Waste of the Day: No-Bid Contracts Jeopardize Taxpayer Funds

Topline: Over 29% of federal contracts in fiscal year 2024 were noncompetitive awards, according to federal disclosures reviewed by OpenTheBooks.com.

Why so many no-bid contracts?

Key facts: Government contracts are typically subject to a competitive bidding process. The government announces that it needs a good or service, and several companies submit proposals to see who can provide it at the lowest reasonable price and best quality.

The federal government did not solicit bids for $221.2 billion of the $753.8 billion of contracts it awarded last year.

Nearly all of the noncompetitive awards came from the Department of Defense. The DOD did not accept bids for $187 billion of the $445 billion (42%) of contracts it awarded.

When signing a no-bid contract, federal workers must provide a written explanation of why the bidding process was not used.

Background: No-bid contracts are often awarded to save time and meet urgent needs, but a rushed process can hurt the public even more.

David Williams, president of the Taxpayers Protection Alliance, once called no-bid contracts the “essence of corruption” in an editorial in The Hill, noting that military no-bid spending increased almost every year between 2008 and 2016.

A particularly egregious example

In 2005, the Federal Emergency Management Agency signed four no-bid contracts worth $400 million to speed up help for victims of Hurricane Katrina. 

The four contractors took advantage and raised the price to $3 billion. FEMA did not ask for any more bids and lost money that could have been used to rebuild houses or provide other relief.

The Associated Press reported that “FEMA did not always properly review the invoices submitted by the four companies, exposing taxpayers to significant waste and fraud.”

No-bid contracts can also be awarded as a “sole source” agreement, when a product is specialized and only one company can provide it.

Mergers within the defense industry have decreased competition and made sole source agreements more common.. Today’s so-called “Big Five” defense contractors — which accounted for 16% of the Pentagon’s contract spending last year — used to be 51 separate companies.

Search all federal, state and local government salaries and vendor spending with the AI search bot, Benjamin, at OpenTheBooks.com. 

Summary: Private businesses safeguard their revenue by making the cheapest possible purchases without sacrificing quality. There is no reason the government cannot do the same.

The #WasteOfTheDay is brought to you by the forensic auditors at OpenTheBooks.com.

This article was originally published by RCI and made available via RealClearWire.