[Federal Register Volume 74, Number 43 (Friday, March 6, 2009)]
[Presidential Documents]
[Pages 9755-9757]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-4938]


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  Federal Register / Vol. 74, No. 43 / Friday, March 6, 2009 / 
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