OMB orders cut in management services contracts

The Office of Management and Budget has ordered agencies to cut their management support services contracts, in an effort to reduce spending on the services by 15 percent.

Over the past decade, agency spending for management support functions has quadrupled, far outpacing the growth in overall contract spending, OMB officials wrote in a memo from Nov. 7. And officials will be paying close attention to make certain that spending goes down.

OMB announced a goal of reducing spending on management support service contracts by 15 percent by the end of fiscal 2012. The government has to bring spending down by $6.7 billion governmentwide to $37.4 billion in 2012.

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Agencies will have to cut back in areas, such as IT services, acquisition planning, and program management. Across government, agencies spent more than $44 billion on 12 types of support services in fiscal 2010.

OMB has ordered the chief financial officers and chief acquisition officers to set a clear course for less spending and then make it happen.

They have to:

• Identify agency contracts for management services in fiscal 2011.
• Figure out how much the agency has to cut in 2012 to spend 15 percent less money on management services compared to 2010.
• Calculate how much they have already decreased in 2011 compared to the previous year.

Once they figure out these details, CFOs have to set the course ahead. CAOs are responsible for enforcing the goal when procurement officials consider buying management services. OMB suggested requiring justifications to buy the services.

OMB wants internal controls to monitor the money going toward the support services in 2012. CFOs and CAOs also need to track the 2012 spending compared to 2010.

Still, OMB left the decision to award a contract solely to agency. However, OMB will want additional information on quarterly spending from agencies that are not on track to meet its 15-percent goal.

Agencies will share their information when they meet Office of Federal Procurement Policy officials by Dec. 1.

One of the administration’s concerns is that contracts for management support services often are high-risk types. OMB said agencies are twice as likely to use the high-risk contract types, especially time-and-materials contracts. Dan Gordon, OFPP administrator, has continually brought attention to buying smarter, as one of his initiatives. He has told agencies to think about contract types with less risk, such as fixed price contracts.