Obama Government Finds $19B In Cost Savings By Cutting Contracting, Consolidating Software Buys

The Obama administration identified cuts to contracting within the federal government that puts the United States on track to save $19 billion this year and $40 billion by the end of the 2011 fiscal year.

Among the cuts is the consolidation of software purchases at the Department of Homeland Security to save more than $87 million.

"These changes will save the American people billions of dollars," President Obama said at an event today announcing the award winner from a government contest to identify savings.

He also said that next year he'd host an event at the White House seeking ideas from private sector on how to cut government spending.

Earlier today, staffers from the Office of Management and Budget outlined some of the cuts and announced the government will create an online "dashboard" so taxpayers can gauge whether agencies are meeting their goals.

They detailed some stats from reports that will be posted today on the OMB Web site.

OMB Deputy Director for Management Jeff Zients said the cuts will extend to every agency, including the executive office of the president staffers in the White House.

OMB's Dan Gordon said the new plan would allow the government "to do business smarter, more effectively, more efficiently," but added, "We have a lot of work ahead of us."

In one example, the Department of Homeland Security had 27 different contracts for its desktop computer applications.

"That is not a smart way to buy software," Zients said.

So to fix it, the chief information officer and the contracting team developed a set of common requirements that will help DHS save money by pooling purchasing power. They estimate it will save $87.5 million.

The goals:

• Achieve 3.5 percent in savings during FY2010 and 7 percent by the end of FY2011.
• Reduce the use of high-risk contracts for new procurements by a minimum of 10 percent this fiscal year.
• Identify organizations within each agency that may be overreliant on contractors and
pilot new processes to achieve the best mix of public and private labor resources.

There are 24 agencies within the government that account for more than 98 percent of all contracting spending.

One report says the savings are being accomplished by imposing internal spending caps, better use of competition and online reverse auctions and electronic-sealed bids.

It says there will be "program terminations and reductions" but does not specify if that will result in layoffs.

The report says OMB will evaluate the use of contract workers in a first-ever "human capital plan" due March 31, 2010.

The Department of Energy's National Nuclear Security Administration (NNSA) is using more online tools such as one that's like eBay and will save $73 million.

"Contractors enter prices until the bid 'auction' ends with the selection of the lowest-price contractor. As eBay allows bidders to enter a higher price for an item if they are outbid, a contractor can revise its bid if another firm offers a lower price. Through these mechanisms, NNSA is seeing an average cost savings of 18 percent per contract," the report says.

The report details $10 million the Pentagon will save by making a design change to a next-generation shoulder-fired missile, called the Javelin. In layman's terms, they are using a different coating on tubes inside the weapon so it won't be as expensive to repair.