WASHINGTON — Guidelines issued March 4 by U.S. President Barack Obama aimed at reducing waste in federal contracting is targeting one acquisition practice that is fairly standard on government space programs and another that is getting consideration in the wake of a spy satellite procurement fiasco a few years back.
In a memo to agency and department heads, Obama cited a preference for fixed-price contracts and open competition in the procurement of goods and services from the private sector. The memo did not cite any particular programs, but space systems typically are procured via cost-plus- award-fee contracts, meaning the contractor’s costs are passed on to the government while profit is performance based. Meanwhile, the intelligence community over the past year has suggested that sole- source contracts for certain space- based capabilities would be less costly than trying to create competition where none currently exists.
Spending on government contracts has nearly doubled in the past seven years, to more than $500 billion a year, Obama noted in the memo, which was posted on the White House Web site. During that time, the federal government has also come to rely more heavily on contracts issued without competition, and independent reviews have shown these kinds of contracts have been misused, Obama said. Reversing that trend could save billions of dollars each year, he said.
“When awarding government contracts, the federal government must strive for an open and competitive process,” Obama said. “However, executive agencies must have the flexibility to tailor contracts to carry out their mission and achieve the policy goals of the government.”
The government should also maintain a preference for fixed- price contracts, except in situations where it is unable to define its requirements sufficiently, the memo said. The memo also said taxpayers may receive more value for their money by reducing the use of contractors to perform work that is inherently governmental. The line between inherently government work and what can be outsourced has become blurred, the memo said.
Obama gave specific instructions to agency and department heads aimed at cutting back on wasteful spending. Those department heads, including the secretary of defense and NASA administrator, must by July 1 help identify existing government contracts that are wasteful, inefficient or otherwise unnecessary for corrective action. Those corrective actions may include modifying or terminating those contracts, Obama said.
In addition, Obama directed the director of the Office of Management and Budget to develop and issue by Sept. 30 government- wide guidance to clarify the appropriate use and oversight of sole- sourced and competitive contracts and clarify when outsourcing is and is not appropriate.
James Muncy, a space policy consultant here, said moving from cost-plus contracts in the space arena to more fixed-price contracts would essentially allow only systems with fully developed technologies to be fielded. Technologies that push the state of the art would have to be developed in experimental programs.
“This would be a truly back-to-basics approach, and it could create more opportunities for more commercially focused companies in areas like remote sensing and space launch.”
Sole-source contracts are the exception rather than the norm in government satellite procurements, but one senior intelligence official has hinted at moving in that direction for certain capabilities. Alden Munson, U.S. deputy director of national intelligence for acquisition, said one reason the procurement of a new generation of imaging spy satellites, dubbed the Future Imagery Architecture, went awry was that the government attempted to create competition in an arena where none had existed.
Michael Birmingham, a spokesman for the U.S. Office of the Director of National Intelligence, did not respond to a request for comment on the implications of the president’s memo.
Loren Thompson, chief operating officer of the Lexington Institute, a think tank here, said sole-source contracts are unavoidable in many instances. “[Government] efforts to generate competition have largely backfired,” Thompson said. “The belief that it can save billions of dollars through tighter oversight is nave, because the simple truth is in many cases there is only one qualified provider.”
