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Selling products and services to the federal government has become an enormous industry in the United States. In 2005, federal contracts represented about 3 percent of U.S. gross domestic product, making it approximately the same size as the entire automobile industry, including the sale of imported cars and auto parts. Insuring that the government maintains a fair, open, and competitive market for the goods and services it purchases is important not only for maintaining the quality of key government services and minimizing their cost but also for setting ethical and performance standards that affect the broader economy.
Yet there are clear indications that serious contract abuse has become a widespread problem affecting programs and agencies across the entire government and involving tens of billions of dollars in federal funds annually. Non-competitive contracting has more than doubled during the first half of this decade. And just during the last three years more than five federal officials have been convicted of crimes involving federal contracting, three others were placed under indictment, and more are under investigation.
Contractors play a central role in the delivery of critical government services, and their work has a direct and immediate impact on everything from the protection of public health and the flow of commerce to the preservation of our national security. Corrupt and ineffective management of government purchasing therefore places all of the government’s responsibilities at risk.
Cronyism, corruption, and fraud in government procurement increase the cost of government and, subsequently, the taxes that must be paid to support it—as well as reduce the willingness of citizens to pay those taxes. Such practices not only corrode the standards of the businesses competing for government contracts; they also undermine standards of conduct in other industries, making the entire economy less efficient, less competitive, and less prosperous.
In recent years there appears to have been a failure of oversight into contracting procedures at almost every level of government. Inspectors general within departments and agencies have been pressured to cover up the bad news; some have been fired for their unwillingness to do so, and increasingly it appears as though others were selected because of their willingness to look the other way.
Ultimately the responsibility for ensuring that the money provided to the executive branch is effectively spent rests with the Congress. But clearly the Congress has failed almost completely in its willingness and capacity to perform the constitutional function of insuring the efficiency and effectiveness of the government that it has funded. Over the course of the last three Congresses, work weeks have often begun on Tuesday evening and ended by noon on Thursday. The Congress’s attention has frequently been directed more toward the small percentage of funds that are earmarked for pet projects than on the 98 percent of the discretionary budget spent at the direction of the executive branch.
This paper examines what is presently known about the potential size and scope of wasteful and corrupt contracting within the federal government. It provides the new Congress with hopefully useful guidance for developing a broader understanding the problem. Finally, it outlines some steps that might be taken to restore greater transparency and accountability in the use of public funds in the procurement process.
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