OMB touts 'historic' $20 billion in contracting savings

Office of Federal Procurement Policy Administrator Joe Jordan Office of Federal Procurement Policy Administrator Joe Jordan OPM

Agency spending on goods and services contracts fell by $20 billion during the past year, the Office of Management and Budget announced Thursday.

Office of Federal Procurement Policy Administrator Joe Jordan ascribed this “historic” savings level to “a concerted and collaborative effort by all federal agencies.”

The downward trend in contracting -- a $35 billion drop-off or 16 percent decrease within three years -- surpasses the goal President Obama set in 2009, Jordan told reporters in a conference call. Its decline represents a “dramatic reversal of the unsustainable 12 percent contract spending growth rate experienced from 2000 through 2008,” he said.

Jordan added contract spending on management support services, such as information technology systems development, was cut by $7 billion during the past two years by “buying smarter and buying less,” another administration goal.

The new numbers surrounding the $500 billion-plus annual spending on contracts came a day after acting OMB Director Jeffrey Zients issued a memorandum to all agency heads establishing procedures to require strategic sourcing, or multiagency bulk purchasing of supplies. Some in Congress and in the small business community have objected to such efficiency efforts because they shrink the number of eligible contractors.

The fresh embrace of strategic sourcing, which has been evolving at OMB and the General Services Administration since the George W. Bush administration, requires the seven largest-buying departments to develop at least 15 new governmentwide strategic sourcing solutions that their agencies will commit to using for the next two years. Each agency must designate an official to be held accountable for strategic sourcing.

The White House procurement policy chief will lead a new Strategic Sourcing Leadership Council consisting of the designated officials at the Defense, Energy, Health and Human Services, Homeland Security, and Veterans Affairs departments, as well as GSA and NASA. By March 2013, each will identify five products or services that can be converted to mandatory strategic sourcing.

The memo gives GSA the added responsibility of identifying, in consultation with the new council, at least five new governmentwide strategic sourcing solutions in both fiscal 2013 and fiscal 2014. And it reminds the contracting agencies of the need to give special consideration to small businesses.

“GSA should be pleased,” Jordan said, “because their great work in collaboration with other agencies and OMB has proven out that the concept of strategic sourcing works. It not only saves money but furthers other procurement goals,” he added, noting GSA’s office supply initiative brought new opportunities to small businesses. “The goals we are pushing for agencies are mutually reinforcing,” he said.

Asked about objections from small businesses that are being removed from rosters for contracting through the long-standing GSA schedules, Jordan said, “there will be winners and losers. We ask companies to give us their best numbers for review, and we make sure agencies are working with small businesses upfront to maximize their opportunities to compete. We manage the businesses who do win with on ramps and off ramps and analytics to make sure the government is getting value,” while the winning businesses gain increased volume and can do a good job with planning. Recompeting the contracts in the future to get the highest-quality vendors, he added, is a “win-win.”

The decision to make some of strategic sourcing mandatory, Jordan added, which was signaled by Zients in September, came from a recommendation by the President’s Management Advisory Board. “As the largest purchaser in the world, the government can’t behave like 150 midsize businesses making their own procurement decisions,” he said. “We’ve taken best practices in recent years from government and the private sector and pulled it all together. It’s not from a blue-ribbon panel. It’s saying this is how we plan to do business in the government.”

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