The War on Rampant Defense Spending

President Obama has declared war on inefficient government contracts.  I know we've all heard this before.  Remember when Al Gore, the "Efficiency Czar," dumped a pile of paperwork on the White House lawn and declared that the Clinton administration would conquer government waste and inefficiency?  And who can forget George W. Bush stating that "the era of big government is over" at the beginning of his term in the White House?  We all know how that one panned out. #FAIL!

But today Obama issued a Presidential Memorandum to the heads of all executive branch agencies.  In that memorandum he ordered agencies to rein in no-bid contracts of the sort that have oozed wasted money in Iraq; cut down on outsourcing "inherently governmental activities;" and review all current government contracts for waste and, if necessary, cancel them.  Here's the good part:

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.

If you made it through that, congratulations.  If the bureaucrat-ese made you zone out after the first sentence, the long and short of it is that OMB has until July 1st to come up with government-wide "guidance" to review and cancel wasteful contracts.  Now some of you may say "They have until JULY?  Is anything EVER going to change?"  But trust me, 4 1/2 months in the government is like 2 days in the corporate world.  Seriously.

Moreover, Obama's directive to cut down on farming out "inherently governmental" activities actually made me smile.  This is a direct reversal of GWB's policies.  W was a big fan of Circular A-76, a fun little document directing government agencies on outsourcing government jobs to contractors.  It's been around for awhile - like since the 60's - but W was its biggest fan.  Although A-76 policy protects "inherently governmental" activities from outsourcing, Number 42's administration stretched the definition of not "inherently governmental" to Gumby-esque heights.  These are the people that brought us mercenaries contractor "security" forces and our lovely friends from The Company Formerly Known As Blackwater, or Xe, for short.  Can you think of anything more inherently governmental than acting as U.S. security in a war zone?  Neither can I.  So Obama's directive to cut it out is good news coming so soon in his term.

Reviewing all government contracts will likely take some time and encounter resistance from contractors, defense lobbyists, and even government bureaucrats who don't take "change" seriously, having seen it held aloft as the gospel every four years.  But tackling the entrenched system has to start somewhere and Obama means business.  The one serious problem I foresee is finding the resources and manpower to actually review the contracts. 

This is something not often talked about outside of Washington, D.C., but those that handle the bidding and management of government contracts have suffered cut after cut over the last 20 years or so and a nice big chunk of the remaining work force will be retiring over the next 10 years.  It's clear that Obama realizes this as his memorandum also orders OMB to develop guidance to, "assist agencies in assessing the capacity and ability of the Federal acquisition workforce to develop, manage, and oversee acquisitions appropriately."  It's all well and good to talk about increased contract oversight and management, but that talk must be followed up with the trained workforce to actually do it.  With Obama's acknowledgment of the problem, I'm hopeful that the culture of government contracting may actually change.

In the wonky world of government contract policy our mantra is transparency, competition, integrity and accountability.  I'm hopeful that this time, we're actually taking the first steps back in the right direction.  But if Barack Obama doesn't follow through, we'll certainly be watching and ready to call him out in kind.

Stephanie is a government contracts attorney and for some reason finds all this stuff endlessly fascinating.  She also blogs about useless personal stuff at Lawyer Mama.

Comments

[Drew]

More inherently governmental. Sure. Where do I start? Collect taxes. Pay government debts. Borrow money. Regulate commerce with foreign nations. Coin money. Make treaties. Nominate and appoint Ambassadors, public Ministers, and Judges. Grant reprieves and pardons. Try cases of law arising under the Constitution and treaties. (Hint: Articles I, II, and III)

Providing security guards is pretty far down on the list of government tasks. It should have gone without stating, but it depends on whether those individuals are acting as an army (i.e., engaging in offensive military operations) or are acting as security guards. Folks who dislike U.S. policy in Iraq AND A'stan (under whichever President you choose to revile, Bush or Obama) immediately proclaim private security is "an army" and brook no analysis. It is all blanket proclamations about broad swaths of individuals, founded on blog entries and 30-second snapshots fueling the 24-hour news cycle.

But hasty action because one "feels" like one aspect of an issue is "unfair" or based on at best a cursory understanding of what this issue entails does not sound like a sound approach. One might want to take a hard look at the impact of the changes they seek. E.g., are you prepared to pay for the long-tail pension, benefit, etc. costs of having the military supply the 10,000+ private security guards engaged for the past couple decades by the Federal Protective Service?

No doubt government contracting is a trainwreck. But meaningful Change (cue chorus of angels and burst of crepuscular rays) and reduction in waste--if such a thing is ever to occur--lies in two other planks of the new Memoranda: (1) requiring fixed fee contracts except in exceptional circumstance, and (2) massively improving the joke that is the government acquisition workforce. It won't be found in the I-don't-like-this-vicious-and-unjust-war-let's-target-security-contractors-as-a-surrogate-for-those-nasty-military-people hysteria. For every ugly incident involving contractors, you can find 20 involving uniformed folks. While beating the drum about how evil are military people proved an unpopular tactic the last couple times around, demonizing contractors provides the same orgasmic thrill and still neatly fuels attack on national defense structure.

The overwhelming majority of these individuals, in or out of uniform, have sought at every turn to do their best for their country. It's called a battlefied, and it is NEVER pretty.

[Melissa]

Here's the thing though, Obama is going to sign HR1105 if the Ds manage to pass it. So while's he's making a big to-do over the contracting, he's letting everyone pork up the FY09 spending bill because, y'know, those are earmarks from before he took over.

Excuse me? Who cares if they were in the bills before. If you want to get rid of earmarks then take a stand. Which, of course, he can't because everyone loves the trough. Some of the earmarks have merit, some don't. And they only amount to about $400m but still... principle is important.

There have been a couple of amendments to strip the earmarks entirely that have failed. But there is a proposal circulating that could pass. If it does, then we'll get a long-term continuing resolution (CR) for the rest of FY2009. Why? Because Speaker Pelosi says the House already passed the bill and they're not taking it up again this year. 'Course, that's what a conference committee is for anyway but that would require a short term CR on top of appointing conferees and, I dunno, actually addressing earmarks.

I'm not one to say that all earmarks are bad and wasteful. On the contrary, some are quite useful and good. But the current process of inserting them into must-pass spending bills is awful, broken, corrupt, and generally unworkable.

This fellow MOMocrat wants to play fair. If you want to reduce waste over here, then you should want to reduce waste over there too.

[Lisse]

From my POV, this isn't so much about spending for earmarks vs. security forces, or whether or not we should be in Iraq and Afghanistan in the first place. It is about preventing the FRAUD that no-bid contracts allow.

It is for the reason of combatting fraud that we need skilled contract administrators who are permitted and encouraged to investigate and raise a red flag when Haliburton charges for goods and services never provided.

People have been talking in recent days about a Truth Commission concerning the conduct of the war. What I think we need is a special investigator charged with requiring documentation for everything Halliburton charged the taxpayers for and permission to withhold payment or charge back for anything that was either not properly documented or overcharged by market standards.

[Lawyer Mama]

Drew - I agree with you to some extent. BUT. "Not Inherently Governmental" has been stretched beyond recognition. For instance, the woefully inadequate contracting force you referred to. In recent years, they've started contracting contract administration out. Talk about the rooster guarding the hen house!

I'm sorry, but I just flat out disagree about contractors in a war zone. Acting as security guards in a war zone is a job for our military. I don't care how many stories you hear about contractors versus military. That's irrelevant and not a good comparison anyway. In fact it's a job that many perform. In fact, my brother just got back from a fun tour doing exactly that. It has nothing to do with our policies in Iraq and Afghanistan, at least not for me. I happen to live in an area rife with government contractors. I represent them. I know what goes on. In fact, I probably know a hell of a lot more than the general public, bloggers, or the media reporting on a "30 second snapshot." And it 'aint pretty and it needs to stop. Plus, the inherently governmental & outsourcing issue goes well beyond contractor forces in Iraq. It has dramatically decreased continuity and eliminated a large amount of institutional knowledge in nearly every sector of government. So yeah, I see it as a REALLY BIG DEAL. And why am I now guessing that you work for The Company Formerly Known as Blackwater....?

As for the other portions of the memo, I completely agree that supplementing the acquisition force needs to happen. As I said in my blog post, this is the first time I've seen an acknowledgment of the reality of contract administration.

As for "fixed fee" contracts, I'm not sure what you mean. The memo mentions eliminating "cost plus" contracts, so I'll assume that you're saying the government should use fixed *price* contracts whenever possible. Yes and no. The problem is that once a contractor bidding is forced to bear the risk of unforeseen circumstances and problems, the price of the contract increases at the front end instead of the back end. Or, the government ends up legally responsible for cost increases anyway b/c of the orders or actions of the government contracting officer. I see it as 6 of one, half a dozen of another.

While politicians love to use the soundbite of making all contracts fixed price with no changes, that's frankly ridiculous. It doesn't make sense economically for contractors to bid in such a way. And it doesn't make sense for the government to attempt to do business with contractors in such a way. And some contracts are just completely unfeasible as anything other than a cost plus contract - such as many R&D contracts. Like you said, it's easy to make assumptions based on a few blog posts and the 30 second media soundbite.

Melissa - I totally see where you're coming from on earmarks. I can't say I don't agree. But I see that as more political and, let's face it, the President can't always control all the pork that pops up in legislation. So unless we want to try line items veto powers again & pray the Supremes won't throw a hissy, that's the process. I still see government contracting reforms as a good thing. Having seen so much crap in my career, I'm just thrilled that something is happening to try & change the status quo.

[r4 card]

But today Obama issued a Presidential Memorandum to the heads of all executive branch agencies. In that memorandum he ordered agencies to rein in no-bid contracts of the sort that have oozed wasted money in Iraq; cut down on outsourcing "inherently governmental activities;" and review all current government contracts for waste and, if necessary, cancel them.