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Contract spending dips first time in 13 years

Feb. 3, 2011 - 06:00AM   |  
By SARAH CHACKO   |   Comments
The government's contract spending decreased from $550 billion in fiscal 2009 to $535 billion in fiscal 2010, the first reduction of contract spending in 13 years. Dan Gordon, administrator of the Office of Management and Budget's Federal Procurement Policy, said the trend to pare down spending will continue.
The government's contract spending decreased from $550 billion in fiscal 2009 to $535 billion in fiscal 2010, the first reduction of contract spending in 13 years. Dan Gordon, administrator of the Office of Management and Budget's Federal Procurement Policy, said the trend to pare down spending will continue. ()

The federal government has reduced its contract spending for the first time in 13 years, officials with the Office of Management and Budget said Thursday.

Contract spending decreased to $535 billion in fiscal 2010 from $550 billion in fiscal 2009, putting agencies on track toward but still short of meeting a presidential directive to save $40 billion in contract spending annually by 2011.

"Indeed, we have reversed the trend of uncontrollable growth," said Jeffrey Zients, OMB's deputy director for management and chief performance officer. "We're saving money and making sure every taxpayer dollar is well spent."

Dan Gordon, administrator of OMB's Office of Federal Procurement Policy, said the trend to pare back contract spending will continue: The president's 2012 budget will call for a 10 percent cut in spending on professional and technical services bought from contractors, an area that has grown disproportionately over the last decade.

In 2010, spending declined particularly on sole-source contracts and contracts that pay for time and materials, Gordon said. Cost reimbursement contracts saw a relative increase, which Gordon attributed to the shift away from more risky contract methods.

Gordon said agencies experienced savings by "buying less and buying smarter."

Buying less means they were more realistic about what they could afford, avoiding the "bells and whistles" that routinely drive up prices.

Agencies are also doing better at leveraging the full buying power of the government, Gordon said.

"When agencies across the government are buying the very same software but doing it through a whole series of individual contracts, we're not getting the benefit of being the world's largest customer," he said.

But while the overall dollars to contractors is reduced, more contracts should go to small businesses that can offer the government new technology and more competitive prices, Gordon said.

"All too often, barriers to entry prevent us from getting those small businesses into the federal marketplace," he said. "Getting more federal business to small business can help them get the revenue they need to create jobs and to drive their economy forward."

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