Contract reform: Welcome and overdue

President Obama seems to be announcing new initiatives at the rate of one a day, but this latest program is much needed and long overdue.

He has instructed his budget director, Peter Orszag, to conduct a governmentwide review, due to be completed in September, of federal contracting and procurement procedures with the goal of cutting down on fraud and waste by adding more competition and accountability.

The review will be supplemented by contract-reform legislation sponsored by Sens. John McCain, R-Ariz., and Carl Levin, D-Mich.

The Bush administration, with an excess of suspicion of government and faith in the private sector, had a policy of outsourcing government functions, often on no-bid contracts.

In eight years, procurement spending increased by 155 percent to almost $532 billion while the number of federal employees monitoring those contracts increased by only 10 percent.

Said Obama: "Far too often, the spending is plagued by massive cost overruns, outright fraud and the absence of oversight and accountability. In some cases, contracts are awarded without competition; in others, contractors actually oversee other contractors."

The defects of this kind of unsupervised outsourcing were most evident in the wars in Iraq and Afghanistan. The Justice Department has under way more than 100 investigations into alleged contract fraud relating to the wars.

Obama believes that simply by tightening the rules for awarding contracts the government can save $40 billion a year. This is probably optimistic because honesty and efficiency have their own cost.

It’s all very well to talk about small government and cutting the bureaucracy, but without a well-trained corps of federal contract analysts and procurement specialists we’re fated to repeat the cycle that got us where we are now.