Agencies have until Dec. 1 to detail to the Office of Federal Procurement Policy how they are going to reduce their spending on management service contracts in fiscal 2012.

OFPP Administrator Dan Gordon and Danny Werfel, the Office of Management and Budget’s controller, sent chief acquisition officers (CAO) and chief financial officers a memo Nov. 7 outlining the 12 product codes and specific steps each of them should take over the next year. OMB posted the memo Nov. 14.

“Planning reductions in spending on management support services must be approached as a shared responsibility of program, financial management, acquisition, and information technology offices,” Gordon and Werfel wrote. “CFO Offices will need to work with agency program managers to identify areas where spending cuts can be made – i.e., where there is excess that can be eliminated, and what is affordable and what is not. Acquisition offices will need to help the CFO Offices identify where spending for these services is greatest by identifying the largest contracts for management support services. In addition, Acquisition offices will then need to work with their customers to buy smarter so that agencies can continue to effectively meet mission goals at reduced spending levels-monitoring the 15 percent reduction target.”

OMB mandated this summer agencies cut the spending on management support service contracts, such as those for systems engineering services, personal services contracts and procurement support services, by 15 percent by the end of 2012. Agencies spent more than $44 billion on these types of contracts in 2011.

Over the next year, Gordon and Werfel want each executive to provide specific oversight of the reduction.

“The CFO and CAO shall identify covered contracts funded by the agency in FY 2011 using the Federal Procurement Data System (FPDS) and identify the size of the reduction required in FY 2012, aligned to available budgetary resources, to achieve a 15 percent spending reduction from FY 2010 levels,” the memo stated. “The CFO and CAO should be prepared to identify the amount spending has been reduced in FY 2011 and the amount spending that will be reduced in FY 2012 to achieve the 15 percent reduction goal.”

CAOs will:

• Enforce the goal when covered acquisitions are being considered by their agency, for example, by insisting that requisitions for management support services that would obligate 2012 funding include justifications and/or higher level approvals.
• Institute appropriate internal controls to monitor the obligation of 2012 funds for management support services under new contracts, new orders, or options under existing contracts.
• Regularly monitor the agency’s spend rate for management support services in comparison to 2010 and take appropriate actions if the agency does not appear to be on course to achieve its 15 percent savings goal.
• Work with OMB throughout 2012 to discuss progress in reducing spending. “All decisions on individual contract actions remain solely within the agency’s discretion. However, if the agency is not on course to achieve its 15 percent savings goal at the end of the first, second, or third quarters, it will provide information about planned actions in the following quarter, including information on specific contracts.”

CFOs will:

• Provide direction to ensure achievement of the agency’s goal.
• Institute appropriate internal controls to monitor the obligation of 2012 funds for management support services under new contracts, new orders, or options under existing contracts
• Take appropriate actions if the agency does not appear to be on course to achieve its 15 percent savings goal.
• Within 30 days after the end of each fiscal quarter, provide examples of actions taken on specific contracts to achieve the 2012 spending target.
• Work with OMB throughout 2012 to discuss progress in reducing spending. “All decisions on individual contract actions remain solely within the agency’s discretion. However, if the agency is not on course to achieve its 15 percent savings goal at the end of the first, second, or third quarters, it will provide information about planned actions in the following quarter, including information on specific contracts.”

OFPP also will regularly check on agency progress during AcqStat sessions, which are used to make sure acquisitions are on track.

During those meetings, CAOs should provide a sample of management service contracts the agency is changing and other information about planned acquisitions to determine if a more cost-effective labor mix is possible and if there are redundancies that could lead to more savings.

“This initiative is not meant to discourage use of contractors,” the memo stated. “We fully expect agencies to continue to make good use of the expertise, innovation, and capabilities of contractors for a wide range of management support activities, such as program evaluation – investing in what works, and ensuring we have the data, evaluations, analyses and other studies we need to ensure we are spending taxpayer dollars wisely. While we do not expect agencies to increase the number of federal employees as a result of this policy, any agency that believes implementation of this policy would require hiring of additional federal employees should raise the matter with OMB.”

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