November 2, 2007

The Earmark Incubator

Pork-barrel politics hits the front page of the Washington Post today, with a look at what Jeff Flake once called the "earmark incubator", Concurrent Technologies. The defense contractor that John Murtha helped birth and keeps well fed turns out to be a charity case -- a real charity case, recognized as one by the IRS. Its tax-exempt status turns out to be only one of the oddities surrounding this pork warehouse:

Behind the rise of Concurrent is Rep. John P. Murtha (D-Pa.), chairman of the House Appropriations Committee's defense subcommittee, who helped arrange funding to launch the organization in 1988. Murtha has since arranged millions of dollars more in directed congressional appropriations called earmarks. Now Concurrent has nearly $250 million in annual revenue and 1,500 employees.

Concurrent is a prime example of how to marry entrepreneurial savvy, influence on Capitol Hill and arcane procurement rules to create budget magnets in congressional districts. Unlike many other big contractors, Concurrent pays no income tax on most of its revenue. Unlike nonprofit, federally funded research-and-development corporations, it is not chartered by the federal government.

According to Concurrent's chief financial officer, Edward J. Sheehan Jr., the Internal Revenue Service approved Concurrent as a charity because it "lessens the burden on governance" and helps "the federal government and American industry to perform more effectively through the use of emerging technologies."

Though most of its revenue comes from government contracts, it has thrived with help from the political imprimatur that comes with the earmarks and their sponsors.

It seems as though it doesn't just thrive on government contracts, it practically feeds on nothing else. Out of the "nearly $250 million" in revenue it receives, $176 million of it comes from the federal government. That seems a rather high percentage of business to support 1500 employees, even for a charity. Seventy percent of their revenue comes from handouts directed mainly through John Murtha.

As I noted earlier this week, charity is a good description of Concurrent, anyway. It gets its contracts almost entirely through non-competitive means. In 2006, only 19% of their contracts had another bidder, but that beats 2005 and 2007, which has 5% and 4%, respectively. In contrast, Halliburton's parent KBR won 95% of its contracts in multibid competition in 2005, 93% in 2006, and 99.4% in 2007. In 2007 so far, only $3 million of the $66 million given to Concurrent came in multi-bid contracts (via

Concurrent has a darker side, too. One of its subsidiaries, Commonwealth Research, found itself in the middle of a scandal involving large payouts to a political appointee. Former senior Air Force officer Charles Reichers got $13,400 a month in salary for no work at all on Commonwealth's behalf while awaiting approval from the White House on a Pentagon appointment. Reichers committed suicide after Congress began asking questions about the arrangement. The IRS might want to look into the reasons a tax-exempt charity would pay someone almost $27,000 to do no work at all -- especially when that someone had a pending appointment in an area that would bring material benefit to their organization.

These are the kinds of activities that earmarking not only protects, but encourages. The story of Concurrent has finally hit the front pages of the Post, but Concurrent is hardly the only problem one finds when putting pork under the microscope.


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