The great contracting scandal.

I

A little-known truth about Washington has become more evident through recent news about three seemingly unrelated subjects: Iraq, Katrina, and the nation's richest counties.

Let's start with the last first. America's three richest counties are all in Washington's suburbs. The Wall Street Journal offers a two-word explanation for this phenomenon: government contractors. They have become wealthy courtesy of the United States taxpayer, and these counties are where they live.

As for how they became wealthy, two words again go a long way towards telling the story: Iraq and Katrina. Enormous sums have been appropriated by Congress for reconstruction in Iraq and Louisiana and Mississippi. Yet one report after another has described how little evidence there is on the ground that this money has accomplished its mission. Where, then, is the money? You guessed it. A very considerable portion of it is lining the pockets of those contractors.

Clever contractors have learned to promise anything to get a government contract. They know that government contracting officers are under pressure from their top administrators and from the White House and Congress to at least create the appearance of action. This is exactly what signing a contract does.

The contracting officers are relatively easy marks. After all, they are paid an average of only $57,000 a year. But their bosses, the congressmen and the White House, are also too easy to satisfy, because they are so eager for the appearance of activity. And all too often reporters are gulled into thinking that appropriations and contracts are in themselves action and fail to follow up to see if what's supposed to get done actually gets done.

Contracting out also satisfies conservative ideologues who do not want to face the fact that adding functions to government may require additional employees. If the work is done under contract, the people who do it are employees of the contractors, not of the government. Thus the IRS is now hiring outside collection agencies to collect back taxes. This despite the fact that the IRS knows that adding employees of its own would do the job for considerably less--three cents a dollar collected, compared to 22 to 24 cents for the contractors--according to David Cay Johnston of The New York Times.

II

The Clinton administration went in for a bit of this sort of thing. Boasting as they did of downsizing the government, they were not averse to using contracts to hide additional personnel. But the Clintonites were pikers compared to the Bush administration, under which contracting out has exploded, not just to repair damage by Katrina and the war in Iraq but also in a giant new field of government spending: homeland security.

The latest example of using contracts for homeland security is to build a "virtual fence" along our borders. And here it is interesting to see where the administration is looking for help. The headline over an article by Eric Lipton of The New York Times tells the story: "Seeking to Control Borders, Bush Turns to Big Military Contractors."

Lipton identifies these contractors as Lockheed Martin, Raytheon, and Northrup Grumman. This illustrates the tendency of government officials to deal with familiar faces. They seem to feel that well-known names endow the contracting transactions with an air of respectability--even though the contractor may be, like Halliburton, known for its ability to separate large sums from taxpayers in the form of overbilling for services rendered.

III

The main justification for contracts is that the contractor can do something the government can't. Sometimes this means supplying personnel with skills and talent not readily available in the agency doing the contracting. But what are we to make of this recent headline from The New York Times: "Former Antiterror Officials Find Industry Pays Better?"

The reporter--again Eric Lipton--reveals that at least 90 former officials of the Department of Homeland Security now work for the agency's contractors. They include former secretary Tom Ridge, former deputy secretary James Loy, and three former undersecretaries. If the government merely gets employees from the contracting agencies to do the work, what does the government gain? Indeed, it seems to lose. Now it's paying the same people higher salaries.

IV

Back to the fellows in the rich Washington suburbs. How do they get the money that has yet to reach New Orleans? Once the contract is signed, money is available to pay the salaries of the contractor's employees, but that does not mean anything is happening in New Orleans. The contract may subcontract the work or parts of it to subcontractors, who may in turn subcontract their share to other subcontractors. Creating this chain may mean a long time will elapse before some hapless Mexicans actually begin clearing the site.

All this does not mean that all government contractors are bad. Some actually do a better job for less money than the government could do. But congressional overseers and reporters should learn to make sure that that really is the case and that the contract is not like the one that the IRS is signing for back-tax collection.