[Federal Register: March 6, 2009 (Volume 74, Number 43)]
[Presidential Documents]
[Page 9755-9757]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06mr09-79]
Presidential Documents
[[Page 9755]]
Memorandum of March 4, 2009
Government Contracting
Memorandum for the Heads of Executive Departments and
Agencies
The Federal Government has an overriding obligation to
American taxpayers. It should perform its functions
efficiently and effectively while ensuring that its
actions result in the best value for the taxpayers.
Since 2001, spending on Government contracts has more
than doubled, reaching over $500 billion in 2008.
During this same period, there has been a significant
increase in the dollars awarded without full and open
competition and an increase in the dollars obligated
through cost-reimbursement contracts. Between fiscal
years 2000 and 2008, for example, dollars obligated
under cost-reimbursement contracts nearly doubled, from
$71 billion in 2000 to $135 billion in 2008. Reversing
these trends away from full and open competition and
toward cost-reimbursement contracts could result in
savings of billions of dollars each year for the
American taxpayer.
Excessive reliance by executive agencies on sole-source
contracts (or contracts with a limited number of
sources) and cost-reimbursement contracts creates a
risk that taxpayer funds will be spent on contracts
that are wasteful, inefficient, subject to misuse, or
otherwise not well designed to serve the needs of the
Federal Government or the interests of the American
taxpayer. Reports by agency Inspectors General, the
Government Accountability Office (GAO), and other
independent reviewing bodies have shown that
noncompetitive and cost-reimbursement contracts have
been misused, resulting in wasted taxpayer resources,
poor contractor performance, and inadequate
accountability for results.
When awarding Government contracts, the Federal
Government must strive for an open and competitive
process. However, executive agencies must have the
flexibility to tailor contracts to carry out their
missions and achieve the policy goals of the
Government. In certain exigent circumstances, agencies
may need to consider whether a competitive process will
not accomplish the agency's mission. In such cases, the
agency must ensure that the risks associated with
noncompetitive contracts are minimized.
Moreover, it is essential that the Federal Government
have the capacity to carry out robust and thorough
management and oversight of its contracts in order to
achieve programmatic goals, avoid significant
overcharges, and curb wasteful spending. A GAO study
last year of 95 major defense acquisitions projects
found cost overruns of 26 percent, totaling $295
billion over the life of the projects. Improved
contract oversight could reduce such sums
significantly.
Government outsourcing for services also raises special
concerns. For decades, the Federal Government has
relied on the private sector for necessary commercial
services used by the Government, such as
transportation, food, and maintenance. Office of
Management and Budget Circular A-76, first issued in
1966, was based on the reasonable premise that while
inherently governmental activities should be performed
by Government employees, taxpayers may receive more
value for their dollars if non-inherently governmental
activities that can be provided commercially are
subject to the forces of competition.
However, the line between inherently governmental
activities that should not be outsourced and commercial
activities that may be subject to private
[[Page 9756]]
sector competition has been blurred and inadequately
defined. As a result, contractors may be performing
inherently governmental functions. Agencies and
departments must operate under clear rules prescribing
when outsourcing is and is not appropriate.
It is the policy of the Federal Government that
executive agencies shall not engage in noncompetitive
contracts except in those circumstances where their use
can be fully justified and where appropriate safeguards
have been put in place to protect the taxpayer. In
addition, there shall be a preference for fixed-price
type contracts. Cost-reimbursement contracts shall be
used only when circumstances do not allow the agency to
define its requirements sufficiently to allow for a
fixed-price type contract. Moreover, the Federal
Government shall ensure that taxpayer dollars are not
spent on contracts that are wasteful, inefficient,
subject to misuse, or otherwise not well designed to
serve the Federal Government's needs and to manage the
risk associated with the goods and services being
procured. The Federal Government must have sufficient
capacity to manage and oversee the contracting process
from start to finish, so as to ensure that taxpayer
funds are spent wisely and are not subject to excessive
risk. Finally, the Federal Government must ensure that
those functions that are inherently governmental in
nature are performed by executive agencies and are not
outsourced.
I hereby direct the Director of the Office of
Management and Budget (OMB), in collaboration with the
Secretary of Defense, the Administrator of the National
Aeronautics and Space Administration, the Administrator
of General Services, the Director of the Office of
Personnel Management, and the heads of such other
agencies as the Director of OMB determines to be
appropriate, and with the participation of appropriate
management councils and program management officials,
to develop and issue by July 1, 2009, Government-wide
guidance to assist agencies in reviewing, and creating
processes for ongoing review of, existing contracts in
order to identify contracts that are wasteful,
inefficient, or not otherwise likely to meet the
agency's needs, and to formulate appropriate corrective
action in a timely manner. Such corrective action may
include modifying or canceling such contracts in a
manner and to the extent consistent with applicable
laws, regulations, and policy.
I further direct the Director of OMB, in collaboration
with the aforementioned officials and councils, and
with input from the public, to develop and issue by
September 30, 2009, Government-wide guidance to:
(1) govern the appropriate use and oversight of
sole-source and other types of noncompetitive contracts
and to maximize the use of full and open competition
and other competitive procurement processes;
(2) govern the appropriate use and oversight of all
contract types, in full consideration of the agency's
needs, and to minimize risk and maximize the value of
Government contracts generally, consistent with the
regulations to be promulgated pursuant to section 864
of Public Law 110-417;
(3) assist agencies in assessing the capacity and
ability of the Federal acquisition workforce to
develop, manage, and oversee acquisitions
appropriately; and
(4) clarify when governmental outsourcing for
services is and is not appropriate, consistent with
section 321 of Public Law 110-417 (31 U.S.C. 501 note).
Executive departments and agencies shall carry out the
provisions of this memorandum to the extent permitted
by law. This memorandum is not intended to, and does
not, create any right or benefit, substantive or
procedural, enforceable at law or in equity by any
party against the United States, its departments,
agencies, or entities, its officers, employees, or
agents, or any other person.
[[Page 9757]]
The Director of OMB is hereby authorized and directed
to publish this memorandum in the Federal Register.
(Presidential Sig.)
THE WHITE HOUSE,
Washington, March 4, 2009
[FR Doc. E9-4938
Filed 3-5-09; 8:45 am]
Billing code 3110-01-P