Obama wants contracting overhaul

President calls for limiting outsourcing and restricting contract types

The way government agencies acquire the goods and services needed to carry out their responsibilities will take an abrupt 180-degree turn if President Barack Obama gets his way.

Obama made it clear last week that he wants to abandon the Bush administration’s drive to push more federal work into the private sector and, at the same time, toughen on contracts that he considers prone to exploitation by companies and wasteful to agencies.

“It’s time for this waste and inefficiency to end. It’s time for a government that only invests in what works,” Obama said in a news conference March 4. The same day, Obama signed a presidential memo putting the overhaul into motion.

The president’s push to have agencies interact differently with contractors is a sea change from the Bush era. Departments have become overly reliant on contractors, Obama's memo states. As a result, government spending through contracts has more than doubled since 2001, reaching more than $500 billion in 2008.

Obama would put more obstacles in front of contractors who might want to cheat the government with substandard work. And he plans to “in-source” federal work, a process of identifying outsourced work and bringing it back into agencies.

Furthermore, he’s moving away from cost-reimbursement and no-bid contracts by demanding that agencies use fixed-price contracts as much as possible. (Story, Page 38)

The unexpected scope and sweep of Obama’s directive took Washington’s procurement community by surprise and prompted a wave of criticism from outside contractors and acquisition officials inside the government. Obama’s campaign rhetoric against procurement abuse might play well with the mainstream press and the general public, they say, but he’s missing some of the most crucial problems that plague federal procurement. (Forum, Page 16)

Critics say Obama’s proposals would do little to stem an explosion in the use of of task and delivery orders rather than full contracts. And it does not seem to offer any relief to an already stressed acquisition workforce.

“In an area as technical as procurement, it is not a good idea simply to translate campaign rhetoric into the nuts-and-bolts of government management,” said Steve Kelman, administrator of the Office of Federal Procurement Policy from 1993 to 1997 and now a Harvard University professor, on his FCW.com blog, "The Lectern."

A major point of contention is the administration’s negative view of no-bid and cost reimbursement contracts. Although Obama’s memo cites the increase in those contract types, he misses the larger picture, Kelman said, which is all contracting has increased significantly in that span of time. According to an OFPP memo from 2008, the proportion of contracts that are fully competed has remained steady at more than 60 percent from 2003 to 2007.

“It is a higher priority to seek to increase [the] use of performance and cost incentives in cost-reimbursement [or time-and-materials] work than to attack cost-reimbursement contracting per se across the board,” Kelman wrote.

Obama said the Office of Management and Budget will issue governmentwide guidance by Sept. 30 on the appropriate use and oversight of sole-source and other types of noncompetitive contracts. He said the amount of money funneled through those types of contracts jumped from $71 billion in 2000 to $135 billion in 2008, which is a 47 percent increase. He instead wants to see more full-and-open competition for contracts.

Furthermore, OMB will develop more detailed guidance by July 1 to help agencies review their existing contracts to find the wasteful ones that are unlikely to meet their needs, the memo states.

“We will end unnecessary no-bid contracts and cost-plus contracts that run up the bill that is paid by the American people,” Obama said. He predicted his reforms would save the government $40 billion each year.

While those reforms might save money, experts said more dramatic savings could come from a well-educated and better-trained acquisition workforce. Obama needs to make training the workforce the paramount priority, not simply curtailing certain types of contracts, they say.

“That’s got to be the central theme,” said Robert Burton, former deputy Office of Federal Procurement Policy administrator from 2001 to 2008 and now partner at Venable law firm.

Many acquisition employees don’t fully understand the 1,949 pages of the Federal Acquisition Regulation and their agencies’ own regulatory supplements, Burton said. Training them to improve their understanding of and adherence to the laws could solve many contracting programs, he said.

Meanwhile, task and delivery orders are increasing with little guidance, Burton said. Today, more than 50 percent of the federal contracting expenditures go through huge task and delivery orders. Core problems exist with these orders, such as poorly defined requirements that are often out of scope of the contract, and limited competition for work. It’s an area that needs more guidance, he said.

Similarly, a panel of former Defense Department acquisition officials told senators last week that knowledgeable and experienced acquisition employees are the solution to improving programs and controlling costs.

Fixed-price contracts have a role in federal contracting, but contracting officers need a wider range of options, several government acquisition executives said. Officials should not discourage the acquisition community from using other appropriate contracts that might suit specific needs.

Still, experts say departments’ contracting officers must support the White House’s changes if agencies expect better contracting decisions and savings. Michael Sullivan, director of acquisition and sourcing management at the Government Accountability Office, said memos and legislation might not achieve the goals unless departments transform the overall acquisition culture.

Ray Bjorklund, a military officer and Defense Department acquisition official from 1971 to 1998 and now senior vice president and chief knowledge officer at FedSources, said Obama is aggressively pushing agencies to choose the right type of contracts.

Angela Styles, OFPP administrator from 2001 to 2003 and now partner at Crowell and Moring’s Government Contracts Group, said Obama might have hampered his efforts by over-generalizing the motives of contractors,. The president will need good contractors to drive the initiative forward, cooperation that he might be less likely to get if they feel offended that he appeared to characterize all contractors as mercenary and untrustworthy.

“If you make one false turn as a contractor, you will be brought to your knees by the full power of the U.S. government," Styles said. "It is not a great place to be. The vast majority of government contractors understand that what they do is for the taxpayer and to make the federal government work better.”

Bringing the work home

Obama said he wants to limit the outsourcing of federal work, whereas the Bush administration sought to increase it. The question, as always, turns on the definition of inherently governmental work, which is work that only federal employees can properly do.

The fiscal 2009 Omnibus Appropriations Act already passed by the House would require a clarification of those functions. The Senate had not passed the bill as of March 6, but Obama has made limiting outsourcing a priority to pursue regardless of the bill's fate. The legislation would make it easier for agencies to pull work back into the agencies and away from contractors.

And so it appears that Obama, with the vocal support of Democrats in Congress in addition to Republicans such as Sen. John McCain of Arizona, is fundamentally changing the relationship between the public and private sectors. And it would also appear that the tide is in his favor. Several members of Congress made statements of support for Obama, and many of his proposed reforms are already incorporated in the current Defense Authorization Act, which President Bush signed last year.

“We must put an end to no-bid contracts and dishonorable procurement practices that are often the root cause of waste, fraud and abuse of taxpayer dollars,” said Rep. Edolphus Towns, (D-N.Y.), chairman of the House Oversight and Government Reform Committee.

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

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Reader comments

Fri, Mar 20, 2009

Having worked as both a Gov Contracts Professional and a contractor - I believe that there have been many good acquisition changes in the past few years that promote competition and hold contractors to ethical standards. What I have not seen happen is reform of the Government Workforce. While there are many bright, hardworking, dedicated Federal Employees, there are also a large number of stereotypical Government employees feeding off of the system. These people abuse the acquisition process, use contractors for personal services, or simply don't do any work. In that respect, the country is better off hiring contractors to provide support services who can be held accountable for the work they do and removed if they are not performing. It is almost impossible to fire an ineffective Federal employee, so they are simply promoted to get them out of the way. We should not begin to think of changing contractor jobs to Federal jobs until we overhaul the Government and ensure that the Government is able to retain and promote the best and brightest and is is not unduly clogged with incompetent or unethical personnel.

Tue, Mar 17, 2009

Fine we get government stagnation of many unmotivated employees knowing they have no competition (I am not talking to the majority but that group at every agency that are camped out for a lifetime in each agency doing minimally successful work). Next we get the cheapest contractor over someone who we have had learn our business culture over a period of time and have to start all over. President Obama has some good ideas but there is enough redundency, out-of-date FAR and related regulations, out dated Prompt Payment Act, out of control intragovernmental contracts not going through the acquisition community, antiquated legacy systems and processes, etc. to take a good look and have a plan before acting on a hunch. Listen to your wise brain trust, factor in some of your intelligent gurus, and have a plan and implement instead of this ad-hoc on the fly quick to change mentality. The problem is huge, the elephant is large, but taking 5 bits just makes the problem messier and the elephant more angry. You can move my cheese, but please quit grinding it, melting it, and then telling me everything is fine!!

Mon, Mar 16, 2009 Ginger

It would help if the President would start with having the FAR updated and kept up-to-date since it is what most KOs base their decisions on.

Thu, Mar 12, 2009

We need do away with the Advisory and Assistance Service (A&AS) contracts we have been doing the last few years. I have worked in the A&AS side of the house for the government in contracting and I can tell you that we have spent more money on A&AS type of contracts than we ever did when we had government employees doing the work. Also, there should not be a big push on every government employee to have a degree. I have been in the government for 30 years and I don't have a college degree of any type but I cannot get promoted because I don't have that piece of paper. Yet, I am the one when the people are brought in with their degree that has to train them how to do their job. Having a college degree does not make a person any smarter than one who has had on the job training. I have more government courses than any of the college people will probably ever have. Experience versus degree needs to be weighed the same for promotions.

Wed, Mar 11, 2009 Just my opinion NOVA

I've been a professional in the the Government Contracting world for 35 years and every Administration wants "CHANGE" in one form or another. What is change? What constitutes effective change and how does that work in our Government? Obama's latest Memo on reducing tghe waste fraud and abuse in government contracting and inferring that the 'contractors' are to blame is only a 'partial' truth. Yes some contractore are to blame and some legislators who influence procurements to cronys are to blame. But most of all the government procurement system is severely broken and has been for years. Too many disagree on how to fix it. Would it be too much to ask for a government/industry coalition o do a 6 month analysis to determine root causes, then fix those? I happen to agree - the procurement system is broken and there too few educated, experienced and FAR knowledgeable procurement professionals in the government. Fixing that would be a major 'change'.Many legislators believe that contractors abuse the procurement system. Some do. How many legialators use 'earmarks' to get 'pet' projects added to bills that have nothing to do with the bill's original intent - they do exactly what they acuse contractors of doing. Yet, Obama wants that to change but he won't demand removal of those BILLIONS in earmarks from the latest $410 BILLION stimulus package he just signed. Is that effective change or more of the same old stuff stated differently?Just my opinion

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