How to Make Billions Off Government Contracts
I formerly worked at a public relations firm where I not only handled local clients, but also worked on national accounts.
This coupled with the fact that I’ve dealt with lawyers has given me an understanding of the calculated fleecing of clients by some firms, where work is invented just to inflate billable hours.
I couldn’t stomach it, so I left.
When I reviewed government documents regarding work the marketing firm Shepardson, Stern & Kaminsky (SS&K) did for Michelle Obama’s “Let’s Move” campaign, I was taken back to my corporate public relations days...
You see, SS&K charged $100,000 to design a slogan and logo for Michelle Obama’s anti-obesity program. This fee included a focus group study.
According to a government document, “SS&K developed 20 designs and then held focus groups to test the effectiveness of the logo and design. They then presented the finalists for the designs to an interagency working group for final design selection.”
Before reading the document, I couldn't imagine how one could charge $100,000 to come up with the slogan “Let’s Move” and for design. But then I came across a Department of Agriculture document, and I started to see how those billable hours could get so high.
For a government facing $17 trillion in debt, do we really need to be spending this kind of money for a focus group to test a feel-good campaign logo that, frankly, tells us what we already know — that feeding children nutritious food and encouraging them to exercise will help alleviate the childhood obesity problem in this country?
What’s worse is the “Let’s Move” campaign is supposed to raise awareness of the Supplemental Nutrition Assistance Program (SNAP); however, the Healthy, Hunger-Free Kids Act Mrs. Obama spearheaded and touts took 13.6% of SNAP funding, reducing the recipients’ monthly benefits.
The Healthy, Hunger Free Kids Act is a $4.5 billion program.
An Illegal Arrangement
The marketing company had to know that anything the First Lady does will garnish earned media, which is free.
Now, that's not to say the program didn’t need any paid marketing... but perhaps it didn't warrant a price tag of $100,000. Maybe they should have used a less expensive firm.
However, Michelle Obama wouldn’t know if another firm would be more reasonable, since this was a no-bid contract. SS&K didn’t have to compete for getting this award, and therefore was not inspired to give a competitive rate.
According to Judicial Watch, this “violates federal contracting rules”:
The arrangement violates federal contracting rules and is even acknowledged by federal officials as an "unauthorized commitment," the records obtained by JW show. As a result the agency that illegally awarded the contract, the U.S. Department of Agriculture (USDA), prepared a "request for ratification of an unauthorized commitment" to legitimize the expenditure. The justification provided to JW as part of the records is that the program was too important and time-sensitive for the official who awarded the no-bid deal to research the rules.
In other words: They didn’t have time to research the rules, because they wanted to get Michelle Obama’s project rolling, so they just went with it.
Exceptions for the Obamas
There were exceptions for the First Lady’s website during the government shutdown as well. The “Let’s Move” website was still up and running, unlike other government websites.
As always, there are exceptions for the Obamas.
In 2009, President Obama said he was going to “eliminate no-bid contracting.” I read this in more than one place, but I had to see it for myself...
Clip after clip shows Obama pledging the same thing, promising “tough new guidelines on government contracting,” so that contractors don’t “run up a bill that is paid for by the American people.” He promised to “strengthen oversight to maximize transparency and accountability,” and asserted, “we need more competition for contracts.”
Office of Management and Budget (OMB), echoed Obama’s statements on the dangers of no-bid contracting:
Noncompetitive contracting, cost-reimbursement contracts, and time-and-materials and labor-hour (T&M/LH) contracts pose special risks of overspending.
Non-competitive contracts present a risk because there is not a direct market mechanism for setting the contract price. Cost-reimbursement contracts and T&M/LH contracts pose a risk because they provide no direct incentive to the contractor for cost control.
Despite the president's promise, no-bid awards rose 9% from 2009, when Obama made the pledge to stop the practice; and in fiscal 2012, federal agencies bestowed $115.2 billion in no-bid contracts.
In addition, Obama pledged to open up more bidding to small businesses — yet contract awards decreased by 4% during his first term.
Congressman Sam Graves, (R-MO) chairman of the House Small Business Committee, is quoted in the Washington Post as stating: “It is unacceptable that noncompetitive awards grew by $9 billion while small business awards shrunk. It’s proof that this administration is paying lip service to small business and competition.’’
A $1.4 Billion Scam
The most talked-about no-bid contract deal involves hiring of the Canadian-based CGI Federal to build the Affordable Care Act website, Healthcare.gov.
I have found conflicting information regarding this, and the government has been tight-lipped when it comes to anyone else vying for the $678 million contract...
My guess is if CGI did compete, the company was likely a shoe-in, since a top executive of the company, Toni Townes-Whitley, went to Princeton with Michelle Obama. The two remain friends. In fact, Townes-Whitely and her family visited with the Obamas during the Christmas season in 2010 (and the pictures I’ve seen look rather cozy).
In addition, CGI Federal has obtained $1.4 billion in federal contracts since 2009. The company is one of 16 contracting companies preapproved for government work.
The Obamas have been criticized for awarding their cronies government contracts, hiring people like Jessica Teal, who was brought on to help design Healthcare.gov. Teal was hired to design for the Obama 2008 Campaign.
Then we have David Cole, who, according to Judicial Watch, was “Deputy Director of New Media in the Obama White House. He was also the data lead for the Obama campaign in Iowa in 2008.” Cole owns a company called Development Seed; he was contracted to work on the Healthcare.gov website as well.
I honestly don’t have a problem with hiring people you feel comfortable working with, especially if they are people or firms you know can deliver.
That said, I don’t fault the Obama Administration for hiring people they trust, as long as friends don’t monopolize the contracts.
However, I also think all companies — cronies or not — should go through the bidding process to ensure the American taxpayers are getting the best deal possible.
CGI Federal did not have a good reputation for technology, but they got the contract anyway. In fact, CGI Group, the parent company of CGI Federal, was fired in September 2012 for failing to meet three years' worth of deadlines among infractions involving their work for Canada’s health care agency.
Time and again we see politicians setting different standards for themselves than for everyone else...
Something my father used to tell me when I was younger reminds me of how the Obama administration operates: “Do as I say, not as I do.”
Voice your values...