The Unelected Government

Consultants reap billions

In November 1978 Senator David Pryor happened to share a taxicab in Washington with two men. Neither recognized the Arkansas Democrat and they began discussing their work as paid consultants to the Federal Government. The topic: How much they should bill a particular agency for their services$12,000 or $25,000? They decided that the bureau would swallow the higher fee without complaint and so, right there in the cab, they settled on $25,000.

That overheard conversation so appalled Pryor that he began studying the use of outside consultants by the Government. Today he is the foremost congressional expert, and critic, on the subject. As chairman of the Senate Subcommittee on Civil Service and General Services, Pryor joined Democratic Congressman Herbert Harris II of Virginia, chairman of the House Subcommittee on Human Resources, to dig up some facts. During the past two weeks they have held joint hearings on the abuses and weaknesses of federal consultant programs. At the same time, the General Accounting Office released a devastating study on the subject. Says Harris: "Millions, perhaps billions, are being wasted."

Consulting for Washington is Big Business, the hearings showed, though just how big is unclear. The GAO report estimates that federal agencies are spending between $1 billion and $2 billion a year on such services, but because there is no clear definition of a "consultant contract," GAO officials admit that the figure could just as easily top $5 billion. There are more than 1,000 firms in the advising business in the Washington area alone, and for years they have been known as the Beltway Bandits, since so many are clustered along the highway that circles the city. Trying to get a grip on their multifarious activities, says Pryor, "is like wrestling with an 800-lb. marshmallow."

Pryor and other critics charge that agencies often sign contracts for useless and overpriced studies, play favorites by hiring former Government staffers as consultants, and employ outsiders as full-time employees in order to get around hiring freezes. Most important, Pryor claims that agencies increasingly are allowing consultants to make important policy decisions. Says he: "It's a really scary situation. They [the consultants] are elected by no one and are accountable to no one." Among the examples of questionable practices and mismanagement detailed in the GAO report: -- The Department of Health, Education and Welfare ordered a survey of college graduates in 1978. The contract was modified seven times, the cost rose from $160,947 to $325,920, and the report is still unfinished. -- The Department of Commerce hired consultants for $25,000 to develop the concept of a "floating department store." According to the GAO report, the deal was made because "this expertise is not available from in-house sources." But the GAO pointed out that when the consultants fluffed the job, the project was completed by employees of the Department of Commerce itself. -- The Department of Education gave a contract for $17,416 to a firm to provide "management" services for a conference sponsored by the agency. But the GAO noted that the management merely provided normal logistical services. -- Three Department of Energy contracts, totaling $478,070, had even less justification for recruiting outside experts. The arrangements were for such clerical services as typing and photostating.

One example of the revolving door between the Government and the contractors is the role of Robert Baran, an electronics engineer. In 1978 Baran left his job in Naval Air Systems Command to go with a consulting firm named Science Applications Inc. (SAI), where he worked on projects that he had first suggested at his old job. Eventually, Baran claims, he got $417,000 worth of defense contracts for SAI by what he calls "the judicious use of hyperbole and exaggeration." Baran even admitted to TIME Correspondent Jonathan Beaty: "I did my part to falsify technical data to suit the objective of expanding and perpetuating the [consulting] program." Baran turned his evidence over to both the GAO and the U.S. Naval Investigative Service. So far, no action has been taken by the Navy, which is still conducting an inquiry into the situation.

The Federal Government, of course, often has a legitimate need to hire consultants for expert advice not available within its own agencies. Outside experts also can provide objectivity in judging programs and analyzing problems.

During last week's hearings, Senators and Congressmen dueled with Langhorne Bond, administrator of the Federal Aviation Administration, who defended his use of consultants. Bond had been criticized by the GAO for not considering other firms before giving a $200,000 contract to the firm of Booz, Allen & Hamilton Inc. to study possible management changes at the agency. Bond pointed out, accurately, that he had not violated any policy or law, and then blasted the GAO itself as a "menace." Said Bond: "They want to create a world in which there is a perfect audit trail for every Government action."

But establishing such controls made sense to the committee. The hearings and the GAO report showed all too clearly that the Government's jerry-built system of hiring consultants badly needs reform. Now that it is budget-cutting season in Washington, Pryor believes the moment is ideal to deflate that 800-lb. marshmallow. Says he: "We could take back maybe $1 billion or $2 billion and not cut out any services at all." In fact, the hearings revealed that the Office of Management and Budget has already decided that all agencies will be required to slash funding for consultant contracts by 15%. Recalling the OMB's failure so far to count all existing contracts, Pryor remains skeptical. "Where are you going to cut it from," he wonders, "when you don't even know how much you're spending?"

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