Paul Phillips
Eubulides wrote:
washingtonpost.com No 'Cronyism' in Iraq By Steven Kelman Thursday, November 6, 2003; Page A33
There has been a series of allegations and innuendos recently to the effect that government contracts for work in Iraq and Afghanistan are being awarded in an atmosphere redolent with the "stench of political favoritism and cronyism," to use the description in a report put out by the Center for Public Integrity on campaign contributions by companies doing work in those two countries.
One would be hard-pressed to discover anyone with a working knowledge of how federal contracts are awarded -- whether a career civil servant working on procurement or an independent academic expert -- who doesn't regard these allegations as being somewhere between highly improbable and utterly absurd.
The premise of the accusations is completely contrary to the way government contracting works, both in theory and in practice. Most contract award decisions are made by career civil servants, with no involvement by political appointees or elected officials. In some agencies, the "source selection official" (final decision-maker) on large contracts may be a political appointee, but such decisions are preceded by such a torrent of evaluation and other backup material prepared by career civil servants that it would be difficult to change a decision from the one indicated by the career employees' evaluation.
Having served as a senior procurement policymaker in the Clinton administration, I found these charges (for which no direct evidence has been provided) implausible. To assure myself I wasn't being naive, I asked two colleagues, each with 25 years-plus experience as career civil servants in contracting (and both now out of government), whether they ever ran into situations where a political appointee tried to get work awarded to a political supporter or crony. "Never did any senior official put pressure on me to give a contract to a particular firm," answered one. The other said: "This did happen to me once in the early '70s. The net effect, as could be expected, was that this 'friend' lost any chance of winning fair and square. In other words, the system recoiled and prevented this firm from even being considered." Certainly government sometimes makes poor contracting decisions, but they're generally because of sloppiness or other human failings, not political interference.
Many people are also under the impression that contractors take the government to the cleaners. In fact, government keeps a watchful eye on contractor profits -- and government work has low profit margins compared with the commercial work the same companies perform. Look at the annual reports of information technology companies with extensive government and nongovernment business, such as EDS Corp. or Computer Sciences Corp. You will see that margins for their government customers are regularly below those for commercial ones. As for the much-maligned Halliburton, a few days ago the company disclosed, as part of its third-quarter earnings report, operating income from its Iraq contracts of $34 million on revenue of $900 million -- a return on sales of 3.7 percent, hardly the stuff of plunder.
It is legitimate to ask why these contractors gave money to political campaigns if not to influence contract awards. First, of course, companies have interests in numerous political battles whose outcomes are determined by elected officials, battles involving tax, trade and regulatory and economic policy -- and having nothing to do with contract awards. Even if General Electric (the largest contributor on the Center for Public Integrity's list) had no government contracts -- and in fact, government work is only a small fraction of GE's business -- it would have ample reason to influence congressional or presidential decisions.
Second, though campaign contributions have no effect on decisions about who gets a contract, decisions about whether to appropriate money to one project as opposed to another are made by elected officials and influenced by political appointees, and these can affect the prospects of companies that already hold contracts or are well-positioned to win them, in areas that the appropriations fund. So contractors working for the U.S. Education Department's direct-loan program for college students indeed lobby against the program's being eliminated, and contractors working on the Joint Strike Fighter lobby to seek more funds for that plane.
The whiff of scandal manufactured around contracting for Iraq obviously has been part of the political battle against the administration's policies there (by the way, I count myself as rather unsympathetic to these policies). But this political campaign has created extensive collateral damage. It undermines public trust in public institutions, for reasons that have no basis in fact. It insults the career civil servants who run our procurement system.
Perhaps most tragically, it could cause mismanagement of the procurement system. Over the past decade we have tried to make procurement more oriented toward delivering mission results for agencies and taxpayers, rather than focusing on compliance with detailed bureaucratic process requirements. The charges of Iraq cronyism encourage the system to revert to wasting time, energy and people on redundant, unnecessary rules to document the nonexistence of a nonproblem.
If Iraqi contracting fails, it will be because of poorly structured contracts or lack of good contract management -- not because of cronyism in the awarding process. By taking the attention of the procurement system away from necessary attention to the structuring and management of contracts, the current exercise in barking up the wrong tree threatens the wise expenditure of taxpayer dollars the critics state they seek to promote.
The writer is a professor of public management at Harvard University. He served from 1993 to 1997 as administrator of the Office of Federal Procurement Policy. He will answer questions about this column during a Live Online discussion at 2 p.m. today at www.washingtonpost.com.
