The incredible growth in the amount of money spent by the federal government on contractors, with almost no corresponding increase in oversight or management, was highlighted in a recent New York Times article, "In Washington, Contractors Take on Biggest Role Ever." According to the article, the amount spent on federal contracts has doubled since 2000, from $207 billion to $400 billion. The lack of sufficient government oversight has led to a virtual free reign for contractors, who are not answerable to the public and have not been called to account by the federal government.

Federal contractors, while legally obligated to provide a particular service or product, are essentially invisible and unaccountable to the public. Agencies must answer questions from the public and provide documentation on actions if requested under laws like the Freedom of Information Act. But companies, even those accepting hundreds of billions of federal money, are not required to be transparent or responsive to the public in any way. There is no requirement that companies accepting federal contract money also accept any responsibility to be open and forthcoming with the public or Congress.

The New York Times article is the first in a series. The article highlighted how various functions that were previously performed by government are now being outsourced. Some would say this outsourcing is a way to give the impression that government is smaller than it really is, since there are no analyses that identify the number of contractors providing agency functions. Others have argued that "inherently governmental" activities should never be contracted out; however, they are increasingly being done so. Finally, some have noted that people who treasure public service are leaving government to work as a contractor, doing the same work they may have done in government, but being paid considerably more money.

The increasing amount spent on contracts and the diminishing amount of accountability contributed to the effort during the last Congress to pass the Federal Funding Accountability and Transparency Act (P.L. 109-282). The bill, now law, was co-sponsored by Sens. Tom Coburn (R-OK) and Barack Obama (D-IL) and mandates that the Office of Management and Budget (OMB) create and maintain a searchable database of all federal spending by 2008. This new tool will be the first step to bring greater attention to how the government spends billions each year.

While the government website isn't supposed to available until next year, OMB Watch used currently available data to launch a website called FedSpending.org that allows users to search more than $12 trillion of federal spending over six years. The site includes tutorials on using the site that explore many of the issues raised in the Times article, including the growth of federal contracts, the decreasing use of competition, and the intense concentration of federal contract money among a relative few companies.

Using FedSpending.org, OMB Watch found there were 168,317 contractors in 2005, but that just 20 companies accounted for 36 percent of the $382 billion contracted out (see chart below). This concentration of resources in the hands of a few companies raises a number of questions, particularly about accountability.

OMB Watch also found that between 2000 and 2005, there has been a rapid increase in contracts that have not been competed, but instead awarded as sole-source contracts. During that period, sole-source contracts have doubled in size (see graph below). Additionally, the number of contracts that have had open competition but only one bidder has also risen rapidly since 2000.

This may be part of the reason that the House Oversight and Government Reform Committee will be holding four days of hearings, from Feb. 6-9, on waste, fraud, and abuse of taxpayer dollars. The first two hearings will address contracting issues related to the war in Iraq. The third hearing with address contracting issues related to the Department of Homeland Security. The final hearing will focus on fraudulent, abusive, or wasteful pharmaceutical pricing practices that affect federal health programs.

If the trends of increasingly outsourcing government activities and decreasing the amount of oversight such contractors receive are to be reversed, Congress is going to have to use tools such as FedSpending.org and the Coburn-Obama law as first steps to broader reforms. Changes that might help include placing stricter limits on what activities can and can not be outsourced, stronger requirements for competition, contractor requirements for disclosure of compliance with federal laws, and other information.