Contracting Smarter, Saving More

From the start of the Administration, President Obama has charged agencies to cut waste and give the American people a government that is not only more affordable, but also more efficient and effective. One critical area for those efforts has been contracting.  

Last year at this time, we reported that agencies turned the tide on contract spending – cutting spending for the first time in 13 years. Collectively agencies spent a remarkable $80 billion less on contracting than would have occurred had growth continued at the same rate as under the prior Administration. Today, we are pleased to report that we sustained this new era of fiscally responsible contracting in FY 2011, maintaining the reduced spending level of $535 billion achieved in 2010 as we have continued our aggressive campaign to keep costs down and deliver better value for the American taxpayers.

This marks the first time in almost two decades that spending has either declined or remained unchanged for two years in a row. In fact, had contract spending continued to grow at the same pace as it did in the last Administration, we would have spent $690 billion on contracts, or $155 billion more than agencies ended up spending in FY 2011. While there is much still to be done, we now can confirm what we’ve had good reason to believe for some time: that the promising results of FY 2010 demonstrated that we have moved in a sustainable way into an era of more accountable contract spending and getting a better return for every taxpayer dollar. 

During the prior Administration, contract spending exploded, but contract management and oversight capacity were not strengthened to keep up with that demand. As a result, agencies struggled to hold contractors accountable. That’s why President Obama took action right away, directing agencies in March 2009 to slash billions in contracting costs and continuing more recently with further efforts to strengthen accountability for contracting spending as part of the Campaign to Cut Waste.

In the two fiscal years since President Obama first challenged agencies to reform contracting spending, agencies planned and implemented an aggressive campaign to buy less. This has included ending contracts that are unnecessary, unaffordable, or redundant. We have also driven costs down by buying smarter – leveraging the government’s buying power through increased use of government-wide and agency-wide contracts, a practice known as strategic sourcing. By pooling our purchasing power and renegotiating contracts to secure deeper discounts, we are delivering better prices for taxpayers while also eliminating the wasteful duplication of effort that stems from creating hundreds or even thousands of similar contracts across departments, agencies, bureaus and offices. Already, agencies saved an impressive $50 million in FY 2011 alone from strategic sourcing in office supplies and domestic delivery services for mail and packages. And to ensure we are doing all we can to protect taxpayers from cost over runs and holding bad actors and poor performing contractors accountable, we are strengthening our consideration of a contractor’s past performance and business integrity and ethics as well as  our suspension and debarment capabilities across the Federal government. In all, with the help of tools such as these and strong agency leadership by our Chief Acquisition Officers and Senior Procurement Executives, and with the support of our Chief Financial Officers, agencies spent tens of billions less between FY 2009 and FY 2011 than they would have without these reforms.

There is good reason to be optimistic that this bending of the procurement spending curve that agencies worked so hard to achieve in FY 2010 and FY 2011 will continue for the foreseeable future. Agencies are continuing to root out inefficiencies wherever they may be – and will be well on their way to meeting their 15 percent reduction goal for spending on management support services by the end of FY 2012. This category of spending includes services such as information technology systems development, program management, and engineering services – where spending quadrupled between during the last Administration. With dedicated management attention, agencies already have reversed the costly growth in this area and have brought spending down by 7 percent, or $3 billion, in just the last fiscal year. 

These smarter and leaner approaches to contracting have positioned agencies to meet to the President’s recent charge in his Executive Order on efficient spending and cutting waste, to save $8 billion by FY 2013 through reduced spending in administrative activities, such travel, information technology, and printing. By leveraging government-wide contracts for print management services, wireless plans, and software licenses as well as expanding use of agency-wide (so-called enterprise wide) contracts for IT and related services, agencies expect to significantly exceed the already impressive savings realized from strategic sourcing.

Here is more information on how we are sustaining our efforts to buy less, buy smarter, and achieve the best results for the American people. We look forward to continuing our streak of reporting good news on contract spending in FY 2012, as agencies’ better buying practices rapidly become their everyday buying practices.

Danny Werfel is Controller of the Office of Federal Financial Management