OMB finds savings in IT contracts

By Ed O'Keefeand Marjorie Censer
Washington Post Staff Writers
Wednesday, September 15, 2010

The Office of Management and Budget on Wednesday plans to announce the cancellation or restructuring of three multiyear information technology contracts totaling $337 million, according to senior administration officials.

The changes are part of the Obama administration's budgetary and management reforms designed to cut billions of dollars in wasteful and no-bid government programs and contracts.

According to the OMB, the Environmental Protection Agency plans to save $180 million and the Department of Housing and Urban Development will pocket about $44 million by restructuring two long-term IT contracts. The Small Business Administration should save $113 million by canceling a contract.

The EPA contract is meant to replace an older financial system that had inconsistent data and costly maintenance, among other problems. CGI Federal, based in Fairfax, has received $83.1 million in contracts for the program being restructured, according to the Obama administration's IT Dashboard, a public Web site that compiles data on federal agencies' IT programs. The company referred questions to the EPA.

Delta Solutions of Reston has received more than half of the$2.1 million in contracts awarded so far for HUD's Financial Management Business Case program, according to the IT Dashboard. The company did not respond to a request for comment.

The Small Business Administration said the contract being canceled with Fairfax-based SRA International to do a major modernization of its computer system originally cost $217 million. The SBA has spent $29 million on the contract so far, according to spokesman Mike Stamler. But the deal became too costly, and the agency instead will complete $97 million worth of upgrades over 10 years, he said.

The Department of Veterans Affairs in July canceled a similar multiyear IT project slated to cost as much as $300 million. Other agencies may cancel or rewrite similar deals in the coming months, the OMB said.

The cuts announced Tuesday are "a classic outcome of what we expected when we looked more closely at these projects," said OMB Controller Danny Werfel. Though they amount to a small fraction of the $80 billion in annual federal IT costs, they are part of a series of reforms announced since the spring that administration officials hope demonstrate the White House's resolve to curtail government spending as deficit concerns dominate midterm election campaigns.

The cuts - and their impact on several Washington-area contracting firms - come as the Senate plans to pass a multibillion-dollar package of loans and tax relief for small businesses. They also add to growing fears that the Washington region could face significant layoffs as the government slashes billions in contracting deals.

"Anytime you have program cancellations, there's a job impact, but that alone is not a reason to continue a program," said Stan Soloway, president of the Professional Services Council, the largest group representing contracting firms. "A program needs to be delivering a need to the government and the taxpayer."

But Soloway questioned whether the OMB is fully consulting agencies and contractors as it determines which contracts to eliminate.

In an interview Tuesday, OMB Deputy Director Jeffrey Zients said: "Our job is to focus on making sure every taxpayer dollar is well spent. There are plenty of opportunities for us to spend dollars on IT projects that have very high returns for taxpayers. We're going to make sure that the dollars are spent on high-return projects." Staff writer Dana Hedgpeth contributed to this report. Censer is a Capital Business reporter.

© 2010 The Washington Post Company