By Steve Kelman

Blog archive

Will contracting savings plans translate into budget cuts?

Some people are getting concerned about the Obama administration’s appeal to the procurement community to do its part to reduce the deficit by finding new ways to save money in contracting.

During a recent presentation on contracting issues, I said some nice things about the idea, believing that as Americans public servants in contracting ought to contribute. I also think the idea ties into an important cultural value within contracting.

But someone in the audience expressed the worry that savings identified would simply be scooped up as a sort of 100 percent tax by the budgeteers in the Office of Management and Budget. An agency's only reward for aggressive contracting savings would be to have its budget cut more.

There's of course a fine line to be walked here. On the one hand, the goal of this exercise is to reduce the enormous deficit that the government needed to create to prevent the economy from disintegrating. As much as agencies might like a situation in which a dollar of contracting savings could simply be used to buy more mission support, that's not realistic.

On the other hand, if every dollar of contracting savings results in a dollar decrease of one's budget, there is no incentive for agencies to save more. In fact, agencies that save less would be penalized less. Furthermore, any advance estimates of actual savings to be generated by a savings plan are guesswork, hardly exact enough to be used as guides for budget decisions.

I believe that the budget office should either impose an across-the-board government cut in contracting dollars or it should make agency-specific cuts based on policy considerations not tied to contracting savings plans. This cut should be moderate, something that reasonably could be met or exceeded by cost-savings measures (as opposed to program cuts). Then, if an aggressive agency succeeds in saving a lot of money through better contracting, it would have something left over, after the cuts, to pour back into increased program. If they come in short, they will have to take program cuts. This would seem to get the incentives right.

Reactions either from agencies or from budget types? Is this what OMB is already doing?

Posted by Steve Kelman on Mar 02, 2010 at 12:08 PM


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