OMB to agencies: Start contractor reforms

OMB issued three memos today that outline $40 billion in savings on contract spending. It told agencies to cut seven percent from their budgets for contractors.

White House officials today asked federal agencies to trim seven percent from their contracting budgets by Sept. 30, 2011, beef up their reporting on contractor performance and reduce their reliance on high-risk contracts.

The Office of Management and Budget released three memos on acquisition and contracting to achieve those goals. The broader target is to attain $40 billion in savings from a total federal contracting budget of more than $500 billion a year.

“Too much money is spent on too many wasteful contracts, and too many contracts are awarded with too little competition,” OMB Director Peter Orszag said in a statement. “We are taking steps that are effective immediately to change the culture of government contracting, putting the focus on providing the best services for the taxpayers.”

For Stan Soloway's analysis of the memos, click here.

The first memo directs federal agencies to decrease by 3.5 percent their baseline contracts in fiscal 2010 and another 3.5 percent in fiscal 2011. Directors who have recently started paring budgets can include those savings. “Agencies that have recently announced or commenced acquisition reforms may count those savings in these reforms in meeting the seven percent target,” the memo issued today states.

Agencies can save money by eliminating contracts that are no longer needed, leveraging their buying authority, utilizing technology, developing strategic approaches, re-engineering businesses process or other means, the memo said.

In addition, agencies must reduce by 10 percent, in comparison to the fiscal 2008 baseline, their use of high-risk contracts, which are defined as noncompetitive contracts, cost-reimbursement contracts and others.

The second guidance issued today advises federal agencies on improving their workforce management to achieve the best balance of public and contractor employees.

Jeffrey Liebman, executive associate director of OMB, said in a conference call that the goal is to reduce “over-reliance on contractors” and “restore balance” in the federal employee/contractor workforce. Liebman said professional services contracts are more apt to indicate over-reliance because the work being performed is sometimes very similar to what federal workers are doing.

The third OMB memo states that agency contracting officials will be required to electronically submit contractor-performance reports to the Past Performance Information Retrieval System, which is an online database used by government officials to track contractor performance. The information in the database is not available to the public.

Starting Feb. 1, 2010, the Office of Federal Procurement Policy will begin monitoring agency compliance with the performance requirement.“We will hold agencies accountable,” Liebman said.

The OMB memoranda are based on principles outlined by President Barack Obama in a March 4 memo intended to help restore accountability in government, save money for taxpayers, and reduce over-reliance on contractors.

Federal contractor spending more than doubled between 2002 and 2008, to $500 million. The amount that was obligated in noncompetitive contracts increased to $188 billion, from $82 billion, during the same period.

OMB said it would issue additional contracting guidance in September focusing on “maximizing competition, choosing appropriate contract types, building the capacity of the federal acquisition workforce, and clarifying when outsourcing is appropriate.”