Sole-Source Cronyism Alive and Well in Washington
Were Hollywood to make a movie about the “Revolving Door” that long has connected government agencies to the consulting firms that populate the Beltway encircling the Nation’s Capital, a starring role would go to the international company Deloitte Consulting LLP. Few large consulting firms are able to match Deloitte’s roster of former top federal officials on its gargantuan payroll. This is especially the case with regard to government agencies having responsibilities for national security matters; and therein lies the very real potential for abuse.
Not only does Deloitte count among its principals key former top officials from agencies including the Department of Homeland Security (DHS) and Customs and Border Protection (CBP); but enjoys a reciprocal relationship with those agencies employing spouses and close associates of key Deloitte employees.
While there are extensive federal regulations designed to ensure transparency and avoidance of conflicts of interest between government and private industry — primarily the Federal Acquisition Regulation (FAR) – these have proved clearly inadequate to address such potentialities.
This has become obvious in the large number of sole-source contracts regularly if not routinely negotiated between consulting firms such as Deloitte and federal government agencies with national security responsibilities. Sole-source contracts, known also as “no-bid” contracts, can mean multi-year and hundred-million dollar income streams for Deloitte and other companies similarly situated. And while procedures laid out in FAR (which have been in place since Ronald Reagan’s first term) are supposed to ensure that sole-source contracts are the exception to the rule of competitively-bid contracts, the “exceptions” seem to have become the norm. This phenomenon has an especially pernicious effect on America’s small businesses, which are supposed to benefit from the open competition FAR and Small Business Administration (SBA) rules appear to mandate but often fail to deliver.
Frequent use of no-bid contracting is hardly a problem unique to the Trump Administration; nor is he the first to decry the practice and to promise to “drain the swamp” in Washington. Every U.S. president since Jimmy Carter in the late 1970s promised to bring a new and higher degree of transparency to government contracting.Not surprising, no-bid contracting increased during the Obama years, and the practice continues. For example, the SBA Inspector General recently reported that just under 90% of sole-source contracts set aside for women-owned businesses had been awarded improperly. Included among the improperly-awarded, no-bid contracts were some dealing with national defense matters.
Such problematic and disturbing goings on in government contracting are the sort that were to be avoided by the statutorily-mandated FAR requirements. The FAR requirements for “other than full and open competition,” would appear to place serious and difficult hurdles to limit the awarding of no-bid contracts. In practice, however, the seven detailed “exceptions” have proven easy to circumvent for those who travel the revolving door superhighway between federal agencies and Beltway consulting firms like Deloitte.
In 2014 alone, DHS awarded 399 no-bid contracts worth in excess of $300 million. While there exist numerous and qualified small businesses that would be in line to compete for such contracts, it has become standard for the large Beltway firms, including Deloitte near the front of the line, to reap the awards of such contracts by shoehorning themselves into one of the FAR exceptions. The Beltway Big Boys are adept also at circumventing SBA requirements designed to provide small businesses the opportunity to compete.
Family relationships between Deloitte and agencies like CBP and DHS, and the ping-ponging of former members of the Senior Executive Service as well as Senate-confirmed positions, between private industry and government and back again, has made a mockery of FAR’s requirements.
Deloitte, of course, is hardly the only company that takes advantage of maintaining and nurturing such relationships. The Sentinel Company, which counts among its rainmakers a former CBP Commissioner, practices the game admirably. Just one recent example of such cozy relationships between government and the close fraternity of major outside consulting firms, is the case of Kevin McAleenan, the current head of CBP who has close ties with the Sentinel Company, a somewhat clone of Deloitte Consulting. Shortly after his appointment as Acting Commissioner of CBP, that agency awarded Deloitte a no-bid contract for $32.2 million for IT Business Support Services based on an “urgency” exception to competitive bidding. Deloitte’s foot in the door on that deal netted it a follow-on contract worth up to $69.2 million as – you guessed it – a sole-source exception.
These examples represent the tip of the proverbial iceberg of questionable sole-source contracts awarded to large Beltway-oriented consulting firms, populated by former officials with the very same agencies that continue to award them sweetheart deals; all paid for by US. taxpayers and without being bothered with open competition in the marketplace.
Former Senator John McCain was a vocal critic of such practices as these. His voice will be sorely missed.