OMB claims $19B in contractor savings

Savings derive from reverse auctions and software contract consolidations

The Obama administration has identified $19 billion in contracting savings for fiscal 2010, which is on track to meet President Obama’s goal of saving $40 billion, White House officials said today.

The savings are coming from 24 agencies—including the Defense, Energy and Homeland Security departments—that represent 98 percent of the federal government’s contracting dollars, according to a new report published by the Office of Management and Budget (OMB) today.

Federal Chief Performance Officer Jeff Zients, who also is OMB's deputy director for management, said today in a conference call with reporters that OMB will publish an online dashboard in the spring to track and describe the savings in detail.

For example, the money saved includes $87 million from the Homeland Security Department through consolidating purchases of desktop software and $10 million from Defense for using staff engineers to develop a protective coating for shoulder-fired missiles that protects against expensive repairs, he said.

Also, the Energy Department’s National Nuclear Security Administration is saving up to 18 percent on its contracting by holding reverse auctions online, Zients said. Calling it a “reverse Ebay,” he said the bidders are encouraged to lower their bids for performing the contract by watching the other bids, anonymously, in the online reverse auction.

Federal spending on contracts more than doubled to $540 billion between 2002 and 2008. Noncompetitive contracts rose by 129 percent over that period, to $188 billion, according to OMB.

To reverse that trend, Zients said OMB is encouraging the agencies to reduce their use of high-risk contracts such as noncompetitive contracts, identify the right mix of contract and federal employees, and build the acquisition workforce.

“In the last six years, contracting doubled and the workforce was flat,” Zients said. “In that process, there was a rush to outsource, with a marked increase in reliance on cost-reimbursement contracts and sole-source contracts,” he added. “We have a lot of work to do. We will save money by bringing in best practices.”

In addition to their savings plans, agencies have identified initiatives to reduce by 10 percent the money spent on new high-risk contracts, which include non-competitive, cost-reimbursement or time-and-materials/labor-hour contracts.

Each agency also has identified at least one pilot project to find where they might be over-reliant on contractors, and will evaluate the best mix of in-house and contractor skills. Results are due May 1.

Fedeal agencies now are required to submit an electronic contractor performance review to a centralized federal database, the Federal Awardee Performance and Integration Information System. It allows agencies to assess a firm’s track record before signing a new agreement. Compliance and quality assessments will begin in February, the OMB said.

The new database is drawing some criticism. A watchdog group says it should be more transparent, while a contractor organization wants it to be more secure. Both groups said the data may not be reliable enough to guide important contracting decisions.

About the Author

Alice Lipowicz is a staff writer covering government 2.0, homeland security and other IT policies for Federal Computer Week.

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