Procurement Savings of $400 Billion Are There for the Asking: President Obama and His Team Must Show the Way
President Barack Obama’s deficit commission is struggling to reach consensus around its recommendations to trim a projected $1.3 trillion budget gap. Critics, meanwhile, are lining up to attack every proposal. But the Obama administration doesn’t need to wait and see how the fight plays out to pick up the pace of budget cuts everyone agrees are needed.
A recent Center for American Progress report, “A $400 Billion Opportunity,” finds that federal spending could be cut by as much as $54 billion a year just by improving how the federal government buys and sells goods and services. The White House is off to a good start, having identified an estimated $19 billion in unnecessary procurement costs in this year’s budget. The administration should take the following concrete steps today to increase the momentum—and magnitude—of savings realized from procurement reform.
Start at the top
Government waste-reduction efforts in place today are being led largely by procurement officials who do not control budgets nor many decisions that lead to waste. Department secretaries and deputy secretaries must lead procurement cost-reduction efforts if we hope to translate savings into budget reductions. In fact, the president needs to get involved himself. Specifically:
- The president should indicate his ongoing commitment to procurement reform by holding cabinet secretaries, members of the President’s Management Council, and senior White House staff accountable for documented savings that can be reallocated to other critical needs.
- Every agency should be ordered to demonstrate their savings by cutting budgets. The administration’s goal should be to double its rate of procurement savings to $40 billion a year and to reach that annual goal gradually within 36 months, in the form of savings documented and verified by chief financial officers in each agency.
- The federal procurement policy office and the performance management section at the Office of Management and Budget should work together and have broad latitude to guide agency planning and review processes, and help departments prioritize where and how to find procurement-related savings. Strategic sourcing of common goods and services should be included in the review process, as should program-related procurements deemed “critical.”
- The president should receive and comment on public quarterly updates that track each department’s progress in cutting waste and improving procurement quality. The president can use these quarterly meetings as a platform to communicate his determination to reduce wasteful spending and to highlight specific agency successes.
Make procurement reform a “high-priority performance goal”
Procurement is central to the performance of most government programs, and improvements in purchasing can improve how the government does its work and what it delivers to the taxpayers. For instance, procurement reforms at the Department of Transportation can drive down costs while improving air passenger safety. Improving our purchase of weapons systems can likewise enhance national security.
To cement the linkage between procurement and program performance, procurement reform should be integrated into the White House’s High Priority Performance Goals initiative and receive the same degree of oversight as other top goals.
Craft and manage a well-articulated plan that identifies proven cost-reduction strategies
Every agency should have a procurement reform plan that:
- Sets current procurement spending as a baseline from which savings are calculated
- Targets recurring cost centers such as travel, fleet, energy usage, leases, telecommunications, and printing
- Mandates cooperative sourcing (or “strategic sourcing”) of common goods and services within an agency or across the government
- Identifies critical programs where success is highly dependent on effective and efficient procurement
These plans and estimated savings should be built into agency budget projections. If the savings are not achieved, agency officials must find the savings elsewhere.
Create agency “SWAT” teams for procurement reform
The White House should direct each agency to establish a procurement-reform SWAT-style team led by an “operations deputy” or the chief operating officer. The teams should include the most senior officials in charge of programs, finance, information technology, and procurement.
Teams should be led by a senior executive with experience leading large cost-reduction and procurement reform efforts. The manager should be a nonpolitical position to ensure the continuation of the team through political transitions. The department secretary should meet at least monthly with the agency team to review progress, identify barriers, and keep the initiative on track toward savings and reform goals.
The government should also create interagency “SWAT” teams that can assist agencies in complicated acquisitions that require specialized negotiation skills or market knowledge.
Communicate successes and reward employees for saving the taxpayer money
The department secretary and other senior leadership must ensure that successes are communicated as they happen, and that people see tangible rewards—such as time off—for achieving them. Procurement reform successes (or failures) should be part of every senior executive’s annual performance assessment.
Washington may be locked in policy fights over tax policy and how quickly to shrink the federal budget deficit, but no one disputes the principle that each dollar collected from a taxpayer should be put to good use. With less of these dollars to go around and a growing demand for government services, wringing the waste out of the federal government’s $500 billion annual procurement budget is more critical today than ever.
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