Civilian Agency Contract Spending Reaches Record High in Fiscal 2020

Civilian agencies’ contract spending hit a record high of $228 billion in fiscal 2020, an increase of 17% ($33.5 billion) from 2019. The surge in spending is mainly due to the novel coronavirus pandemic. 

The Health and Human Services, Veterans Affairs and Energy departments drove the increase in spending, Bloomberg Government said in a report released on Wednesday following the close of the fiscal year on September 30. Of the $228 billion, 26% or $59.4 billion went to small businesses, a $6.5 billion increase from fiscal 2019. 

“In previous years there’s been single digit jumps, so this is a huge jump compared to previous years,” Robert Levinson, senior defense analyst at Bloomberg Government, told Government Executive on Thursday. He noted that there is a 90-day delay for the Defense Department’s contract spending for security purposes and there is also classified spending that will never be released.

HHS, which spent $41.2 billion in fiscal 2020 in contract obligations, accounted for 44% of the $33.5 billion in overall increased civilian contract spending. The majority of HHS’ spending was for vaccines, research, ventilators and other pandemic-related efforts. Some of these contracts, such as for a public relations campaign to “inspire hope” about the pandemic and new data reporting system, have drawn concern from Democratic lawmakers. 

VA's spending in contracts totaled $33.1 billion in fiscal 2020. The majority of the VA’s increase in spending from fiscal 2019 was due to “community care.” This could “have been driven by...treatment for veterans in their communities for COVID,” said Levinson. 

As for the Energy Department, its $35.4 billion in contracts predominantly went to two nuclear research labs. He noted that the labs have “super computers” doing coronavirus research and funding could have also contributed to “revamping the nuclear arsenal.”

Bloomberg’s report also says the Small Business Administration is notable because its increase in contract spending is mainly due to an agreement with the consulting firm RER Solutions Inc. to help process disaster loans during the pandemic, which came under scrutiny by the SBA inspector general and Congress. 

SBA’s contracting spending increased from $177 million in fiscal 2019 to over $1.5 billion in fiscal 2020. SBA Administrator Jovita Carranza “on April 17 approved raising the RER’s original $10 million contract to $600 million—without competitive bidding—as millions of [Economic Injury Disaster Loan] applications flooded in,” The Wall Street Journal reported on August 30. 

“If Congress passes additional assistance, contracts of this type may increase,” said the report. 

Health care company McKesson Corp. was the top contractor (as has been the case since at least fiscal 2015) with about $6.8 billion in contract obligations, and biotechnology company Moderna was the top small business contractor, with about $1 billion in contract obligations. Moderna has one of the leading coronavirus vaccine candidates so far. 

Bloomberg Government didn’t examine too closely the types of contracts that were awarded, but Levinson said that HHS’ four big contracts for vaccine-related matters were “other transaction authority contracts,” which use procurement flexibilities outside of the traditional system. These have been increasing each year, as referenced in its report on federal contracting in fiscal 2019. 

Another long-term trend is that “the Trump administration has tried to cut civilian agency spending every year in its budget requests,” he said. “Congress has basically pushed back on that” and, as a result, contract spending has gone up. 

Update: This article has been updated to note that the VA's increase in spending was due to community care.