Tackling Waste

This is a good way for the Obama Administration to deflect the rise of the fiscal responsibility scolds. There is plenty of room for cuts in the federal budget, but they are typically places that the so-called "moderates" don't want to go. In that Politico tick-tock Ben Nelson objected to reductions in Big Ag subsidies because, well, he's from a farm state. And there are plenty of these moderates with defense contractors in their districts who won't like the effort to clean up that process.

President Barack Obama said on Wednesday the U.S. government was paying too much for things it did not need and ordered a crackdown on spending he declared was "plagued by massive cost overruns and outright fraud."

Obama said wasteful spending was a problem across the whole government but he zeroed in on the defense industry after earlier citing a project to build a new presidential helicopter fleet as an example of the procurement process "gone amok."

"The days of giving defense contractors a blank check are over," Obama told reporters.

He ordered a reform of the way the government did business, a move he said would save taxpayers $40 billion a year and help cut the budget deficit, which he has forecast will hit $1.75 trillion for the 2009 fiscal year.

$40 billion a year in savings is more than every federal earmark over the last two years. At least those actually create something. Procurement overruns are just a handout.

If you want spending cuts, there are plenty of places to cut. So, it's up to the moderates to decide whether they believe in fiscal responsibility or not.

...Spencer Ackerman has quite a bit more, and it's a pretty big deal.

Obama today issued a memorandum to the heads of all the executive departments agencies directing them to restrict no-bid contracts; to rein in outsourcing of “inherently governmental activities”; and to, if necessary, cancel wasteful contracts outright. The crucial paragraph, even if it’s written in bureaucratese, particularly calls out the Defense Department:

"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."

Clearly, this has applications far beyond the Pentagon. But the list of big-ticket defense items that have experienced huge cost overruns is a long one. Future Combat Systems in the Army; the Littoral Combat Ship in the Navy; the Joint Strike Fighter in the Air Force — all of these programs, near and dear to the services, have run massively over budget. If I was a lobbyist for Lockheed or Boeing, I’d be dialing my contacts in the Pentagon and the Hill to figure out what the prospective damage to my company was. And then I’d come up with a strategy to fight this forthcoming Office of Management and Budget review.

Here's the memorandum. In it, the President notes that contracting costs have doubled since 2001 (well, that's an interesting date to start with), with increases in no-bid contracts and overruns. The cost-plus system actually creates an incentive to contractors to spend taxpayer money lavishly. We're talking a lot of money.

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.

Obama really took a shot across the bow today, not only to end waste and abuse, but to END THE PRIVATIZATION OF GOVERNMENT FUNCTIONS and the greed it engendered.

However, the line between inherently governmental activities that should not be outsourced and commercial activities that may be subject to private 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.

Great work. But we have to make sure there's a good follow-through. One of the point people on this procurement reform is deputy Secretary of Defense Bill Lynn, who was a Raytheon lobbyist. The military-industrial complex is not going to be easily calmed or dismantled. But we now have the words of the chief executive, who is willing to fight.