Cutting Fat From the $55.6 billion DHS Federal Budget

For a private-sector minded individual, cutting fat from a Federal procurement budget might at first seem like an extremely easy task. But once you sort your way through all the Federal red tape not to mention congressional and presidential meddling, it's not quite as simple as it looks. Still, reading articles like this suggest that there's potential billions on the table, if only the Federal sector would get some Spend Management savvy. According to the above-linked article, "The Homeland Security Department plans more oversight of major acquisitions, including information technology buys ... the department is using several strategies, including stronger central procurement oversight, strategic sourcing, greater use of fixed-price contracts and ongoing efficiency measures."

Still, I wonder if these tools will be enough. One of the major challenges of Federal contracting, according to my old friend and former FreeMarkets colleague Raj Sharma, is that all too often departments and agencies limit their universe of potential suppliers by writing requisitions and RFPs in highly targeted ways which are often worded such that only a single supplier is qualified for the business. Perhaps this is why in 2006, a bi-partisan congressional committee chaired by Tom Davis and Henry Waxman found tremendous waste in the DHS. What were some of the highlights at the time?

According to the congressional report, "Noncompetitive Contracts Have Soared. No-bid and other forms of noncompetitive contracts have grown even faster than overall DHS procurement spending. In 2003, DHS issued $655 million in noncompetitive contracts. By 2005, this figure had ballooned to $5.5 billion, an increase of 739%[*]. In 2005, over 50% of the dollar value of DHS contracts was issued without full and open competition." Moreover, "DHS has repeatedly failed to engage in responsible contract planning, including the determination of government needs and program requirements." In sum, the bi-partisan committee found that "the Costs to the Taxpayer Are Enormous". In total, the report identified "32 contracts collectively worth $34.3 billion that have been plagued by waste, abuse, or mismanagement over the last five years. In the case of each of these 32 contracts, reports from GAO, Pentagon auditors, agency inspectors general, or other government investigators have linked the contracts to major problems in administration or performance."

Granted, things have improved since this report was originally issued. But when you're dealing with the Federal government and $55.6 billion in spend, change is always glacial. And the fact that DHS is just getting around to introducing "strategic sourcing and central procurement oversight" into IT spending shows just how far the agency still needs to go.

* Editor's Note: An increase from $655 million to 5.5 billion represents a factor of 8.396 or 840% -- not 739% calculated in the congressional report.

- Jason Busch