Study Finds Political Connections May Matter More Than The Best Bid In Federal Contracting

Why A Local Congressman Can Be Worth More To A Corporation Than A Senate Powerhouse

Most Americans assume federal contracts go to the best bidder. A sweeping new study covering two decades of federal spending suggests the reality is more complicated, and that companies with stronger political connections often appear to have an edge over competitors.

Researchers at Ball State University, the University of North Texas, and Marquette University spent years mapping how corporate political donations relate to government contracting outcomes. Their findings, published in Contemporary Economic Policy, point toward what economists sometimes call “political capitalism,” a system in which firms with greater political capital tend to receive greater value from government contracts. What the data suggests is counterintuitive: the most powerful politician in Washington is often worth less than the one who represents the ZIP code where their workers clock in.

That local-versus-national divide is one of the study’s most important findings. When companies cultivate political allies who represent the districts and states where they actually operate, they tend to win more contracts, secure larger awards, and walk away with deal terms that are less common under standard competitive bidding. Companies relying primarily on nationally prominent senators and representatives, even household names at the peak of congressional power, show weak and inconsistent contracting gains by comparison.

What Political Connections Actually Buy in Federal Contracts

Politically connected companies do not just win more contracts. They often win better ones. Researchers tracked four coveted contract features using a “sweetheart index”: no-bid awards, which can reduce competition significantly; cost-plus contracts, which shift more financial risk to the government; multi-year deals, which lock in steady revenue streams; and waivers of the requirement to submit detailed pricing data, which give companies more room to negotiate on their own terms.

Firms with deeper local political connections scored measurably higher on this index. A company with well-placed local allies was more likely to land a sole-source contract, more likely to negotiate terms that protected its bottom line, and more likely to operate under fewer transparency requirements. Individually, each advantage is meaningful. Over years of contracting activity, they can compound in ways that significantly shape a company’s financial position.

One important caveat: this study is observational, not experimental. The findings show consistent associations between political connections and contracting outcomes, not that political influence fully determines who wins. Merit, technical capability, and other factors remain part of the picture.

Why Local Politicians Deliver More Federal Contracts Than National Powerhouses

To measure political clout, the research team built individual power scores for every member of the House and Senate across the study period. Each lawmaker was rated on five factors: time in office, party leadership or committee chairmanship, majority party membership, the security of their seat, and the breadth of their professional network. Scores ran from zero to five, with the top tier including Kevin McCarthy, Nancy Pelosi, Paul Ryan, Chuck Schumer, and Harry Reid.

Companies were linked to politicians through PAC contributions, money funneled through a company’s affiliated Political Action Committee. Donating even a dollar to a lawmaker’s campaign counted as access. Each firm’s total political power was then calculated by totaling the power scores of every politician it had funded, divided into two categories: politicians whose districts or states overlapped with the company’s federal contracting work, and everyone else.

Local connections performed better, consistently. National political power, even when it included the most recognizable names in Congress, showed weak or inconsistent effects on contracting outcomes across most analyses. A firm could have relationships with half a dozen Senate heavyweights and still lose ground to a competitor that had cultivated ties with the representatives covering its home turf.

Incentives appear to explain the gap. A senator from a state where a company employs nobody has little reason to go to bat for that firm. A representative whose constituents work there has more reason to help it win. Federal contracts mean local jobs, and local jobs tend to mean votes. The research team examined the relationship between district-level unemployment and incumbent re-election rates, finding that higher unemployment significantly reduced an incumbent’s odds of winning across multiple statistical methods. Steering contracts toward local employers, the authors suggest, appears tied to political incentives like re-election.

A Corporate Strategy Built on Decades of Data

The study drew from large and mid-sized publicly traded U.S. firms between 1999 and 2019, focusing on those that received at least one dollar in federal procurement money. Procurement records came from the Federal Procurement Data System, which logged more than 56 million contracts and modifications over the period. Campaign finance data came from the Federal Election Commission.

Among the firms with the highest political power scores were United Parcel Service, Comcast, General Electric, Boeing, Northrop Grumman, and Raytheon. Defense contractors and manufacturers dominated the top of the list, reflecting how much federal spending flows into those sectors. Many of the top-ranked firms had also invested heavily in local political relationships, not just national ones, suggesting many firms had already adapted to this dynamic.

When a company’s political network takes a hit, typically because a key ally loses an election, the firm tends not to sit still. Companies affected by such losses responded in the very next election cycle by increasing donations to candidates who ultimately won while cutting off those who went on to lose. The pattern resembles portfolio management more than civic engagement, with firms reallocating political capital toward the most promising returns after a loss.

Formal earmarks, a once-common tool that allowed legislators to steer spending directly to favored projects, were largely eliminated from the federal contracting process years ago. Yet the data suggests political connections continue to play a meaningful role in who wins and on what terms. As former House Speaker Tip O’Neill once stated, “All politics is local.” For companies competing for hundreds of billions in annual government business, those three words are not just a political maxim. They are a business strategy.

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Disclaimer: This article is based on an observational study and reflects associations found in the data, not proven causal relationships. The findings apply primarily to large publicly traded U.S. firms and may not generalize to smaller companies or other contracting contexts.

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