cronyism? What cronyism?
Source Eubulides
Date 03/11/07/10:47
No 'Cronyism' in Iraq
By Steven Kelman
Thursday, November 6, 2003

There has been a series of allegations and innuendos recently to the
effect that government contracts for work in Iraq and Afghanistan are
being awarded in an atmosphere redolent with the "stench of political
favoritism and cronyism," to use the description in a report put out by
the Center for Public Integrity on campaign contributions by companies
doing work in those two countries.

One would be hard-pressed to discover anyone with a working knowledge of
how federal contracts are awarded -- whether a career civil servant
working on procurement or an independent academic expert -- who doesn't
regard these allegations as being somewhere between highly improbable and
utterly absurd.

The premise of the accusations is completely contrary to the way
government contracting works, both in theory and in practice. Most
contract award decisions are made by career civil servants, with no
involvement by political appointees or elected officials. In some
agencies, the "source selection official" (final decision-maker) on large
contracts may be a political appointee, but such decisions are preceded by
such a torrent of evaluation and other backup material prepared by career
civil servants that it would be difficult to change a decision from the
one indicated by the career employees' evaluation.

Having served as a senior procurement policymaker in the Clinton
administration, I found these charges (for which no direct evidence has
been provided) implausible. To assure myself I wasn't being naive, I asked
two colleagues, each with 25 years-plus experience as career civil
servants in contracting (and both now out of government), whether they
ever ran into situations where a political appointee tried to get work
awarded to a political supporter or crony. "Never did any senior official
put pressure on me to give a contract to a particular firm," answered one.
The other said: "This did happen to me once in the early '70s. The net
effect, as could be expected, was that this 'friend' lost any chance of
winning fair and square. In other words, the system recoiled and prevented
this firm from even being considered." Certainly government sometimes
makes poor contracting decisions, but they're generally because of
sloppiness or other human failings, not political interference.

Many people are also under the impression that contractors take the
government to the cleaners. In fact, government keeps a watchful eye on
contractor profits -- and government work has low profit margins compared
with the commercial work the same companies perform. Look at the annual
reports of information technology companies with extensive government and
nongovernment business, such as EDS Corp. or Computer Sciences Corp. You
will see that margins for their government customers are regularly below
those for commercial ones. As for the much-maligned Halliburton, a few
days ago the company disclosed, as part of its third-quarter earnings
report, operating income from its Iraq contracts of $34 million on revenue
of $900 million -- a return on sales of 3.7 percent, hardly the stuff of

It is legitimate to ask why these contractors gave money to political
campaigns if not to influence contract awards. First, of course, companies
have interests in numerous political battles whose outcomes are determined
by elected officials, battles involving tax, trade and regulatory and
economic policy -- and having nothing to do with contract awards. Even if
General Electric (the largest contributor on the Center for Public
Integrity's list) had no government contracts -- and in fact, government
work is only a small fraction of GE's business -- it would have ample
reason to influence congressional or presidential decisions.

Second, though campaign contributions have no effect on decisions about
who gets a contract, decisions about whether to appropriate money to one
project as opposed to another are made by elected officials and influenced
by political appointees, and these can affect the prospects of companies
that already hold contracts or are well-positioned to win them, in areas
that the appropriations fund. So contractors working for the U.S.
Education Department's direct-loan program for college students indeed
lobby against the program's being eliminated, and contractors working on
the Joint Strike Fighter lobby to seek more funds for that plane.

The whiff of scandal manufactured around contracting for Iraq obviously
has been part of the political battle against the administration's
policies there (by the way, I count myself as rather unsympathetic to
these policies). But this political campaign has created extensive
collateral damage. It undermines public trust in public institutions, for
reasons that have no basis in fact. It insults the career civil servants
who run our procurement system.

Perhaps most tragically, it could cause mismanagement of the procurement
system. Over the past decade we have tried to make procurement more
oriented toward delivering mission results for agencies and taxpayers,
rather than focusing on compliance with detailed bureaucratic process
requirements. The charges of Iraq cronyism encourage the system to revert
to wasting time, energy and people on redundant, unnecessary rules to
document the nonexistence of a nonproblem.

If Iraqi contracting fails, it will be because of poorly structured
contracts or lack of good contract management -- not because of cronyism
in the awarding process. By taking the attention of the procurement system
away from necessary attention to the structuring and management of
contracts, the current exercise in barking up the wrong tree threatens the
wise expenditure of taxpayer dollars the critics state they seek to

The writer is a professor of public management at Harvard University. He
served from 1993 to 1997 as administrator of the Office of Federal
Procurement Policy.

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