On July 29, 2009, the Office of Management and Budget (OMB) issued a memorandum for the heads of departments and agencies on improving government acquisitions as part of OMBs implementation of the policies announced in the President's Memorandum on Government Contracting, issued March 4, 2009. This first step in OMB's implementation of the President's Memorandum provides guidance to federal agencies on reviewing existing contracts and acquisition practices. The second phase, to be issued in Fall 2009, will provide guidance on competition, contract types, acquisition workforce, and outsourcing.

Acquisition Savings Plan

To achieve the Administration's target savings of $40 billion a year in contract spending, agencies are instructed to develop plans to save 3.5 percent of basline contract spending in FY2010 and an additional 3.5 percent in FY2011. These plans are required to identify the steps that will be taken to achieve the savings as well as the projected savings at each identified step. Examples of ways agencies may achieve these savings include: ending contracts that do not meet program needs; augmenting the acquisition workforce so as to improve contract negotiation and management; using strategic contracting approaches that leverage Government purchasing power; increasing the use of technology in contract management; and "reengineering ineffective business processes and practices." Attachment 1 to OMB's memorandum includes further details on these examples for agencies to use in reducing their contract spending.

Reducing the Use of High Risk Contracting Authorities

Responding to concerns expressed in the President's Memorandum and reports from the Government Accountability Office (GAO), agencies are instructed to take actions to reduce the use of “high risk”contracting vehicles such as noncompetitive contracts, cost-reimbursement contracts, and time-and-material/labor hour (T&M/LH) contracts. In particular, OMB is instructing agencies based on FY08 baselines to reduce by at least 10 percent in FY2010 the combined share of dollars obligated to these types of contracts. Thus, for example, if an agency spent 40 percent of its contract dollars on noncompetitive, cost reimbursement or T&M/LH contracts in FY08, it should reduce this threshold to no more than 36 percent for new contract actions in FY2010. The memorandum also notes that noncompetitive contracts include awards under FAR 8.405-6, which permits agencies to restrict competition for Federal Supply Schedule contracts, and FAR 16.505(b)(2), which permits agencies to make exceptions to the “fair opportunity process” for the award of task and delivery orders under multiple delivery or task order contracts. Attachment 2 to OMB's memorandum acknowledges the benefits of appropriate use of these contract vehicles and provides agencies with examples of “good stewardship” for these “high risk” contract types. Attachment 2 further notes that changes to the FAR intended to improve the policies and practices relating to cost-reimbursement contracts, such as when to use such contracts, the acquistion plan findings required to use such contracts, and the acquisition workforce resources need to manage cost reimbursement contracts, are currently underway.