3.1: Contract Costs
Saving $40 Billion from Contracting Annually by FY 2011 Other Information:
In March 2009, the President directed agencies to save $40 billion in contracting annually by FY 2011 and to reduce the use
of high-risk contracts. Responding to the President’s mandate, we took immediate actions to arrest the unsustainable growth
in spending on contracts by working with agencies to apply fiscally responsible acquisition practices. These efforts successfully
reduced the growth in contracting spending from an average of 12 percent over the last decade to 4 percent in FY 2009. Agencies
identified $19 billion in savings from contracting for FY 2010, and we remain on track to achieve this savings through a combination
of program terminations and reductions, new and stronger applications of strategic sourcing, and continued implementation
of innovative procurement methods, such as the use of web-based electronic reverse auctions. Agencies are also working to
reduce the use of high-risk contracts. These risks come from two main sources —overspending that occurs when contracts are
awarded without benefit of competition and wasteful spending that occurs when agencies enter into cost-reimbursement contracts
rather than fixed price arrangements. Each agency has a goal to reduce by 10 percent the share of dollars obligated through
new high-risk contracts in FY 2010, and we are off to a good start. In the first half of FY 2010, the percentage of dollars
awarded in new contracts without competition dropped by 10 percent when compared with the same time period in FY 2009. During
the same timeframe, the percentage of dollars awarded in new non-fixed price contracts dropped by 7 percent compared to the
prior year. Agencies are achieving these reductions by implementing sound contracting practices, often with the assistance
of peer reviews or contract review boards that bring seasoned contract and other experts together to help contracting and
program offices increase competition and address high-risk practices.
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