Contractors Face More Scrutiny, Pinched Purses

Some contractors have already begun to feel the difference. After the Sept. 11, 2001, attacks, contractors were rewarded for proposing cutting-edge systems that pushed the technological envelope. But after repeated cost overruns and delays with those high-risk ideas, safer solutions are back in vogue. Earlier this month, Boeing won a coveted $15 billion helicopter program using an updated version of its 50-year-old, war-tested Chinook.

"The notion that comprehensive networking and cutting-edge sensors can solve our military problems has been confounded by the experience of Iraq," Thompson said.

Perhaps sensing the changing environment, Lockheed Martin recently began giving presentations on the state of the defense industry, arguing that military spending is a small part of the gross domestic product.

That logic may prove a tough sell with Democrats who campaigned for office this fall on a platform of cleaning up corruption that has been intertwined with contractors. Former Republican representative Randy "Duke" Cunningham (Calif.) pleaded guilty to taking bribes from contractors, and Halliburton became a favorite target of Democrats who thought Republicans were reluctant to scrutinize the politically connected firm's billions of dollars of work in Iraq.

"One thing you can be assured of is that we will do aggressive oversight," said Rep. Bennie Thompson (D-Miss.), who is set to lead the Homeland Security committee.

Rep. Henry A. Waxman (D-Calif.), a frequent critic of Halliburton, is to become chairman of the Government Reform Committee in January, and he has indicated that he plans to introduce legislation to put contractors on a shorter leash. His Clean Contracting Act is aimed at curbing no-bid deals, limiting the use of subcontractors and closing loopholes that Waxman says open the door to abuse.

Rep. Janice D. Schakowsky (D-Ill.), meanwhile, plans to revive legislation that would require more oversight of military contractors in Iraq. "This Iraq experience has made the case for aggressive monitoring of contractors," Schakowsky said. "This is a foggy area where billions and billions of taxpayer dollars are being spent, and we have no sense of how or what they are spending or doing."

Industry groups are fighting greater regulation, arguing that such proposed laws would hamstring contracting officers and prevent the government from getting goods and services when it needs them.

"Many Democrats have had the impression, and they are feeding the impression, that contracting is a process that is fundamentally broken. But there's not a scintilla of evidence that that is the case," said Stan Soloway, president of the Professional Services Council, an industry trade group.

Soloway said he welcomes closer scrutiny of the industry but only under certain conditions.

"It could be largely political, or it could be part of a very substantive look at a very complex set of processes," Soloway said. "If it's the latter, it might be beneficial. If it's just about 'gotcha,' it will exacerbate the problems."