Follow Us

Campaign contributions help companies get more federal contracts, study finds

by

In 2011, the U.S. federal government awarded $537 billion in private contracts. If U.S. federal contracts were their own national economy, they would be the 21st largest in the world, just behind Sweden ($538 billion). In other words, this is a lot of money.

Much of this money goes to large corporations, and many of these large corporations are also major campaign contributors. Which begs the obvious question: is there any connection between contract awards and contributions?

According to a recent study by St. Louis University political scientist Christopher Witko, the answer is that indeed there is. The more companies give in campaign contributions, the more they get in contracts, on average.

Looking at campaign contributions and contracts from 1979 to 2006, Witko found “a significant relationship between contributions and the receipt of future contracts,” in a paper entitled “Campaign Contributions, Access, and Government Contracting,” published in the Journal of Public Administration Research and Theory.

He estimates that for each additional $201,220 in campaign contributions (one standard deviation of the contributions variable), a company can expect to add 107 additional government contracts over what we would otherwise expect them to obtain, given their history and reputation. Since the average government contract in 2006 (the last year Witko looked at the data) was $49,800, 107 contracts would mean an additional $5.3 million in revenue.

Some quick back-of-the-envelope math: if we assume contractors make 10 percent profit on an average contract, $5.3 million in contracts would be worth $530,000 in profits. That would mean campaign contributions pay back more than double their initial investment.

For those who want to better understand the links between campaign contributions and federal contracts, we remind you that data for both are available on our Influence Explorer website.

Witko’s basic theory is that government contracts give campaign contributions to get access to members of Congress who then “can influence the decision making of public managers,” usually through their oversight roles. It’s certainly a plausible theory, and one that Witko illustrates with case studies from the no-bid contract that Halliburton subsidiary Kellogg, Brown and Root received to develop the Iraq oil infrastructure and the no-bid contracts that Bechtel, Fluor, Shaw Group and CH2M Hill received through the Federal Emergency Management Agency (FEMA) to help clean up New Orleans in the wake of Hurricane Katrina. The data cover 367 firms.

As Witko notes in his article, between 2000 and 2007, the number of no-bid contracts tripled, reaching 207 billion, and as of 2005, roughly 40% of contracts did not arise from full competitive bidding processes. More recently, the Obama administration got into some trouble for a $433 million no-bid contract for the maker of an experimental smallpox vaccine.

Yet the Obama administration also deserves some credit for proposing to require federal contractors to disclose their political spending when they submit contract bids. The proposal, however, met with significant opposition in Congress, much to our chagrin. It has not become law.

Witko’s research offers some insight as to why this kind of disclosure matters. It’s also fodder for the cynical hypothesis about why Congress would oppose this kind of disclosure – because members don’t want it to be known just how much these contractors are buying with their political contributions.