Onward and Upward

Driven by the war effort and health-related expenditures, federal procurement spending continues to skyrocket.

Right now, the federal government has a couple of big priorities-fighting a war overseas and ensuring the health of citizens here at home-that have one thing in common: They cost a whole lot of money.

As a result, federal procurement spending continues to climb, blowing well past the $400 billion mark in fiscal 2006. The total of $425 billion was nearly 10 percent higher than the year before.

Much of that money goes to the handful of huge contractors that dominate the defense industry. For example, Lockheed Martin Corp.'s total of $33 billion last year was fully 27 percent higher than it received in 2005. The company's total federal contracts are now far more than the entire procurement budget of any civilian agency in the federal government. Northrop Grumman Corp. also got a substantial increase in 2006 contract awards, boosting it to nearly $19 billion, while fellow members of the top five contractors club-Boeing Co., General Dynamics Corp. and Raytheon Co.-saw smaller, yet still substantial, increases.

The war has drawn some new players into the Top 200. One is Blackwater USA, the private security company that's gotten its share of attention for its efforts in Iraq-and nearly $600 million in contract awards in 2006.

Much of the war-related spending is for high-tech gear and equipment and forces on the ground, but some of it is more prosaic. For example, petroleum giants BP and ExxonMobil Corp. took their places among the biggest contractors with a combined total of well over $2 billion in Defense Department contracts last year. Likewise, the Top 200 data provide ample evidence for the notion that an army travels on its stomach. Three South Korean outfits-the Korea Agricultural Cooperative Trading Co. Ltd., Dogog Farm and Kemyong Farm Ltd.-each did hundreds of millions of dollars in business shipping fruits and vegetables to U.S. soldiers posted overseas.

Meanwhile, on the domestic side of the ledger, the effort by the Health and Human Services Department to jump-start the development of technologies for the production of flu vaccines in the United States had an immediate impact on the rankings. In May 2006, HHS awarded contracts totaling more than $1 billion to a series of companies under the initiative, immediately vaulting Glaxo- SmithKline, Novartis AG and Solvay Pharmaceuticals into the ranks of the nation's contractor elite with hundreds of millions of dollars each in awards.

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