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Good morning. The Center for Public Integrity is a nonprofit, nonpartisan organization that does investigative reporting and research on public policy issues in the United States and around the world. Since 1990 the Center has produced more than 250 investigative reports and 13 books. In the past seven years, the Center's work has been honored 26 times by the Society of Professional Journalists, Investigative Reporters and Editors, and other respected organizations.

The Center is funded by foundations and individuals and the sale of our publications. We do not accept advertising or contributions from companies, labor unions, governments or political parties. We do not take positions or lobby on specific policy or legislative matters. The names of our major donors and other information about the Center are available on our award-winning Web site, www.publicintegrity.org. We gratefully acknowledge support for this project today from the Town Creek Foundation, the New York Community Trust—Everett Philanthropic Fund, and Vincent Ryan.

Late last year, after utilizing 20 researchers, writers and editors over six months, filing 73 Freedom of Information Act requests and even suing the Army and the State Department, we issued a report entitled Windfalls of War, which chronicled and posted online all of the available major Pentagon and State Department contracts in Afghanistan and Iraq. The report, since updated four times, won the prestigious George Polk award. Substantively, it placed the large, controversial contracts won by Halliburton and its subsidiaries in overall context, definitively revealing that Vice President Dick Cheney's former company has been awarded by far the most taxpayer money in Iraq and Afghanistan, sometimes with no bidding. The report also documented how Halliburton and all of the top 10 Iraq/Afghanistan U.S. contractors have also been major political influence players in Washington, spending millions of dollars on campaign contributions and lobbying.

Tracking the Iraq and Afghanistan contracts whetted our appetite to go both broader and deeper, which brings us to this morning. Today we are releasing an exhaustive, unprecedented Center report entitled, Outsourcing the Pentagon: Who's Winning the Big Contracts. For the past nine months, a team of 23 researchers, writers and editors, led by project manager and respected author Larry Makinson, has examined more than 2.2 million contract actions totaling $900 billion in authorized expenditures over the six-year period from fiscal year 1998 through fiscal 2003 (Oct. 1, 1997—Sept. 30, 2003). Our prime source was the Pentagon's own publicly available but obscure procurement databases.

From that, we identified and have profiled online the biggest Defense Department contractors—all 737 of them, including several thousand of their subsidiaries and affiliates—who have received at least $100 million in contracts over the past six years, with breakdowns of each company's total contract dollars, the types of contracts they won, the competition they faced, a list of their key subsidiaries, analysis of their lobbying and campaign contributions, and a list of the chief products and services they sold to the Pentagon. We have then cross-meshed this information with at least two other massive federal data sets, campaign contribution records and lobby disclosure documents, in addition to interviewing dozens of people and filing more than a dozen Freedom of Information Act requests. Again, our Web site is www.publicintegrity.org or this massive study can be accessed directly through www.pentagonspending.org.

What did we find?

No-bid contracts have accounted for more than 40 percent of Pentagon contracting since 1998, which amounts to some $362 billion in taxpayer money to companies without competitive bidding. We discovered that out of the top ten contractors, only one—Science Applications International Corp., or SAIC—won more than half its dollars through full and open competition. All the others won most of their federal funds through sole source and other no-bid contracts.

The report also documents the extent to which the Defense Department has become dependent on outside contractors, finding that every annual increase in defense spending has been matched by an equal increase in contracting. Fully half the Defense Department budget—some $900 billion since 1998—has gone out the door to contractors rather than paying for direct costs such as payrolls for the uniformed armed services.

Indeed, these are good times for defense contractors. From fiscal year 1998 through 2003, the Pentagon's overall dollars to contractors has risen up 59 percent, from $129 billion in 1998 to $219 billion in 2003. The biggest defense contractors the past six full, fiscal years (1998-2003) have been Lockheed Martin ($94 billion); Boeing ($81.6 billion); Raytheon ($39.9 billion); Northrop Grumman ($33.8 billion); General Dynamics ($33.3 billion); United Technologies ($17.9 billion); General Electric ($10.6 billion); SAIC ($10.6 billion); Carlyle Group ($9.3 billion); and Newport News Shipbuilding ($8.85 billion). These totals do not include the extra billions of dollars these companies collected as partners in joint ventures. Halliburton ($6.8 billion) came in 14th on our list of the biggest 100.

These biggest contractors also received the most money in no-bid contracts, which is also detailed on our site. A few of these companies have found themselves under the harsh glare of public scrutiny in recent years. Halliburton, formerly run by Dick Cheney and recently found by the Securities and Exchange Commission to have misled the public and its shareholders during the time he was the CEO, is the subject of numerous government investigations in the United States and abroad, in addition to pending civil litigation. Boeing is currently under a Justice Department criminal investigation that has already yielded one conflict of interest conviction regarding a highly-criticized Air Force tanker contract.

We found, not surprisingly, that the biggest defense contractors are also major political players, spending millions of dollars to grease the skids in Washington. The 10 biggest defense contractors all spent heavily on both campaign contributions (a combined $35.7 million) and lobbying ($414.6 million). But the return on their investment was staggering: $340 billion. Overall, the 737 biggest defense contractors spent nearly $214 million in campaign contributions to federal candidates, political parties and leadership PACs from 1998 to 2003. The money came from PACs, soft money donations (while they were still legal) and individual contributions from company executives, employees and their families. Seventy percent of the donations to political parties went to Republican Party committees ($62 million of a two-party total of $86 million).

No politician in America has received more money from top defense contractors than President George W. Bush, who has gotten $5.4 million between 1998 and July 31st of this year. Sen. John Kerry, his Democratic opponent, collected just under $2 million. That means between the two major presidential candidates, Bush collected 73 percent of the biggest defense contractors' contributions. To put that into context, the former Texas governor has received only $1.7 million in contributions during the exact same period from oil and gas companies, his former industry. By far most of Kerry's campaign largesse from top defense contractors came this year after he won the Iowa caucuses and became the presumptive presidential nominee of his party. Interesting how money follows power and even potential power.

Before 2004, in the period from 1998 through 2003, Bush had received 13 times more than Kerry in campaign cash from the biggest defense contractors, more than $4.5 million to John Kerry's $332,000. By comparison, Vice President Al Gore, from 1998 through 2000, took in $671,464.

In other words, in recent years, George W. Bush unmistakably has become the top defense contractors' favorite candidate.

Defense contractors also spent a fortune on lobbying lawmakers and the executive branch—some $1.9 billion overall. We profile a firm that caters to Defense contractors, a firm called PMA Group, which boasts that 30 of its top 31 employees have swung through the revolving door. PMA's clients have won $266 billion worth of defense contracts, or a third of the contracts given out over the period we studied.

We were surprised to learn that the Pentagon lacks the most basic information about its contractors, and in fact doesn't even know exactly how many contract workers it employs today. And to find out the answer, of course it has hired more contractors. The Secretary of the Army complained in 2002 that the Army lacked "visibility" over its service contract workforce, and asked that the information be collected. But by mid-2004 the data gathering had yet to begin. The Defense Department, which has reduced by almost half the number of officials who oversee procurements, ended up hiring firms like Booz Allen Hamilton, Jefferson Solutions and the Rand Corporation to manage its contractors. In other words, companies managing companies.

What does it all mean? This report shows that competitive bidding at the Pentagon happens less often than we think, and the no-bid controversy surrounding Halliburton in Iraq actually is, unfortunately, not an aberration. Fact is, from running interrogations at Abu Ghraib to writing the President's defense budget, contractors are playing an increasingly significant role, and Pentagon management of these outside vendors is uneven and inadequate. These issues need to be looked at more carefully by the Congress and the public.

But there is an even more fundamental problem underscoring our entire investigation: the stunning lack of accountability. We are talking about hundreds of billions of dollars of our hard-earned taxpayer money being spent without any competitive bidding, and an entire, growing class of literally tens of thousands of companies whose employees are not bound by federal ethics and Freedom of Information laws, government salary schedules or the Uniform Code of Military Justice. "These laws apply to officials, not contractors, on the presumption that officials are in control," said Dan Guttman, a respected expert on federal government contracting retained by the Center for Public Integrity who wrote an accompanying essay. "The rules do not apply—or protect the public—when, as is increasingly the case, contractors are doing the basic work of government, and government lacks the expertise and experience to control the contractor workforce."

For years now, everyone from the Secretary of the Army to the Department of Defense Inspector General to the Government Accounting Office has complained about the Pentagon's lack of control over the growing contractor class, to no avail. Not only has government made little effort to regain control, the companies, with a hammerlock on our political process, have no compelling incentive to loosen their grip on power or to self-regulate. These inherent dangers to our democracy were as obvious more than 40 years ago as they are today, when former Supreme Allied Commander and Republican President Dwight Eisenhower said prophetically in his 1960 Farewell Address, "This conjunction of an immense military establishment and a large arms industry is new in the American experience. We must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist."

Eisenhower warned us all that the military industrial complex should never be permitted to "endanger our liberties or democratic processes. We should take nothing for granted."

But, of course, we do, at our own peril.

I would like to thank several key people who have made this report possible: Brilliant campaign finance research pioneer, senior writer and overall project manager Larry Makinson, author and research consultant Dan Guttman, database editors Aron Pilhofer and Daniel Lathrop, writers Elizabeth Brown and Alex Knott, graphic designer Jonathan Werve, Web developer Han Nguyen, research editors Alexander Cohen and Peter Newbatt Smith, researchers Agustin Armendariz, David Dagan, Julia DiLaura, Neil Gordon, Lindsey Holden, Mohammad Ismail, Sapna Patel, Daniel Politi, Susie Schaab, André Verlöy, and Derek Willis, IT manager Javed Khan, Ann Pincus and Nathan Kommers for communications and outreach, Barbara Schecter, Sugesh Panicker and Julie Mañes for development, and Cathy Sweeney for finance and administration. And finally, for this and all Center reports this past, very intense year, particular thanks to our spectacular managing editor Bill Allison and deputy managing editor Teo Furtado.

Now I'd like to introduce project manager Larry Makinson, who will provide more detail about this report, Outsourcing the Pentagon.

Thank you.