Via IEC Journal comes word of this Government Accountability Office report written up in this Government Executive article by Elizabeth Newell on the post-employment trends of 400 top former Defense Department officials — all of whom were subject to a one-year ban on lobbying their old colleagues. Newell offers this staggering finding:

Approximately 65 percent of those former officials were employed by one of seven contractors: Science Applications International Corp. (SAIC); Northrop Grumman Corp.; Lockheed Martin Corp.; Booz Allen Hamilton Inc.; L3 Communications Holding Inc.; General Dynamics and Raytheon Co. All but one of those companies, Booz Allen Hamilton, ranked in the top 10 of Government Executive’s Top 200 Contractors list in 2007. Booz Allen Hamilton was 24th on that list.

USASpending.gov, maintained by Office of Management and Budget, ranks all of those seven contractors in their top 20 for 2007. Newell quotes Cristina Chaplain, the report’s author, as saying, “Our results indicate that defense contractors may employ a substantial number of former DOD officials on assignments related to their former DOD agencies or their direct responsibilities.”

Newell writes that the report asks the Pentagon to think about how they can address this situation:

GAO recommended that Defense consider what type of contractor disclosure and certification information on former officials was necessary to ensure compliance with post-government employment restrictions

More robust disclosure of former official’s contacts with their old colleagues on contracting actions would be a start — perhaps the information could be included in USASpending.gov.

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Some $9 billion managed by the Coalition Provisional Authority and intended for the rebuilding of Iraq has gone missing, journalists Donald L. Barlett and James B. Steele report in Vanity Fair, and the U.S. government doesn’t seem particularly interested in finding out where it went. Barlett and Steele describe the Wild Wild Middle East atmosphere, in which two guys with no experience can get millions from the C.P.A. to protect civilian flights in and out of Iraq, and Bahamanian P.O. Boxes are the business addresses of choice for those supposedly keeping the books. Perhaps the most disturbing bit among many was just how out of touch Congress was on the doings in Baghdad during the C.P.A.’s tenure starting in 2003:

Over the next year, a compliant Congress gave $1.6 billion to Bremer to administer the C.P.A. This was over and above the $12 billion in cash that the C.P.A. had been given to disburse from Iraqi oil revenues and unfrozen Iraqi funds. Few in Congress actually had any idea about the true nature of the C.P.A. as an institution. Lawmakers had never discussed the establishment of the C.P.A., much less authorized it—odd, given that the agency would be receiving taxpayer dollars. Confused members of Congress believed that the C.P.A. was a U.S. government agency, which it was not, or that at the very least it had been authorized by the United Nations, which it had not. One congressional funding measure makes reference to the C.P.A. as "an entity of the United States Government"—highly inaccurate. The same congressional measure states that the C.P.A. was "established pursuant to United Nations Security Council resolutions"—just as inaccurate. The bizarre truth, as a U.S. District Court judge would point out in an opinion, is that "no formal document … plainly establishes the C.P.A. or provides for its formation."

"Confused members of Congress" seems like both a phrase that should be far more common in news coverage, and an inappropriately charitable description. In any case, it’s an incredible story from two of the best investigative reporters in the business — well worth reading (and don’t miss the Q&A with the authors). An addendum — note how Barlett and Steele describe the result of a FOIA request for a government contract:

On October 25, 2003, the C.P.A. awarded a $1.4 million contract "to provide accountant and audit services" to help "in the management and accounting of the Development Fund for Iraq." In other words, the purpose was to help Bremer and the C.P.A. keep tabs on the billions of dollars under their control, and to help make sure that the money was properly spent. The one-year C.P.A. contract was awarded to a company called NorthStar Consultants. When a request was made to the U.S. government for a copy of this contract, officials at the Pentagon, which has oversight, dragged their feet for weeks. The document they eventually supplied had been strategically redacted. Nearly all the information about the contractor had been blacked out, including the name and title of the company officer who had executed the contract, the name of the person to call for information about the company, the last four digits of the company’s phone number, and the name of the U.S.-government official who had awarded the contract in the first place.

This is something Anu and I run into on RealTime all the time. So much for transparency…

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The New York Times today broke a story that I first learned about nearly two years ago – that the federal government’s annual accounting of federal contracts going to “small businesses” is routinely overstated, with much of that money actually going to large corporations.

I stumbled onto the story while analyzing six years of Pentagon contracts for the Center for Public Integrity. I’d been tipped off to the practice by a Defense Department analyst who’d been working with the contract data for years. He told me – and I subsequently documented it in the records – that under the contracting rules, if a small business is bought by a larger one, the contract is still counted as going to small business.

In fact, the analyst told me, some large corporations intentionally seek out small businesses to acquire – after they’ve won Pentagon contracts thanks in part to their preferential status as a small business.

While I looked only at defense contractors, the Times report says – and I’m not at all surprised – to see that the practice also affects other federal departments.

 Last year, at least $4.9 billion worth of contracts, coded as small business, went to 13 of the largest government contractors, according to a review by The New York Times of contracting data provided by Eagle Eye, a research firm based in Virginia.

 "The S.B.A.’s handling of small business contracting is a mess," said Harry C. Alford, president and chief executive of the National Black Chamber of Commerce. "They know about this problem and yet it continues to happen. The agency is either unwilling or unable to deal with it."

Here’s how it works: for years, as a way of boosting small business, Congress has set informal quotas that a proportion of the federal government’s contracts – at least 23 percent – should be set aside for small businesses. Sounds like a good idea, and one very popular with small business constituents back home.

Because Congress is sensitive to the issue, every agency, from the Defense Department to the Small Business Administration itself, tries mightily to meet that quota and keep Congress off their back. To put it mildly, there’s little incentive for the agencies to make sure those small business set-asides are actually going to small businesses.

You might be surprised, by the way, to find out how the Small Business Administration defines “small.” The definition is based either on annual revenues or the number of employees, and it varies widely depending on the industry. (You can find the entire list on the SBA website.)

Farmers, for instance, qualify as small business if their annual revenue is less than $750,000. But a local trucking company could make as much as $23.5 million and still be defined as small. As for the number of employees, the standards range from under 100 employees (for wholesalers, for example), to as many as 1,500 employees for such businesses as phone companies and airlines.

Yet even by those standards – far higher than what most people would think of as “small businesses” – contractors have learned to game the system.

The poster child for the big-business vs. small-business problem is GTSI, a Northern Virginia firm that qualified as a “small” business with under 500 employees when it won a 10-year contract in 1996. It has since grown substantially larger, but under federal rules that contract will continue to be classified as going to small business for the entire 10 years. (Between 1996 and 2003 GTSI won $1.6 billion in defense contracts alone. Not bad for a “small business.”)

A GTSI spokesman, quoted by the Times, responded that “We don’t make the rules, we just follow them.”

Over the next few months we’ll be seeing a lot more light shined on the business of government contracting. The non-profit research group OMB Watch is currently preparing a new online database of government contracts that will be searchable by anyone. A Sunlight Foundation grant is providing the money and OMB Watch is adding the expertise and database design. Watch for it this fall.

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We do not know whether Congress will pass an overhaul of the nation’s immigration laws; we do not know whether such a bill would follow the House’s preference for border enforcement or the Senate’s preference for amnesty for those already here plus increased ceilings on the number of legal immigrants for those aspiring to come. We do not know how the debate over this contentious and emotional issue will be resolved–to date the conventional wisdom has proven to be a bit off target, to say the least.

One thing that apparently has been resolved, however, is that whatever results from the immigration debate, the solution will be implemented by a private company:

Some of the nation’s largest defense contractors were among the firms yesterday that submitted bids on a multi-billion dollar Homeland Security Department contract designed to shore up the nation’s porous borders and help curb illegal immigration.

The Secure Border Initiative, which has at its heart a six-year, $2 billion contract, is intended to give the United States a comprehensive solution to its persistent border problems. Homeland Security officials have said they are looking for a contractor that can bring together technology, Border Patrol staff members and barriers to keep illegal immigrants on the other side of the nearly 7,000 miles of U.S. land that borders Mexico and Canada.

While the government says it will leave the details to the contractor, Homeland Security Secretary Michael Chertoff has mentioned a desire to see increased use of unmanned drones, better detection technology and expanded detention facilities, among other elements. (emphasis added)

According to the Washington Post, there are five companies bidding: Lockheed Martin Corp., Raytheon Co., Northrop Grumman Corp., Boeing Co. and Ericsson, which apparently is the only company in the running without large defense contracts.

With all due respect to these firms, shouldn’t the federal government “bring together technology, Border Patrol staff members and barriers” rather than a private company?

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Muckraked! (second item) notes a Government Executive report that tells us that auditors are going to look into the FAA’s outsourcing of operations at 58 FAA flight centers around the country to Lockheed Martin. Already, the Transportation Department has realized that $500 million of the supposed $2.2 billion in savings will, well, not be realized.

Among other issues, the IG office plans to look into changes in projections for how much the agency expects to save. When the contract was awarded, FAA announced that private sector performance would save the government $2.2 billion over the life of the contract, based on a 10-year estimate for the 5-year base period with up to five extension years. In its announcement of the audit this week, the inspector general’s office quoted an anticipated savings of $1.7 billion.

“We are aware of the difference and will be looking into this as part of our review,” Barnes told Government Executive.

“If this is an honest-to-goodness audit, then I’m thrilled,” said Kate Breen, president of the National Association of Air Traffic Specialists, which represented the federal employees at the centers. She said the competition for the work, which was run under the Office of Management and Budget’s Circular A-76 rules, and the appeals process at the time, seemed slanted in favor of the contractor.

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Yesterday news broke that President Bush’s Housing and Urban Development Secretary Alphonso Jackson became a lightening rod after it was reported that in a speech he stated that he believes that he should only give contracts to supporters of President Bush. Jackson made his point by telling an anecdotal story about a contractor trying to obtain a contract from HUD. The contractor, for some inexplicable reason, told Jackson that he did not like President Bush, at which point Jackson decided that he wouldn’t give this man the contract because, as Jackson himself says, “Why should I reward someone who doesn’t like the president?”

Now, Jackson is retracting his statement by saying that he made up the story. The HUD spokeswoman stated, “The secretary’s story was anecdotal. He is not part of the contracting process. He was trying to explain to this group how politics works in D.C.” Josh Marshall says, “This doesn’t sound like a particularly exculpatory explanation. That story was made up. Jackson was just how explaining how he does business?”

Think Progress offers two points about why this explanation is a bit unbelievable:

1) That excuse isn’t just difficult to swallow — it also contradicts the spokesperson’s first response in which she indicated Jackson was referring to a real contract: “On May 3, Tucker told the Business Journal that the contract Jackson was referring to in Dallas was ‘an advertising contract with a minority publication,’ though she could not provide the contract’s value.” It looks like Jackson is changing his story as criticism builds.

2) Bidding for a government contract isn’t ‘asking for money.’ It’s not Alphonso Jackson’s money to give away to his buddies. It is the taxpayers’ money. It should go to whoever can do the best job, regardless of their political views.

So, either Jackson lied by making up his “anecdotal story” or he is lying to cover up the story. Either way the real issue is not with the factual accuracy of Jackson’s story but whether he was factually representing his own belief when he stated: “Why should I reward someone who doesn’t like the president?” It seems that Jackson wanted to make this very point and then crafted a story to fit his predetermined belief/actions. Jackson needs to come clean on whether he is breaking the law by only distributing contracts to supporters of President Bush. Doesn’t he know that lies make baby Jesus cry? (georgia10 at Daily Kos has more dirt on Jackson)

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As Ellen Miller pointed out yesterday, the Housing & Urban Development Secretary, Alphonso Jackson, is decidely hands-on when it comes to his job–so much so that he even intervenes in procurement matters, if only when he feels prospective contractors are insufficiently enthusiastic about his boss, President George W. Bush. As reported in the Dallas Business Journal, Jackson was quite explicit in describing how he denied government business to a potential advertising contractor who had “a problem” with the president. The bit in his remarks that interested me was that Jackson said, “Why should I reward someone who doesn’t like the president, so they can use funds to try to campaign against the president? Logic says they don’t get the contract. That’s the way I believe.”

So how when and where did he come to believe this? Nexis turned up this interesting bit from a February 17, 1996 story in the Dallas Morning News by George Keumpel. As is often the case, the story involves a conflict of insiders: A state lawmaker, Dawnna Dukes, had a consulting firm that had worked for the winner of a state contract, Page Southerland Page. Other bidders for the same contract asked that the contract be reopened, alleging that the Page Southerland Page had received preferential treatment from the procurement officials–civil servants–working for the General Services Commission, the state agency that awards contracts. Jackson, then the chairman of the GSC (which, by the way, is now called the Texas Building and Procurement Commission), intervened, delaying the contract award. Dukes found reason to intervene back:

Ms. Dukes said she was only doing her job as a state representative in raising questions about the delay.

She said she called Mr. Jackson after a lobbyist suggested to her that he and others wanted the job to go to an unidentified big contributor to Gov. George W. Bush’s political campaign.

Mr. Bush appointed Mr. Jackson chairman of the commission.

The same story tells us that the General Services Commission’s executive director, Tom Treadway, proposed a rule that would take procurement decisions away from technical staff, leaving them at the discretion of the executive director:

The proposal has come under fire from some board members and from Mr. Treadway’s predecessor, John Pouland, who said it would inject politics into the bidding process.

Mr. Jackson and Mr. Treadway say decisions on contracts are too important to be left to lower-level employees.

After all, how can technical staff be expected to determine from technical documents what the political orientation of the bidders are?

The Carpet Bagger Report notes that the line from HUD, for the time being, is that Jackson’s April 28 remarks were made up, and that the Secretary doesn’t get involved in procurement decisions. We all know what regard Jackson’s past shows for the decision-making abilities of lower-level employees…

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Sen. Frank Lautenberg (D-NJ) called on HUD Secretary Alphonso Jackson to resign in the wake of his comments regarding the politicization of HUD contracting. Lautenberg: “If Secretary Jackson really said this, then President Bush should ask for his resignation. Government contracts must be based on merit, not on political favoritism.”

UPDATE: Waxman and Frank call for hearings into HUD contracting, according to Reuters.

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President Bush’s Housing and Urban Development Secretary Alphonso Jackson seems to not understand the federal contracting process. You see he believes that only supporters of President Bush should get contracts. From the Dallas Business Journal courtesy of David Sirota:

After discussing the huge strides the agency has made in doing business with minority-owned companies, Jackson closed with a cautionary tale, relaying a conversation he had with a prospective advertising contractor. ‘He had made every effort to get a contract with HUD for 10 years,’ Jackson said of the prospective contractor. ‘He made a heck of a proposal and was on the (General Services Administration) list, so we selected him. He came to see me and thank me for selecting him. Then he said something … he said, ‘I have a problem with your president.’ ‘I said, ‘What do you mean?’ He said, ‘I don’t like President Bush.’ I thought to myself, ‘Brother, you have a disconnect — the president is elected, I was selected. You wouldn’t be getting the contract unless I was sitting here. If you have a problem with the president, don’t tell the secretary. He didn’t get the contract,’ Jackson continued. ‘Why should I reward someone who doesn’t like the president?’”

Aside from this being a violation of federal rules as Think Progress points out:

Government business shall be conducted in a manner above reproach and, except as authorized by statute or regulation, with complete impartiality and with preferential treatment for none. Transactions relating to the expenditure of public funds require the highest degree of public trust and an impeccable standard of conduct.

Jackson’s most egregious statement comes when he explains his understanding of the contracting process:

“Why should I reward someone who doesn’t like the president, so they can use funds to try to campaign against the president? Logic says they don’t get the contract. That’s the way I believe.”

Josh Marshall explains Jackson’s “logic”:

political supporters get contracts so they can pump a percentage of the profits back into the political party. Standard machine politics, at best. Organized bribery, at worst. And whatever you want to call it, the guiding principle of all contracting and government spending in the second Bush administration.

Unbelievable.

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Currently, federal law sets the rate of pay for the President of the United States at $400,000 a year. Assuming that he works 48 weeks a year (there are those who would argue that our current President doesn’t, but I tend to think those arguments are cheap and petty — even on vacation, the office travels with him), that works out to an hourly rate of $208.33 ($400,000/(48 wks * 40 hrs/wk).

Meanwhile, private contractors charge the government, for the use of some employees — well, look here, on page 9 — to see that Deloitte & Touche charges the Feds $249.37 an hour for a partner/principal, or here for the $294.21 charged by George Washington University for a Senior Executive Consultant/Lecturer (defined as someone who is a…

Top leader in subject area. Serves as distinguished subject matter expert in content or delivery. Maintains current knowledge of industry best practices and ongoing industry developments and completes whitepapers and speaking engagements on such topics as requested by preeminent publications and organizations. Works with other senior management and senior corporate management to develop the direction of the organization and ensure that the organization s people can meet those needs.

…or here to see the $225 an hour for a senior economist, $230 for a managing director, $320 an hour for a vice president (the one we elect–the one who lives in the Naval Observatory–earns a scant $108 an hour by comparison), $380 for a senior vice president or a senior managing director, and $420 an hour for president (twice what we pay the one we’ve chosen to faithfully execute the laws of these United States) charged by Lukens Energy Group. Good enough for government work indeed.

I was put in mind of this the other day when The Washington Post ran this story about local contractors making millions selling their firms:

Washington companies received $52.5 billion in federal contracts in 2004, an increase of more than 55 percent over 2001 and the largest concentration of government work in the country, according to the Institute for Public Policy at George Mason University.

As their pipeline of business and staff expertise increased, companies such as Kathryn B. Freeland’s RGII Technologies Inc. became attractive to bigger firms — in RGII Technologies’ case, Computer Horizons Corp., which paid Freeland more than $21 million in a takeover.

Jeanette Lee White, who did not take a salary for the first four years she ran Sytel Inc., will split most of the $18.5 million profit from its sale with her ex-husband.

Roger Mody made about $125 million when his 15-year-old government contracting firm, Signal Corp., was sold for $227 million in 2002.

For me, it was like hitting the lottery,” Mody said.

Well, good enough for government work, in any case.

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