Aiming at Government and Hitting Big Business
By Phil Mattera, Dirt Diggers Digest
The tea party caucus calling the shots in the U.S. House of
Representative is gloating about having shut down the federal government while
simultaneously claiming that technical problems in the rollout of the Obamacare
health exchanges are a sign of the failure of the public sector. On both fronts
the truth is a lot more complicated.
What the critics of big government tend to overlook is that the
public and private sectors are so intertwined that it is difficult to tell
where one ends and the other begins. The tea party crowd may have no concern
about the hardships they are imposing on 800,000 furloughed federal workers, yet their
shutdown is also threatening the well-being of the much larger number of
contractor employees—once estimated at more than 7 million—who
often work alongside those directly on the federal payrolls.
It’s not only a labor issue. The employers of those contract
workers are also being affected, some immediately and many more if the shutdown
lasts more than a few days. The federal departments and agencies covered by the
USASpending website together accounted for some $517 billion in
contract spending in FY2012.
The Defense Department, of course, was responsible for the bulk
of that total ($361 billion), but other departments and agencies also make
extensive use of contractors for goods and services; for example, Energy ($25
billion), HHS ($19 billion), Veterans Affairs ($17 billion), NASA ($15 billion)
and Homeland Security ($12 billion). Another 15 each spent $1 billion or more.
Many large corporations eat heartily at this contracting trough.
Businessweek reminds us that
some depend on the feds for more than half of their revenue: Lockheed Martin
(80 percent), Booz Allen Hamilton (71 percent) and Raytheon (59 percent), for
instance. A Bloomberg story entitled
“Businesses Often Opposed to Government Beg for Its Return,” quotes someone
from the Aerospace Industries Alliance urging a resolution of the shutdown
standoff: “You can’t run a business this way. The uncertainty is killing us.”
Despite the wrong-headed rhetoric on the Right about a
government takeover of healthcare, the Affordable Care Act is also an example
of the incestuous relationship between the public and private sectors. This
begins, of course, with the fact that the ACA is creating millions of new
customers for private insurance companies (while also extending Medicaid
coverage to more lower-income families).
At the same time, a great deal of the administration of the ACA
itself has been placed in the hands of contractors. The blame for the snafus in
the new online healthcare exchanges rests with the companies hired to build the
websites and the related call centers.
As I wrote about last year, the exchanges have
been a goldmine for contractors such as Accenture, Xerox and Maximus.
Accenture got a $359 million contract just for the
California exchange while Maximus got awards from states such as Minnesota and
Connecticut as well as the District of Columbia.
The involvement of companies such as Maximus and Accenture do
not bode well for the future of the exchanges. Both companies were involved in
a major scandal involving the creation of a $900 million social services
enrollment system in Texas, while Maximus has been at the center of contracting
controversies in numerous states. In 2007 it had to pay $30.5 million to resolve Medicaid fraud charges related to
its contract with the District of Columbia.
Another tainted company, Serco, got a contract worth up to $1.2 billion
to help determine which users of the healthcare exchanges are eligible for
federal subsidies. The firm’s parent Serco Group is being investigated by
British authorities for irregularities relating to its contract
to monitor offenders on parole and individuals released on bail. It was
recently reported that the UK’s Serious Fraud
Office is looking into allegations that some of the people Serco was charging
the government for electronically tagging were either still in prison or dead.
What is commonly seen as a crisis of government is actually a
pair of crises for the private sector — one in which the corporations feeding
off the public sector face an interruption in their revenue stream and another
in which some of those contractors failed to deliver, at least initially, on a
high-profile project. The tea party contingent needs to face the fact that it
is now impossible to take a swipe at Big Government without hitting Big
Business.
