late.

“Taxpayers should be outraged at the billions of dollars that have been wasted,” said Waxman. “And the Bush administration isn’t learning from its mistakes, it’s repeating them.”

In many cases, the report found, the types and terms of the contracts have made them ripe for abuse:

* Spending on cost-plus contracts -- under which the government bears the risk of cost overruns -- has increased from $62 billion in 2000 to $110 billion in 2005.

* Spending on no-bid contracts -- those granted without competition from other companies -- rose 110%, to $97.8 billion, during the same period.

* Spending on monopoly contracts, which allow the government to buy goods and services without defining them in advance, nearly doubled, to $15.3 billion.

The report comes as the federal government’s handling of contracts is increasingly in question. On Tuesday, the government’s onetime chief procurement officer, David H. Safavian, was convicted of making false statements and obstruction of justice for concealing his relationship with disgraced former GOP lobbyist Jack Abramoff. The jury’s decision in Safavian’s case, Waxman said, “underscores the findings of the new report.”

“The corruption and inappropriate influence of special interests in government contracting has gone virtually unchecked and erodes the public trust in the federal government,” he said.

Also on Tuesday, the Senate rejected -- for the third time -- a proposal to form a special committee to investigate contracting improprieties in war zones.

“It’s scandalous that the GOP Senate refuses to look into the hundreds of billions of dollars spent in the war in Iraq to see that the funds are carefully and honestly spent,” Sen. Edward M. Kennedy (D-Mass.) said in a written statement after the vote.

Kennedy’s comments echoed the concerns outlined in Waxman’s report, which also identifies several smaller pieces of $745.5 billion in federal contracts awarded between 2000 and 2005 that the auditors deemed wasteful, fraudulent or mismanaged.

In 2003, for example, the Border Patrol was found to have paid $20 million for security camera systems that malfunctioned or were never installed. That same year, the Transportation Security Administration awarded Boeing Co. $44 million for installing and maintaining airport luggage screening equipment -- a job that was never evaluated.

In 2005, the Federal Emergency Management Agency bought $915 million worth of temporary housing and offices for Katrina victims and relief workers. More than a third of them have never been used.

“The lesson of this report is that there’s a massive amount of spending, and yet we very clearly aren’t spending it smartly,” said Peter Singer, an analyst with the Brookings Institution, a centrist public policy center in Washington. “When the overspending is not just in the billions but in the hundreds of billions -- that’s worrisome.”

A spokesman for the White House Office of Management and Budget, which is responsible for overall procurement policy, said it made sense to turn to the private sector for providing security after the Sept. 11, 2001, terrorist attacks and cleaning up after Katrina -- two disasters that affected everyone, not just government.

Tapping private-sector expertise allows the government to “bring the full strength of American ingenuity to bear as we seek solutions,” said OMB spokesman Scott Milburn.

But, he added, contracting requires constant oversight to make sure “the public’s money is spent responsibly.”


Times staff writer Joel Havemann contributed to this report.