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Washington, D.C.—Guidance on initial steps to improve the federal contracting process issued to departments and agencies today by the Office of Management and Budget (OMB) was welcomed by the leader of the nation’s largest independent union of federal employees.

“Today’s guidance is a sharply-focused and positive first step toward establishing a much-needed framework for improving federal contracting,” said President Colleen M. Kelley of the National Treasury Employees Union (NTEU). “OMB has put federal agencies on notice that in the future they will have to be much more responsible—and accountable—for the way in which they carry out federal contracting practices.”

The three-part OMB memorandum requires that agencies reduce overall spending on contracts by $40 billion a year by better acquisition program practices; it further requires agencies to develop plans to generate savings of 3.5 percent in each of the next two fiscal years.

The documents call on agencies to cancel ineffective contracts; build up their acquisition workforces to provide better planning of the contracting process and oversight of contractors; and reduce their share of high-risk contracts by 10 percent by the end of this year. Such contracts include those that are of the sole-source, cost-plus and time-and-materials variety.

President Kelley has long been the leader in the fight against runaway and costly federal contracting and lax government oversight of private companies performing federal work; in addition, she has called for an end to contracts in which the performance continues to be ineffective and a return in-house of contracted functions.

The OMB guidance—with additional guidance planned in the fall—is in line with a Memorandum on Government Contracting issued by President Obama in early March calling on OMB and other federal agencies to improve and strengthen federal contracting practices.

The initial step was for OMB to provide government-wide guidance to help agencies review in an ongoing manner existing private contracts to identify those that are wasteful, inefficient or otherwise not likely to meet the agency’s needs, and to generate appropriate corrective action in a timely manner.

OMB also warned that overreliance on contractors “can lead to the erosion of the in-house capacity that is essential to effective government performance.” It adds: “Such overreliance has been encouraged by one-sided management priorities that have publicly rewarded agencies for becoming experts in identifying functions to outsource, and have ignored the costs stemming from loss of institutional knowledge and capability and from inadequate management of contracted activities.”

These arguments strongly underscore the position NTEU consistently has taken in its continuing opposition to rampant federal contracting, which last year totaled more than $500 billion.

Today’s OMB guidance also addresses in a limited fashion the question of in-sourcing. It calls on agencies to use sensible human capital policies that highlight the need for agencies to retain in-house capabilities. The guidance also directs agencies to identify at least one activity in which there is an excessive reliance on contractors, analyze it and take steps to remedy it—perhaps by in-sourcing the work or hiring additional internal staff to oversee the contract.

“All of these are positive developments,” President Kelley said. “NTEU’s position on government contracting has been clear for a long time—namely, that given the appropriate tools, resources and training, no one can perform the work of the federal government as well as trained, dedicated and accountable federal employees.”

NTEU is the largest independent federal union, representing 150,000 employees in 31 agencies and departments.