Over half of Pentagon spending since FY2001 went to the private sector

Speaking Security Newsletter | Advisory Note for Organizers and Candidates, n°115 | 20 September 2021

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Situation

The Costs of War project released a report last week concluding that from fiscal year (FY) 2001-FY2020, the Pentagon spent $14 trillion, “one-third to one-half of which went to defense contractors.”

This estimate seemed too low and unnecessarily broad so I did my own analysis. I found that over half (54%) of the money Congress gave to the Pentagon since FY2001 ended up being passed along to the private sector.

Findings

To the author’s credit, the report’s more precise estimate for the percentage of Department of Defense (DOD) contracts that went to the top 5 firms since FY2001—Lockheed Martin, Raytheon, General Dynamics, Boeing, Northrop Grumman—is pretty much on the money. The author says “one-quarter to one-third”—my analysis shows that it’s 27%.

Discussion

What explains the discrepancies between my analysis and the Costs of War report regarding 1) total amount of DOD spending, and 2) the share of DOD spending that went to private sector contracts?

Regarding 1), I came up with $15 trillion in DOD spending and not “over $14 trillion”, because my study included FY2021.

Regarding 2), I have no idea where the author came up with the “one-third to one-half” finding because the methodology isn’t fully explained. My guess is that the author didn’t manually go through and calculate the amount of DOD contracts for each fiscal year (otherwise his estimate for contract share of the DOD budget wouldn’t have been as broad as it was [33-50%]). Can’t blame him, though—that’s what I did, and it took forever.

Methodology

Pentagon spending refers to the Department of Defense (DOD) discretionary budget authority from fiscal year (FY) 2001 through the third quarter (Q3) of FY2021, via the ‘National Defense Budget Estimates for FY2022 (Green Book)’ from the DOD Comptroller. Data is presented nominally in the chart, but is adjusted for inflation for the subtitle and title in the chart as well as the text in this article. Inflation adjustments made according to data by the US Bureau of Labor Statistics (part of the US Department of Labor). Because budget authority and not budget outlays are used in this study, the 54% figure is likely an underestimate. Another reason it is likely to be an underestimate is because the total DOD budget was used for FY2021, while contractor data (for the top5 and not-top 5 firms) doesn’t include Q4 FY2021 data. DOD contract data from FY2001-FY2007 is from the System for Award Management (SAM.gov). DOD contract data for FY2008-3Q FY2021 is from USA Spending (usaspending.gov), accessed 15 September 2021. For DOD contract data for the top 5 military contractors, USA Spending was used for the first three (federal) quarters of FY2021. For FY2001-FY2020, the System for Award Management was used. Specifically, from FY2001-FY2005, SAM’s contractor search feature was cited; for FY2006-FY2020, SAM’s top-contractor reports were cited. Both were controlled to only display contracts funded by the DOD.

Thanks for your time,

Stephen (@stephensemler; stephen@securityreform.org)

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