Government Contracting Is Targeted – WSJ.com

Government Contracting Is Targeted – WSJ.com.

By CAM SIMPSON

WASHINGTON — President Barack Obama on Wednesday pledged to save as much as $40 billion a year by overhauling government-contract awards and targeting waste, singling out defense spending as an area rife with overruns and poor oversight.

Mr. Obama pointed to waste in Iraq and runaway spending. He said an independent government audit last year identified $295 billion in cost overruns for 95 major defense projects. Overall, the federal government spent $518 billion on contracts last year.

More

See a list of the top 100 government contractors for fiscal year 2008, which ended Sept. 30.

The president said his administration will distinguish between defense programs “that are designed to keep the American people safe and those that are designed to make a defense contractor rich.”

Although weapons makers faced the most direct criticism, Mr. Obama ordered all of his cabinet members and agency chiefs to revamp contracting procedures. In a memo, he said the initiative should focus on increasing competition and oversight while reducing outsourcing, but he offered few specifics.

Peter Orszag, the head of the Office of Management and Budget, will lead the effort to craft new guidelines. The president asked Mr. Orszag’s office to provide agencies with preliminary guidance by July 1 and for final plans to be developed by Sept. 30.

Contractors and their lobbyists reacted cautiously. “Any review of the procurement process must be fact-based and not caught up in the myths perpetuated about government contracting,” said Stan Soloway, a former defense official under President Bill Clinton who now heads the Professional Services Council, the largest trade association of government-service contractors.

And some Republican leaders criticized Mr. Obama for launching an initiative to cut up to $40 billion while supporting an appropriations bill in Congress from Democrats that is more than 10 times that size.

—August Cole contributed to this article.

Write to Cam Simpson at cam.simpson@wsj.com