Contracting as an economic engine

Buylines | Policies, strategies and trends to watch

The federal government spends more than
$450 billion a year on the purchase of goods
and services. As a result, it has properly
drawn increasing attention from a Congress
intent on ensuring the money is spent
responsibly, the government gets value for
the money it spends and contractors ethically
deliver what they promise. As the
Government Accountability Office recently
reported with regard to major weapons systems
contracts, the biggest stumbling blocks
to the first goal are stark workforce limitations
and other
internal governmental

In terms of the second,
important goal,
report after report has concluded that, in the
vast majority of cases, contractors perform
both well and ethically.

Unfortunately, the broader economic
value generated through the government's
increased partnership with the private sector
generates little attention, while those occasional
abuses dominate the headlines. The
$450 billion spent annually on goods and
services directly produces and supports hundreds
of thousands of jobs across the nation.

The total economic impact of those expenditures
is well into the millions of jobs. In fact,
while some have cited a claim by New York
University's Paul Light that there are 8 million
contractors working in support of the
government as a reason to oppose contracting,
Light's researchers acknowledge that his
figure includes jobs directly supporting the
government and the broader, ancillary
employment and economic impact generated
by the government's direct expenditures. It is thus a reason to celebrate the economic
value of contracting.

Rep. Kirsten Gillibrand (D-N.Y.) made
this connection when she hosted a seminar
in March for more than 200 companies in
her upstate district, which receives more
than $1 billion in federal contracts. A number
of other members of Congress are also
working to make their constituents aware of
the opportunities ? and challenges ? government
contracting presents. After all, the
money might be appropriated in
Washington, but the work under those contracts
is performed in virtually every state
and congressional district.

The government contracting industry is
unlike any other in the country. Indeed, few
industries are so highly regulated and
subject to so many audit and other
unique oversight regimes. To a large
extent, this is understandable because the
bills are paid using taxpayer dollars.

But none of that obviates the importance
of recognizing the enormous,
positive economic impact this industry
creates. It is a basic tenet of economics
that private-sector development generates
more overall value and sustainable growth
than does government itself. Moreover,
the government pays no corporate income,
sales, real estate or
other taxes.

The mere existence
of or potential
for economic
growth is not in
itself a reason to advocate for expanding federal
contracting. There is a balance that
must be achieved. But the economics are an
important factor that must be considered.
Properly executed, federal contracting is a
win for the government and for local and
regional economies. With all the talk about
our nation's economic struggles and the worries
about jobs, this is an engine that can,
and does, help significantly. That is something
well worth bearing in mind.

Stan Soloway ( is president
and chief executive officer of the
Professional Services Council.

About the Author

Stan Soloway is a former deputy undersecretary of Defense and former president and chief executive officer of the Professional Services Council. He is now the CEO of Celero Strategies.

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