Feeling the Pinch

Agencies watch their wallets and bring work back in-house.

The Obama administration has taken out its paring knife and started slowly peeling back recent layers of growth in civilian contract spending. The Office of Management and Budget urged federal agencies to cut their procurement budgets, insource some private sector functions and eliminate high-risk contracts. More specifically, agencies must save 7 percent from their baseline contract spending by fiscal 2011 and reduce by 10 percent their use of sole-source, cost-reimbursement and time-and-materials contracts. OMB expects these reforms to save $40 billion annually.

By December 2009, the 24 agencies that perform most federal contracting had identified about $19 billion in proposed savings during fiscal 2010. Agencies took different approaches to the cuts. For example, the Homeland Security Department standardized its desktop operating systems, saving more than $87 million. The Environmental Protection Agency followed the lead of many agencies by using strategic sourcing to consolidate its IT requirements and switching many of its older, more stable service contracts from cost-reimbursement to fixed-price models, which are considered safer because costs can be better controlled. The Veterans Affairs Department, meanwhile, is focusing on issuing fewer sole-source contracts while the Education Department is designing contracts with hybrid cost structures and scrutinizing higher-risk procurements.

The administration also has started the process of bringing certain federal services back in-house. Agencies have been asked to identify at least one area of potential overreliance on contractors and to conduct a pilot insourcing program. In addition, in March, the administration issued a long-awaited proposed policy directing agencies to use a single governmentwide definition of functions that are inherently governmental and therefore prohibited from outsourcing. The memo instructed officials to avoid an overreliance on contractors for functions that are "closely associated with inherently governmental" or are "critical" for the agency's mission.

These reforms and policy proposals, however, aren't yet reflected in civilian agency spending figures, which increased from $138 billion in fiscal 2008 to more than $160 billion in fiscal 2009. Significant upticks in contract spending occurred at the Energy Department and General Services Administration, both of which were major recipients of Recovery Act funds. Contract spending at other civilian agencies such as NASA and DHS-which were not among the largest recipients of stimulus funding-stayed flat. Across the federal landscape, the stimulus provided a major infusion of contract spending. To date, Energy has obligated $7.2 billion in Recovery Act contracts, followed by GSA ($4.6 billion); Health and Human Services Department ($1.5 billion); and the Interior Department ($1.4 billion).

While Recovery Act spending is slowly beginning to wind down, a pair of unforeseen events has given a recent boost to federal contracting spending. Agencies have responded to January's devastating earthquake in Haiti by issuing $123 million in contracts, and closer to home, the federal government has ramped up its procurement in response to the April Deepwater Horizon oil spill in the Gulf of Mexico with another $45 million in contracts.

Click here for the top 100 civilian contractors.

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
Close [ x ] More from GovExec

Thank you for subscribing to newsletters from GovExec.com.
We think these reports might interest you:

  • Sponsored by Brocade

    Best of 2016 Federal Forum eBook

    Earlier this summer, Federal and tech industry leaders convened to talk security, machine learning, network modernization, DevOps, and much more at the 2016 Federal Forum. This eBook includes a useful summary highlighting the best content shared at the 2016 Federal Forum to help agencies modernize their network infrastructure.

  • Sponsored by CDW-G

    GBC Flash Poll Series: Merger & Acquisitions

    Download this GBC Flash Poll to learn more about federal perspectives on the impact of industry consolidation.

  • Sponsored by One Identity

    One Nation Under Guard: Securing User Identities Across State and Local Government

    In 2016, the government can expect even more sophisticated threats on the horizon, making it all the more imperative that agencies enforce proper identity and access management (IAM) practices. In order to better measure the current state of IAM at the state and local level, Government Business Council (GBC) conducted an in-depth research study of state and local employees.

  • Sponsored by Aquilent

    The Next Federal Evolution of Cloud

    This GBC report explains the evolution of cloud computing in federal government, and provides an outlook for the future of the cloud in government IT.

  • Sponsored by Aquilent

    A DevOps Roadmap for the Federal Government

    This GBC Report discusses how DevOps is steadily gaining traction among some of government's leading IT developers and agencies.

  • Sponsored by LTC Partners, administrators of the Federal Long Term Care Insurance Program

    Approaching the Brink of Federal Retirement

    Approximately 10,000 baby boomers are reaching retirement age per day, and a growing number of federal employees are preparing themselves for the next chapter of their lives. Learn how to tackle the challenges that today's workforce faces in laying the groundwork for a smooth and secure retirement.

  • Sponsored by Hewlett Packard Enterprise

    Cyber Defense 101: Arming the Next Generation of Government Employees

    Read this issue brief to learn about the sector's most potent challenges in the new cyber landscape and how government organizations are building a robust, threat-aware infrastructure

  • Sponsored by Aquilent

    GBC Issue Brief: Cultivating Digital Services in the Federal Landscape

    Read this GBC issue brief to learn more about the current state of digital services in the government, and how key players are pushing enhancements towards a user-centric approach.

  • Sponsored by CDW-G

    Joint Enterprise Licensing Agreements

    Read this eBook to learn how defense agencies can achieve savings and efficiencies with an Enterprise Software Agreement.

  • Sponsored by Cloudera

    Government Forum Content Library

    Get all the essential resources needed for effective technology strategies in the federal landscape.


When you download a report, your information may be shared with the underwriters of that document.