Administration cites progress reining in procurement costs

After nearly a decade of unsustainable growth, the federal government finally has hit the brakes on contract spending, the Obama administration's top procurement official testified on Thursday.

Between fiscal 2000 and fiscal 2008, federal contract spending increased by an annual rate of 12 percent, according to Daniel Gordon, administrator of the Office of Federal Procurement Policy at the Office of Management and Budget.

But, between fiscal 2008 and fiscal 2009 -- which included more than eight months of the Obama presidency -- the growth rate slowed to 4 percent, with spending increasing from $537 billion to $560 billion, Gordon told the Senate Budget Committee's Task Force on Government Performance.

"I can't tell you today that we have solved all of the problems. Far from it," Gordon said. "It took years to dig the hole we are in. And, we cannot dig ourselves out of it in a few short months. But I can tell you we have made real, measurable progress."

Gordon highlighted OMB data that shows during the first two quarters of fiscal 2010, agencies decreased their reliance on sole-source contracts, as well as cost-reimbursement and time-and-materials contracts, compared with the same period the previous year.

That data, however, covers only newly issued contracts and it does not include orders on multiple-award contracts or modifications of existing contracts, which accounted for more than half the total spending during that period.

Agencies, Gordon said, also are pooling their purchases and making better use of strategic sourcing. He cited recent blanket purchasing agreements by the General Services Administration for office supplies and the Homeland Security Department for desktop operating systems, e-mail and office automation.

OMB is working with other civilian agencies to identify opportunities for strategic sourcing, particularly in information technology and medical and surgical supply purchases, he said.

In addition, later this summer, GSA will launch a knowledge management portal where studies, market research and spending analyses connected with governmentwide and agencywide strategic sourcing initiatives will be posted.

The Defense Department, meanwhile, announced plans last month to save more than $100 billion during the next five fiscal years through more cost-effective procurements and by identifying unproductive or low value-added overhead expenses.

Shay Assad, director of defense procurement and acquisition policy, said the department also is phasing out time-and-materials contracts, increasing the participation of small businesses, and improving competitive procedures.

Defense also will scrutinize the proliferation of multiple-award indefinite quantity-indefinite delivery contracts to examine whether they have yielded adequate competition, he said. Primarily, the reform effort will look prospectively at new contracts, rather than altering existing awards. "We need to examine not only what we are acquiring, but also how we are acquiring these activities and programs," Assad testified.

Both Assad and Gordon noted contracting reform efforts all are tied to building up the size, strength and capability of the acquisition workforce. Defense plans to add about 20,000 employees within the next five years and is currently ahead of its expected pace. To date, Assad said, the department has added about 4,800 staffers.

Obama's fiscal 2011 budget proposal requested that Congress appropriate $158 million for the civilian agencies' acquisition workforce. The funding, Gordon said, would enable agencies to increase the size of their acquisition staffs by 5 percent and to invest in more training and technology.

"This is a relatively small investment that will have a high return," he noted.