Obama’s Contracting Initiatives: An Update

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President Obama’s 2008 election campaign made strong commitments to reduce the government’s dependence on the use of contractors. Now come the implementation details:

The Bush Administration had been a big promoter of the use of contractors, basically doubling spending on contracting to about $500 billion a year. Congress pushed back on some initiatives to outsource some government functions – even when the Republicans controlled the Congress.  It increased restrictions, embedded study requirements regarding the appropriate balance of government vs. private employees, required the Administration (in the Defense Department authorization bill) to develope a definition of what constitutes “inherently governmental” positions, and directed the Intelligence Community to conduct an assessment of its staffing mix between public and private resources, and the Intel Community is beginning to tilt its staffing mix toward more government hires.  Most recently, the Senate has proposed banning all outsourcing studies.

In his first 100 days, President Obama signed a memorandum on contracting reform directing a re-assessment of public vs. private sectors in providing governmental services.  The new deputy secretary of Defense issued internal guidance on how Defense agencies should address this, as well.  The presidential memo included several studies and deadlines.  Several of those have just been released, according to a story by Joe Davidson in today’s Washington Post, “OMB Moves to Cut Outside Contractors.”

According to the Post article, OMB has (or will) issue four guidance memos to agencies:

  • Improving Government Acquisition.  This memo set out guidance to agencies to review their existing contracts and buying practices in order to save $40 billion a year through better practices.  It requires them to:  (1)  develop plans to save 7 percent of contract spending over the next two years (3.5 percent in fiscal year 2010; 3.5 percent in fiscal year 2011); and (2) reduce by 10 percent next year the amount of dollars awarded under “high risk contracting authorities” such as non-competitive contracts, cost-reimbursement contracts, and time-and-material contracts.
  • Managing the Multi-Sector Workforce.  This memo sets out initial guidance to help agencies improve their management of their combined public sector and contractor workforces.  It requires agencies to (1) adopt a human capital planning framework that covers their multi-sector workforce, (2) pilot an analysis of at least one program where the agency has a concern about an over-reliance on contractors, and (3) develop guidelines for when to in-source work to government employees (along with an attachment based on earlier guidance developed by the Defense Department).
  • Improving the Use of Contractor Performance Information.   This memo, directed to agency procurement officers, requires them to submit an electronic record of contracting performance to a central governmentwide database.  It also directs them to develop internal procedures and designate individuals to be in charge of ensuring contracts are assessed. 
  • A third memo will be issued by OMB in the Fall covering competition, contract types, acquisition workforce, and when outsourcing is or is not appropriate.

The private sector, in an assessment by the research firm FedSources, seems to have already recognized that the growth in contract spending may be over.  In a story last month by Elise Castelli for Federal Times, “Contract Spending Expected to Flatten,” she wrote that the study “projects government contract spending to grow at a compound annual rate of 2 percent between 2008 and 2014.  That’s a sharp contrast to the 12 percent compound annual growth rate of the last six years.”

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