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Northern Virginia’s Terror Economy Unlikely to Slip Under Next President, Congress

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reported last week

For Northern Virginia, economic anxiety stems from the ballot box and not Wall Street. “There is a wait-and-see attitude as the Bush administration winds down its final year,” said Gerald Gordon, director of the Fairfax County Economic Development Authority. “There could be a dramatic philosophical shift in the new administration.”

Image has not been found. URL: http://www.washingtonindependent.com/wp-content/uploads/2008/09/nationalsecurity1-150x150.jpgIllustration by: Matt Mahurin

Gordon said he is worried about the imminent retirement of two influential Virginia Republicans, Sen. John Warner, former chairman of the Senate Armed Services Committee, and Rep. Tom Davis, the former chairman of the House Committee on Oversight and Government Reform. Warner and Davis leave a Democratic Congress that is increasingly critical of post-9/11 government contracting.

Ultimately, however, Fairfax and Arlington probably don’t need to panic. Federal contracting experts say it is possible that the IT contracting economy may slow down. But, these experts say, the federal government is now so dependent on the companies’ intelligence-gathering and analyzing abilities that it is likely not to be reversed by a Congress with a larger Democratic majority or a new president.

“There is too much information asymmetry right now,” said Daniel Guttman, a professor at John Hopkins University, and the author of “Shadow Government,” a history of government contracting. “The reality is that the IT officials know more than the government supposed to provide oversight on them.”

Stephen Fuller, an economist at Arlington’s George Mason University, says that the growth rate in contracting over the next five years will be more modest than between 2002 and 2007. “The easy money is gone,” Fuller said. “And there’s no sense it’s coming back unless there is another major catastrophic event.”

But, Fuller emphasized, even without another event like 9/11, the money that the Dept. of Homeland Security and other programs dole out to contractors for surveillance, telecommunications and computer work won’t be decreased either. “I’ve tracked contracting for 28 years and it’s gone down one year in Northern Virginia,” he said.

Indeed, the efforts made by Congress are not to scale back private contracting as much as to correct the most egregious abuses in the federal contracting system. For example, in mid-March the Accountability in Contracting Act easily passed the House. It seeks to limit the amount of time a contractor has to complete the work of a no-bid contract.

Lawmakers are hoping this modest step ends arrangements like the one between the Dept. of Homeland Security and the Fairfax County-based IT, Booz Allen Hamilton. In 2003 DHS gave the company a $2-million no-bid contract to develop an intelligence-gathering program. By late 2005, Booz Allen still hadn’t finished the program — so they received a second no-bid contract, this time worth to complete it.

But even a withdrawal probably won’t disrupt the post-9/11 counterterrorism programs run by IT’s.

One notable feature of the Accountability in Contracting Act is its Senate sponsor — Sen. Barack Obama, the Democratic presidential candidate. In fact, the Illinois Democrat has written a series of bills equivalent to the reform efforts that passed the House oversight committee in March.

These include ensuring that all contracts worth more than $25,000 are subject to competitive bidding. Obama is also calling for the creation of a public database of all waste, fraud and abuse committed by federal contractors.

Guttman of Johns Hopkins doubts, however, that these transparency measures will disrupt government contracting — especially IT contracting. “So much of the data will be non-public, based on national security and business secrecy claims,” he said in an e-mail. “Officials who have access to the data may not have the incentive to do anything — officials already know that contracting is excessive.”

Government watchdogs, though, say they are heartened by Obama’s attention to the overall issue of government contracting — especially when they compare it to that of his Democratic opponent, Sen. Hillary Rodham Clinton (D-N.Y.), and the likely GOP nominee, Sen. John McCain (R-Ariz.). “Obama has been more high-profile on transparency issues in contracting than the other two candidates,” said Craig Jennings, A federal fiscal policy analyst at OMB Watch.

Clinton does mention cutting 500,000 contractors as part of her 10-point plan for government reform. McCain, on the other hand, says nothing about the $430-billion government contracting industry.

Yet it is true that McCain’s campaign emphasized transparency in other government spending, like congressional earmarks. “It’s conservative ideology that hiring contracts is an inherently more efficient way to spend money,” Jennings said.

Where a new administration could most affect defense and intelligence contractors is in its foreign policy. On this issue, the starkest contrast between the Democrats and McCain are pledges by Obama and Clinton to end the war in Iraq.

Leaving Iraq would clearly affect defense contractors that supply weapons and armed personnel, and it would surely have broader consequences on America’s war on terror. But even a withdrawal probably won’t disrupt the post-9/11 counterterrorism programs run by IT’s.

“There might be some reduction in DOD spending,” said Angela Styles, director of the Bush administration’s Office of Management and Budget between 2001 and 2003. “But the information companies are serving the government in many different areas.”

More likely to slow IT contracting down is that there are no longer post-9/11 agencies and database programs to be created. “DHS bought up a lot of start-up, data-intensive technology,” Fuller said. “That leveled off by 2006.”

One intriguing subplot on the future of Northern Virginia’s economy is what effect, if any, will come from the retirements of Davis and Warner. Experts were split on how much the two either increased overall government contracting or steered contracts to Virginia, specifically Davis’s Fairfax County district.

Through a spokeswoman, Warner declined to comment on whether he used his chairmanship of the Senate Armed Services Committee between 2003 and 2007 to bring contracts to Virginia. Davis, who was chair of the House oversight committee between 2003 and 2007, claims the IT boon was inevitable.

“There’s a ceiling on the number of federal employees,” Davis said, “and so when the government does IT work they have to contract it out. And it’s hard to do government IT work in India or California.”

Styles, who clashed with Davis over government contracting at the White House, said that with insufficient transparency, the most powerful members of Congress are bound to provide their constituents more contract business. “Obviously, he made some kind of difference,” Styles said. “The companies chose Fairfax. They didn’t choose Maryland.”

Fuller, though, says that other factors have led to Northern Virginia, not Maryland and other locations near Washington, capitalizing on the contracting boom. “There’s lower taxes here, a looser regulatory environment and companies are less likely to be unionized,” he said. “That’s much more important than saying John Warner represented us.”

Warner and Davis’s chairmanships do coincide with what may be looked back on as the boom days for Northern Virginia’s IT economy. Their absence — coupled with a possibly more Democratic Congress and a Democratic president — may put the brakes on some contracts.

But erasing the reliance on IT’s requires an entirely new approach to national security. This is something that no one is proposing. Unlike the national housing market, this doesn’t seem to be a boom about to go bust.

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