Obama’s contracting plan met with approval, skepticism

Democratic presidential nominee Barack Obama's plan to limit federal contracting has been met with mixed reviews from acquisition specialists who say the proposal makes for a rousing stump speech but would be difficult to put into practice.

On Monday in Green Bay, Wis., the Illinois senator unveiled his most detailed plan to date about how he would manage the world's largest and most expensive bureaucracy if elected president in November.

Among his proposals, detailed in an 11-page policy document, would be to cut spending on federal contracts by at least 10 percent and reduce the number of contractors, saving an estimated $40 billion per year. Obama also repeated his pledge to end the privatization of tax collection functions at the Internal Revenue Service.

"I will … save billions of dollars by cutting private contractors and improving management of the hundreds of billions of dollars our government spends on private contracts, and I will end the abuse of no-bid contracts for good," Obama said.

The campaign has said it would find the savings not necessarily by cutting existing contracts but by better managing the acquisition process. This would include more precise specifications about what the government wants to purchase and improved contractor oversight.

Some contracting observers say it's a mistake for Obama to start with a pre-determined percentage of contracting expenditures he would eliminate.

"I am always concerned when someone comes into Washington and says they are going to clean up this one-horse town," said Larry Allen, president of the Coalition for Government Procurement, a contracting trade group. "Because if you are looking for witches, witches are what you will find."

Reducing the contract workforce has been a popular goal for Democratic presidential candidates in recent years. The 2004 nominee, Sen. John Kerry of Massachusetts, pledged to cut 100,000 contractors. During this season's primary, Sen. Hillary Clinton of New York raised the ante to 500,000.

Kerry and Clinton's proposals were met with stiff pushback from contracting lobbyists, but Obama's plan has drawn significantly less scorn.

Industry officials insist that not only is Obama's plan more modest, but his spending reductions would be offset by the hiring of more federal contract managers and improved training for acquisition specialists.

Stan Soloway, president of the Professional Services Council, another contractor trade organization, said he would support Obama's plan if it were driven by greater efficiencies in the acquisition system.

"There's no arbitrary sort of anti-contractor language and so forth in [the plan]," he said. "Separating out some of the rhetoric, if you look at what it actually says -- whether the $40 billion is achievable or real remains a real question -- but it's certainly not a harsh assault on the public-private relationship."

While the devil may be in the details, Obama's recognition of the critical role that the civil service, particularly the acquisition community, plays in federal contracting is an important step, Soloway said.

Others are more skeptical. "It's a stump speech," Allen said. "It plays well in Peoria and to the masses. But when you get into office, you need to apply sound, common-sense management principles."

To restore the government's oversight and management capacity, Obama said he would audit one-fourth of all large contracts each year. The first year would be focused on noncompetitive and cost-plus contracts, both of which he would attempt to minimize or eliminate in favor of fixed-price or incentive-based contracts, the plan stated.

"The audit will verify performance and cost savings, as well as whether the work was appropriate for contracting out, the competition was done fairly, and the contractor treated its workers appropriately," the document stated.

Obama has yet to distinguish how his plan would mesh with the existing auditing system operated by entities such as the Defense Contract Audit Agency. He also did not address whether cost-plus contracts might be the best alternative during contingency situations, such as the aftermath of Hurricane Katrina, which many in the industry say is the case.

"The question really isn't fixed-price versus cost-type," Soloway said. "It's the appropriate use of the appropriate contract in the appropriate environment … Acquisition strategy should identify the contract type that makes the most sense for each individual circumstance."

Contracting watchdogs and observers welcomed Obama's newfound focus on in-the-weeds contracting issues, but criticized the plan for its lack of long-range strategy.

Daniel Guttman, a contracting professor at Johns Hopkins University, said promises of better contract management and more competition are decades old and have limited success. To succeed where others have failed, he said, Obama needs a vision that examines the public service workforce, including contractors, as a whole.

"It is not clear the plan addresses the real problem. Much of the government's basic work is already done by contractors, and contractors have de facto become a core part of the public service workforce," Guttman said. "If we cut contract spending and turn civil servants into contract managers, we are not addressing the core problem of who will be doing the government's work."

Adam Hughes, director of federal fiscal policy at the nonprofit OMB Watch, said Obama's plan is an adequate jumping off-point, but missing is a more nuanced discussion of what kind of work the government should be performing and what is better left for the private sector.

"We need to get into a larger conversation about what government should be doing," Hughes said. "We have swung the pendulum all the way to one side where the belief is that government should not be doing anything; that the private sector is always better. And that has obviously not proved true. We need to swing it back in the other direction. The question, though, is where do you stop?"