Further Government Contracting Reform on the Obama Agenda

By Moorhouse, Richard L.; Connolly, Sean M. | National Defense, May 2009 | Go to article overview

Further Government Contracting Reform on the Obama Agenda


Moorhouse, Richard L., Connolly, Sean M., National Defense


* Contractors should prepare for major federal contracting reforms within the next several months. President Obama advised in his fiscal year 2010 budget highlights and in his March memorandum to executive agencies to expect more accountability and competition in federal procurements. The administration has committed to take specific steps to reduce wasteful spending, overcharges, and fraud, including:

* restricting use of noncompetitive and cost-reimbursement contracts;

* ensuring inherently governmental functions are not outsourced;

* improving acquisition workforce quality;

* implementing Government Accountability Office (GAO) recommendations to reduce overpayments and cost overruns; and

* reviewing GAO-specified high-risk acquisition programs.

President Obama confirmed as federal government policy a preference for competitive fixed-price contracts. Noting that cost-reimbursement contracting since 2000 had ballooned from $71 billion to $135 billion, the president directed that, cost-reimbursement contracts shall be used "only when circumstances do not allow the agency to define its requirements sufficiently to allow for a fixed-price type contract," and combined this mandate with a directive to severely limit non-competitive awards.

This is not new policy; indeed, it reinforces the Competition in Contracting Act (CICA). Passed in 1984, CICA requires specific justifications and approvals for any procurement not awarded based upon full and open competition. Implemented by the Federal Acquisition Regulation (FAR), CICA permits noncompetitive awards in seven instances:

* if only a limited number of responsible sources exist;

* in the event of an unusual and compelling urgency;

* to maintain a producer or supplier in case of a national emergency or to establish or maintain an essential capability;

* if full and open competition is precluded by an international agreement or treaty;

* if a statute authorizes other than full and open competition or a brand name is required;

* if disclosing agency needs would compromise national security; or

* full and open competition is not in the public interest for a particular acquisition.

To implement this policy, the director of the Office of Management and Budget has been directed to issue agency guidance by July 1 to review and identify existing, wasteful contracts that should be modified or cancelled. The OMB director was also tasked to issue guidance by Sept. 30 for governing sole source and other noncompetitive contracts and to maximize full and open competition.

The administration also is committed to clarify and bar outsourcing of inherently governmental functions, noting that the line has been blurred and inadequately defined. The fiscal 2010 budget highlights that such functions "will not be performed by the private sector for purely ideological reasons."

These concerns began in the last administration.

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