Budget proposes cuts to some service contracts

President Barack Obama’s fiscal 2012 budget proposal will attempt to take a chunk out of professional and technical service contracts, a senior administration official said today.

In the budget proposal due out Feb. 14, the administration will call for a reduction in those services, which are often referred to as advisory services. Officials want to reduce by 10 percent the governmentwide spending in fiscal 2012 on the administrative and contract costs related to those types of services, said Dan Gordon, administrator of the Office of Federal Procurement Policy.

The professional and technical services are an important component of those costs, he said.

Related coverage:

Steve Kelman proposes experiments to test management approaches

“This is an area that has grown disproportionately over the past decade, and we see significant potential for savings,” Gordon said during a conference call this morning.

Contracting in this area has increased by 17 percent per year between 2000 and 2008. In other words, for every $1 spent on contracting in general each year, agencies spent $1.50 on these services, the Office of Management and Budget said.

In 2012, agencies are requesting approximately 20 percent less money for professional and technical services in the fiscal 2012 budget compared to fiscal 2010, officials said.

A number of the fiscal 2010 service contract inventories, which were released this week, show agencies spending at times as much as 32 percent of the money on those types of advisory services.

For instance, the Commerce Department spent more than $50 million last year on contracts for program management and support services, as well as work on program evaluations and program reviews.

The General Services Administration spent 32 percent, or $762 million, of its overall service contracts on program management and support services, according to its inventory.

The government has come to rely too heavily on private-sector businesses as advisors, and federal officials want agencies to do it themselves, Gordon said. And by investing in the acquisition workforce, the government’s need for contract management and advisory services will decrease. Importantly, the buildup of the workforce — both in number and training — has a lot of support throughout the administration and in Congress.

Outside of the administration’s budget proposal, Gordon’s office is expected to release soon its policy guidance on insourcing. The guidance gives agency officials insight on reviewing inherently governmental functions and jobs closely associated to those functions, and when those jobs need to be taken away from contractors. Further, it lays out the right questions to ask to determine if a job should be insourced, if it isn’t clearly an inherently governmental function or close to it.

The proposed guidance is built around the general principle that the more critical a function is, the greater the need for internal capability to maintain control of the agency’s mission and operations. Obama officials aim to build up a core base of federal employees who understand how agency operations run and then better manage the work, instead of handing everything over to a contractor.

“We were talking about targeted efforts to strengthen that workforce to be sure that we’re in charge of our contracting process and to be sure that we’re managing our contractors appropriately,” Gordon said.