Taking particular aim at overruns in defense spending, President Barack Obama pledged yesterday to save up to $40 billion a year by reforming federal purchasing.
The White House is backing legislation by Sens. John McCain, an Arizona Republican, and Carl Levin, a Michigan Democrat, to reform defense spending. But the president also has ordered his own budget office to develop new rules by this fall on the way everyone in government does business.
"This problem cuts across the government," Obama said at the White House in signing a memo ordering a government-wide review of contracting. Pointing to problems in defense spending, he said: "The days of giving defense contractors a blank check are over."
Included in the review are government functions that have been privatized and outsourced over the past 40 years, a practice Obama said does not always yield savings or take advantage of private-sector competition.
Speaking about defense, he cited a Government Accountability Office report last year on 95 major projects that disclosed cost overruns totaling $295 billion. The president blamed overruns on investments in unproven technologies, lack of oversight and "indefensible no-bid contracts that have cost American taxpayers billions of dollars."
Defense Secretary Robert M. Gates has been a critic of defense contracting, calling for reforms in acquisition and contracting during testimony before Congress in January.
Gates outlined steps to rein in contracting costs and is expected to propose the elimination of certain troubled weapons programs.
The Pentagon also wants to reinvigorate its acquisition offices, which have been drastically trimmed by Congress over the past decade. When he unveils details of the military budget next month, Gates is expected to outline new policies for choosing weapons systems and containing costs.
Overall, government spending on goods and services increased from $200 billion in 2000 to surpass $500 billion last year, the White House said. Reforms could save up to $40 billion a year, officials estimated.
Peter Orszag, director of the Office of Management and Budget, will oversee the development of new guidelines on contracting by Sept. 30, the end of a federal budget year expected to run a $1.75 trillion deficit.