OMB touts contract reductions, amplifies strategic sourcing push

Agencies have decreased their reliance on contractors, OMB says. Meanwhile, a new memo creates greater accountability for strategic sourcing.

Joe Jordan

Joe Jordan cheers reduction in contract spending.

Federal contract spending declined for the third year in a row in fiscal 2012, the Office of Management and Budget announced, decreasing by 4.5 percent from fiscal 2011.

In fiscal 2011, the government spent $537 billion in contract costs, and in fiscal 2012, it spent $513 billion.

“It is not hyperbole to say, this is a historic reduction in contract spending,” Joe Jordan, administrator of the Office of Federal Procurement Policy, said during a Dec. 6 conference call. He said the more than $20 billion decrease is the largest single-year dollar decrease.

Fiscal 2012’s total spending on contracts was $35 billion less than the amount spent in fiscal 2009.

“This decline represents a dramatic reversal of the unsustainable 12 percent contract spending growth rate experienced from 2000 through 2008,” Jordan wrote in a post on the OMBlog Dec. 6. On the same day, OMB issued a memo creating more accountability on strategic sourcing.

Defense and civilian agencies each did played a role in lowering spending, Jordan said. The Defense Department reduced its spending from $374 billion in fiscal 2011 to $360.5 billion last year, which is a 4 percent decrease. Civilian agencies spent $163 billion in 2011 and $152 billion in ’12, a 7 percent decline, according to OMB's figures.

The decreases are the result of “a concerted and collaborative effort on behalf of all the agencies,” particularly with strategic sourcing efforts, he said.

“You also see that all agencies took this charge very seriously,” Jordan said. The administration had pushed to reduce spending on management and support services by 15 percent by 2012. The government exceeded the goal, recording 16 percent less spending in those areas, just a bit more than $7 billion last year.

Strategic sourcing: New rules

On the same day officials released their spending figures, the administration took another step in its strategic sourcing efforts. An OMB memo created a leadership council and are requiring agencies to designate an official who is in charge of getting the money-saving effort into action.

Each department has until Jan. 15 to tell OMB who will be the designated Strategic Sourcing Accountable Official. The official will have the authority to coordinate the agency’s internal sourcing activities and its participation in governmentwide efforts.

The memo also creates the Interagency Strategic Sourcing Leadership Council, comprised of the major departments that have a heavy hand in using strategic sourcing, such as the Defense Department and the General Services Administration. The new council’s first assignment is to recommend to the administration management strategies to ensure the government gets the best offer possible for specific goods and services, including IT commodities. OMB is looking what would yield the greatest savings, how to track the savings, and the contracts that would help to that end. The council would replace the Chief Acquisition Officers Council’s Strategic Sourcing Working Group.

However, some industry leaders say OMB forgot industry in the memo. Officials are bringing together integrated teams from the various largest spending departments to discuss how to proceed with gaining even greater savings. But industry is nowhere to be found and without a voice.

“There’s nothing ‘Myth Busters’ about this,” said Roger Waldron, president of the Coalition for Government Procurement, referring to the OMB initiative that pushes for more direct interaction with industry in various aspects including government contracting. “You work with your suppliers. That’s true strategic sourcing,” he added.

Jordan, however, said he interacts with industry on many levels and in many ways. The government has learned a lot from them in the early stages of setting up the Federal Strategic Sourcing Initiative, he said, which is the new memo’s foundation.

“I firmly believe and have always said anything we do in government procurement has to be done in collaboration with industry,” he said. “We need to work in partnership with our vendors to make sure we create a system that provides taxpayers with the best value.”

Waldron and Roger Jordan, vice president for government relations at the Professional Services Council, both raised concerns with whether the new council will be more bureaucracy and duplicate what other groups are doing. For instance, the Chief Acquisition Officers Council has worked on similar strategic sourcing efforts in the past.

The new memo also seems similar to draft legislation on buying commodity IT in other, smarter ways.

A spokesman for Rep. Darrell Issa (R-Calif.), chairman of the Oversight and Government Reform Committee, said Issa appreciates the new memo as it embraces important elements of the committee’s approach to IT reform. Issa is circulating a draft version of the Federal Information Technology Acquisition Reform Act. It aims to streamline IT acquisition through broader accountability.

“Considering this memorandum alongside previous directives and memoranda issued by the administration, OMB should be a willing partner in the legislative reform effort in order to finally make progress addressing the waste and duplication in federal IT procurement,” the spokesman said.

Roger Jordan said the memo resembles Issa’s bill, but OMB gives more flexibility for agencies.

“It allows agencies to get their own procurement shops in order before taking on a governmentwide effort,” he said.

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