September 2022 | Publication

The World’s Biggest Customer: Procurement and the U.S. Government


The federal government’s vast procurement power increasingly drives American business.  Washington’s buying decisions ripple far beyond weapons systems, impacting industries widely regarded as driven by free-market competition.  Netflix, the largest private-sector customer of Amazon Web Services (AWS), pays the latter more than $300 million annually;1 in FY 2021, unclassified U.S. defense spending on cloud exceeded $13 billion.The Pentagon now is one of the largest participants in the fresh produce market; Department of Defense (DoD) purchasing on behalf of schools nationwide has increased from approximately $6 million in 1996 to $90 million in 2010 to $491 million in 2021.3 

Business leaders and policy makers who understand the traditionally-defined market as the uncontested driver of the economy overlook a critical factor.  As described by private equity mogul Ramzi Musallam,“Government is at the forefront of all the complexities and issues that confront us. These are government-influenced markets, no doubt about it.”If current trends persist, the future of America’s private sector will be in competing for greater market share in the public sector. 

The Rise of Procurement

The market for government contracts has grown considerably in recent years. From fiscal year 2015 to 2020, federal spending on contracts grew 41 percent, from $538 billion to $761 billion, adjusted for inflation.5  Unsurprisingly, procurement often has tracked major political developments.  For example, DoD acquisition swelled during the War on Terror from $296 billion in 2001 to $537 billion in 2008, adjusted for inflation.6  Similarly, in the first year of the COVID-19 pandemic alone, contract spending expanded 12 percent, with half that attributable to medical supplies and pharmaceuticals.7 

Now, many major industries have reached a threshold: once ancillary to core business strategy, procurement increasingly acts as a major factor. Alert companies have responded accordingly.  For example, Amazon has established itself as a major public-sector partner, most recently exemplified by the award of the National Security Agency’s (NSA) “WildandStormy” cloud contract to AWS in April 2022, valued at roughly $10 billion.8 


The scope and complexity of the federal government make public spending a mystifying subject even for most insiders: the Government Accountability Office (GAO) recently found that 92 percent of federal managers were unfamiliar with the government’s own official resource for spending data.9  The behind-the-scenes intricacies compound the challenge for business leaders.  As the market for government contracts has grown, the process governed by the esoterica of the Federal Acquisition Regulation (the FAR) has become more, not less, obscure, and acts as a formidable barrier to entry. 

The conventional wisdom embraces a technocratic view of procurement, according to which a neutral process selects the best solution.  The Standards of Ethical Conduct for Employees of the Executive Branch outlines explicitly “the impartiality rule” for executive branch employees, embodying, in the words of former Office of Government Ethics (OGE) Director Walter Shaub, “the principle that employees must avoid even the appearance of impropriety.”10 This view neglects, however, the social and political forces that relentlessly shape the procurement process. 

Asymmetric information characterizes the public-sector marketplace, with companies holding the advantage concerning costs, capabilities, and timelines.  When a public-sector entity issues a Request for Information (RFI) prior to the formal Request for Proposal (RFP), sophisticated companies immediately shape the government’s perceptions.  Director of Defense Pricing Shay Assad gained notoriety among defense contractors – Politico called him “the most hated man in the Pentagon” – for aggressively negotiating with vendors: “We generally overpay for almost everything we buy.”11 

Know Your OTAS

The recent rise of Other Transaction agreements (OTAs) has added to the murkiness.  Originally, OTAs provided a rarely used non-competitive procurement process for special situations.  For example, an OTA was used in 2007 for the rapid acquisition of the Mine Resistant Ambush Protected Vehicles (MRAP) family of military vehicles to address the urgent need in Iraq to provide better protection from improvised explosive devices (IEDs).12 The exemptions from the FAR make OTAs a valuable tool for such urgent projects, but at the expense of competition and all the associated benefits. 

OTAs have become far more important during the last half decade as decision makers have underscored the urgency of the Pentagon’s adoption of new technologies to out-compete the People’s Republic of China: from fiscal year 2016 to 2020, OTA spending grew 871 percent, from $1.7 billion to $16.5 billion.13  This increase is not simply the result of the pandemic, as OTA spending already had doubled from 2017 to 2018, and again from 2018 to 2019.14 

Whatever the benefits of OTAs, the loosening of contracting procedures has reduced transparency, shutting out prospective bidders and making deep expertise in the formal and informal structures of procurement even more important. 


Despite high-profile media coverage of contentious bid protests, the procurement process remains opaque, much to the benefit of those companies dedicated to navigating this environment.15  Corporations whose markets are shaped by government purchasing must urgently develop domain awareness of competitors’ activity.  To leverage opportunity and mitigate risk, enterprises must become intimately familiar with the political debates impacting acquisition – broadly as well as with respect to individual business units.  Those who remain focused exclusively on private-sector markets will find themselves locked out of Uncle Sam’s economy-tipping decisions. 


1. “Netflix, Inc.,” Securities and Exchange Commission, Form 10-Q, Q1 2020, March 31, 2020, data/1065280/000106528020000155/form10qq120.htm. 

2. “Fiscal 2019-2021 Federal Cloud Market Spending and Contract Award Trends,” GovWin from Deltek, March 16, 2022, Fiscal-2019-2021-Federal-Cloud-Market-Spending-and-Contract-Award-Trends/6453; and “Department of Defense Information Technology and Cyberspace Activities Budget Overview,” Department of Defense Office of Cost Assesment and Program Evaluation, June 2021,

3. All numbers adjusted for inflation. Thank you to International Fresh Produce Association (IFPA) Vice President for Political Affairs John Toner, V for assistance in identifying this trend. See “Department of Defense Fresh Fruit and Vegetable Program,”; and Nancy Benecki, “DLA Troop Support provides fresh fruits, vegetables for record-breaking USDA summer program,” Defense Logistics Agency (DLA), July 15, 2021, 

4. Nathan Vardi and Hank Tucker, “Meet Ramzi Musallam, Wall Street’s Top-Secret Billionaire Investor,” Forbes, Sep 29, 2021, 

5. Government Accountability Office, “Contracting Data Analysis: Assessment of Government-Wide Trends,” March 9, 2017, 5, pdf; and Government Accountability Office, “A Snapshot of Government-Wide Contracting for FY 2020,” June 22, 2021, 

6. Jesse Ellman et al., “Defense Contract Trends: U.S. Department of Defense Contract Spending and the Supporting Industrial Base,” Center for Strategic and International Studies, May 2011, 6, 

7. Government Accountability Office, “A Snapshot of Government-Wide Contracting for FY 2020,” ibid. 

8. Jason Miller, “NSA quietly re-awarded its Wild and Stormy cloud contract,” Federal News Network, April 26, 2022, 

9. Government Accountability Office, “Federal Spending Transparency: Opportunities Exist for Treasury to Further Improve’s Use and Usefulness,” December 16, 2021, 12, 

10. “Standards of Ethical Conduct for Employees of the Executive Branch,” Code of Federal Regulations, Subpart E – Impartiality in Performing Official Duties, https://www.ecfr. gov/current/title-5/chapter-XVI/subchapter-B/part-2635; and Walter Shaub, “A Refresher on the Impartiality Rule,” Office of Government Ethics, January 25, 2017, 

11. Ellen Mitchell, “Meet the Most Hated Man in the Pentagon,” Politico, April 11, 2016, 

12. “Rapid Acquisition of Mine Resistant Ambush Protected Vehicles,” Government Accountability Office, July 15, 2008,; and John Dobriansky and Patrick O’Farrell, “Other Transaction Authority: Acquisition Innovation for Mission-Critical Force Readiness,” Contract Management, July 2018, 

13. Government Accountability Office, “A Snapshot of Government-Wide Contracting for FY 2020,” ibid. 

14. “Federal Contract Spending: Five Trends in Five Charts,” Bloomberg Government, January 5, 2021, 

15. Moshe Schwartz and Kate M. Manuel, “GAO Bid Protests: Trends and Analysis,” Congressional Research Service, July 21, 2015, pdf/R/R40227/24.