GAO pokes holes in OMB's acquisition savings claims

Tuesday - 11/15/2011, 6:32pm EST

The Obama administration's claim of saving billions through contracting reforms is dubious at best. The Government Accountability Office found the Office of Management and Budget's data lacks reliability and completeness and said there is confusion about how to calculate savings.

"We analyzed agencies' reported savings results in [OMB] MAX [intranet database] and determined that it is not possible to accurately determine the results of this initiative, in part because a significant amount of the savings was based on DOD's identified savings," auditors wrote in a report issued today for Sens. Susan Collins (R-Maine) and Scott Brown (R-Mass.) "DoD's savings were solely attributed to budget reductions included in an overall effort to reduce spending, and were not necessarily tied to contract savings. According to senior DoD officials, OMB supported the department's decision to use a budget-based approach to this initiative so that reported savings would be quantifiable and verifiable. Moreover, our analysis of the civilian agencies' MAX data identified overstated and questionable savings in the billions of dollars."

OMB reported agencies reduced spending on contracts by $15 billion between 2010 and 2009, and reduced the number of new high risk—time and materials, labor hours and cost-plus type—contracts by 1 percent in 2010.

Office of Federal Procurement Policy Administrator Dan Gordon questioned GAO's findings, saying the results show only a narrow and questionable picture of the efforts of agencies.

"In our view, the draft GAO report presents an incomplete picture of the progress made in reducing spending on contracts because GAO does not give proper credit to the Department of Defense's reported acquisition savings of more than $18 billion," Gordon wrote. "We disagree with the implication in GAO's statements that spending less on contracts is not a contract savings."

Auditors said part of the problem with the savings numbers came from data in MAX as reported by 23 civilian agencies.

GAO said they reported contract savings of $8 billion in 2010, but the audit agency found billions of dollars in overstated and questionable savings. GAO said this includes $1.1 billion that was erroneously reported and another $200 million that was duplicative. GAO said the Department of Health and Human Services Accounted for more than $849 million in overstated savings.

"Further, even when taking into consideration data entered into MAX on the civilian agencies' forecasted savings for fiscal 2011 — about $5.9 billion — and DOD's estimated fiscal year 2011 savings of $11 billion, the 24 agencies are far short of the administration's $40 billion goal," GAO said.

GAO also found agencies took credit for savings that was based on the ending of programs. For instance, NASA took credit for reducing contacts spending by $647 million by retiring the shuttle. GAO said the problem is that had been in the works since 2004. The Interior Department took $107 million in savings from de-obligated contracts. The State Department took credit for saving $1.4 billion "based on an unrealistic scenario wherein the department would stop contracting for security services in Iraq and directly hire government security personnel. This number was based solely on a GAO estimate using fiscal 2008 data that compared the obligated amounts of an existing security contract to the higher estimated annual costs department officials said they would incur if the agency were to provide the services with its own personnel."

Gordon said buying less is the most basic type of contract savings because it requires agencies to make tough decisions on what's a priority.

"In addition, it is our view that there is no basis for GAO's apparent assumption that agency decisions to spend less on contracts were outside the scope of OMB's initiative," Gordon said. "Overall, we are concerned that the GAO report focuses more on process rather than results."

GAO made five recommendations, including clarifying how to calculate and compare savings, and improving the high-risk contracting reduction initiative to include all high risk contracts, not just new ones.

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