By Anna Field
Published: December 22 2009
The Obama administration will use an “Ebay in reverse” system as part of its efforts to cut $40bn in contracting costs from the federal budget each year.
Officials said yesterday they had already found $19bn (€13.3bn, £11.8bn) in savings for the current fiscal year.
The strategy, which would also see federal agencies banding together to buy the likes of stationery and software, was part of President Barack Obama’s directive to end unnecessary contracts and improving acquisition management, the White House said.
“We are here today for a simple reason: at a time when we face not only a fiscal crisis, but also a host of difficult challenges as a nation, business as usual in Washington just won’t do,” Mr Obama said after the White House’s Office of Budget and Management announced its plans for cutting waste.
“After years of irresponsibility, we are once again taking responsibility for every dollar we spend, the same way families do,” the president said.
US government spending on contracts more than doubled between 2002 and 2008, with contract spending reaching $540bn last year. Notably, the value of “high risk” contracts, awarded without open competition, increased by 129 per cent to $188bn during the Bush administration years.
Mr Obama in March issued a directive to government agencies to save $40bn in contracting costs in the year ending September 30 2011. The report published on Monday identified $19bn, or 3.5 per cent, in savings that could be made by the end of September next year.
“No business, large or small, could survive the continued waste and mismanagement the federal government has experienced,” Jeffrey Zients, OMB deputy director for management, told reporters on Monday morning. “It’s illogical, it’s unacceptable, and we will fix it.”
As an example of how money could be saved, the Department of Energy’s national nuclear security administration would conduct “reverse auctions” where contractors could bid online, with the lowest bid winning.
This “Ebay in reverse” system was expected to save the NNSA about 18 per cent on each contract, Mr Zients said.
Under the cost-saving measures, agencies have identified initiatives to reduce by 10 per cent the money spent through new high-risk contracts.