Security Spending Drives Growth

he biggest news in civilian procurement in 2002 came from an agency that didn't exist before the fiscal year began. Officials at the Transportation Security Administration, created in November 2001 to federalize security at the nation's airports, decided quickly to rely on contractors to fulfill the agency's post-Sept. 11 mission, largely because they didn't have a workforce of their own to meet tight deadlines set by Congress. TSA sent billions of dollars to contractors. By the end of fiscal 2002, TSA was managing $8.5 billion worth of contracts, the Transportation Department's inspector general estimated.

Most of the money has been going to well-established vendors. TSA awarded Boeing a contract worth up to $1.4 billion over six years to install and maintain explosive detection systems for baggage. Lockheed Martin won a $105 million contract to train the TSA workforce and a $350 million deal to reconfigure the security screening process. TSA awarded a $248 million telecommunications contract to Unisys. Boeing, Lockheed and Unisys have been among civilian agencies' top contractors for years. Relative newcomer NCS Pearson of Eden Prairie, Minn., now Pearson Government Solutions, charged TSA $700 million to run the hiring program for TSA's screeners and field managers. Each of those major contracts involved dozens of subcontractors.

TSA joins other big boys of civilian spending-NASA and the Energy Department-in relying on contractors to complete central missions. In fact, TSA chief James Loy, a retired Coast Guard admiral, credits contractors with much of the agency's progress. "Without contractors, TSA would not have made it as an agency," Loy said at a conference in Washington in February. "That's a bold statement, but very true."

What makes TSA's reliance on contracting particularly interesting is that the agency was created in large part to federalize a private security-screening workforce deemed ineffective by congressional overseers.

But heavy reliance on contractors has raised concern across civilian agencies. The space shuttle Columbia disaster has focused attention both on NASA and on United Space Alliance, the Lockheed-Boeing partnership that runs the space shuttle program. In April, Energy Secretary Spencer Abraham announced that the University of California's long-standing contract to run the Los Alamos Nuclear Laboratory will be put up for competition in 2005, in part because of "systemic management failures that came to light in 2002." And even at young TSA, the inspector general has said officials need to do more to control contract costs-the Pearson contract was originally valued at $104 million, but TSA let the cost mushroom to $700 million.

Civilian agency spending for prime contracts worth $25,000 or more rose $4.8 billion, or 6.4 percent, from $75.3 billion in fiscal 2001 to $80.1 billion in fiscal 2002. TSA accounts for some of that growth, as does the Coast Guard's award of its Deepwater fleet acquisition program to a Lockheed Martin-Northrop Grumman partnership. Spending by and through the General Services Administration also played a major part in the growth. GSA's prime contracts went up $2.4 billion last year, from $10 billion to $12.4 billion, fueled in large part by increased technology sales.

Three agencies account for 54 percent of civilian contracting-GSA, the Energy Department with $19 billion and NASA with $11.5 billion.

Civilian spending is likely to continue to rise during the Bush administration as the Homeland Security Department gears up its procurement operations and as agencies comply with the administration's goals to let contractors bid on work currently performed by tens of thousands of federal government employees.