The Floodgates Open

Agencies unleash a torrent of spending.

This was supposed to be the year federal contract spending started to dry up. A year ago, Barack Obama was talking about quickly pulling U.S. troops out of Iraq and drawing down the defense budget. John McCain pledged to hit the "pause" button on domestic spending and launch an effort to cut out waste.

But behind the scenes of the presidential campaign, something else was going on. The wars in Iraq and Afghanistan continued to consume huge amounts of resources, and contracts issued since the beginning of those conflicts worked their way through the pipeline. At the same time, the U.S. economy sank deeper and deeper into recession, leading to both a financial sector bailout and a $787 billion economic stimulus package earlier this year. Those moves are destined to drive federal contract purchases even higher in the years ahead.

If so, the spending will be rising from new heights. Agency purchases totaled $515.3 billion in fiscal 2008, according to General Services Administration data analyzed for Government Executive by Eagle Eye Publishers Inc. of Fairfax, Va. That's up from $436.4 billion in 2007-an almost unprecedented jump of 18 percent in a single year.

More than half the $79 billion boost in spending came from the Army alone, as the service struggled to support the surge of troops in Iraq and maintain operations in Afghanistan. It's a telling sign when a company like FLIR Systems Inc., a maker of military night-vision systems, goes from $249 million in contracts in fiscal 2007 to $542 million in 2008.

But the spending increases aren't restricted to the Defense Department. Civilian agencies issued more than $137 billion in contract awards in fiscal 2008, up from $121 billion the previous year. Information technology spending, thought to be dormant at the end of the Bush administration, rose almost 9 percent, from just under $58 billion to more than $63 billion.

And while companies like FLIR Systems are coming out of nowhere to join the government's contracting elite, the rich are getting richer, too. All the top firms increased their contract awards in 2008, some by large margins. Northrop Grumman Corp., for example, held steady in the rankings, maintaining its hold on the No. 3 slot. But its contract awards went up nearly 30 percent, from $19.8 billion to $25.7 billion. BAE Systems moved up two slots to No. 4, nearly doubling its revenues from $8.8 billion to $16.6 billion.

The increased spending has had a dramatic effect on the procurement landscape. The club of contractors that took home more than $1 billion a year in federal money used to be quite exclusive. Now it has no fewer than 58 members. In fact, to even make the Top 200 list, a company must have well over $200 million in prime federal contracts. With Uncle Sam's spending spree just beginning, that number surely is going nowhere but up.

Click here for the top 200 federal contractors.

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