Obama Orders Contracting Overhaul

The only myths I can think of right now are:

 

1. Industry can police itself; industry can be trusted to be ethical.
2. That there is any level of meaningful government oversight of the industrial contracting complex currently.

 

 

By the way, this quote came to me today.  Most interesting especially considering the changes of direction this wind made the last few years:

 

“We cannot afford, literally, to continue under the status quo.”

– Sen. John McCain, R-Ariz., urging fiscal restraint.

 

-GFS

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Link to original:  http://www.govexec.com/story_page.cfm?articleid=42187&dcn=e_gvet

 

By Elizabeth Newell enewell@govexec.com March 4, 2009

President Obama on Wednesday ordered the Office of Management and Budget to undertake an in-depth review of the government’s contracting efforts, including the outsourcing of work historically performed by federal employees.

A memorandum Obama issued requires the OMB director to work with the Defense secretary, NASA administrator, General Services Administration chief, Office of Personnel Management director and others to develop guidance on strengthening contract oversight, ending unnecessary no-bid and cost-plus deals and maximizing competition in procurement. Obama said these reforms will save taxpayers $40 billion annually.

The guidance, due by Sept. 30, must clarify “when governmental outsourcing for services is and is not appropriate.” The memo stated that OMB Circular A-76, the government’s playbook for public-private job competitions, was based on the “reasonable premise” that taxpayers might get a better deal if activities that are not inherently governmental are subject to competitive forces.

“However, the line between inherently governmental activities that should not be outsourced and commercial activities that may be subject to private sector competition has been blurred and inadequately defined,” Obama wrote. “As a result, contractors may be performing inherently governmental functions. Agencies and departments must operate under clear rules prescribing when outsourcing is and is not appropriate.”

The Bush administration strongly supported competitive sourcing and engaged in a number of legislative skirmishes to push the initiative and defend it from congressional detractors. Lawmakers have continued to fight public-private competitions, however, most recently with a provision in the fiscal 2009 omnibus spending bill that would suspend new Circular A-76 competitions.

The provision also would require agencies to review current contracts and issue guidelines for considering if new projects can be performed by federal employees, or if previously outsourced work can be brought back in-house.

The House approved the omnibus bill last week. Senate Democrats are scrambling to get their version passed and signed by President Obama by Friday, when the continuing resolution currently funding most government programs expires.

“We hope this is the end of the era of privatization during which agencies were forced to contract out regardless of cost or quality, and at the expense of integrity and accountability of federal programs,” said John Gage, president of the American Federation of Government Employees.

Angela Styles, former administrator of OMB’s Office of Federal Procurement Policy and now a partner at the Washington law firm Crowell & Moring, said the Obama administration is facing a conflict between its desire to bring certain activities back under the government fold and the massive amount of contracting that will occur under the economic stimulus plan.

“It’s all going to be behind the curve,” Styles said. “It’s hard to balance these two issues. The best you can do is say, ‘We’re going to clarify,’ but by the time you do, you have huge amounts of dollars that have already gone out the door. And once it’s out the door it’s difficult to bring it back in.”

Rep. Darrell Issa, R-Calif., ranking member of the House Oversight and Government Reform Committee, agreed with Obama that contracting is plagued by cost overruns, fraud, and a lack of oversight and accountability. But he said these problems will be exacerbated by the rapid spending required under the $787 billion 2009 American Recovery and Reinvestment Act.

“The solutions President Obama is offering to reduce waste and abuse pale in comparison to the new levels of waste and abuse created by his massive spending spree,” Issa said.

Styles said OMB’s undertaking will be even more difficult given the critical political positions that remain unfilled governmentwide. Obama has yet to nominate an OMB deputy director for management to replace Nancy Killefer, who withdrew for tax reasons, or an OFPP administrator, for instance.

“By getting presidential involvement you probably have a better chance of solving [these issues] but each individual one is just a huge task in and of itself,” Styles said. “Career people have known about these issues for quite some time, [but] you really do need leaders in place in each of these identified areas and … I haven’t heard of many announcements of substantive government acquisition officials at the political level.”

During a speech announcing the procurement reform effort, Obama also endorsed legislation introduced last week by Sens. Carl Levin, D-Mich., and John McCain, R-Ariz., that would require the Defense Department to re-examine contracts if costs increased by more than 25 percent from the initial estimate. The department’s 95 largest acquisition programs are an average of two years behind schedule and have exceeded their original budgets by a total of almost $300 billion, according to Levin.

Obama said he wants the 2009 Weapon Systems Acquisition Reform Act passed quickly and has asked Defense Secretary Robert Gates and Deputy Secretary William Lynn to work with Levin and McCain.

Stan Soloway, president of the Professional Services Council, a contractor association, said Obama’s memorandum had “constructive ideas and is a way to move the new face of government forward,” but warned that “any review of the procurement process must be fact-based and not caught up in the myths perpetuated about government contracting.”

Obama: Government pays too much for things….

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UPDATE 3-Obama takes aim at costly U.S. defense contracts

2009-03-04 23:18:35 GMT (Reuters)

 

*Obama estimates reforms will save $40 bln annually

*Reforms would end unnecessary no-bid, cost-plus contracts

*Defense companies say they played by the rules

(Updates with additional quotes)

By Ross Colvin

WASHINGTON, March 4 (Reuters) –

 

President Barack Obama said on Wednesday the U.S. government was paying too much for things it did not need and ordered a crackdown on spending “plagued by massive cost overruns and outright fraud.”

 

The Democrat, under fire from Republicans for the $3.5 trillion price tag for his 2010 budget plan, also took aim at predecessor George W. Bush and noted the cost of government contracts had doubled to more than half a trillion dollars over the past eight years.

 

Obama, who inherited a $1.3 trillion budget deficit when he took office on Jan. 20, said wasteful spending was a problem across the government, but he zeroed in on the defense industry and costly weapons projects hit by “delay after delay.”

“The days of giving defense contractors a blank check are over,” Obama told reporters in a briefing on his reforms.

 

He has singled out the ballooning costs of a Lockheed Martin Corp project to build a new presidential helicopter fleet as an example of the procurement process “gone amok.”

Defense companies, however, bristled at Obama’s suggestion they had been running wild with taxpayers’ money and insisted there had always been oversight and accountability.

 

Obama said he was ordering a reform of the way the government did business, a move he said would save taxpayers $40 billion a year and help cut the budget deficit, which he has forecast will hit $1.75 trillion for the 2009 fiscal year.

 

“We will stop outsourcing services that should be performed by the government and open up the contracting process to small business. We will end unnecessary no-bid and cost-plus contracts,” he said.

 

Critics say cost-plus contracts invite abuse because they allow companies to charge the government costs plus a fixed profit, no matter how poor their performance.

Obama has tried to show his determination to apply fiscal discipline even as he ratchets up government spending he says is vital to tackle the worst economic crisis in decades.

Republicans, including his opponent in the election, Senator John McCain, support procurement reform but say his budget proposal is part of a “tax-and-spend” onslaught.

 

SPOTLIGHT ON IRAQ

 

Obama has instructed White House budget director Peter Orszag to start working with Cabinet officials and agency heads to develop new guidance on contracting by the end of September.

 

“Far too often spending is plagued by massive cost overruns, outright fraud and the absence of oversight and accountability,” said Obama, who campaigned on promises of sweeping change and greater accountability in Washington.

 

“We are spending money on things we don’t need and we are paying more than we need to pay and that is completely unacceptable. I reject the false choice between securing this nation and wasting billions of taxpayers’ dollars,” he said.

 

Obama said the Government Accountability Office had examined 95 major defense projects in 2008 and found cost overruns totaling $295 billion.

 

“It comes from a lack of oversight. It comes from influence peddling and indefensible no-bid contracts that have cost American taxpayers billions of dollars,” he said.

 

Obama spotlighted the war in Iraq, where he said too much money had been paid for services never performed and buildings never completed, while companies “skimmed off the top.”

 

Defense Secretary Robert Gates has already told Congress the Pentagon faces tough decisions on expensive weapons programs partly as a result of the global economic downturn and continuing war costs in Iraq and Afghanistan.

 

The Pentagon is reviewing the acquisition process and is expected to make decisions on the fate of big-ticket programs such as Lockheed Martin’s premier F-22 jet.

 

Lockheed Martin, the Pentagon’s top supplier by sales, said on Wednesday it would work with the government and Congress to ensure effective systems were developed and deployed.

 

Boeing Co, the No. 2 contractor, said it was committed to providing “the very best value for the taxpayer.”

 

The Aerospace Industries Association, which represents top U.S. defense contractors, disputed Obama’s statement that there had been a blank check for contractors.

“There’s always been oversight, accountability and enforcement of acquisition rules,” said Cord Sterling, the group’s vice president.

 

(Writing by Ross Colvin; Additional reporting by Jim Wolf, Caren Bohan, Andrea Shalal-Esa, Matt Spetalnick, David Morgan, and Jeff Mason; Editing by Eric Beech)