Government reports $15B in contract cuts, first reduction since 1997
Thursday, February 3, 2011; 6:49 PM
In what administration officials describe as a major milestone, the federal government spent $15 billion less on contracts for outside products and services last year, the first year-to-year cuts in such costs since 1997.
Government contracts totaled $535 billion in fiscal 2010, down from $550 billion the year before, the White House said Thursday. With those reductions, the Obama administration is on course to achieve its two-year goal of eliminating at least $40 billion on contract spending, according to Office of Management and Budget Deputy Director Jeffrey D. Zients.
"We have reversed the trend of uncontrollable growth," Zients said in announcing the cuts. "We're saving money and making sure every taxpayer dollar is being well-spent. We certainly have much work to do."
Dan Gordon, the administration's top contracting official, said much of the cuts came from the cancellation of overdue information technology contracts at the departments of Homeland Security, Justice, Treasury and Veterans Affairs, and by having agencies pool the purchase of costly software licenses.
"When agencies across the government are buying the very same software, but doing it through a series of individual contracts, we're not getting the benefit of being the world's largest customer," Gordon said.
In hopes of making deeper cuts, President Obama's fiscal 2012 budget will call for a 10 percent reduction in professional and technical service contracts, a part of contract spending that has "grown disproportionately in the last decade," Gordon said.
OMB officials couldn't provide specific figures or identify contracts that might be cut. They also couldn't say whether contracting cuts would lead to job losses but cautioned that ongoing reviews may just lead to reductions and not the cancellation of agreements.
Stan Soloway, president of the Professional Services Council, a trade association for the government professional and technical services industry, said measuring potential job cuts is impossible "until we understand the full scope of the proposed cuts."
"The scope and numbers should flow from what you've determined you no longer need to do," he said. "To the extent that the numbers are tied to an analysis of that type, then they make some sense. To the extent that that analysis hasn't been done, then limits on contracting and federal employees are essentially putting the cart before the horse."
Also, in a nod to the administration's pro-business job growth initiatives, agencies will be pushed to increase the number of small businesses hired for contracts, Gordon said. The administration will issue guidance to agencies on how to do so and is pushing more of the acquisition process online to make it easier for smaller companies to learn about potential business opportunities.
"All too often, barriers to entry prevent us from getting those small businesses into the federal marketplace," Gordon said. "Getting more federal business to small business can help them get the revenue they need to get jobs and drive our economy forward."
But, said Soloway, "when you're pushing for specific levels of cuts, that can run contrary to the goal of increasing small- business participation,"
"You not only have to be very careful that your cuts don't disproportionately affect small business, but then you have the added challenge of increasing small-business participation," he said.