Agencies identify $19 billion in contract savings

Plans submitted to the Office of Management and Budget by the 24 federal agencies that do the most contracting will result in more than $19 billion in acquisition-related savings, OMB reported on Monday.

The plans, which will not be made public until an online dashboard focusing on the savings is launched in spring 2010, include a combination of strategies, according to Jeff Zients, federal chief performance officer and OMB's deputy director for management. They include program terminations and reductions, internal agency spending caps and more effective use of competition.

"At a time when we face not only a fiscal crisis, but also a host of difficult challenges as a nation, business as usual in Washington just won't do," said President Obama of the contracting plans. "After years of irresponsibility, we are once again taking responsibility for every dollar we spend, the same way families do."

Many of the plans include a renewed commitment to strategic sourcing, which relies on increased use of agencywide and governmentwide contract vehicles. OMB has challenged agencies to take immediate steps to "aggressively" seek deeper discounts by using blanket purchase agreements for recurring needs.

Zients praised Homeland Security Department officials for standardizing desktop operating systems across the department, allowing DHS to award a single contract for all necessary IT products. That move, he said, saved the department $87.5 million.

Zients also highlighted a number of other approaches to savings, such as a new online reverse auction service implemented by the Energy Department's National Nuclear Security Administration. Zients said the service is like eBay in reverse, with contractors dueling to bid the lowest price. NNSA says the system has resulted in average cost savings of 18 percent.

Agencies also are seeking to find the right balance of contractors and federal employees. Each of the 24 agencies has identified at least one area of potential overreliance on contractors. The agencies have developed pilot programs to determine the appropriate number of contractors and federal workers and will report on progress under these programs by May 2010. According to OMB, assessments under the pilots could lead to actions such as moving functions back into government or adding resources for contract management.

Another key administration priority is the reduction of high-risk contracts -- those awarded noncompetitively, or as cost reimbursement arrangements -- which Zients said "carry the greatest potential risk of overspending taxpayer resources." He said the "explosion" of these contracts -- the use of which increased by 129 percent between 2002 and 2008 -- is a concern. Agencies are working to meet the president's goal of reducing money spent through such contracts by 10 percent, and will report twice a year on their progress.

To transition away from an overreliance on contractors and high-risk contracts, agencies must address weaknesses in their acquisition workforces, OMB says. Each agency is required to submit a human capital plan for acquisition by March 31, 2010. Zients said the plans will serve as a basis for budget preparation next year.