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Resource 1.    Federal Spending on Grants and Contracts: 

                            A Big Picture Primer

Often, those of us seeking proposal-based funding from federal sponsors find our comfort zone with a few relevant agencies. given the complexity of the competitive proposal process, this is the norm for most organizations. few groups can afford the luxury of a staff dedicated to full-time prospecting and proposal production. but a new online resource has emerged that can help all of us see the big picture.

 

Overall federal spending and accountability

The US government today spends over $3 trillion dollars per year on everything from pencils to social security checks to aircraft carriers. Spending is authorized mainly by some two dozen large federal agencies and hundreds of programs within those agencies. Even in the age of inexpensive computers, the US government has been unable to efficiently track and report how each tax dollar is allocated and spent. As a result, few of us comprehend the universe of opportunities that arises from our government infrastructure and tax base. In this section, Proposal Exponent attempts to put things in perspective so that you can see where you fit in the grand scheme of things.

 

In September 2006, the Federal Funding Transparency and Accountability Act (Coburn-Obama sponsors) mandated that the Office of Management and Budget (OMB) create a free, searchable database of federal spending for use by the American public. OMB’s response was www.USASpending.gov launched in 2007 – nearly six years after the launch of the super websites www.Grants.Gov and www.FedBizOpps.Gov.

 

Interestingly, OMB followed the lead of OMB Watch, a non-profit group committed to citizen participation and promotion of government accountability. In October 2006, OMB Watch launched its own website, www.fedspending.org. This database elegantly captures federal spending during the period 2000-2009 according to expenditure type, geography or congressional district, agency sponsor, contractor or grantee, and competition category (very revealing!). This ground-breaking resource was accomplished on a relative shoestring – a $342K grant from the Sunlight Foundation. Its accuracy, however, is only as sound as the two federal databases upon which it is built (FPDS and FAADS). OMB has "relaunched" the fedspending platform, so to viiew the most current data, www.USASpending.gov is now the place to go.  OMB's challenge is to keep pace with its 24 federal agency categories so that the system database stays current to within 30 days..

 

Let’s look at some historical data from these ongoing efforts to gain some big-picture perspective.

 

Table 1.  Federal Spending in Billions of Dollars  (from www.USASpending.org)

	FY 2000	FY 2001	FY 2002	FY 2003	FY 2004	FY 2005	FY 2006
Contracts	$209	$220	$260	$299	$342	$382	$420
Grants	$295	$331	$406	$493	$450	$441	$489
Loans	$108	$142	$217	$211	$155	$119	$95
Insurance	$431	$492	$557	$567	$604	$653	$771
Dir. Payments	$768	$840	$842	$948	$965	$1,004	$1,093
(e.g. Soc. Sec.)
Other	$3	$3	$0	$1	$0	$0	$4
Total	$1,814	$2,027	$2,281	$2,518	$2,516	$2,600	$2,872

 

From Table 1, we can see that total federal spending from 2000-2006 increased from $1.8T to nearly $2.9T.  In recent years, about 1/3 of total spending has consistently been in the form of what are considered Contracts and Grants. These are the pools of greatest interest for most of you reading this website.  At a first cut, this means that we proposal writers should be keeping our eyes on about $1 trillion federal dollars each year!

 

Using 2006 as a model, we find that comparable amounts were awarded in the form of contracts (15%) and grants (17%). If you have perused Proposal Exponent’s Agency Quick R&D Profiles, you know that the total US R&D budget projected for 2008 is $147B. This means that overall federal grant and contract expenditures are over six times that dedicated to R&D alone. 

 

Who gives away and who receives these funds and what proportion is awarded on the basis of formal proposals? Let’s explore more deeply by hand building some charts and tables that can extracted from either website.

 

Federal grants

The dominant federal sponsor of “grants” is the Department of Health and Human Services. In 2006, this agency distributed $282B, or 58% of the $489B available. About $200B of this was provided by DHHS’ Health Care Financing Administration (formerly Medicare and Medicaid Services) for medical assistance programs. For the research crowd reading this, NIH awarded $22.6B that year by comparison. The next most important federal grant sponsors are DOT, Dep’t of Education, and the Dep’t of Housing and Urban Development (see pie chart below). Interestingly, DOD ranks only 8^th among grant sponsors if Army, Air Force, Navy, and DOD category 9700 expenditures are combined.

 

In terms of recipients, the lion’s share, 88% ($427B), went to state and local governments in 2006. 7% ($34B) went to higher education (universities), and 3% ($15B) to nonprofits (Table 2). The government is not in the business of funding most for-profit enterprises, and so their take of the pie was only 1% ($5B). Individuals (mostly disaster relief victims) collected another 1% ($4B) of awards included in the “grant” category. The top five sponsors and top five recipients of 2006 grant funding in each of these awardee groups are listed in Table 2.

 

Table 2.  FY 2006 Federal Grants: Top sponsors and recipients by awardee type (compiled from www.FedSpending.org)

	Top Sponsors	Amount ($M)	Top Recipients	Amount ($M)
Gov't (non-federal)
($427B)
1	HHS (HCFA)	$206,784	Multiple recipients - California	$29,464
2	DOT (FHA)	$46,020	Multiple recipients - New York	$28,663
3	HHS (SHHS)	$41,121	Multiple recipients - Texas	$14,722
4	USDA (FNS)	$20,931	Multiple recipients - Florida	$12,335
5	HUD (CPD)	$16,063	Multiple recipients - Pennsylvania	$11,068
Higher Education
($34B)
1	HHS (NIH)	$14,659	Regents of the University of CA	$853
2	DOED	$8,982	University of Washington	$772
3	NSF	$2,809	Johns Hopkins	$713
4	USDA (CREES)	$1,037	University of Michigan	$485
5	DOED (OHEP)	$1,008	University of Pennsylvania	$475
Nonprofits
($15B)
1	HHS (NIH)	$4,440	Massachusetts General Hospital	$305
2	HHS (SHHS)	$3,713	Vanderbilt University Hospital	$264
3	HHS (HRSA)	$1,592	Fred Hutchinson Cancer Research Center	$254
4	HUD (PIH)	$519	Birgham and Women's Hospital	$246
5	DOL (ETA)	$517	Scripps Research Institute	$218
For Profits
($5B)
1	HHS (NIH)	$2,690	Chemical Synthesis and Analysis Lab	$196
2	DOED	$692	METRA	$130
3	DOE	$588	Westat, Inc.	$95
4	DOT (FTA)	$149	Stephens Institute	$90
5	NSF	$146	Social and Scientific Systems, Inc.	$82
Individuals
($4B)
1	DHS (FEMA)	$3,602	Multiple recipients - Louisiana	$2,601
2	SBA	$191	Multiple recipients - Mississippi	$528
3	USDA (RHS)	$58	Multiple recipients - Florida	$291
4	NSF	$18	Multiple recipients - Texas	$99
5	EPA	$14	Multiple recipients - New York	$24

 

A more comprehensive overview of 2006 grant expenditures (Table 3) allows one to obtain a feel for which recipient groups are favored by particular granting agencies. For example, the general bias favoring government recipients is not so apparent within DOED, DOD, Commerce, and NASA. These agencies depend heavily upon universities and nonprofits to execute projects. While grant pickings for for-profit companies are slim, there is significant money to be had from DHHS, DOT, DOED, DOD, and DOE. 

 

Table 3.  FY 2006 Federal Grant Expenditure Data by Agency (compiled from www.FedSpending.org)

Rank	Agency	FY 2006 $ (billions)	# awardees	# awards	Gov't (millions)	Higher Ed (millions)	Non-profits (millions)	For profits (millions)	Other (millions)	Individuals (millions)
1	DHHS	$282.560	7,764	180,945	254,209	15,241	9,999	2,878	232	1
2	DOT	$58.213	2,482	86,213	57,660	189	142	215	0	8
3	DOED	$50.693	9,930	54,269	38,778	10,549	559	746	59	2
4	HUD	$26.129	8,567	24,768	25,206	51	825	23	24	0
5	USDA	$23.569	12,236	23,150	21,741	1,177	542	24	18	67
6	DHS	$12.802	4,442	17,028	9,014	15	26	6	140	3,602
7	Labor	$8.347	1,171	7,603	7,662	160	522	2	0	0
8	Justice	$5.296	6,449	10,478	4,428	72	69	54	671	2
9	EPA	$3.838	2,478	6,126	3,438	127	255	0	4	14
10	DOD (9700)	$3.798	796	8,414	1,955	1,300	313	221	9	0
11	Army	$2.997	567	4,926	1,946	641	260	146	4	0
12	DOE	$2.111	1,451	5,609	369	922	200	588	32	0
13	Commerce	$1.810	1,632	3,409	715	533	290	50	222	0
14	Interior	$1.079	3,387	7,757	776	132	155	9	6	2
15	NASA	$0.939	1,073	6,698	13	646	261	19	0	0
16	VA	$0.456	12,236	690	456	0	0	0	0	0
17	Air Force	$0.313	261	13,441	0	227	20	64	2	0
18	Navy	$0.301	251	1,861	0	272	24	5	0	0
19	SBA	$0.193	369	440	193	0	0	0	0	0
20	State	$0.139	5	32	139	0	0	0	0	0
	All other	$2.933			-1516	1,845	598	-55	1,829	227
	Totals	$488.516	77,547	463,857	$427,182	$34,101	$15,060	$4,996	$3,252	$3,924

 

OMB Watch does not split out competitive from non-competitive grant awards as they do for contracts.  Consequently, it is difficult to estimate what proportions of these respective grant pools might have been distributed on the basis of RFPs. It is likely that state and local governments are allocated funds largely by formulas and earmarks. Of course, these non-federal government recipients likely issue their own solicitations in order to spend many of these federal dollars. One would expect university, nonprofit, and for-profit grants to be awarded predominantly on competitive grounds. However, it is useful to dig deeper into the database when looking at these global numbers. For example, $8.5B of the reported $34B grant intake by higher education in 2006 went toward direct student loans underwritten by the Department of Education (see DOED line under Higher Ed in Table 2).

 

In conclusion, the amount of grant money accessible in 2006 through competitive proposal submissions is likely to have been substantially less than the $489B total reported as “grant” expenditures. We know that only 12% ($58B) of the total $489B was available to higher education, nonprofits, companies, and individuals. After accounting for grant renewals, sole sourcing, and other non-competitive situations, perhaps half of this $58B was accessible via full and open competition among non-governmental organizations.

 

Federal contracts

Sourcing of federal contracts is even more lopsided than that of grants. Here, the Department of Defense is the heavy hitter, accountable for $295B or 71% of all US contract expenditures in 2006 (see pie chart below). The costliest products and services required by DOD in 2006 consisted of aircraft ($18B), liquid propellants and fuels ($11B), logistics support services ($7.5B), general healthcare ($7.5B), and defense aircraft R&D ($7B). Favored DOD contractors in 2006 included Lockheed Martin ($27B), Boeing ($20B), Northrup Grumman ($16.5B), General Dynamics ($10.5B), and Raytheon ($10B). The six next richest agency players are Energy, Homeland Security, NASA, the General Services Administration, Health and Human Services, and the Veterans Administration. 

 

Contract recipient information extractable from FedSpending.org is rich and detailed.  Contractors are grouped into 25 searchable categories, or you can search by exact contractor name. And so, for example, if one wanted to know the top three “small businesses” utilized by the US Army in 2006, a search reveals that these were “miscellaneous foreign contractors” ($5.4B), DRS Technologies ($425M), and Ninilchik Native Association, Inc. ($297M). The precise agency source and nature of products and services sold to the Army by these contractors are a few clicks away. 

 

Perhaps most interesting is the information provided by FedSpending.org on how contracts have been awarded. OMB Watch breaks out seven categories of competition:

 

1. full and open
2. full and open but only 1 bid
3. competition after exclusion of sources
4. follow-on contract
5. not available for competition
6. not competed
7. unknown

 

In Table 4, Proposal Exponent provides a comprehensive survey of 2006 contract expenditure data for the top 21 agency sponsors, including competition data.  For simplicity, we condense OMB Watch’s seven compete categories into three (1+2, 3-6, 7).  Coming out on top insofar as sponsorship of full and open competitions were USAID (82.5%), DOED (76.7%), DOE (66.8%), DHHS (66.1%), and Labor (60.2%).  Those agencies least prone to open solicitations were the VA (11%), Justice (28.1%), Homeland Security (28.6%), EPA (33.6%), and the SBA (34%). Congress should probably take a hard look at exactly how a few agencies disburse contracts – for example, the nature of 55.3% of the VA’s awards is "unknown".  Going back to an earlier example, we can discover that Ninilchik Inc.’s 17 transactions with the US Army in 2006 were almost entirely “not available for competition”. There may have been very good reasons for this – but this is where the database stops providing clear answers. 

 

Table 4.  FY 2006 Federal Contract Expenditures by Agency (compiled from www.FedSpending.org)

Rank	Agency	FY 2006 $ (billions)	% share of awards	% competed full & open	% not competed full & open	% compete method unknown	# of contractors	# of awards
1	DOD	$294.90	71.1%	42.9%	54.6%	2.5%	78,133	1,298,094
2	DOE	$22.70	5.5%	66.8%	32.4%	0.8%	2,358	10,937
3	DHS	$15.50	3.7%	28.6%	51.4%	20.1%	16,449	74,196
4	NASA	$14.40	3.5%	41.4%	57.2%	1.3%	5,138	35,870
5	GSA	$12.00	2.9%	45.1%	21.9%	33.0%	15,361	756,601
6	DHHS	$11.80	2.9%	66.1%	29.8%	4.1%	9,954	70,379
7	VA	$10.30	2.5%	11.0%	33.7%	55.3%	21,412	948,216
8	State	$4.90	1.2%	34.9%	39.3%	25.8%	18,249	53,737
9	Interior	$4.70	1.1%	54.0%	35.0%	11.0%	21,150	84,088
10	Justice	$4.00	1.0%	28.1%	26.4%	45.5%	10,800	91,918
11	USDA	$3.90	0.9%	52.0%	32.6%	15.3%	13,090	46,850
12	Treasury	$3.90	0.9%	45.5%	28.7%	25.7%	4,841	48,488
13	Commerce	$2.00	0.5%	43.0%	41.0%	16.0%	6,849	25,431
14	Labor	$1.70	0.4%	60.2%	31.7%	8.1%	2,009	8,513
15	EPA	$1.60	0.4%	33.6%	37.6%	28.8%	4,485	21,591
16	DOT	$1.40	0.3%	36.4%	37.7%	25.8%	2,356	10,703
17	DOED	$1.40	0.3%	76.7%	11.5%	11.8%	1,681	4,743
18	HUD	$1.10	0.3%	44.1%	48.2%	7.7%	978	3,914
19	SSA	$0.80	0.2%	39.4%	21.5%	39.1%	1,529	7,102
20	USAID	$0.20	0.06%	82.5%	15.9%	1.6%	483	768
21	SBA	$0.10	0.02%	34.0%	61.7%	4.4%	382	963
	All other	$1.80	0.4%	50.4%	32.6%	17.0%	5,135	27,608
	Total	$415.00	100%	--	--	--	242,822	3,630,710

 

In conclusion, assuming that 2006 was a representative year, it appears that a relatively healthy proportion of federal contracts is competitively awarded. The weighted average % of funds competed full and open in 2006 (including those for which only 1 bid was solicited) was 44%. If we subtract out some $35B in contracts that went (competitively) to the top ten defense industry giants, this leaves $380B, 44% of which equals $167B of contracts ostensibly up for bid two years ago. This number has increased in 2007-2008 (databases are playing catch-up) and should continue to rise. 

 

The numbers of contractors and awards arrived at in Table 4 should probably be interpreted cautiously.  A quarter million contractors suggests a robust system in terms of participation (note that the actual number is probably fewer as many contractors work with more than one federal agency and are therefore over-counted by this method of reckoning). A blind computation of average award size results in the number $114K/award.  This suggests that many, many very small “contracts” (tens of thousands of dollars) are included in the FPDS and FAADS databases. 

 

Summary

Although the American system of government calls for full and open disclosure, the burden of record keeping has stood in the way of understanding how taxes are distributed by the vast federal infrastructure each year. For those of us interested in competing for government funds by way of grants and contracts, this limits our ability to grasp the big picture, prospect intelligently, evaluate competitors, and anticipate shifts in political and social priorities.

 

Several years ago, the private citizens group OMB Watch proved that the tools exist to do better. OMB Watch ‘s prototype database/website, www.FedSpending.org was a gift to the American public and to the Office of Management and Budget that enabled this behemoth agency to jump start its own congressionally mandated resource, www.USASpending.org. Now, contractors and researchers have an alternative to painstaking independent analysis or hiring of professional government business consultants.

 

Proposal Exponent has prepared this primer to give grant and contract seekers a sense of how they fit into the one trillion dollar world of federal spending on grants and contracts. We hope the charts, tables, and illustrations we have described will help you improve your awareness of the opportunities available to your organization. 

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