the WHITE HOUSEPresident Barack Obama

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Turning the Tide on Contract Spending

Summary: 
“Buying less” and “buying smarter” are simple ideas to understand, but history tells us that these basic principles of fiscal responsibility are not as easy to implement as one might think. Since 1997, and in 18 of the past 20 years, total spending by the federal government on contracts has increased – and at a near break-neck pace of 12 percent per year between 2000 and 2008. During this eight-year period, annual procurement budgets grew from $200 billion a year to more than $500 billion a year.

“Buying less” and “buying smarter” are simple ideas to understand, but history tells us that these basic principles of fiscal responsibility are not as easy to implement as one might think.  Since 1997, and in 18 of the past 20 years, total spending by the federal government on contracts has increased – and at a near break-neck pace of 12 percent per year between 2000 and 2008.  During this eight-year period, annual procurement budgets grew from $200 billion a year to more than $500 billion a year. 

This Administration is doing what has been so elusive in the past:  cutting wasteful spending on contracts and getting better value for the taxpayer dollar.  For the first time in 13 years, we have reduced spending on contracting and agencies have stopped the costly upward spiral in contract growth.  In FY 2010, agencies spent nearly $80 billion less than they would have spent had contract spending continued to grow at the same rate it had under the prior Administration. 

A new sense of fiscal responsibility is taking hold.  Agencies are thinking more carefully about what they buy and how they buy it. They are ending contracts they cannot afford or no longer need.  They are taking greater advantage of buying strategies that are more appropriate for the world’s largest purchaser – pooling their buying power to negotiate better prices and deeper discounts.  And, after years of inattention, they are rebuilding the capacity and capability of the acquisition workforce to achieve and sustain better acquisition outcomes and improved government performance. 

In his State of the Union address, President Obama said that, “we can’t win the future with the government of the past.” Instead, he said we must reform the way we do business in Washington and give the American people a government that’s not only more affordable, but also more effective and more efficient. This principle has been the cornerstone of our work on contracting and across the Accountable Government Initiative. From reforming and cutting costly IT systems, implementing unprecedented transparency and reporting efforts, buying in bulk, establishing a government-wide Do Not Pay list, or moving toward electronic government payments, we’re making real progress in changing the way government does business.

Here is more information about how we are saving money, cutting waste, and getting better results from our acquisitions. We are turning the tide, but there is still more to be done. OMB’s Office of Federal Procurement Policy will continue to work closely with agencies to build on their accomplishments to date and explore new opportunities for saving so that every taxpayer dollar is spent wisely.

Jack Lew is the Director of the Office of Management and Budget.