Opinion

Mugging Taxpayers in the Swamp

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Posted: Dec 29, 2018 12:01 AM
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Mugging Taxpayers in the Swamp

The big dollar muggings in Washington these days are not done with pistols. The sophisticated weapons of choice are “sole source contracting,” lobbyists, and insiders. And the victims are not tourists, but taxpayers.

Large multinationals game the system using the revolving door between government and the private sector, with the help of aggressive lobbying. There are so many examples, but one is the fourth largest privately- owned company in the United States, Deloitte Touche Tohmatsu Limited, which originated as one of the biggest accounting companies in America. 

Today they are masters of the D.C. contracting game with sole source contracting. They are not doing anything illegal, but the end result is that taxpayers and small entrepreneurs are shafted. 

They and affiliates haul off as much as $38 billion a year in perfectly legal, clean, government contracting. No Saturday Night Specials needed.  

Federal contracting is big business, governed by dozens of federal statutes enacted by Congress, explained in dozens of legal volumes that can be found in every law library across the nation. Federal policy as provided in that governing law is based on the concept of “competitive bidding,” because as the most rudimentary economics shows, better results in terms of price and quality are obtained by competition rather than by monopoly.

But if a company is a crony favored by contacts, friends, or relatives of company employees, or of lobbyists working for the company, that company can get “sole-source contracts” or even sole source grants, not subject to any competition. The money flows just when the contact, friend or relative working inside of some contracting government agency signs on the dotted line, giving away some share of the federal government’s trillions in annual spending. 

And what happens to price and performance under such “sole-source contracts”? Price goes up and quality, service and performance go down. Because there is no competition or incentive for lower prices or better quality, service and performance, when you can get the contract or grant without competition. Is anybody even monitoring quality, service and performance under such secretive sole-source contracts?

Sometimes such contracts are for unnecessary services, with bloated, non-competitive budgets. Even redundant services, or goods already provided by someone else under another contract. 

This is all why they call it “the Swamp.” 

The Small Business Administration reports that small businesses make up 99.9% of U.S. companies, 30.2 million spread from Maine to California and beyond, with 47.5% of private sector employees, 58.9 million in 2015. But these small businesses and companies do not have contacts, friends and relatives in faraway Washington, D.C. bureaucracies, and cannot even afford lobbyists. They and their workers are completely excluded whenever a sole source contract or grant is given away along with your taxpayer money in the Swamp.

The esteemed Department of Homeland Security (DHS) is a major source of these noncompetitive sole source contracts.  In 2014 alone, DHS gave away 465 noncompetitive contracts and grants doling out $425 million in taxpayer funds, for overpriced, substandard goods and services (“waste”). Over the prior 6 years, such giveaways totaled more than $3 billion, just from this one agency alone.

Deloitte is not the only company that has mastered the art of “sole-source” contracting, yet they are a great example of a company that has figured out how to game the system and avoid the competitive bidding process.  The worry is that some companies embed former staffers and relatives of staffers at government agencies as a way to get at the non-competitively bid system.  The “revolving door” is still alive and well in the D.C. Swamp.

Governing federal contracting law does provide for eight exceptions to competitive bidding for sole source contracts. But many of the sole source contracts on closer inspection do not seem to meet these exceptions, with other potential contractors often documented as able to do better work at lower prices. 

The Swamp can be cleaned up in these cases simply by better enforcement of federal law, providing for competitive bidding. The biggest federal contracting agency of all, the Defense Department, is still burdened by some of these swampy practices, but obvious abuses such as sole source contracting do not seem prevalent any more. 

Such federal contracting abuses are an obvious opportunity for the Trump Administration to clean up the Swamp, as promised.