The ever expanding use of private consultants and researchers by the federal government has produced an epidemic of conflicts of interest, favoritism, massive waste and flagrant violations of government regulations and policies.
A review of all 13,848 contract awards published last year showed that the government spent more than $9.3 billion for outside expertise -- a figure that has not been compiled previously.
That same review found that the government's system of awarding contracts through competition -- required by regulation and policy --- has virtually collapsed. Sixty-eight percent of the 16,101 research and consulting contracts advertised last year were awarded without competition.
The work done by outside firms is often unmonitored and unnecessary, while studies of critical importance performed by firms with deep financial self-interest, routinely go unquestioned.Tens of millions of dollars in studies and research sit unexamined in warehouses, agency files and cardboard boxes.
These conclusions are based on an eight-month investigation by The Washington Post. Thousands of documents were examined, and more than 600 government officials and private contractors were interviewed.
Everything in this series of articles is documented and based on on-the-record statements by those directly involved in the federal contracting business.
There are some who defend consulting work both in government and industry, and there have been competent studies and research in which the taxpayers received their money's worth. But the pervasive view of those closest to the business, both in government and in private firms, is negative. This is a series about an epidemic of waste, as told by the participants.
The series will detail, in case studies of more than 40 private firms and 11 federal departments and agencies, exactly how the government contracting system works today. It will show:
CONFLICTS OF INTEREST. The government awards multi-million-dollar contracts to major oil and chemical companies and their research divisions to provide and evaluate data used in regulating their own products. In many instances, the traditional adversary relationship between government regulator and private manufacturer has broken down.[See accompanying story today.]
WIDESPREAD WASTE. An examination of 13 contracts for five federal agencies totaling $15 million shows that officials and consultants agree that most of the money was wasted and half of the products resulting from the contracts were useless. [See reports Monday and Tuesday.]
REVOLVING DOOR. In hundreds of cases, government officials leave their posts to work at much higher pay with consulting firms they had monitored weeks or even days earlier. These officials then routinely receive federal contracts directed to them by former colleagues and friends from within the agencies they left behind. Some former officials charge their former agencies $300 to $500 a day. [See Wednesday's report.]
PROCUREMENT FAVORS. Many government officials responsible for awarding and monitoring contracts routinely accept favors from contractors and enjoy a close relationship with them well beyond that required by work. In one instance, the contractor and the very government official who headed the office that supervised the contract lived together in the same house. In another case, a firm hired prostitutes for a senior government official monitoring the firm's troubled contracts. [See Thursday's report.]
So flawed is this system from start to finish that many of those involved in it openly condemn their own work.
"There are just too many people who have angles to get around the system," says John O'Mally, editor for the last 11 years of the official daily publication that advertises federal contracts to potential bidders.
"The real sexy stuff with big bucks . . . more often than not has been 'wired' for somebody," said Joseph Seltzer, a consultant who formerly served as inspector general for the Department of Energy. "It's something talked about quite openly. Whenever the fat-cat consultants get together over lunch, they talk about 'wiring' [advanced, unauthorized agreements]. The third question over lunch is 'Do you know if this thing is wired yet?'"
The process in awarding the contracts is just the first flaw. Next is the quality of the work performed. Here, again, there are voices of despair and resignation within the system.
"The bottom line on contracts -- pure paper studies," says Roy Higdon, a contract-monitoring officer for the Environmental Protection Agency. "The public gets . . . maybe 10 percent of their money's worth."
"It's a game," adds William Farris, a consultant who sits on the national board of directors of the Institute of Management Consultants. "Government comes to us and wants help in identifying their problems, but they don't seem to be able to use the material. They could spend much less and get more for it."
David Webb, a contract officer in charge of a $250,000 study that the then Department of Health, Education and Welfare labeled "an unintelligible pile of papers," says: "I look at it this way. Nothing was received and we paid thousands for it. It really is a lot of gobbledygook . . . As a taxpayer I'm sick."
At the Department of Energy, contracting officer William Stevenson says: "We're so busy trying to shovel the money out the door, we don't have time to see what happens to it after it leaves. All the money could be stolen and I wouldn't know it . . . The place is a madhouse."
But, even while they are condemning the system, some government officials and consultants decide to take advantage of it. One example is Max Paglin, who left the Federal Communications Commission in 1971 after serving 30 years there in several positions, including general counsel and executive director.
In 1977, Paglin was asked by FCC Chairman Charles Ferris to come back as a consultant. He has since received $112,442 in noncompetitive contracts to perform studies. Now, at age 66, he has his own office in the FCC general counsel's office, where he spends three to four days a week being paid at a rate of $225 a day.
"Should this thing be put out for bids?" he asks. "I'd guess in principle I'd say so." But Paglin says the award to his is justified. "I'm a unique person to produce this kind of report. I don't think there's anyone else around. I don't mean to sound boastful."
Still, Paglin acknowledges that such contract awards can cause problems:
"It's pretty damn obvious. Let's not play games. There's the sweetheart-type contract where the admiral resigns and his buddies get him a contract. Certainly there are opportunities for abuse."
Another example is James Pickman, former executive deputy commissioner of education. In March 1979, while still on the job, Pickman wrote a memo to then Health, Education and Welfare secretary Joseph Califano, saying: "I am concerned about cozy relationships on the program side as well as in our grants office.
Less than a year later, Pickman resigned his HEW post. Within 11 days of his leaving, on Feb. 5, 1980, he submitted a proposal for a consultant contract. Ten days later he was awarded a noncompetitive contract. He was to be paid $1,500 a week for six weeks as an office space consultant. His task: to find office space for 14 new presidential appointees and their staffs for the new Department of Education.
"It obviously looks lousy," says Pickman of his contract. "Here I was someone who left and got a contract . . . But it was a real natural . . . This was an area I was familiar with already. To compete would have been crazy."
Pickman's award did not violate HEW regulations because the contracting officer (a former HEW associate of his) signed a document declaring that Pickman and only Pickman could do the specified work.
The Post investigation found that every federal department and agency has its own, often confusing, rules on when and how to contract out for expertise. Frequently, the agency is so vague in what it is seeking that even the contractor says he does not know what is expected of him.
While the government pays out more than $30 million a day to these contractors, rarely does it make an effort to verify consultants' billings for hours logged or travel expenses charged to the government. The contractors merely send in invoices and the government sends back checks. Audits, sometimes conducted years after the contractor has been paid, detect only the most flagrant abuses.
Even fewer safeguards exist to protect against fraud. Last year, for example, the EPA awarded a $170,000 contract to Opalack & Company, a Washington accounting firm that was auditing Department of Labor contracts. Even as the new EPA contract was awarded, the FBI was concluding its investigation of Opalack, which had won the Labor Department contract by submitting a score of resumes of people not affiliated with the firm.
"They almost invited us in," Paul Opalack said in an interview a week before he was to begin serving a six-month jail sentence for submitting the false resumes.
In another instance, in 1976, Gene Miller, a former HEW official who had been convicted and jailed for accepting a bribe, began a consulting firm after his trial in Dallas, Tex. While in jail, he received money from several schools that paid him to advise on the use of federal funds for student financial aid.
Over the next five days the series of articles will explore the trail of millions of dollars in government contracts -- where, how and why and to whom the money goes.