Biggest companies rake in Recovery Act contracts

In the most significant taxpayer-funded economic recovery plan in history, the rich are getting richer.

During the past five months, 17 of the largest government contractors have won more than $1.6 billion in Recovery Act contracts -- more than all small businesses combined -- according to a new spending analysis conducted by Government Executive. The data, which is updated through July 15, was obtained through USASpending.gov.

The overwhelming majority of these contracts were issued by the Energy Department, primarily for construction, demolition and environmental cleanup projects at its laboratories.

Federal agencies so far have spent nearly $7 billion in contracts under the 2009 American Recovery and Reinvestment Act. But with nearly one-quarter of that money going to large, well-connected federal contractors, small and mid-size firms are worrying they won't reap the level of benefits some envisioned from the stimulus plan.

The analysis shows that 17 companies, each of which ranked among the top 100 recipients of government contracts in fiscal 2008, won more than $1.62 billion in stimulus funds. Those firms earned nearly $68 billion in federal contracts last year, according to new data from Government Executive, scheduled to be released later this month in the Aug. 15 issue of the magazine.

The economic stimulus contracts those 17 large firms won represent more than 23 percent of the roughly $6.9 billion in total Recovery contracts that federal agencies have issued to date.

Comparatively, 1,137 small businesses from all socioeconomic categories combined have received $1.45 billion in Recovery contracts, according to data from the Small Business Administration that is updated through July 24.

The data includes only contracts that federal agencies issue. Recovery contracts that states and local governments issue will not be available on a federal database until October.

Advocates for small businesses argue that stimulus contracts to large corporations do little to help those who are struggling through the deep recession.

"These contracts go against the grain of what the stimulus is all about," said Guy Timberlake, chief executive officer of the American Small Business Coalition. "How much of a stimulus do these companies need?"

The list of Recovery Act awardees Government Executive examined reads like a who's who in federal contracting.

Lockheed Martin Corp., which earned $37.5 billion in federal contracts last year -- the most among all companies -- was issued two task orders by the Housing and Urban Development Department worth nearly $160,000 for staff training programs. HUD officials did not return calls for comment.

URS Corp., which ranked No. 12 with $5.1 billion in contracts last year, won nearly $122 million in stimulus contracts by the Agriculture, Energy and Veterans Affairs departments and the General Services Administration. The contracts are for environmental clean-up activities, dam rehabilitation and construction management.

Hewlett-Packard and Dell Computers, which ranked No. 22 and No. 50, respectively, among federal contractors in 2008, picked up $2.2 million in Recovery Act funds from the Social Security Administration to equip new agency workstations.

"Since Recovery Act funding was used to create additional jobs within Social Security, we believe that meets the president's goals of spurring the economy and creating jobs, as does the purchase of supplies and equipment for these newly hired employees," said SSA spokesman Mark Hinkle.

While agencies governmentwide have turned to large firms to spend economic stimulus funds, Energy is in a class by itself. Under the Recovery Act, the department will spend more than $39 billion during the next two years, a figure greater than its annual appropriation. Among other things, Congress directed Energy to use about $6 billion to accelerate the clean-up of Cold War-era nuclear weapons plants -- highly-specialized work for which few firms are qualified. The department thus far has spent just under $1.4 billion on contracts to industry behemoths, including Bechtel Group Inc. and Battelle Memorial Institute, almost exclusively for the management of their government-owned, commercially run laboratories.

The contracts include demolition projects at the Oak Ridge site in Tennessee, construction and building upgrades at Lawrence Berkeley National Laboratory on the grounds of the University of California Berkeley, and a massive environmental cleanup of the Idaho National Laboratory site.

In total, Energy has spent $3.6 billion through Recovery Act contracts, but only $62 million has gone to small businesses in prime contracts.

Most of Energy's awards were issued through cost-plus, award-fee contracts, which President Obama has described as risky and prone to abuse. The Recovery Act encourages agencies to use fixed-price contracts whenever possible.

A government source familiar with Energy's contracting procedures said the department wants its prime contractors to be a "one-stop-shop for all the things they are going to need, whether it's construction or outfitting the equipment inside the lab or getting people to mow the lawn and pave the parking lot. From a prime contracting perspective, it is virtually impossible for a small business to win a contract to run these labs."

Energy Department officials did not respond to repeated requests for comment about their Recovery Act contracts. Administration officials also declined to comment.

Most other federal agencies are performing considerably better in reaching small business contracting goals, said Joseph Jordan, associate administrator of government contracting and business development at SBA.

To date, nearly 21 percent of all Recovery contracts have gone to small businesses and those figures have been trending up every month, Jordan said. The Recovery Act encourages agencies to award at least 23 percent of their contracts to small firms, the same as the government's annual procurement goals.

Small disadvantaged businesses, including 8(a) firms, have led the way with $715 million in stimulus contracts. Historically Underutilized Business Zone firms have taken in $430 million; women-owned small businesses have brought in $275 million; and service-disabled veteran-owned small businesses have won $146 million in contracts, he said.

"I think small businesses are fundamental to any recovery and creating and retaining jobs," Jordan said. "We believe getting these contracts in the hands of small businesses is vitally important."

But agencies are not backing away from their contracts to large firms.

The Federal Aviation Administration, for example, paid $37 million to Jacobs Engineering Group Inc. to modernize the infrastructure at 18 of the agency's 21 air route traffic control centers. The ceiling for the contract is approximately $400 million.

"The projects that make up the contract are located across 17 states, so the award of a single contract to a vendor with national construction capabilities is expected with this type of expansive work," the Transportation Department said in a statement. "Jacobs also awards and oversees subcontracts at the local level to perform some of the work. The Jacobs contract is appropriate for stimulus-funded projects because it creates construction-type jobs nationally."

The Environmental Protection Agency, meanwhile, has issued $40 million in Recovery Act contracts to Ch2m Hill Companies and $54,000 to Aecom Technology, all for the Superfund remediation program.

As was the case with many of the contracts Government Executive examined, EPA spent these funds through pre-existing contracts, guaranteeing that no other firm would have an opportunity to bid on the work. Using such contracts, however, allows agencies to spend funds quickly and with fewer resources, which also are goals of the Recovery Act.

"All of the projects chosen are expected to create or maintain jobs regardless of whether the funds are awarded to a large business or a socioeconomic firm," says spokeswoman Enesta Jones. "EPA's plan envisions using a mix of contracts with large and small contractors, including women-owned; small, disadvantaged and service-disabled veteran-owned businesses."

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