Obama Orders Overhaul of "Broken" Procurement System Denouncing a “broken system of government contracting,” President Obama ordered an overhaul of procurement policies that will focus on increased competition, limits on cost-plus contracts and better oversight. The president instructed the director of the Office of Management and Budget, Peter Orszag, “to develop tough new guidelines on contracting by the end of September.” Speaking March 4 at the White House, Obama declared, “We are spending money on things that we don't need, and we're paying more than we need to pay. And that's completely unacceptable. “We will stop outsourcing services that should be performed by the government, and open up the contracting process to small businesses. We will end unnecessary no-bid and cost-plus contracts that run up a bill that is paid by the American people. And we will strengthen oversight to maximize transparency and accountability.” Expanding on themes he sounded during the campaign, Obama said his reforms would save taxpayers up to $40 billion a year. In a memorandum to all agency heads, he wrote, “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." He ordered OMB to issue new guidance by July 1 “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.” By Sept. 30, the administration will issue new policies to maximize competition and define government functions that are and are not appropriate for outsourcing. The president also ordered an assessment of the capabilities of the acquisition workforce. Focusing on defense contracting, which accounts for almost two-thirds of procurement dollars, he said, “If a system isn't ready to be developed, we shouldn't pour resources into it. And if a system is plagued by cost overruns, it should be reformed. No more excuses, no more delays. The days of giving defense contractors a blank check are over.” The Government Accountability Office recently examined 95 large defense contracts, and found cost overruns totaling $295 billion. Appearing with the president were Senate Armed Services Committee Chairman Carl Levin, D-MI, and Sen. John McCain, R-AZ. They have introduced legislation to tighten controls on defense contracting. Obama instructed Defense Secretary Robert Gates to work with the senators to pass it.