White House Targets Management Support Contracts The White House is telling federal agencies to cut spending on management support contracts by 15% in the next year. Officials said contract spending in 15 categories of professional and management services has quadrupled to nearly $40 billion over the last decade. Agencies must cut $6 billion in contracts by the end of fiscal 2012. (List of categories, below.) “That’s where the money is. That’s where the spending is increasing,” said Dan Gordon, administrator of the Office of Federal Procurement Policy, at a White House forum on July 7. Gordon said the directive is not intended to encourage insourcing, but to spend less. “We don’t want people to think this is a numbers game [where] all you have to do is put this under a different product service code and you’ve solved the problem,” he told an audience of federal acquisition executives and industry representatives. “We will work through this with the agencies to be sure it’s done intelligently. We’re going to be watching.” Gordon acknowledged that some agencies have become heavily dependent on management support contractors, but he said the jobs often are close to inherently governmental, to the point that it’s hard to tell who is a contractor and who is a federal employee. He said almost three-fourths of such contracts are cost reimbursement or time and materials/labor hour types, which the administration has identified as high-risk. Gordon said the message to agencies is “buying less if you can, but buying smarter when you do buy.” Deniece Peterson, senior manager of federal industry analysis at Deltek, said contractors should analyze what their agency customers are spending in the 15 target categories, “then perform a brutal assessment of what functions your company might be performing that could be construed as closely related to ‘inherently governmental.’ Those are your greatest vulnerabilities.” In a post on the company’s blog, she wrote, “Over the next several years, the contractors that thrive will be those best prepared to help the government streamline. If you’re worried that last week’s announcement left your company vulnerable, the best business decision you could make might be to pick up the phone and start giving your clients ideas on how they can meet these new requirements, and how you can help.” While many small firms handle such work, nearly one-fourth of government spending in the targeted categories went to five large companies last year, according to Bloomberg Government: Lockheed Martin, Northrop Grumman, SAIC and United Space Alliance and Carlyle Group, which owns Booz Allen Hamilton. Jeffrey Zients, deputy director of the Office of Management and Budget, said the government will “still look to contractors for a wide range of professional and technical needs, but in a more prudent, cost-effective manner.” Functions Targeted for Cuts Cost Benefit Analyses, PSC B505; Policy Review/Development Services, R406; Program Evaluation Services, R407; Program Management/Support Services, R408; Program Review/Development Services, R409; Specifications Development Services, R413; Management Services/Contract & Procurement Support, R707; Intelligence Services, R423; Engineering and Technical Services, R425; Systems Engineering Services, R414; Personal Services Contracts, R497; ADP Systems Development Services, D302; Automated Information Systems Services, D307; ADP System Acquisition Support Services, D314; ADP Backup and Security Services, D310. Source: Office of Management and Budget