Media Blog

Contractors’ Profits: The Buried Story

Unless you read Federal Times or get the Blackwater Tactical Weekly (yes, my interests are obscure) then you probably haven’t heard this story about the scanty profits that government contractors–operating in Iraq and elsewhere–actually bank. The money ‘graphs:

Sixty-nine percent of government contractors generated profit rates of less than 10 percent from their government business and 7 percent generated no profits at all, according to Grant Thornton’s annual survey of government contractors.

“Contrary to recent public and political perception, government contracting is not a business where companies generate abnormally high profits,” said the Tuesday report. Only 12 percent of responding companies said they generated profits of more than 15 percent from their government contracts in fiscal 2006.

I’m skeptical of these studies, though I have not looked at the Grant Thornton report closely enough to offer any substantive criticism of it. I suspect that contracting, like other aspects of government, is rife with waste, fraud, abuse, &c. But then so is non-contracted work that government workers do themselves. Contractors (such as the aforementioned Blackwater) have gotten a bad rap because allegations of war-profiteering are a cheap and easy talking point for the anti-Bush gang. Taking it as a given that about 80 percent of what our federal government does it has no business doing at all, it is interesting to note that the image of the well-connected contractor basically hooking up a syphon pump to the treasury while shouting “I drink your milkshake!” is yet another media myth.
Blackwater has gotten a worse rap than most other contractors–and it is totally unearned. Blackwater hires highly trained people to do difficult and dangerous work, and it is in business to make a profit. I like profits. Interesting that the Blackwater critics say that we should just have a bigger army, so that contractors can be dispensed with, and then suggest instituting a draft to populate that contractor-free army. That is, the “progressives” want to replace profits with slavery.

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