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Obama Looks to Ax Contracting Waste

By Matthew Yglesias  

"Obama Looks to Ax Contracting Waste"

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The President today released an important memo outlining plans to try to reduce the amount of money lost on the wasteful and abusive government contracting industry that conservatives love:

Since 2001, spending on Government contracts has more than doubled, reaching over $500 billion in 2008. During this same period, there has been a significant increase in the dollars awarded without full and open competition and an increase in the dollars obligated through cost-reimbursement contracts. Between fiscal years 2000 and 2008, for example, dollars obligated under cost-reimbursement contracts nearly doubled, from $71 billion in 2000 to $135 billion in 2008. Reversing these trends away from full and open competition and toward cost-reimbursement contracts could result in savings of billions of dollars each year for the American taxpayer. [...]

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. 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. [...]

I hereby direct the Director of the Office of Management and Budget (OMB), in collaboration with the Secretary of Defense, the Administrator of the National Aeronautics and Space Administration, the Administrator of General Services, the Director of the Office of Personnel Management, and the heads of such other agencies as the Director of OMB determines to be appropriate, and with the participation of appropriate management councils and program management officials, to develop and issue by July 1, 2009, Government-wide guidance to assist agencies in reviewing, and creating processes for ongoing review of, existing contracts in order to identify contracts that are wasteful, inefficient, or not otherwise likely to meet the agency’s needs, and to formulate appropriate corrective action in a timely manner. Such corrective action may include modifying or canceling such contracts in a manner and to the extent consistent with applicable laws, regulations, and policy.

Barack Obama doesn’t like to talk in broad ideological terms. But to provide some background for this, the very same right-wing politicians who like to complain about government spending actually love increasing spending in a variety of circumstances. Any time you can make something less efficient, more costly, and more wasteful by laundering public funds through a private, for-profit firm, they’re for that. That’s why they love subsidies for private student loans and hate cheaper, direct lending. They also like to deal with “out of control entitlement costs” by overpaying private insurance companies to handle Medicare patients rather than the cheaper option of doing it themselves. And of course, they have an enormous love of spending money on defense projects.

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Thus, as Spencer Ackerman observes, defense waste may be unusually hard-hit by these new directives:

Clearly this has applications far beyond the Pentagon. But the list of big-ticket defense items that have experienced huge cost overruns is a long one. Future Combat Systems in the Army; the Littoral Combat Ship in the Navy; the Joint Strike Fighter in the Air Force — all of these programs, near and dear to the services, have run massively over budget. If I was a lobbyist for Lockheed or Boeing, I’d be dialing my contacts in the Pentagon and the Hill to figure out what the prospective damage to my company was. And then I’d come up with a strategy to fight this forthcoming OMB review.

Beyond the Defense Department and the special cases of student loans and Medicare that are being tackled separately, my understanding is that the mother lode in terms of privatization of core government functions is in the Department of Homeland Security. Since this agency was born, raised, and weaned under the administration of George W. Bush, it’s tended to exhibit all the pathologies of Bushian governance in unusually strong ways (hence Katrina). At any rate, the total amount of savings you can get from clamping down on contracting abuse is more than small change, but less than gargantuan. The main virtue of it is that you’re really not doing any harm to any important public purpose by doing it. It’s important at this time of stimulus bills and new investments to show some seriousness about fiscal discipline, and the right way to do that is by going after this kind of waste rather than arbitrary measures.

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