Much of stimulus funding going to Washington area contractors

By Alec MacGillis
Washington Post Staff Writer
Thursday, December 3, 2009

As struggling communities throughout the country wait for more help from the $787 billion stimulus package, one region is already basking in its largess: the government-contractor nexus that is metropolitan Washington.

Reports from stimulus recipients show that a sizable sum has gone to federal contractors in the Washington area who are helping implement the initiative -- in effect, they are being paid a hefty slice of the money to help spend the rest of it.

The contractors' work hardly differs from the basic operations of the federal departments hiring them. The Energy Department is paying Technology & Management Services, a Gaithersburg firm, $6.9 million to review applications for renewable energy loan guarantees. The Department of Homeland Security awarded Deloitte Consulting's Arlington branch $8.6 million to provide "program management and support" for the stimulus plan's $1 billion airport security initiative, and gave McKing Consulting, a Fairfax firm, a $1.5 million contract to review applications for fire department construction funding.

Held against the total stimulus package, the contracts represent a relatively small portion of spending. But they help explain why the Washington area is weathering the recession so well. And, as President Obama convenes a jobs summit Thursday to discuss lagging employment, the contracts raise questions about whether enough funding is getting to areas suffering the most.

"The way it's set up, the money's largely going to places where it's always been going," said Karl Stauber, a former undersecretary for rural development in the Agriculture Department who is now director of the Danville Regional Foundation in struggling southern Virginia. "We need to invest stimulus dollars in ways that help create new competitive advantage in places that are now being left behind."

Of the stimulus grants and contracts awarded so far, the District has received nearly 10 times as much per capita as the national average, and Maryland has received more per capita than much harder-hit states, among them Florida, Michigan, Nevada and Ohio. Virginia's statewide average is relatively low, but of the 496 stimulus contracts the state has received, two-thirds of them, with a total value of $562 million, have gone to Northern Virginia, home to hundreds of contractors.

Virginia's unemployment rate is 6.6 percent, and Maryland's is 7.3 percent, well below the 10.2 percent national average. And data released Wednesday puts the Washington metro area's unemployment rate at 6.2 percent, an increase of two percentage points over last year, while the jobless rates in other metro regions has gone up much more -- to 9.3 percent in New York, and above 10 percent in Chicago, Atlanta and Los Angeles.

"Our region has fared dramatically better than other regions in this recession," said Rep. Gerald E. Connolly (D-Va.), who represents Fairfax County. "The presence of the federal government as a direct employer and . . . a significant source of outsourcing is no question a major reason for that."

It is only natural that a surge in government spending would benefit local contractors, said Dave Gallerizzo, a principal at Fig Leaf Software, which won a $1.1 million Interior Department contract to build a computer system for stimulus funding recipients to report back to the government. That enabled Fig Leaf to hire three more people at its office in the District.

"I look around the country at all the places that are hurting and the one place that has jobs is here," Gallerizzo said. "And I don't have a problem with it. If the money went to Michigan and employed three people there, what's the difference?"

Federal officials say that they do not have enough manpower to process the stimulus money, and that because the spending increase is temporary, it makes more sense to rely on contractors than hire new staff.

"The overwhelming majority of the department's work to oversee the Recovery Act is being done in-house," said Matt Rogers, a McKinsey consultant who was hired to oversee the Energy Department's $36.7 billion in stimulus spending. "But in some cases where we need additional help with administrative tasks -- temporary work on a temporary program -- the fastest, most economical option is often to engage a private company."

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