Federal No-bid Contracts Skyrocket at Defense Dep't
The contracts are often for mundane items and services that could easily be competitively bid. But, due either to various "set asides" or to other policies or laws, the ordinary bid process is suspended.
A case in point is the $16.2 million no-bid contract Sheppard Air Force Base staff awarded last summer to Work Services Corporation, a non-profit that focuses mostly on military work and provides jobs to people with disabilities.
About six months later, David Toogood, a top official at the base outside Wichita Falls, Texas, was hired as president and CEO for Work Services.
While Toogood had nothing to do with letting the food services contract and told AMI he sought an ethics opinion that found no conflicts with him taking the job, the contract highlights the increasing amount of dollars Defense officials spend without bid and the revolving door between top government officials and federal contractors.
Early in his first term, President Barack Obama signed an executive memorandum directing executive branch agencies to cut no-bid contracts. “We will end unnecessary no-bid and cost-plus contracts that run up a bill that is paid by the American people,” he said.
Many federal agencies, which in past years let a substantial percentage of their contract dollars without bid, have increased bidding. For example, the U.S. Department of Health and Human Services and the U.S. Department of Veterans Affairs increased dollars bid by a few percentage points between the 2010 fiscal year and last year. At the Small Business Administration, their unbid contracts dropped from 37 percent contract dollars in 2010 to about 12 percent last year.
These figures come from an American Media Institute analysis of the database USASpending.Gov.
The Defense Department went the other way. Its portion of unbid contract dollars rose from 37 percent in 2010 to nearly 43 percent last fiscal year. Worse still, through June of this fiscal year, 54 percent, or $72 billion out of $133 billion contract dollars, were issued without bid.
“It’s a pretty big problem, especially with the large companies,” said Neil Gordon, an investigator at the Project on Government Oversight, which promotes disclosure and accountability at the federal level.
From the 2015 through June of this fiscal year, Defense officials issued more than $2 billion in housekeeping, food service and grounds-keeping contracts, paid $1.4 billion for constructing and renovating buildings, and bought $388 million in passenger motor vehicles -- all without a competitive bidding process.
Obama’s Office of Management and Budget did not return several messages left on their voicemail, and Pentagon spokesman Mark Wright did not return repeated contacts seeking comment on the Defense bidding practices.
Many of the companies who receive the most contracts without a competitive process are contractors who hire a significant number of former top military and Pentagon brass.
Lockheed Martin is the largest recipient of single source contracts from the defense department with $133 billion in non-competitive contracts since the 2010 fiscal year, government contracting databases show. Raytheon and Boeing round out the top three with $53 billion and $42 billion, respectively.
Those same companies that often hire retiring Pentagon officials.
Through a Freedom of Information Act request, Citizens for Responsibility and Ethics in Washington, a non-profit government watchdog group, received a list of ethics opinions from Pentagon officials looking to join contractors. The spreadsheet, while without the officials’ names and only showing 2012 and 2013 requests, revealed that Lockheed, Raytheon and Boeing were some of the top places officials were looking to take jobs.
David Williams, president of the National Taxpayers Alliance, said the no-bid deals and the revolving door insure that tax money is wasted.
“This is why everyone’s so cynical about the relationship between the government and companies,” he said. “There’s a clear contingent of people going from the military to a company and getting a contract. Taxpayers aren’t stupid. The dots are there to connect whether the Pentagon wants to admit it or not.”
Lockheed spokeswoman Maureen Schumann emailed that the company “will not be able to support (your request) with an interview at this time.” Raytheon public affairs did not return repeated requests for comment, and Boeing officials also declined an interview but emailed a statement.
“(W)e have cautioned other reporters about drawing conclusions from aggregate data outside the context of individual contract awards,” Boeing spokesman Dan Beck wrote. “We compete for many of our contracts while in other cases we are awarded single-source contracts in those situations where the government determines that is the best course.”
Beck also wrote that the company strives to provide “competitive pricing” for taxpayers, but he declined to discuss the hiring of military personnel other than to say that Boeing abides by all rules, laws and regulations when hiring former government employees.
Federal ethics rules prohibit staff that acted on or approved a contract from taking a job with the business without a cooling off period. But if the staff member didn’t directly approve or issue a deal, he or she can take the job no matter how much work his or her agency does with the contractor.
And often purchasing officials aren’t allowed to bid certain contracts, AMI found.
At Sheppard, anytime the base needs food service, contract support services or postal services, they have to go to Work Services Corp., according to Lt. Col. Michael Kennebrae, commander of the 82nd Contracting Squadron. Work Services is part of the federal AbilityOne Program, which allows nearly 600 non-profits that provide jobs to the blind and disabled to obtain contracts without full competitive bidding. (The products or services are, however, subject to "fair market prices" as determined by a special government committee.)
Since 2009, Work Services received more than $154 million in contracts marked “not available for competition” and “not competed” for such common items as food service, shelf stocking, custodial operations and mowing.
Gordon said it would not be difficult to find other providers of these services to insure taxpayers received the best price, and the fact that the company hired a top official from the base also doesn’t sit well.
“It’s pretty suspicious,” said Gordon when told of the details. “The fact that it involved a non-competitively awarded contracts adds to the fishiness.”
Kennebrae said he didn’t know Work Service's new president was hired from the base until AMI contacted him but his hands were tied when it came to the contracts.
“Congress declared that we have to contract official services and goods with AbilityOne recipients as the highest mandatory source,” he said in a phone interview. “We cannot competitively bid them.”
Kennebrae provided figures showing 98 percent of contract dollars at Sheppard that he and his staff control are bid, but that dropped to 75 percent of all dollars when set-asides and other obligations are included. Set-asides are contracts that are required to go to either specific companies under a program authorized by Congress or to a specific group like minority-owned, veteran-owned or small businesses.
“It is possible to find a cheaper rate if you were only concerned with pricing and not the social and economic impacts,” he said. “The secondary and tertiary impacts is why Congress and other leaders are saying this is the way to go.”
Toogood conceded that he had no experience in the food service, janitorial, grounds maintenance and manufacturing services that Work Services provides the military, adding that the company board was looking for someone who has “leadership skills.”
The contracting is “completely disconnected from the flying wing,” Toogood said, adding he was referred by a friend who was a candidate for the job but didn’t want to move to Wichita Falls. “I had no idea this company even existed … when this offer came up.”
But he said that his military experience at Sheppard, first as an inspector general and most recently as a U.S. national senior representative to NATO’s pilot training program, probably helped him land the job.
“Because a good portion of contracts are from the military, they wanted someone who understood the military and what the military wants from its contractors,” he said.