Guarded Growth

Procurement spending tops $300 billion in fiscal 2004, but agency budgets are tight.

Any longtime observer of the federal government can become inured to matters of scope and size. The amounts-of money, of people served, of items bought-are huge. Years ago, the late Sen. Everett Dirksen, R-Ill., wryly observed, "A billion here, a billion there, and pretty soon you're talking real money." One might say his numbers are a bit out of date and that real money is now measured in the tens of billions.

If so, the increase in the amounts Uncle Sam is spending on procurement of goods and services does qualify as real money. In fiscal 2004, spending recorded in the Federal Procurement Data System was up some $38 billion, to a total of $328 billion. That increase would meet the updated Dirksen definition-even if it constitutes only a 13 percent rise over 2004.

In a federal budget running at about $2.5 trillion, much of which is devoted to transfer payments to individuals, $328 billion is a big number-and one that exceeds federal payroll expenditures by more than $100 billion. Since 1999, the government's yearly procurement outlays have grown by $146 billion. Of that, more than $100 billion was spent by the Defense Department. Defense by itself accounted for more than $30 billion of the increase from 2003 to 2004. Maintaining a high-tempo war effort does not come cheap.

On our Top 200 contractor list, Halliburton Co., the Army's chief contractor in Iraq, shoots up from No. 11 to No. 6, with $8.2 billion. But the big three remain Lockheed Martin Corp, Boeing Co., and Northrop Grumman Corp. Together, these huge defense, aerospace and technology contractors account for $62 billion of the total. About 20 years ago, when Eagle Eye Publishers Inc. first assembled the Top 200 contractors list for a magazine that was subsequently bought by Government Executive, Lockheed had $5 billion in defense contracts, Martin Marietta $3 billion and Grumman $3 billion.

For all the growth, problems abound at the agencies responsible for most of the spending. The Army, Navy and Air Force all face cost escalation problems that imply large reductions in the weapons systems they can field, with consequences for staffing and missions. Growth in technology spending is tailing off. Budgets everywhere are tight. These and other trends are documented in the pages that follow.