The fight against the COVID-19 pandemic drove civilian contract spending across the federal government to a record high of $228 billion in fiscal 2020, which ended on Sept. 30, according to Bloomberg Government data available as of Oct. 6.
The double digit increase of about 17%, or $33.5 billion, over fiscal 2019 spending, dwarfs the single digit year-over-year increases in recent years. Spending at the Departments of Health and Human Services (HHA) and Veterans Affairs (VA) were responsible for a large part of the increase as well as increases at the nation’s nuclear research laboratories run by the Department of Energy (DOE).
Select Agencies Drive Growth
At HHS, contracting obligations jumped from $26.6 billion in fiscal 2019 to $41.2 billion in fiscal 2020, a leap of about 55%. Spending for ventilators, pandemic response, vaccines, biomedical research and other efforts to fight COVID-19 was responsible for virtually all of the increase at HHS. The top contractor for HHS in fiscal 2020 was Merck & Co Inc. with $1.9 billion in obligations, providing HHS with vaccines. Moderna Inc., which has not done business with HHS in recent years, also received nearly $1 billion for vaccine development. Overall, HHS contracting increases accounted for about 44% of the total increase in civilian contracting across the government in fiscal 2020.
The Department of Veterans Affairs increased its contract spending about $4.4 billion in fiscal 2020 over fiscal 2019 — about 15%. The biggest single increase at VA in fiscal 2020 was on the Patient Centered Community contract which went from $3.0 billion in obligations in fiscal 2019 to $5.6 billion in fiscal 2020. This contract, held by Triwest Healthcare Alliance Corp., allows veteran patients to access care in their local communities under certain conditions. Triwest has received $14.8 billion in total obligations on this contract since fiscal 2013 and it ends in March of 2021. According to the VA, 53,207 veterans have been diagnosed with COVID-19, and 11,400 patients have been admitted to VA facilities, which may indicate that a substantial number utilized the community care program. Overall contracting increases at the VA in fiscal 2020 accounted for about 13% of the total increases for civilian contracting across the government.
At the Department of Energy contracting obligations increased $7.1 billion — 25% — in fiscal 2020. The increases were primarily driven by boosts at Sandia National Laboratories, with headquarters in Albuquerque, NM, and the Y-12 National Security Complex at Oakridge, TN. Contract obligations for the operations of both of these labs each increased nearly $2.5 billion for a total of about $5 billion. The contract for operating the Sandia lab is held by a subsidiary of Honeywell International Inc. and the contract for Y-12 is held by Consolidated Nuclear Security LLC. Together these two companies have received nearly $30 billion for the operations of these labs. Although these labs are primarily involved in research related to nuclear weapons, some of the increased spending may be due to Covid-19, both for the increased operational costs of operating with the various health measures being taken at the contractor-operated labs, and the Covid-19-related research being done at both Sandia and Y-12. The spending increases at DOE accounted for about 21% of the overall contracting increase for all civilian agencies.
One other agency of note is the Small Business Administration (SBA). Contracting at that agency jumped from about $177 million in fiscal 2019 to more than $1.5 billion in fiscal 2020. This large increase was mostly for a data analysis and loan recommendation services contract held by RER Solutions Inc., which has received $770 million in obligations. This contract was awarded to help the SBA process loans for small business as part of the Economic Injury Disaster Loan program. If congress passes additional assistance, contracts of this type may increase, though this particular contract is receiving some scrutiny from Congress and the SBA’s own inspector general.
As it has since at least 2015, McKesson Corp. led the pack among all civilian contractors in fiscal 2020 with $6.8 billion in contracting, primarily providing the VA with pharmaceuticals. Overall $59.4 billion — 26% — of the $227 billion total in civilian contracting obligations in fiscal 2020 went to small business. The top small business was Moderna with nearly $1 billion for its HHS work. Information technology contracting increased by nearly $3 billion and professional services by $3.8 billion in fiscal 2020. In both cases the top spender was HHS.
The Trump Administration has sought to reduce spending at most civilian agencies each year but encounters opposition in Congress and proposed cuts never made it into final appropriations bills.
Final contracting figures for the Department of Defense for fiscal 2020 will not be available until January 2021 because the Pentagon delays its data release for 90 days for security purposes.
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