Pay to Play
For 20 years Steve Charles, the executive VP and co-founder of the ImmixGroup, a provider of enterprise technology and services in the government market, representing more than 150 I.T. vendors, has been helping technology companies sell to the government. Charles says that what really matters in selling to the feds is the ability of the would-be contractor to come up with an application or service that's effective in the public sector. "The other stuff — campaign contributions, who you know — they don't really matter at all," Charles says.
Ideally, perhaps, but there is a virtual revolving door between government contractors and government agencies. Virtually all of the I.T. contractors selling their wares to Defense and the various intelligence agencies contribute heavily to political campaigns, especially if the candidates they're backing are in a position to help them get business.
All of which is entirely legal — as long as it is documented and the contributions are reported.
In 2006, defense contractors contributed $16,308,831 to various candidates, 37% to Democrats and 61% to Republicans, according to the Center for Responsive Politics (CRP), a nonpartisan, nonprofit research group based in Washington that tracks money in politics and its effect on elections and public policy. "Most defense-sector contributions are concentrated on members of the House and Senate Appropriations Defense subcommittees, which allocate federal defense money, and the Armed Service committees, which influence military policy," CRP notes on its Web site. "Contributions as a whole favor Republicans, but many of the top contributors within the sector give to both parties fairly evenly, a reflection of the fact that it is important to have friends in high places in both parties when competing for federal contracts."
Typically, the integrators and I.T. solutions providers doing classified business have in-house lobbyists. Their donations are also often channeled legally through outside lobbying firms — or "stealth rainmakers," as they're sometimes called — that specialize in, or focus heavily on, defense contractors. These include the PMA Group, American Defense International (ADI), and Copeland Lowery Jacquez Denton & White. The largest of these firms, PMA, represents dozens of defense contractors including L-3, CACI and DRS Technologies.
L-3, a self-described "leading provider of comprehensive information and communications products, solutions and services for National Security, the Department of Defense, intelligence agencies and other government customers," gave $360,000 through PMA in 2006. In total, it contributed $600,465, according to CRP.
Meanwhile, DRS, a supplier of integrated products, services and support to military forces, intelligence agencies and prime contractors worldwide, chipped in $480,000; CACI, an information systems and high technology services company that sells to the Defense Department and the intelligence agencies, doled out $80,000, CRP says.
The payback from these lobbying efforts can be enormous. Between 1998 and 2004, the 41 defense contractors that paid fees to PMA collectively won $266 billion in contracts from the Pentagon, according to CRP. That amounts to almost 30% of the dollar value of all contracts awarded by the Department of Defense. Moreover, of this amount, $167 billion — nearly two out of three dollars — was received from contracts that were awarded without "full and open" competition. In fact, PMA clients account for 47% of all such non-competitive contracts — contracts in which the government negotiates with a single contractor — handed out by the Pentagon since 1998.
SAIC, which provides everything from geospatial information and signals intelligence to data mining software and visualization tools to the intelligence community on a mostly classified basis, has its own political action committee (PAC). The SAIC Voluntary Political Action Committee contributed $170,000 to Democrats and $226,750 to Republicans in 2006.
These numbers are dwarfed by contributions from the big integrators. Lockheed Martin, whose Integrated Systems & Solutions (IS&S) division's products are utilized by Defense and various intelligence agencies, contributed more than $2 million in 2006, according to CRP. At $1.4 million, General Dynamics, whose Intelligence Solutions (IS) group is a worldwide developer and integrator of mission solutions for U.S. national intelligence interests and selected foreign intelligence communities, wasn't too far behind, according to CRP.
In 2004, the year before he was apprehended, Randy Cunningham was legally taking in campaign contributions as fast as he could count them. Lockheed and Titan, now part of L-3, each put $15,000 into his campaign kitty. Peregrine Semiconductor, which manufacturers semiconductors used in military satellites, came in with $14,500; Cubic Corp., which provides realistic live combat training systems for military forces as well as virtual training systems, constructive simulation support, force modernization, battle command training and education, and engineering and technical support, donated $12,000. Northrop Grumman, Raytheon, SAIC, L-3, defense and aerospace contractor Alliant Techsystems and United Defense each gave Cunningham between $9,400 and $10,000, according to CRP.
Of course, says Larry Noble, an independent ethics expert for CRP, there's nothing illegal about defense contractors making campaign contributions as long as they remain within the legal limits. And there's nothing illegal about buddying up to government officials who will listen to their sales pitch. The difficulties occur when the acquisition process is short-circuited, and when contractors and government officials conspire to circumvent the rules to benefit themselves.
That, of course, was what happened in the Cunningham case.
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