President Obama Ordered Reforms on Government Contracts

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Last week, President Obama convened the Fiscal Responsibility Summit where the President and members of Congress and the business community discussed their ideas to put the country on track toward fiscal accountability and responsibility.  

One of the important topics that came up during the Q&A session of the Fiscal Responsibility Summit when the President and Senator John McCain discussed the problem of procurement overruns, especially in the Defense Department contracts.  

The most immediate result from Fiscal Responsibility Summit is that today, on Mar. 4, President Obama signed a Presidential Memorandum, which will reform government contracting process and procedures.   Senators Carl Levin, Claire McCaskill, and John McCain, and Representatives Edolphus Towns and Peter Welch joined the President during the announcement.

The Office of Management and Budget (OMB) will be tasked to review the government's contracting efforts, including the outsourcing works that were historically performed by Federal employees.

The Presidential Memorandum requires the OMB Director, Peter Orszag, to work with the Defense Department, NASA, the General Services Administration chief, the Office of Personnel Management director, and others to develop guidance on strengthening contract oversight, ending unnecessary no-bid and cost-plus deals, and maximizing competition in procurement. 

The President estimated that these reforms would save the taxpayers $40 billion annually.     

The guidance, which is due by Sept. 30, must clarify "when governmental outsourcing for services is and is not appropriate." The Memorandum stated that OMB Circular A-76, the government's playbook for public-private job competitions, was based on the "reasonable premise" that taxpayers might get a better deal if activities that are not inherently governmental are subject to competitive forces.

The President wrote in his Memorandum the following:

"However, the line between inherently governmental activities that should not be outsourced and commercial activities that may be subject to private sector competition has been blurred and inadequately defined.  As a result, contractors may be performing inherently governmental functions. Agencies and departments must operate under clear rules prescribing when outsourcing is and is not appropriate."

Previously, the Bush administration strongly supported competitive sourcing and engaged in a number of legislative skirmishes to push the initiative while defending it from congressional detractors.  Lawmakers have continued to fight public-private competitions, however, most recently with a provision in the fiscal 2009 omnibus spending bill that would suspend new Circular A-76 competitions.

The provision also requires agencies to review current contracts and issue guidelines for considering, if new projects can be performed by Federal employees, or if previously outsourced work can be brought back in-house

The President also endorsed the goals of the bipartisan effort on defense procurement reform led by Senators Carl Levin and John McCain.

President Obama spoke about those who would try to protect contractor excesses behind cries of weakening our national defenses, as he assured the public that there would be a bipartisan, firm stand to put those excesses to an end.  Read the full text here as released by the White House.

The American people's money must be spent to advance their priorities -- not to line the pockets of contractors or to maintain projects that don't work.
 
Recently that public trust has not always been kept.  Over the last eight years, government spending on contracts has doubled to over half a trillion dollars.  Far too often, the spending is plagued by massive cost overruns, outright fraud, and the absence of oversight and accountability.  In some cases, contracts are awarded without competition.  In others, contractors actually oversee other contractors.  We are spending money on things that we don't need, and we're paying more than we need to pay.  And that's completely unacceptable.
 
This problem cuts across the government, but I want to focus on one particular example, and that is the situation in defense contracting.  Now, I want to be clear, as Commander-in-Chief, I will do whatever it takes to defend the American people, which is why we've increased funding for the best military in the history of the world.  We'll make new investments in 21st century capabilities to meet new strategic challenges.  And we will always give our men and women the -- in uniform, the equipment and the support that they need to get the job done.

But I reject the false choice between securing this nation and wasting billions of taxpayer dollars.  And in this time of great challenges, I recognize the real choice between investments that are designed to keep the American people safe and those that are designed to make a defense contractor rich.
 
Last year, the Government Accountability Office, GAO, looked into 95 major defense projects and found cost overruns that totaled $295 billion.  Let me repeat:  That's $295 billion in wasteful spending.  And this wasteful spending has many sources.  It comes from investments and unproven technologies.  It comes from a lack of oversight.  It comes from influence peddling and indefensible no-bid contracts that have cost American taxpayers billions of dollars.

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