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Feds Spend Big on Outside Legal Work
The National Law Journal
Contracts from the federal government are a financial staple for plenty of industries and it turns out that law is no exception.
During the past five years, the government has awarded $3.3 billion to more than 4,700 vendors for legal work, according to data compiled by The National Law Journal. Much of the money was spent by the U.S. Department of Justice to help administer the federal program that confiscates property from criminals; for law enforcement training in countries like Afghanistan and Iraq; and for technical support in litigation, including cases involving Hurricane Katrina and the Deepwater Horizon oil spill.
Though it wasn't traditional lawyering that brought in the most money, Uncle Sam hasn't ignored attorneys. Nearly $400 million has flowed to private law firms since 2008. And firms among the NLJ 350, The National Law Journal's annual survey of the nation's largest law firms, have taken home the lion's share of the haul, pulling in more than $220 million.
Our data was compiled by the NLJ as part of a yearlong project to understand how much the federal government spends on outside legal services and who gets that work. To gather the data, we downloaded and analyzed more than 67,000 awards from USAspending.gov, a public database on federal spending maintained by the government. We searched broadly, taking in all of the contractors with work classified by the feds as "legal studies" and "legal services." We also included contractors who did work outside those classifications, but were identified as members of the legal sector. All of the contract amounts signify the most money contractors could have been awarded from the government, not necessarily the sums they received in each case.
Despite the publicly available information, federal contracting for legal services is rarely an open book: The work is conducted with little public scrutiny. And most of the contractors and government agencies contacted for this article declined to discuss the nature of the assignments, why they sought contracts or how the contracts were awarded.
Critics of the contracting process say the lack of transparency makes it hard for the public to know whether the government is spending more than it should on legal services. Project On Government Oversight general counsel Scott Amey, who co-authored a report in 2011 titled Bad Business: Billions of Taxpayer Dollars Wasted on Hiring Contractors, pointed to vendors who have had their contracts renewed year after year without question. Amey said it begs the question: Is the federal government "wasting taxpayer dollars?" On average, a U.S. government attorney receives an annual salary of $175,081, a private-sector attorney gets $220,924 and a contractor attorney takes in $554,923, according to Amey's report. "I think the federal government needs to see how many of these roles can be performed by career legal servants," he said.
That said, Amey's report estimates that the federal government spends more than $300 billion annually on service contracts, and the yearly bill for outside legal work is a minute fraction of that figure. Government officials also counter that they are able to reduce costs and better serve the public by hiring specialists. "The Department of Justice utilizes contractors to provide a wide range of services, including those of expert witnesses and litigation consultants, interpretation services and court reporting when necessary and cost effective to do so in order to effectively carry out its law enforcement mission," DOJ spokeswoman Gina Talamona said in a written statement. "Use of contracts gives the department the flexibility to increase or decrease contractor staff in response to work volume, changes in the type of work, and to rapidly obtain the services of appropriately qualified personnel."
The concept of cost effectiveness, however, becomes slightly abstract when $686.6 million is at stake. That's how much Forfeiture Support Associates LLC has been awarded in the past five years to take on clerical, financial and legal services for the DOJ as part of its Asset Forfeiture Program, which, as the name suggests, is designed to seize the assets of those who were involved in aiding or committing a federal crime.
Forfeiture Support is a joint venture of Engility Corp., a Chantilly, Va.-based provider of engineering and "mission support" services for the Defense Department, according to the company's website, and Los Angeles-based AECOM Technology Corp., which specializes in technical and management support services. And it is, by a factor of more than two-to-one, the legal services contractor with the largest award total of the past five years. Some 21 percent of all funds awarded for legal work went to Forfeiture Support.
The company hasn't been showy with its money: It is headquartered in a nondescript brick office building in Ashburn, Va., about 30 miles northwest of Washington. Most of the company's more than 1,500 employees work out of 450 government offices around the country. No company officials contacted by The National Law Journal would comment about the company's work for the DOJ. Charles Rash, Forfeiture Support's chairman and managing director, said questions should be directed to Engility spokesman Eric Ruff, who declined to comment. The closest thing to a public statement about the company's relationship with the government was a framed poster in the lobby of its office building saying that it is "committed to achieving on-going customer satisfaction."
The second-largest contractor is just a few D.C. suburbs away, in Arlington, Va. CACI International Inc. is an information-technology company that pulled in $384.3 million for providing the DOJ with "a wide range of professional services and products that help attorneys acquire, organize, develop and present evidence throughout the course of litigation, from pre-filing investigation, through complaint, discovery and trial, to post-trial briefs and the appeals process," according to the company's website. (Like other contractors, CACI declined to comment for this article.)
The company's motto is "ever vigilant." It could also be "ever richer." On February 19, the company announced that it had been selected as one of a dozen contractors sharing in an $11 billion contract with the Department of Homeland Security.
THE LAW FIRM OPTION
On the law firm side, more than 1,200 firms and solo practitioners were awarded $391.4 million during the five fiscal years studied about 12 percent of the total legal-related funds awarded by the feds.
The biggest winner was Hunton & Williams with $34.7 million. The sum included funds for helping the U.S. Department of Energy with licensing issues related to Nevada's Yucca Mountain, which had been slated to be a nuclear waste storage site. Hunton partner Donald Irwin, who declined to comment, represented Energy in the Yucca Mountain matter.
The 2008 fiscal crisis also triggered big spending on outside firms. The Treasury Department awarded the most funds to law firms and solos, including big dollars for white-shoe heavyweights like Cadwalader, Wickersham & Taft. Cadwalader raked in awards of about $26.8 million as it helped the Treasury Department with efforts to stabilize the auto industry under the Troubled Asset Relief Program.
Smaller firms also did well: Among the top 10 law firm contractors, three non-NLJ 350 firms also appeared, including Potomac, Md., solo practitioner Margaret "Peggy" Dillenburg, who did work for the Department of Defense; Klarquist Sparkman, a 50-lawyer firm in Portland, Ore., that did intellectual property work for the Centers for Disease Control and Prevention, among others; and Leydig, Voit & Mayer, a 90-lawyer Chicago firm.
Leydig received an award of $14.8 million for its patent work on behalf of the National Institutes of Health. Despite the multimillion-dollar price tag, John Kilyk Jr., a Leydig attorney who has advised NIH for more than 20 years, said using his firm is "more efficient" and "cost-effective" for the agency.
Law firms and solos averaged about $322,000 in government contracts. For most, the amounts were much smaller. Elizabeth Ferrell, a McKenna Long & Aldridge partner who leads her firm's terminations and contract restructures group, said "every once in a while" the federal government needs lawyers to fulfill needs that it can't meet on its own, providing law firms new revenue streams.
But contracting with the government has challenges. Law firms must be cognizant of a slew of compliance obligations, including potential conflicts of interest, she said. "You need to know what you're getting into," said Ferrell, whose firm isn't a government contractor. "You need to go in with eyes wide open."
RIGHT TO KNOW
Though the government's contract database yielded thousands of data points on legal work, mysteries remain. The U.S. Office of Management and Budget (OMB) launched USAspending.gov in December 2007 after Congress in 2006 passed the Federal Funding Accountability and Transparency Act providing the public with the U.S. government's first and only one-stop shop for contracting data. OMB said in 2007 that the website provides "detailed information on all government transactions that exceed $25,000." But OMB Director Jim Nussle said that the website was "a work in progress."
Six years later, contractor names like "Small Business Consolidated Reporting" still appear. And some "Small Business Consolidated Reporting" entries list awards in excess of $17 million from the Justice Department.
That category is a remnant of the Federal Procurement Data System created in the 1970s and hasn't been available for use by agencies after 2010, according to the OMB. But entries using that generic description still showed up in 2011 and 2012, according to records The National Law Journal reviewed. Despite appearing as individual awards, Small Business Consolidated Reporting entries consist of several valued at less than $25,000, said Talamona, the DOJ spokeswoman.
Agencies also submit various iterations of contractors' names and don't always connect contractors' subsidiaries with their parent companies, making accurate award totals for some organizations impossible with only a few clicks on USAspending.gov. They often give incomplete or unclear contract descriptions, too.
Craig Jennings, a contracting policy expert at the government watchdog Center for Effective Government, said the Digital Accountability and Transparency Act, which the U.S. House of Representatives passed in 2012, could help improve the USAspending.gov database if it is reintroduced and enacted during this Congress. The bill would have created the Federal Accountability and Spending Transparency Commission, which would have overseen USAspending.gov and tried to make the website more reliable and easier to navigate.
Representative Darrell Issa (R-Calif.), who introduced the legislation in June 2011, said in a written statement at the time that taxpayers have a "right to know" how the government is handling their money. "Incompatible technologies, inaccurate data, and a lack of common standards impede transparency," he said.
Although the public might not easily find information on the government's legal contracting, thousands of businesses know where to look and it's paid off.
Said William Roberts III, a Wiley Rein partner who is a co-chairman of the firm's government contracts practice: "It can be extremely good work."
This article originally appeared in The National Law Journal.