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No-Bid Defense Contracts Found to Be Common

By Renae Merle
Washington Post Staff Writer
Thursday, September 30, 2004; Page E01

More than 40 percent of the Pentagon's $900 billion in prime contracts during the past six years have been awarded without competitive bidding, according to a Center for Public Integrity study released yesterday.

The nonpartisan group found that the Pentagon's largest contractors, including Lockheed Martin Corp. and General Dynamics Corp., received a majority of their defense revenue through no-bid contracts. Also, about $8 billion in work has been awarded since 1998 to unnamed companies designated as classified contractors, most of it without competition, the report said.

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The center examined more than 2.2 million contract records and focused on 737 companies that received at least $100 million in Pentagon funds from 1998 to 2003. "This report shows that competitive bidding at the Pentagon happens less often than we think," said Charles Lewis, the center's executive director.

The use of sole-source contracts has become political fodder since Halliburton Co. was awarded a no-bid contract last year worth billions to help rebuild Iraqi oil fields.

Industry and government officials argue that the consolidation of the industry has reduced the Pentagon's options in obtaining some weapons, rendering competition moot. For example, Northrop Grumman Corp. is the country's last remaining maker of aircraft carriers. It's also common for the Pentagon to order additional quantities of a weapon through a sole-source contract after holding a competition.

The report found that the Defense Department has become increasingly dependent on outside contractors at the same time it has lost many of the procurement officials meant to monitor their work. In some cases, the department has hired one company to monitor the work of another, Lewis said.

The department is examining the report and trying to understand the context of its findings, said spokesman Glenn Flood. The individual services -- Army, Navy, Air Force and Marines -- make decisions on no-bid contracts on a case-by-case basis, he said. "We are in charge of the contractors," Flood said. "The contractors are not calling the final shots."

More than 70 percent of Bethesda-based Lockheed Martin's $90 billion in prime contracts during the past six years were awarded without a full or open competition, according to the report. That excludes revenue Lockheed, the Pentagon's largest contractor, received through joint ventures.

A Lockheed spokesman said the company had not examined the center's results, but a certain number of sole-source contracts should be expected in a firm of its size. When Lockheed wins contracts to develop a weapons systems through the competitive process, it is often followed years later with a sole-source contract to produce the product, said company spokesman Thomas C. Greer.

It is not "cost effective for the Department of Defense to develop a second source for production," Greer said in a statement. "It is important to note that sole-source awards still mandate contract performance. Failure to perform does result in significant penalties."

At the same time, some contractors spent significant amounts on political campaigns and lobbying, the report said. The 737 largest contractors examined in the report spent $214 million in campaign contributions through political action committees, soft money donations and individual contributions from company executives, employees and their families. The companies contributing the largest amounts were in industries outside of defense contracting, including transportation and telecommunications firms, but they had won some Pentagon business. Overall, the report said, a surprising number of companies gave little or nothing at all.

President Bush received $5.4 million in political contributions from defense contractors between 1998 and July 31 of this year. Democratic presidential nominee Sen. John F. Kerry (Mass.) collected nearly $2 million during the same period.

The report also found several large defense firms with contracts federally designated for small businesses. In some cases, the large firms inherited the work from a smaller company it recently took over, the report said. In other cases, companies still had their small-business contracts long after they outgrew the designation.


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