The New York Times
                          September 30, 2004 Thursday
                              Late Edition - Final
SECTION: Section C; Column 5; Business/Financial Desk; Pg. 1
LENGTH: 875 words
HEADLINE: Pentagon Spends Without Bids, A Study Finds
   More than 40 percent of Pentagon business, a total of $362 billion, has been
awarded on a no-bid basis over the last six years, according to a report issued
Wednesday that showed that the biggest companies won the bulk of their contracts
without going through a competitive process.
      The nation's largest military contractor, the Lockheed Martin Corporation,
received the most Pentagon business on a noncompetitive basis. Seventy-four
percent of Lockheed's $94 billion in Pentagon contracts received since fiscal
1998 was awarded without competition, according to the report, which was written
by the Center for Public Integrity, a Washington nonprofit group that studied
2.2 million Pentagon contracts worth a collective $900 billion.
      ''Competitive bidding at the Pentagon happens less often than we think,
and the no-bid controversy surrounding Halliburton in Iraq actually is,
unfortunately, not an aberration,'' said Charles Lewis, the center's executive
director. Mr. Lewis's organization was one of the first to study contracts won
by Halliburton and other companies in Iraq and Afghanistan, and today's report
grew out of that earlier work.
      At Boeing, the nation's second-largest contractor, 60 percent of the $81
billion in Pentagon contracts since 1998 was awarded without competition, as was
67 percent at the No. 3 contractor, the Raytheon Company, which received $40
billion in contracts over the same period. Of the nation's top 10 military
contractors, 9 won more than half of their Pentagon contract dollars through
noncompetitive awards.
      Thomas C. Greer, a Lockheed spokesman, said that because of ''the
substantial investment and lengthy development cycles, followed by limited
annual production quantities,'' competitive bidding for Pentagon contracts is
often not cost effective. Nevertheless, ''It is important to note that
sole-source awards still mandate contractor performance,'' Mr. Greer said.
      In addition, the report said that because of military industry
consolidation, 80 percent of all Pentagon contracting dollars were won by the
top 1 percent of all contractors over the six-year period, which ran from Oct.
1, 1997, to Sept. 30, 2003. The report found that the Pentagon has become
increasingly dependent on military contractors for work that had been done by
soldiers and Pentagon civilian employees.
      Currently, for instance, half of the military budget is outsourced to
contractors, while oversight of these contracts has declined, the report said.
The Pentagon has reduced the number of government officials who supervise
contractors, instead hiring contractors to oversee and manage others, according
to the report. The Pentagon hired a contractor to determine how many contractors
it had employed, the report said.
      ''There is an even more fundamental problem underscoring our entire
investigation: the stunning lack of accountability,'' said Mr. Lewis. ''This is
a Keystone Kop situation where no one is monitoring the monitors. This is a very
serious situation, and the Pentagon is treating it like a hair in the soup.''
      Glenn Flood, a Pentagon spokesman, said that the center's ''accusations
have been made before.'' Mr. Flood said that much of the Pentagon's business is
so specialized that it is impossible to find more than one supplier. Industry
consolidation has also accelerated the noncompetitive trend, he said.
      ''Where do you go if you want or need a sub or a joint-strike fighter?''
said Mr. Flood. ''The mergers of the 1980's have taken their toll. You have only
five or six major contractors. Where do you go?''
      But the center's report said that the great growth in outsourcing is
taking place in providing services, not in the production of weapon systems.
This includes items like the interrogations at Abu Ghraib prison in Baghdad,
helping to write the Bush administration's military budget and devising
strategic plans. At the same time, military contractors have become skilled at
Washington politics and in providing jobs for Pentagon officials after they
leave the government.
      The leading recipient of campaign donations from military contractors has
been President Bush, with $5.4 million from the industry since 1998. Military
contractors, however, began stepping up contributions to Senator John Kerry
after he won the Iowa caucuses, the report said. Before the caucuses, Senator
Kerry had received $332,000 from the industry. He has received just under $2
million since then. The Republican Party has received $62 million from the
industry since 1998, compared to $24 million for the Democratic Party, according
to the report.
      Richard L. Aboulafia, a military industry analyst at the Teal Group, a
consulting firm in Fairfax, Va., said that Pentagon outsourcing is often neither
the cheapest nor the most efficient approach.
      ''I think it is a time for a comprehensive rethink of this trend,'' Mr.
Aboulafia said. ''A lot of it is done to produce short-term numbers that reduce
the size of government, and that always is pleasing to voters. But I'm not sure
it's the best strategic decision. There's a terrific emphasis on cutting the
numbers, and to do that, you need outsourcing to make the numbers look good. But
how much of that is just window dressing?''
GRAPHIC: Photo: The biggest military contractors got most of their business
without competitive bidding, a new report says. (Photo by Markus
Schreiber/Associated Press)(pg. C6)Chart: ''Inside Track''Many military
contractors have gotten work from the Pentagon without having to bid against
other companies. Here are the largest contractors and the percentage of their
military business that was noncompetitive from Oct. 1, 1997, to Sept. 30,
2003.Lockheed MartinNONCOMPETITIVE CONTRACTS (Figures in billions): $69.7TOTAL
MILITARY CONTRACTS: $94.1Noncompetitive contracts as percentage of total:
CONTRACTS: 81.6Noncompetitive contracts as percentage of total:
60RaytheonNONCOMPETITIVE CONTRACTS (Figures in billions): 26.5TOTAL MILITARY
CONTRACTS: 39.9Noncompetitive contracts as percentage of total: 67Northrop
CONTRACTS: 33.8Noncompetitive contracts as percentage of total: 59General
CONTRACTS: 33.3Noncompetitive contracts as percentage of total: 69United
TechnologiesNONCOMPETITIVE CONTRACTS (Figures in billions): 17.1TOTAL MILITARY
CONTRACTS: 18.0Noncompetitive contracts as percentage of total: 95General
CONTRACTS: 10.6Noncompetitive contracts as percentage of total: 88Science
Applications Int'lNONCOMPETITIVE CONTRACTS (Figures in billions): 0.7TOTAL
MILITARY CONTRACTS: 10.6Noncompetitive contracts as percentage of total:
6Carlyle GroupNONCOMPETITIVE CONTRACTS (Figures in billions): 5.6TOTAL MILITARY
CONTRACTS: 9.3Noncompetitive contracts as percentage of total: 60Newport News
ShipbuildingNONCOMPETITIVE CONTRACTS (Figures in billions): 8.7TOTAL MILITARY
CONTRACTS: 8.9Noncompetitive contracts as percentage of total: 98(Source by
Center for Public Integrity)(pg. C6)
LOAD-DATE: September 30, 2004