How the government spends a billion dollars a year on advertising

The federal government is among the biggest spenders on advertising. At about $1.3 billion a year, it's in the top 25 U.S. spenders.

The federal government is among the biggest spenders on advertising. At about $1.3 billion a year, it’s in the top 25 U.S. spenders. The Government Accountability Office has new analysis of which agencies spend the most on advertising, and the companies they spend it with. GAO’s Director of Strategic Issues Jessica Lucas-Judy joins the Federal Drive with Tom Temin.

Interview transcript:

Tom Temin
The federal government is among the biggest spenders on advertising at about $1.3 billion a year. It’s in the top 25. US spenders, the Government Accountability Office has new analysis of which agencies spend the most. And the companies they spend it with. We get more now from the GAOs director of strategic issues. Jessica Lucas-Judy. Ms. Lucas-Judy, what prompted GAO to look at something that in the grand scheme of things is not that big of a deal? Spending wise.

Jessica Lucas-Judy
This is something that we have done a series of reports on over the last several years. Last one was in 2018. And there are members of Congress who are interested in this and involved in in small businesses, and primarily wanting to know, what kinds of businesses are getting these contracts? And what sort of opportunities are available? And are the people who are being communicated with, the ones who would be the recipients of the messages from federal agencies? Are they represented in the companies that are getting those contracts?

Tom Temin
All right. And I imagine it’s the Department of Defense that spends the most, I’m guessing, because of recruitment efforts by the armed services?

Jessica Lucas-Judy
That is definitely a big part of their advertising. So when you think about federal government, you don’t necessarily think about advertising. But just like you said, being a recruitment is a big category, public awareness about health issues or what to do in the case of a disaster, what advertising about the kinds of services that agencies provide and how to access them, those are all very important messages that come from government agencies. So just like you said, the Department of Defense is the biggest spender overall. And that’s consistent with our last report from 2018, that DoD was one of the biggest Health and Human Services and the Department of Homeland Security, likewise, have large contract obligations overall. And then, for advertising in particular.

Tom Temin
And over the past 10 years, you have a bar chart that shows fairly steady growth with a big spike in 2020. And that would have been because of programs related to COVID relief.

Jessica Lucas-Judy
That was definitely one of them. I think the census was probably another spike as well, one of the things to keep in mind when looking at the data is that these are small, relatively small dollar amounts overall, and relatively small number of companies that are involved. And so any fluctuation if a big contract is awarded in one year, that might be a multi year contract, that’ll cause a spike in the data. What we found was that overall, the the spending generally increased in the 10 year period that we were looking at. And the percentage of dollars that went to what we’re calling specified businesses. So these are small businesses for those owned by primarily by women or by minorities, that the percentage of dollars that went to those specified businesses stayed roughly the same as 14-15%, for the most part.

Tom Temin
And is there any evidence or any way to determine really whether if, say, spending went to hidden Hispanic owned ad agency. That was for the purposes of reaching the Hispanic audience? And so on and so on? Or do we know that at all.

Jessica Lucas-Judy
That’s something that would be really interesting. But unfortunately, with the data that we had available, that’s not something that we could determine, like, what specifically the contracts were for, you’d have to do contract by contract review.

Tom Temin
And what about where the spending ends up, because you pay an agency at least traditionally, 15% of the media cost, or the agency gets the discount and keeps the 15% or whatever. And at one time you used to see army ads on television, national TV, that’s expensive. And if you’re at the 1.3 billion level a year, you’re not buying much national television.

Jessica Lucas-Judy
Again, that’s something that’d be really interesting to see, but not with the data that we have. We weren’t able to do that.

Tom Temin
I guess I’m showing my media background here.

Jessica Lucas-Judy
All we have a really is a very general information about the company and the category of company, and then the category of of advertising. It was the same thing with the COVID related contracts. It’s just a checkbox in the national contracting data. So not something unless we were going to do a deep dive, which would have taken much more time than we were going to be able to put into this.

Tom Temin
We’re speaking with Jessica Lucas-Judy, director of strategic issues at the Government Accountability Office. And of the 14%, I guess it was of that spending that went to minority and designated businesses. How does that break down? Hispanic owned is the largest share?

Jessica Lucas-Judy
So when you’re looking at the dollars, which is one of the ways that we got the data. About 47%, went to Hispanic owned Hispanic American owned businesses. And about 21% went to black American owned businesses. But then when you look at it by number of businesses, number of contracts that were awarded, and it worked out a little bit differently. It was, I believe is about 36%, went to Black American owned businesses, and 24% to Hispanic American owned businesses.

Tom Temin
So that’s just a fact. But there’s really not too much we can deduce of motivation or effect from any of that analysis.

Jessica Lucas-Judy
Correct. Mainly, what we were looking at were any significant changes over time. And again, with some slight fluctuations here and there, it was pretty consistent. It’s consistent with what we’d found before in our last report and this report. So, again, looking at just the number of businesses overall, there 2200 businesses in the 10-year-period. So again, not that many. In federal advertising overall, 39% businesses were the specified businesses that we were looking at.

Tom Temin
Did you talk to any agencies individually about what their strategies were for spending this money and what they had in mind?

Jessica Lucas-Judy
Just briefly, but not in any depth for this one?

Tom Temin
Got it. So we don’t really know whether the advertising spend is effective in terms of what their objectives were necessarily.

Jessica Lucas-Judy
Correct. That would have been a different kind of study.

Tom Temin
Let me ask you this. You said Congress, certain members are interested in this. This is why they call up GAO since you worked for Congress. What was their objective in having to do this study, do you think?

Jessica Lucas-Judy
Maybe they were just interested in the makeup of the companies that were getting these contracts, and wanting to make sure that they’re having an opportunity to get into these contracts and be able to communicate with the populations that they come from. We would be interested in doing additional work in this area? If that’s something that the members would like us to do? There’s certainly a lot more that one could do, if some of the topics that we’ve talked about in terms of getting down into some of the contracts maybe, or talking to individual agencies, maybe doing some case studies. That was something we’d done in prior years of talking with agencies about what their strategies were, how they have identified contracts, how they select contracts, and what the purposes of the specific contracts are.

Tom Temin
And interestingly, Homeland Security, which is one of those smaller spenders, had the highest percentage of dollars going to specified businesses. Whereas DoD, the biggest spender, had the among the smallest, only 6% going to designated.

Jessica Lucas-Judy
That was just one more way that you could slice and dice the data. And so when you looked at it by dollars, DoD, like you said was the biggest. When you look at it by percentage, NASA turned out to be the biggest, they had 99% of the contracts meant to specify businesses. But it’s a very small dollar amount overall. So again, one or two contracts, one way or the other, can really sway the difference.

Tom Temin
Sure, yeah. I’m trying to think why would NASA advertise at all. I guess, well, maybe jobs.

Jessica Lucas-Judy
Public awareness, recruitment, all those things.

Tom Temin
All right. Well, it looks like you didn’t have any recommendations with respect to ad spending.

Jessica Lucas-Judy
Yeah, this one, our purpose was just to look at the data to inform, answer questions, things like that. But we were not looking at any sort of compliance issues or things like that. There is some guidance out there for some of this, certainly the OMB and SBA, and other agencies are interested in, looking at where contracts go, and there’s some efforts to reach out specifically to make sure that small businesses, in particular, certain percentage of contracts, federal contracts overall. They’re awarded, but not specifically in advertising.

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