Federal Contracting:

OMB's Acquisition Savings Initiative Had Results, but Improvements Needed

GAO-12-57: Published: Nov 15, 2011. Publicly Released: Nov 15, 2011.

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In 2009, President Obama directed the Office of Management and Budget (OMB) to provide guidance to the 24 largest agencies to save $40 billion annually in contracting by fiscal year 2011 and reduce the share of dollars obligated under new high-risk contracts by 10 percent in fiscal year 2010. Agencies were to submit plans for meeting these goals to OMB's Office of Federal Procurement Policy (OFPP), which implemented the initiative. GAO was asked to assess (1) the extent to which the OMB initiative yielded the intended savings from contracting, (2) how effectively agencies reduced obligations on new high-risk contracts, and (3) the savings and risk reduction strategies to identify those that have the potential to yield long-term savings or improve acquisition outcomes. GAO reviewed agencies' savings and risk reduction plans and agency-reported data, and met with OFPP and senior procurement officials at each agency..

While agencies reported substantial savings, GAO found problems with the reported data and identified missed opportunities to further reduce high-risk contracts. Nevertheless, the initiative has prompted agencies to take actions to identify potential contract savings and reduce contracting risks. The extent of savings resulting from OMB's initiative is unclear. While OMB reported that agencies reduced contract spending by $15 billion from fiscal year 2009 to fiscal year 2010, this analysis was based on governmentwide spending trends and not solely due to the savings initiative. GAO found billions of dollars in overstated and questionable savings, reported by civilian agencies in early fiscal year 2011. For example, one agency reported about $1.9 billion in savings that represented total contract obligations rather than savings, while the National Aeronautics and Space Administration reported $660 million in savings resulting from a 2004 decision to retire the Space Shuttle. Further, the Defense Department's 2010 savings, reported in August 2011, stemmed from a broader, ongoing effort to reduce the department's budget--and were not necessarily tied to contract savings. GAO also found that agency officials were confused about what constitutes a savings due to OMB's broad and changing guidance, and whether the savings initiative would continue in future years. In July 2011, OMB introduced an initiative to reduce spending on professional and management services contracts, but it is unclear how this effort will affect the savings initiative. Although OMB has not reported on the overall results of efforts to reduce the use of new high-risk contracts, GAO found that in fiscal year 2010, agencies decreased use of those contracts, as a share of base spending, by less than 1 percent--well short of the 10 percent goal. OMB did report on results of individual categories of newly awarded high-risk contracts--noncompetitive, competitive solicitations receiving only one offer, cost-reimbursement, and time-and-materials contracts--but GAO's analysis yielded different results. Variations in results were primarily due to differences in the methodologies used by GAO and OFPP on how certain contracts were allocated to the individual high-risk categories, and an adjustment GAO made for one large contract that an agency incorrectly coded as being high-risk. Further, OFPP's focus on only new high-risk contracts limited the potential for greater risk reduction. When all high-risk obligations are taken into account, such as for orders under noncompeted blanket purchase agreements and certain task orders, there was nearly a 2 percent increase in the share of high-risk spending from fiscal year 2009 to 2010. Agencies did use OMB's initiative to garner support from agency leadership to review contracts for cost and risk reduction opportunities. GAO identified many acquisition savings and risk reduction strategies that agencies used--such as improved planning, strengthening the workforce, and streamlining processes--that show promise in yielding long-term savings or improved acquisition outcomes. GAO recommends that OMB continue to focus on the savings initiative and clarify how it aligns with other new initiatives, clarify guidance on how agencies' initiatives are defined and reported, and expand the initiative to include all high-risk actions. GAO also recommends that OMB report on the results of the initiative through fiscal year 2011. OFPP expressed concern that the report presents an incomplete picture of savings, especially at DOD. GAO disagrees and believes the report accurately portrays the scope and results of agencies' efforts under the initiative. OFPP agreed to adopt, where appropriate, GAO's recommendations regarding recording and methodological concerns.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Office of Federal Procurement Policy evaluated its informational needs for subsequent contract savings initiatives and determined the Federal Procurement Data System - Next Generation (FPDS-NG), rather than the MAX Information System, will be used to track and gauge agencies' progress in meeting their savings goals.

    Recommendation: To enhance agency implementation of the acquisition savings and high-risk contract reduction initiative, and to promote improved reporting and outcomes, the Administrator of OFPP should determine OFPP's informational needs to effectively manage and oversee implementation of the savings initiative, including whether OMB's MAX Information System (MAX) is the appropriate tracking and information-sharing mechanism. If MAX continues to be the designated system, develop the appropriate quality-control measures to improve agency-reported data.

    Agency Affected: Executive Office of the President: Office of Management and Budget: Office of Federal Procurement Policy

  2. Status: Closed - Implemented

    Comments: In July 2009, the Office of Management and Budget (OMB) instructed agencies to reduce contract spending on management support services by 15 percent by the end of fiscal year 2012. This initiative became the predecessor to OMB's acquisition savings and high-risk contract reduction initiative. Based on our recommendation, in Novmever 2011 OMB issued a memorandum to the chief financial officers, chief acquisition officers, and senior procurement executives of federal agencies outlining the steps that should be taken to ensure that the goals for spending reductions on management support services are clear, and the methodologies used to determine baseline spending data and savings are consistent and measurable.

    Recommendation: To enhance agency implementation of the acquisition savings and high-risk contract reduction initiative, and to promote improved reporting and outcomes, the Administrator of OFPP should clarify guidance and criteria as to: (1) what constitutes appropriate agency baseline reductions, (2) how savings (or cost avoidance) initiatives are defined and reported, and (3) how actual savings resulting from agency initiatives should be validated.

    Agency Affected: Executive Office of the President: Office of Management and Budget: Office of Federal Procurement Policy

  3. Status: Closed - Not Implemented

    Comments: In February 2012, the Office of Management and Budget (OMB) released an update of federal agencies' savings for fiscal years 2010 and 2011 under a scenario where contract spending continued to grow hypothetically at the average rate of spending growth during the period 2000 - 2008. However, the savings reported was not consistent or comparable with the savings goals identified in OMB's July 2009 memorandum which directed agencies to develop plans to reduce by 3.5 percent baseline contract spending in fiscal year 2010 and a further 3.5 percent in fiscal year 2011. Further, OMB has not announced agencies' cumulative high-risk contract reduction efforts for fiscal year 2011.

    Recommendation: To build on agencies' fiscal year 2010 achievements and leverage the momentum gained to date, the Director of OMB should report no later than the time of the fiscal year 2013 budget proposal submission to Congress on the dollar savings resulting from the agencies' initiatives and the cumulative high-risk contract reduction efforts for fiscal years 2010 and 2011. The results should be reported in a manner that can be easily compared with the administration's announced savings and high-risk reduction goals.

    Agency Affected: Executive Office of the President: Office of Management and Budget

  4. Status: Closed - Implemented

    Comments: In November 2011, the Office of Management and Budget issued guidance to agencies reinforcing the Administration's continued commitment to contract savings, and to focus their attention on management support services, such as engineering and program management, where spending has grown at an accelerated pace with a disproportionate reliance on high-risk contracts. The guidance identifies the lessons learned from the acquisition savings and high-risk contract reduction initiative and noted that planning reductions in spending within an agency are a shared responsibility between program, financial management, acquisition, and information technology offices.

    Recommendation: To build on agencies' fiscal year 2010 achievements and leverage the momentum gained to date, the Director of OMB should clarify and convey the administration's continued focus on the acquisition savings initiative for fiscal year 2011 and beyond, and address how it is expected to align with other initiatives, such as OMB's new undertaking to reduce the use of professional and management support contracts and Department of Defense's (DOD) efficiencies and other savings initiatives.

    Agency Affected: Executive Office of the President: Office of Management and Budget

  5. Status: Closed - Implemented

    Comments: Commencing in early fiscal year 2012, agencies included in their reporting of high-risk contract reductions to the Office of Federal Procurement Policy information on all contracting actions, such as task and delivery orders and contract modifications, and not just new awards.

    Recommendation: To enhance agency implementation of the acquisition savings and high-risk contract reduction initiative, and to promote improved reporting and outcomes, the Administrator of OFPP should revise the focus of the high-risk reduction effort to include all high-risk contracting actions and not just new awards.

    Agency Affected: Executive Office of the President: Office of Management and Budget: Office of Federal Procurement Policy

 

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