Why Some Federal Agencies Panic This Time Of Year

Transcript

AUDIE CORNISH, HOST:

For most Americans the end of September means falling leaves, a nice walk in the woods. If you're a baseball fan there's the post-season to look forward to. But for federal agencies the end of September is usually associated with a different word - panic. To explain why, we're joined in the studio by NPR's Shankar Vedantam, who joins us each week to share interesting social science research. Hey there, Shankar.

SHANKAR VERDANTAM, BYLINE: Good morning, Audie.

CORNISH: All right, so panic - explain.

VERDANTAM: Well, it's the end of the fiscal year, Audie, and agencies realize that whatever they don't spend they're going to lose. So there's this big rush to get projects out the door by September 30. I was speaking with Jeff Liebman, he's a professor at Harvard, but he's also someone who served in the first 2 years of the Obama administration at the Office of Management and Budget. Liebman once convened a meeting of all the acquisition officers, these are people at federal agencies who supervise all of this end-of-year-spending. And at the meeting, one person told Liebman about how agency employees were so overworked at the end of September that one person actually put off dealing with a heart condition because it was this crunch time. Here's Liebman.

JEFF LIEBMAN: The doctors recommended bypass surgery and he decided, against their recommendations, to defer the surgery until October because he wanted to make sure all the contracts could get out during the last month of the fiscal year, during this crunch period. And unfortunately, he passed away in September and never got to the bypass surgery.

VERDANTAM: So of course, Audie, that's an extreme case, a very sad story. But the story made Liebman think that we need to take a closer look at what happens at the end of September, not just in the extent of this project but what its effects were.

CORNISH: Shankar, I think most people hear this and think, well, the rational thing to do would be to distribute the money more evenly throughout the year. I mean, why don't agencies just do that?

VERDANTAM: Yeah, I asked Liebman that question. He told me it actually came from doing something that was very sensible. Many agencies believed they need to store money away during the year in case they need to deal with an emergency before September rolls around. But as September approaches they realize they're not going to spend the money on an emergency and the money is going to disappear at the end of the fiscal year.

So along with Neale Mahoney, Liebman's just finished an analysis of how the government issues contracts to the private sector each year and he finds that there is this very sharp rise in contracts and projects that are issued and awarded at the end of September, the last week of September. And because the federal government spends so much money, something like $50 billion goes out the door this final week of September.

CORNISH: You know, Shankar, this raises the question, you know, when officials are writing up all these contracts so quickly, all at once, what's the effect on quality?

VERDANTAM: You know, that's exactly the question that Liebman and Mahoney asked, Audie. And they analyzed one type of government contract for which they have data, this is spending on information technology projects. Now, they don't have data for the rest of the government, but they assume that what is happening with IT contracts is happening with other kinds of spending as well. They found that information technology projects are much more likely to be started in this final week of September compared to the rest of the year. But they also found that projects started this week were of a significantly different quality than projects started the rest of the year. Here's Liebman again.

LIEBMAN: We found that IT contracts that the government entered into in the last week of the year were five times more likely to be problematic contracts than contracts that were entered into in the other 51 weeks of the year.

CORNISH: So, Shankar, can this be described as wasteful spending?

VERDANTAM: In a way it is wasteful spending, Audie, because we're not getting as much bang for our buck as taxpayers. And this is something potentially that Congress can do something about. Liebman believes the problem is that agencies are not allowed to roll dollars into the next fiscal year or even for a few months into the next fiscal year, because if they did that they wouldn't be in this mad rush at the end of September. In fact there's a good model for what happens when you don't have this mad rush. It turns out that there's one agency that is allowed to roll money for IT projects into the next fiscal year.

The Department of Justice is given this authority and when Liebman analyzes the data coming out of DOJ, he finds that there is no end of September mad rush at DOJ to issue IT contracts and the available data seems to suggest that the quality of the contracts issued by DOJ are also better, they don't have the same end of September problem. Liebman also has another suggestion, it's when agencies don't know how much funding they're going to get the next year, that they feel this pressure to spend every last dime of the money in this year. So one solution would be to give agencies more predictability in terms of what their future spending is going to be and that would involve Congress passing a budget on time.

CORNISH: Shankar, thanks so much.

VERDANTAM: Thank you, Audie.

CORNISH: That's Shankar Vedantam, he regularly joins us to talk about social science research. And you can follow him on Twitter at @HiddenBrain. You can follow me at @nprAudie and of course the program at @MorningEdition. Transcript provided by NPR, Copyright NPR.