Today more than ever, the government must ensure that it spends money wisely and eliminates waste and abuse of taxpayer dollars. With more than one out of every six dollars of Federal government spending going to contractors, it is imperative that contract actions result in the best value for the taxpayer.
In March 2009, the President directed agencies to save $40 billion annually by Fiscal Year (FY) 2011 and reduce use of high-risk contracts. The President's mandate has instilled a new sense of fiscal responsibility and accountability in agencies, and the results are clear. For the first time since 1997, overall contract spending declined. After over a decade of dramatic contract growth that saw annual procurement budgets increase at an average rate of 12 percent per year between FY 2000 and FY 2008, this Administration has turned the tide and reduced contract spending.
Agencies spent nearly $80 billion less in FY 2010 than they would have spent had contract spending continued to grow at the same rate it had under the prior Administration. At that rate, contract spending would have reached a record $615 billion. Instead, FY 2010 contract spending was $535 billion versus $550 billion in the prior year. Agencies are ending ineffective contracts and contracts that support programs that are no longer needed. They are taking advantage of smarter buying practices to pool their buying power to negotiate better prices and deeper discounts for everyday needs. They are increasing competition and reducing the use of high risk contract practices that can lead to cost overruns. Once contracts are awarded, agencies are improving oversight, to ensure that the taxpayers get the price, schedule, and quality the contractor committed to deliver. These efforts will continue as agencies work to implement the Executive Order on Delivering an Efficient, Effective, and Accountable Government.
Spending on contracts grew tremendously over the past decade, averaging 12 percent annually from FY 2000 to FY 2008. Recognizing this growth was unsustainable, the President directed agencies to save $40 billion annually by FY 2011. Responding to the President’s mandate, agencies have taken immediate actions to arrest the growth in spending on contracts by applying fiscally responsible acquisition practices. Agencies spent nearly $80 billion less in FY 2010 than they would have spent had contract spending continued to grow at the same rate it had under the prior Administration. At that rate, contract spending would have reached a record $615 billion.
Agencies are making concerted efforts to reduce the money spent through high-risk contracts – contracts that are not fixed price or are awarded without adequate competition – so that the government faces no greater financial risk than necessary in its contracting. To meet the President’s direction to address contracting risk, every agency is taking steps to reduce by 10 percent the share of dollars obligated through new contracts in FY 2010 that are awarded (1) noncompetitively, (2) after a competition that received only one bid, (3) using a cost-reimbursement contract and (4) using a time-and-materials/labor-hour (T&M/LH) contract. Overall, the government met the goal on two of the four types of contracts. The Office of Management and Budget is working with agencies that did not meet the targets to identify ways to make further progress.
In order to provide agencies with the goods and services that they need to accomplish their missions at the best value to taxpayers, the Government needs talented and trained individuals who can plan, manage and oversee acquisitions. The inflation-adjusted dollar value of civilian agency contracting increased by 56 percent between FY 2000 and FY 2008, while the number of contract specialists in the government increased only half that much. As a result of this, the acquisition workforce spends less time on critical steps in the acquisition process such as planning, requirements development, market research, competition, and contract administration – increasing the chances of cost overruns, delays, and poor outcomes. To ensure that the Government can effectively manage its acquisitions, the Administration is working to properly staff, train and develop the acquisition workforce.
Agency spending is typically fragmented across multiple departments, programs, and functions. As a result, agencies often rely on hundreds of separate contracts for many commonly used items, with prices that vary widely. This often prevents agencies from receiving the best price they could, leading to an unacceptable waste of taxpayer dollars. To address this waste, agencies are reviewing their internal buying patterns and identifying opportunities to combine contracts to achieve significant savings for recurring requirements. The Administration is building on these efforts by pulling agencies together to identify commodities that all agencies need and are likely to buy with similar terms and conditions.