President Takes Aim at Contracting Fraud, Waste, Abuse

President Obama

President Obama discusses his plan to reform the defense contracting system as Sen. John McCain (R-Ariz.) listens in at the Eisenhower Executive Office Building, March 4, 2009.
(Reuters Photo/Jim Young)

President Obama announced today procurement reforms designed to improve competition for federal contracts, while curbing fraud and waste. He said these reforms would save American taxpayers up to $40 billion a year and help usher in a new era of fiscal responsibility.

Flanked by senators Carl Levin and John McCain -- both longtime foes of wasteful spending -- Obama said he had directed OMB chief Peter Orszag to draft "dramatic" new procurement rules that would improve how the government spends more than a half-trillion dollars each year. He formally issued a "Presidential Memo" spelling out his aims.

His announcement at the Eisenhower Executive Office Building, adjacent to the White House, follows years of chronic procurement problems, including a massive increase in the use of less than fully competed contract and a persistent shortfall in the number of federal contracting workers.

"Now, none of this will be easy," Obama said. "We'll have to end old ways of doing business. We'll have to take on entrenched special interests. We'll have to break bad habits that have built up over many years, but we can't keep spending good money after bad. All across America, families are making hard choices, and now we're going to have to do the same. "

The White House issued a "fact sheet" shortly before the president made his remarks. Among other things, it says:

"Government spending on contracting has more than doubled in the last eight years. Government spending on goods and services increased from $200 billion in 2000 to over $500 billion in 2008."

"A study last year by the Government Accountability Office
of 95 major defense acquisitions projects found cost overruns of 26 percent, totaling $295 billion over the life of the projects."
"The Memorandum directs the following:

"The Director of the Office of Management and Budget shall collaborate 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 others to development procurement reform guidance.

"By July 1, 2009 - OMB shall issue 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.

"By September 30, 2009 -- OMB shall issue government-wide guidance to:

(1) Govern the appropriate use and oversight of sole-source and other types of noncompetitive contracts and to maximize the use of full and open competition and other competitive procurement processes;

(2) Govern the appropriate use and oversight of all contract types, in full consideration of the agency's needs, and to minimize risk and maximize the value of government contracts generally;

(3) Assist agencies in reviewing the capacity and ability of the Federal acquisition workforce to develop, manage, and oversee acquisitions appropriately; and

(4) Clarify when governmental outsourcing for services is and is not appropriate."

In his remarks today, Obama said, "Over the last eight years, government spending on contracts has doubled to over half a trillion dollars. Far too often, the spending is plagued by massive cost overruns, outright fraud and the absence of oversight and accountability. ... We are spending money on things that we don't need, and we are paying more than we need to pay, and that's completely unacceptable."

While the problem plagues the entire government, Obama said, it is particularly acute in defense contracting. He pledged to "do whatever it takes to defend the American people." But he rejected "the false choice between securing this nation and wasting billions of taxpayer dollars."

Let us know what you think.

Staff writer William Branigin contributed to this report.

By Robert O'Harrow |  March 4, 2009; 11:04 AM ET
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Posted by: buzzm11 | March 4, 2009 11:26 AM

It is a welcome initiative and in the end will save mone as predictive. The outsourcing of the government has gotten way out of control with the initiatives of the last 8 years and has created far too many businesses that are solely a government contract and have no other clients. This has created a false impression of how the economy was doing and the existance of a welfare business class being paid by the taxpayer. All the time the people seeing it through bad mouthed federal employees in a propaganda campaign. I personnally stopped a contract 7 years ago with a company that was receiving over 200k for each employee suppled to us and paying the employee 90k in salary and benefits. I cancelled the contract and hired the people directly saving at least 150k for the government.very happy to see it happening

Posted by: nelsmith1 | March 4, 2009 11:29 AM

This is all BS and Spin! And WaPo cheerfully shovels this horsesh^t out the door for Obama!

48 hours with scare tactics to pass a Trillion $ "stimulus" bill? a $410 billion bill with 9000 earmarks?

An Obama is worried about "waste?" What a joke!

Posted by: pgr88 | March 4, 2009 11:34 AM

Reform in this area is a bad idea- it would decimate Republican companies and employees.

Posted by: hairguy01 | March 4, 2009 11:39 AM

I applaud the efforts of President Obama and Senators Levin and McCain to fix the broken acquisition processes. However, I note the January testimony of of Secretary of Defense Gates before the Senate Armed Services Committee in which he notes that there have been almost 130 attempts at acquisition reform since the end of World War II, mostly of no avail. Why?

An article in the 3 March 2009 edition of Defense News notes: "Members of Congress tolerate the system's inefficiency because it provides jobs for their districts. Defense companies put up with Pentagon vagaries because, ultimately, they make a lot of money. And the military services go along because, eventually, they get gold‐plated weapons."

Posted by: teburke | March 4, 2009 11:44 AM



How about I arrest you for bringing in the Undocumented Workers and refusing to Document them...

Fei Hu

Posted by: Fei_Hu | March 4, 2009 11:45 AM

Obama has it right... figure out when it is appropriate for government to contract out its work. Under Bush we cut government by throwing money at private companies that did a terrible job in many cases. That is what the GOP wants... to increase spending for private companies. The GOP doesn't like government jobs, but they don't mind spending lots of taxpayer money on private companies, doing less for more. I think privatization of government was a bad idea from the start. It was just a way for the GOP to hand out pork without calling it pork. Shut it down where you can Obama. This is a great idea.

Posted by: goldie2 | March 4, 2009 11:45 AM

By way of full disclosure, I am a Republican who voted for Obama.

So, he is eyeing procurment? Like the way he "eyed" earmarks?
You know the pesky little 4 billion dollars worth of pork projects Harry and Nancy included in the omnibus spending bill and told our not so fearless leader to shove it when he suggested these might not be so smart an idea when the government and country are bordering on bankruptcy.

Mr. Obama is fond of saying he is all about principles. Problem is it sometimes takes acts of personal courage and politcal risk to turn those principles into meaningful policy. So far it looks to a lot of us moderates who crossed over President Obama is perfectly willing to defer to his partners in the Congress at the nation's expense.

What happens if some of these pesky new standards of procurement conflict with a big Democratic contributor getting the job? You guess.

Posted by: bobfbell | March 4, 2009 11:47 AM

There is nothing new in what he has directed the OMB to do. I have worked in procurement for 25 years 20 of it either in the government or contracting with it. I wouldn't expect any great revelations in procurment to come out of this. 90% if of the procurement dollars are small contracts/purchase orders that are made at the base/post level and are competed. I am a O supporter, but this is grandstanding. If they want to cut out the fraud in contracting, they should look at the businiess of agencies acting as contracting agents for other agencies (i.e. GSA FAST, MOBIS, and the other intra-agency money shuffles) They stay alive by charging fees, and providing a audit box to check for price fair and reasonalbleness; but do precious little for the money, and their negotiated rates actually stifle competition.

Posted by: over202 | March 4, 2009 11:59 AM

good start- now all we have to do is to get the federal worker bees to sit at their desks( productively) for a full 8 hours.

Posted by: Tess6 | March 4, 2009 12:04 PM

What a crock! This bozo spends billions of our tax dollars to reward special interests who supported him, and now he says he wants to curb waste? Pure manure, and you folks know it. Obama makes predator Bill Clinton look like a paragon of integrity.

Posted by: LarryG621 | March 4, 2009 12:13 PM

The fully-loaded cost of full-time IT contractor is $220,000 per year. The fully-loaded cost of a full-time Federal employee, including benefits, costs about $150,000. If the government were to in-source 10,000 IT positions across the government, we'd save $700 million per year.

Posted by: tttttttt1 | March 4, 2009 12:19 PM

Every new administration says it's going to implement procurement reform. What they do in the end is create even more administrative headaches for already overburdened procurement officials who use Indefinite Delivery/Indefinite Quantity to get around these hurdles. Most contracts are competed across countless small businesses and socio-economic concerns. I agree with the previous poster that this is pure grandstanding on Obama's part and that if he wants to tackle waste, start looking at the larger programs that are going nowhere fast. Waste comes in all forms of Government spending...Especially in omnibus spending packages which was bloated with pork.

Posted by: Digitalman08 | March 4, 2009 12:23 PM

I have worked as a federal contractor for over 20 years. I believe that the intent of the President's new procurement policy is sound. Who can argue with the fact that there are and have been many instances of waste, fraud or abuse of the procurement system?

The goals are sound. The next step is to dive deeper into causes of many of the inefficiencies cited. In my experience, the procurement system, similar to our legal system, is imperfect. There are typically very good reasons for establishing some of the very procurement rules that enabled instances of waste, fraud and abuse to occur.

Therefore, it is also important to recognize that the solutions to problems in the Federal Procurement System can create obstacles to achieving mission objectives or unintended consequences. For example, no bid contracts are critical to disaster response and can eliminate a lengthy and expensive procurement process in situations that demand speed and may require the specific capabilities only offered by a single vendor. Therefore, it is imperative to attack procurement problems with a broader understanding of the real issues being addressed by and the consequences of any single solution.

I applaud the intent behind the new White House directive and welcome the chance to provide constructive advice on efforts to design new reforms.

Posted by: dfrazier2 | March 4, 2009 12:35 PM

Every new President promises to end fraud, waste, and abuse in the procurement process. Despite numerous efforts in the past, no one has been successful, and I have no reason to think President Obama will be any more successful than any of his predecessors. The same is true of efforts to end the "abuse" of sole source contracts.

Contracting regulations have a detailed procedure to be followed prior to awarding a sole source contract. It all comes down to documenting and justifying the inability to obtain competition (or the need to forgo competition because of the circumstances of the acquisition). No matter how you slice it, that will be the basic requirement of the new regulations. There may be some tweaks, but there is unlikely to be any significant improvement in the process.

Another area of the reform, doing away with contractors performing inherently governmental functions, is likely to be more successful.

For years, there has been a bipartisan, cooperative effort between the President and Congress to claim credit for shrinking the size of the Government by reducing the number of employees. Of course, these claims ignored the corresponding increase in the number of support contractor employees, to the extent that the number of people doing the Government's work has probably increased. Over the years, one of the original claims of long term cost savings (contractors may be more expensive in the short term, but there are savings in the long term because when we do not need them we can terminate the contract) has been shown to be false. Support contractor employees are like regular employees -- when we don't need them on one program they are simply transferred to another. They just do not go away, and the anticipated savings never materialize. Any effort to increase the size of the civil service and reduce the size of the contractor service is likely to yield large dividends.

Posted by: wvanpup | March 4, 2009 12:52 PM

HOORAY, HOORAY! The only thing that would finish this off nicely, would be to see Bush/Cheney behind bars!

Posted by: drjillshackford1 | March 4, 2009 12:57 PM

After passing one lard ridden huge "rescue" spending plan, Obama has the temerity to claim he is going after waste.

Go figure.

Posted by: edbyronadams | March 4, 2009 1:05 PM

Review the files of the DOD contracts accountant that committed suicide; there's your clean-up map. The trail of pizza boxes full of cash delivered in Iraq is tougher to follow.

Posted by: secretscribe | March 4, 2009 1:10 PM

Several observations:

First, the media is reporting this story as an accomplishment, when actually it is only a set of directions to develop new procedures. Big deal.

Despite the asserton of wvanpup, the government can easily control the size of the contractor workforce. Most service contracts are Indefinite Delivery/Indefinite Quantity (ID/IQ) allowing the government to drop or add personnel at will. And, wvanpup, contractors are cheaper in general than full time civil service employees. That is why we have them.

I do agree that over time, contractors have become more and more involved in functions inherently governmental. That is for two reasons: one, the civilian government workforce has not expanded to keep pace with its responsibilities, but more importantly, b) many government civilians LOVE to have their work done by a contractor. It gives them more time to Twitter, text, run a side business, travel, and generally goof off.

Obama is making big promises that will no doubt be just as successful as those made by all his predecessors: they will have little if any effect. But he's COOL, and he makes all his outlandish promises in such a COOL way, that it just sends a thrill up my leg.

-- Former CEO of a government services contractor business

Posted by: Curmudgeon10 | March 4, 2009 1:14 PM

Wow, this is a big leap of faith for the magic negro because one has to assume you have competent government staff to carry out the mandate and in absence of contractors do the work. What a joke. You mean government employees would have to sop smoking 3hrs a day, taking 2hr lunches, work 5-days a week and stay past 3:00PM, I will believe when pigs fly out of michelle's a55

Posted by: goziner | March 4, 2009 1:25 PM

It might have been helpful to list the kinds of contracts they're talking about, but I realize the article was short. Clearly, they must have something in mind already.

As a solo contractor doing small projects for one govt. agency for years, I'm concerned when I read this. As it is, the base project fee, not requiring a competitive bid, has only increased twice in 12 years! This means as my fee (theoritically) goes up, I have to do more work in less time. And if my time is below that amount, I never bill the full fee like I'm sure some contractors do. I've donated thousands in unbilled work because there really isn't a mechanism to bill more when the client causes overruns. Still, it's been a lifeline for me.

In short, I sure as hell hope people like me aren't included in a clean sweep. I go above and beyond the call of duty, catch client errors all the time and am very insistent that projects are done well. I'm always mindful that tax dollars pay for what I do. And I get incensed as a taxpayer when I think things are inefficient.

I should probably start figuring out a way to fill the gap if major changes take place. Or cross my fingers that someone will make wise choices.

Posted by: washtopdx | March 4, 2009 1:30 PM

I find it interesting that the assumption is the contractor is at fault for over runs. I would say 80-90% of all over runs are the result of government incompetence!

Posted by: goziner | March 4, 2009 1:31 PM

All I can say is Good Luck Mr. President.

The end result will be a bunch of bureaucrats and the waste will remain around 30%.

Posted by: jdcw | March 4, 2009 1:40 PM

Sounds good. But that's what politicians do: they make things sound good. I can't tell what's going on under the radar. At the end of the day, he's still a politician.

Posted by: forgetthis | March 4, 2009 1:41 PM

This will "save American taxpayers up to $40 billion a year"?

After spending $3.4 trillion on pet projects this is a complete joke.

As Obama says...let them eat cake!

Posted by: mgd1 | March 4, 2009 1:43 PM

I agree totally with Goziner - the vast majority of cost overruns are caused by incompetent government employees being put in charge of projects they aren't qualified to manage. Of course, the contractors never get to say that, or they'll never get a contract again, and the press always blames the "evil contractors" and the courts, well, they too are the government.

Posted by: allknowingguy | March 4, 2009 1:47 PM

AMEN!! How many stories have I heard from federal employees where an outgoing chief has tailor-crafted a contract for a giant project, then retires and heads up that project for the contracting company? Or stories where, despite federal employees' best efforts to get things done on time, contractors' lack of clear communication has caused costs to overrun and deadlines to be missed!

There are no penalties for these contractors - and they know they will always be paid for work they do shoddily, and late, or never get done at all.

This stereotype of the lazy federal employee must explode now! I'm tired of it. The federal employees I know are chronically overworked, stressed-out, and leaned on to humor contractors whenever possible. I work for a non-profit, and I have seen consultants abuse our contracting system as well. We need to have some fear instilled, system-wide!!!

Posted by: undercover_hon | March 4, 2009 2:08 PM

We have a statute called the False Claims Act which is our most powerful hammer against government program fraudsters. We need to maximize it's use, Mr. President. Of course, this will anger traitors like Grover Norquist and other "R" party thieves, John McCain being the exception, who stole us blind over the past eight years because we had morons and "W" lobbyists running government procurement programs.

Posted by: pookiecat | March 4, 2009 2:10 PM

Why do generals and Pentagon officials seem to enjoy getting ripped off by the weapons manufacturers? Because they either work for them or hope to.

If you were a colonel or general working in acquisition and I were an arms industry exec, and I slipped you $20,000 under the table to favor my company, and it came to light, you'd go to prison.

But if I let you know with a nod and a wink that you can expect a $200,000 p.a. no-work-required non-executive directorship upon retirement from the military, it would be totally legal and even respectable under Washington rules.

Every general who doesn't rock the boat can look forward to a lucrative directorship in the arms industry. As for the Undersecs and DepSecs, most came to the Pentagon straight from an arms industry boardroom.

This is the root cause of the acquisition trainwreck. Incentives for bad behaviour. Just as bonuses for investment profits (without pay penalties for investment losses) incentivized high-risk play on Wall St. Those bankers knew that while they'd get a cut of any profits, their investors would carry 100% of any losses.

Likewise, for the players in acquisition, there's no downside to cost overruns. They all get a piece of the arms profit, and the taxpayer deals with the cost overruns.

Obama said he would close the "revolving doors" in Washington between government and industry, but will he dare to tackle the Pentagon revolving door? Even Obama hasn't got balls THAT big.

Posted by: kevrobb | March 4, 2009 2:11 PM

The normal work week for a contractor is 45-60 hours per week, with no O/T and their performance driven by award fees while Government employees get beans.

The Government IT employee, generally speaking, does their shift and goes home.

Now, where's the value? Save $700 million? When compensation and benefits matches the private sector, maybe the Government will be able to bring in top-shelf talent. Until then, the government will attract the inexperienced and will cause delays in which you think there is a money savings, but because of the slippages in schedule, will result in greater cost overruns.

Simply stated, you get what you pay for.

tttttttt1 SEZ...The fully-loaded cost of full-time IT contractor is $220,000 per year. The fully-loaded cost of a full-time Federal employee, including benefits, costs about $150,000. If the government were to in-source 10,000 IT positions across the government, we'd save $700 million per year.

Posted by: tttttttt1 | March 4, 2009 12:19 PM

Posted by: Computer_Forensics_Expert_Computer_Expert_Witness | March 4, 2009 2:12 PM


The king of ideological spending is saying there will be no waste. Obama has already spent three Iraq wars worth of money. And all that spending was bad!

You guy bought it! It is now in action.

Posted by: thelaw1 | March 4, 2009 2:13 PM

No, my friend... Obama sez, "Let them eat Waygu Beef!!!!

mgd1 SEZ-This will "save American taxpayers up to $40 billion a year"?

After spending $3.4 trillion on pet projects this is a complete joke.

As Obama says...let them eat cake!

Posted by: Computer_Forensics_Expert_Computer_Expert_Witness | March 4, 2009 2:15 PM

Being a former purchase agent with Naval Supply Center, Bremerton, there were plenty of rules and regs to follow. We never purchased $7,000 ten penny nails!! BUT, there has been and will always be cost overruns on RFP's (request for proposals). They are proposals, estimates. Changes occur when specs change, original materials can't be found and others substituted, etc. etc. The IFB's (invitation for bids) are or were one shot only bids meaning you stuck with that bid price if selected regardless of how much you ended up paying.

NOW, having said that, I do think the system needs to be overhauled BUT from the people standpoint NOT the rules. IF the people running the agencies do not change NOTHING will change. IT won't matter what rules change, how strict or loose they become because the same people will be in charge. Top-down changes to me means CHANGING THE PEOPLE.

Posted by: rogerjan | March 4, 2009 2:26 PM

The Feds blame the contractors
The contractors blame the Feds
The Republicans blame the Democrats
The Democrats blame the Republicans

Maybe- just maybe! -we're all partially to blame for this? And maybe- just maybe!- we could work together to fix it, instead of fighting about whose fault it is like seven year olds on a playground?

Heaven forbid anyone ever hold themselves accountable for anything.

Posted by: bryc3 | March 4, 2009 2:30 PM

"Heaven forbid anyone ever hold themselves accountable for anything."

Well ... when all is said and done, and we find ourselves following paths our founding fathers never intended, let's hope those of us who voted for Obama are big enough to admit we were wrong. And more importantly, to admit to ourselves there are no substititutes for experience and hardwork ... and being a good orator is not enough.

Posted by: JohnSmith7 | March 4, 2009 2:36 PM

Great job, President Obama! keep it up. (sorry haliburton)

Posted by: jfern03 | March 4, 2009 2:39 PM

While you are looking at waste, fraud, and abuse in government contracting Mr. Obama might want to question why three of the top ten defense contractors are foreign owned. He might also look into abuse of small business subcontracting where white men, often former government officials or retired military officers, form companies and "hire" a woman or a majority to be the "owner." And finally, why are Indians (from India, that is) who come here with advanced degress and family money considered "disadvantaged" and eligible for no-bid set-aside contracts. There is plenty of stench in the contracting business to keep reformers busy for quite a while.

Posted by: Blue_Moose | March 4, 2009 2:40 PM

Repost cleaned up a bit

While Mr Obma is looking for waste, fraud, and abuse in government contracting he might want to question why three of the top ten defense contractors are foreign owned. He might also look into abuse of small business subcontracting where white men, often former government officials or retired military officers, form companies and "hire" a woman or a minority to be the "owner." And finally, why are Indians (from India, that is) who come here with advanced degress and family money considered "disadvantaged" and eligible for no-bid set-aside contracts. There is plenty of stench in the contracting business to keep reformers busy for quite a while.

Posted by: Blue_Moose | March 4, 2009 2:43 PM

After allowing the GOP to spend $5 trillion dollars of our kids' money on tax cuts for the rich and corporations without saying a single fact calling us traitors for questioning it. A lot of Republicans have all of a sudden become wary of governmental spending.

Let me speak for many of the American people here: YOU HAVE NO CREDIBILITY ON EFFECTIVE GOVERNMENT OR FISCAL RESPONSIBILITY. Asking a "conservative" his views on the budget is like asking Bernie Madoff for help making investments.

Posted by: maurban | March 4, 2009 2:45 PM

It would be helpful if OMB would review the use of eliptical funding transfer across Gov't agencies which also enables patronage and non competitive selection; the use of subcontractors by Government executives to place family members as indirect beneficiaries of source selection awarded indefinite quantity contracts with non competitive delivery orders and the use of noncompetitive source selection processes to award contracts that can be competed on a fixed price basis.

Posted by: BillKeller | March 4, 2009 2:56 PM

I have worked many years as a federal contractor employee. In that time I have met many, many highly qualified and hardworking government employees. They are the rule and not the exception.

That said, there are some very good reasons to hire contractors. A previous poster stated that (fully loaded) contractors cost 220,000 and government workers cost 150,000. That is not quite true. When you add in the cost of federal retirement plans and retirement health insurance, the cost becomes fairly equal.

Another reason to consider contractors in positions where the knowledge required (IT for example) changes rapidly over short time periods is incentive. When you walk through a government office during lunch breaks, you can often point out who is a contractor. The (IT) contractors often study during breaks since their livelihood requires that they maintain current knowledge. Once the federal employee has been hired it is very hard to get rid of them if they do not perform. That leads to less incentive to maintain a competitive edge.

Bottom line:
1) Actual cost of contract VS federal employee is pretty close.
2) For information technology areas at least, contractors have much more incentive to maintain cutting edge skills.
3) There are very good people in government and in contracting. Most problems occur because of poor communication from both sides, not because of fraud or intentional waste.
4) Government would see strong productivity gains from training more of the government personnel in good project management techniques. Many government folks are thrown into managing contractors without being given the tools to do their jobs well.

Posted by: contractor1 | March 4, 2009 3:01 PM

Nothing but praise for his actions.

Posted by: weaverf | March 4, 2009 3:04 PM

Responsibility .. HOOAH!
Accountability .. HOOAH!!

What's the plan for nuclear weapons?
Save lots of taxpayer dollars and
take the moral high ground .. get rid of them.


Posted by: George20 | March 4, 2009 3:10 PM

Biggest problem I saw in my years as a Federal employee working with contractors is that if the contractors (who are supposedly hired for their expertise) screw up for lack of paying attention, the government contracting officer doesn't hold feet to fire. One contractor in Texas insisted that CD drives in computers we had bought for them didn't work. I had to fly to their office and check it out, where I found that they hadn't read the instructions about removing the paper protector inserted for shipping. There were other instances as well, and I doubt that they received anything less than outstanding performance payments.

Posted by: lpryluck1 | March 4, 2009 3:18 PM

"Obama Eyes Contracting Waste"

I almost read this as if he had caught some kind of eye disease.

"Obama's Eyes Contracting Conjuctivitis"

You know what I mean.

Posted by: alarico | March 4, 2009 3:19 PM

I don't get it ... why does everyone assume that all government workers are lazy good-for-nothing bums, and ALL government jobs could be better performed by the private sector?

I call B.S. Sure, some government employees are merely doing the bare minimum not to get fired. Can anyone honestly say that the same thing doesn't happen at private companies? Surely Lockheed Martin, Boeing, etc. has it's share of bad employees.

All government agencies are not equal. Some do a better job than others. Same thing with the private sector - some companies are more conscientious than others. If Enron were a defense contractor, would we really have wanted them doing work that regular government employees could have been doing?

I believe there definitely comes a point when it is more cost effective to hire more government workers than to outsource day-to-day jobs to outside firms, which are of course charging a profit margin for their services. Even scarier is situations where procurement itself is outsourced.

In the defense world, there's also national security implications. The US military doesn't even know how to do some important functions; they have to rely on the Northrup Grummans to do those jobs.

Put another way - let's say agency X says they are cutting Y hundreds of employees. The TRUE cost savings is their salaries & overhead, MINUS the cost of the contracts that agency put out to get private contractors to do those jobs. Sometimes the math comes out ahead, but sometimes it won't.

(Full disclosure - I'm in the consulting business and we do a lot of work for various state agencies as well as some cities and counties, though our company doesn't do federal work so I don't have experience in that).

Posted by: marclips | March 4, 2009 3:26 PM

"He said these reforms would save American taxpayers up to $40 billion a year..."

How did he arrive at this $40 billion figure? Must a have been a PIDOOMA. (Pulled It Directly Out Of My A$$)

Posted by: ahashburn | March 4, 2009 3:41 PM

Posted by: tttttttt1
"The fully-loaded cost of full-time IT contractor is $220,000 per year. The fully-loaded cost of a full-time Federal employee, including benefits, costs about $150,000. If the government were to in-source 10,000 IT positions across the government, we'd save $700 million per year."

You get what you pay for, meaning, the $150K federal employee would most likely be inferior to the contractor.

Posted by: ahashburn | March 4, 2009 3:48 PM

Wow, what a terrific idea. Let's see, we privatize the prisons, and bingo, suddenly more prisoners. We privatize the army and shazam! more war! Privatize the central bank and badabing, more debt!

So, why don't we create and then privatize a Department of Finding Waste, who's job it it will be to ferret out all the wasteful spending and programs and graft and corruption and....ooops, that killed it right there, sorry.

Posted by: whizkidz1 | March 4, 2009 3:55 PM

"We'll have to break bad habits that have built up over many years, but we can't keep spending good money after bad. All across America, families are making hard choices, and now we're going to have to do the same."

Families are making hard choices because they have no money nor credit to spend.

We are talking apples to oranges!

The gov't on the other hand just received $789 Billion + increased (2.x trillion) budget. Hard choices? Right... The gov't just got what one would call a salary increase (like a CEO of a failed company) -- and really, what are they going to do? Yes, gov't needs a stimulus (maybe not that big), and I sure hope they spend it wisely--it's their job--not a challenge!

Lately, there's a lot of hard criticism from The Obama Administration against *its opposition*--and treating everyone like kids in a Rove-ian manner. Just like Mom taking control of the house budget is great to get things *organized*, but what we are doing is *taking risks*, plain and simple. My question to the administration: When do we tell if it's working or not? What is the criteria of SUCCESS:

a. measuring jobs--what time will it be measured? 6mos? a year? 10years?

b. measuring saved money-- when do we measure that? 6mos? 2yrs? 10yrs?

c. measuring economic growth? in 6mos? 1 yr? 15yrs?

d. measuring prosperity? What is that criteria (it's vague now).

Instead what I see is the democrats having a thirst for controlling the media and focusing on the details too much. That's a play out of the Bush playbook.

Where's the criteria?

Posted by: recharged95 | March 4, 2009 4:16 PM

Great Idea! I worked both as a contractor for the government and now am working for the government. The government has been wasting so much of taxpayers' money for incompetant contractors for too long. However, I would like to point out that the quality of federal employees should be improved as well. There are so many unqualified supervisors and managers who reached where they are just because they have been in the government long enough, not by their merits. I encountered so many government employees who would have been fired long time ago if they were in the private sector. Thus, I propose that the administration should create strong incentives to attract brighter and more talented employees so that they want to work for the government.

Posted by: estherk | March 4, 2009 4:25 PM

I must have just been lucky to work as a contractor for the few agencies with good employees. Our biggest cause of attrition is members of our contract teams joining the government workforce! At the same time, we have hired a number of our federal customer's employees who wanted to try the private sector for a while.

estherk comments on incompetent contractors - Most contracts require the contractor to provide personnel with demonstrated experience and skills in the area of work being contracted. Incompetence is usually in how the work is managed, not in the incompetance of the workforce. That management incompetance shows up on both contract and government sides.

With good management on both sides of the contract line, you get the kinds of situations where the contract work force and the government workforce feel comfortable "crossing over". You also get good work done at a good price.

Posted by: contractor1 | March 4, 2009 5:17 PM

One area I would like to see scrutinized for their procurement and contracting policies is the Army and Air Force Exchange Service. Billions and billions spent for exchanges the world over. Yet, shoddy, no-name, overpriced merchandise. Ambiguous pricing. No service. No response to requests for service. Someone in the Bush admin made this agency a free for all. It absolutely needs to be scrutinized.

Posted by: pkbishop | March 5, 2009 9:20 AM

This is the first time for me reading the blog comments after a Washington Post article -- and I'm very surprised by the language and tone of many of the comments. So much bitterness, anger, and name-calling. Ouch. It's painful. I thought these comments were for reasonable people to share their opinions. How else do we usefully exchange ideas in a democratic society? Let's bring back civility.

Posted by: blueskies5 | March 8, 2009 6:35 PM

The following link says it all when it comes to President Obama and government contracts. This long-winded Executive Order 13502 in simple terms says, "Give all the government contracts to unions." Yah, eliminating 84% of the bidders will really cut costs. Nice campaign support payback for the unions, though.

This from the President of Associated Builders and Contractors (ABC):
“Today’s decision to repeal Executive Order 13202 opens the door to waste and discrimination in federal and federally funded construction contracts,” said ABC President and CEO Kirk Pickerel. “This action removes the safeguards that prohibited discrimination based upon union affiliation in the awarding of federal contracts.

“Construction contracts subject to union-only PLAs are designed to be awarded exclusively to unionized contractors and their all-union workforces,” said Pickerel. “Absent the economic benefits of competitive bidding, union-only PLAs are known to increase construction costs between 10 percent and 20 percent and discriminate against minorities, women and qualified construction workers who have traditionally been excluded from union membership.

So the minority contractors who are almost all non-union have just been stabbed in the back by our first minority president. Guess the power of the campaign dollar trumps everything else.

Posted by: BothSides | March 9, 2009 1:24 PM

Is this the memo that he put out suggesting that all construction work over $20M in the stimulus bill be given to union shops? Since 80% of construction workers are non-union, how is this going to help fight corruption and fairly distribute the work? The biggest problem I see will be non-competitive contracts with the government paying more for work then it shouldand getting shoddy work.

Posted by: gerrypooh | March 9, 2009 4:43 PM

What about the NO BID contracts that HALLIBURTON has been enjoying for the past eight years - AND, the subsidiaries of Halliburton???? The American taxpayers have been taken to the cleaners!!!!

Posted by: louise2001 | March 10, 2009 11:35 AM

How can Obama talk so boldly when he is having a elaborate parties at our expense.

Even his stop at Phoenix, his bill for the motel was twice what any other President has spent.

OBAMA - you must apply the rules to you too

Posted by: twilarak | March 11, 2009 11:08 PM

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