White House push to reduce contractors is at odds with expanding role of agencies

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Within his first few months in office, President Obama signed the largest economic recovery package in a generation, significantly boosted government assistance to banks and auto manufacturers, and augmented the role of U.S. troops in Afghanistan. No matter your political affiliation, it is undeniable that these policies have expanded the missions of federal agencies, and by proxy, those of government contractors. History has shown that when the responsibilities of the federal government intensify -- from the growth of Medicare to the creation of the Homeland Security Department -- agencies must turn to the private sector for assistance. The result has been a steady uptick in procurement spending.

But the administration is vowing to buck that trend. In July, the Office of Management and Budget unveiled a bold vision for reshaping, and ultimately reducing, government's dependence on contractors. The guidance, authored by OMB Director Peter R. Orszag, calls for agencies to save 7 percent from their baseline contract spending -- 3.5 percent in fiscal 2010 and another 3.5 percent the year after.

Agencies also must reduce by 10 percent their use of high-risk procurements, including sole-source, cost-reimbursement and time-and- materials contracts. OMB expects these reforms to save $40 billion annually.

While Orszag offered ideas for maximizing savings -- consolidated purchasing, better market analysis and enhanced upfront planning -- agencies are left to determine the best approach. "We are telling them that it's the time to be innovative and to take some smart risks with trying to do things a bit differently to get better performance," says Jeff Liebman, executive associate director at OMB.

Skeptics see the administration's metrics as unequivocally arbitrary and its goals as unrealistic. "When you say you are going to cut contractors it means one of two things: you are either increasing the size of the government in terms of personnel, or you are going to provide less services," says Steven L. Schooner, associate professor of law and co-director of the government procurement law program at The George Washington University Law School. "And, neither one is an option right now."

In the November issue of Government Executive, Robert Brodsky explores the administration's moves toward contracting cuts. Click here to read the full story.

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