Presidential Documents

Federal Register / Vol. 74, No. 43 / Friday, March 6, 2009 / Presidential Documents 9755 

Memorandum of March 4, 2009 

Government Contracting 

Memorandum for the Heads of Executive Departments and Agencies 

The Federal Government has an overriding obligation to American taxpayers. 

It should perform its functions efficiently and effectively while ensuring 

that its actions result in the best value for the taxpayers. 

Since 2001, spending on Government contracts has more than doubled, 

reaching over $500 billion in 2008. During this same period, there has 

been a significant increase in the dollars awarded without full and open 

competition and an increase in the dollars obligated through cost-reimbursement contracts. Between fiscal years 2000 and 2008, for example, dollars 

obligated under cost-reimbursement contracts nearly doubled, from $71 billion in 2000 to $135 billion in 2008. Reversing these trends away from 

full and open competition and toward cost-reimbursement contracts could 

result in savings of billions of dollars each year for the American taxpayer. 

Excessive reliance by executive agencies on sole-source contracts (or contracts 

with a limited number of sources) and cost-reimbursement contracts creates 

a risk that taxpayer funds will be spent on contracts that are wasteful, 

inefficient, subject to misuse, or otherwise not well designed to serve the 

needs of the Federal Government or the interests of the American taxpayer. 

Reports by agency Inspectors General, the Government Accountability Office 

(GAO), and other independent reviewing bodies have shown that noncompetitive and cost-reimbursement contracts have been misused, resulting 

in wasted taxpayer resources, poor contractor performance, and inadequate 

accountability for results. 

When awarding Government contracts, the Federal Government must strive 

for an open and competitive process. However, executive agencies must 

have the flexibility to tailor contracts to carry out their missions and achieve 

the policy goals of the Government. In certain exigent circumstances, agencies 

may need to consider whether a competitive process will not accomplish 

the agency’s mission. In such cases, the agency must ensure that the risks 

associated with noncompetitive contracts are minimized. 

Moreover, it is essential that the Federal Government have the capacity 

to carry out robust and thorough management and oversight of its contracts 

in order to achieve programmatic goals, avoid significant overcharges, and 

curb wasteful spending. A GAO study last year of 95 major defense acquisitions projects found cost overruns of 26 percent, totaling $295 billion over 

the life of the projects. Improved contract oversight could reduce such 

sums significantly. 

Government outsourcing for services also raises special concerns. For decades, the Federal Government has relied on the private sector for necessary 

commercial services used by the Government, such as transportation, food, 

and maintenance. Office of Management and Budget Circular A–76, first 

issued in 1966, was based on the reasonable premise that while inherently 

governmental activities should be performed by Government employees, 

taxpayers may receive more value for their dollars if non-inherently governmental activities that can be provided commercially are subject to the forces 

of competition. 

However, the line between inherently governmental activities that should 

not be outsourced and commercial activities that may be subject to private 


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9756 Federal Register / Vol. 74, No. 43 / Friday, March 6, 2009 / Presidential Documents 

sector competition has been blurred and inadequately defined. As a result, 

contractors may be performing inherently governmental functions. Agencies 

and departments must operate under clear rules prescribing when outsourcing 

is and is not appropriate. 

It is the policy of the Federal Government that executive agencies shall 

not engage in noncompetitive contracts except in those circumstances where 

their use can be fully justified and where appropriate safeguards have been 

put in place to protect the taxpayer. In addition, there shall be a preference 

for fixed-price type contracts. Cost-reimbursement contracts shall be used 

only when circumstances do not allow the agency to define its requirements 

sufficiently to allow for a fixed-price type contract. Moreover, the Federal 

Government shall ensure that taxpayer dollars are not spent on contracts 

that are wasteful, inefficient, subject to misuse, or otherwise not well designed 

to serve the Federal Government’s needs and to manage the risk associated 

with the goods and services being procured. The Federal Government must 

have sufficient capacity to manage and oversee the contracting process from 

start to finish, so as to ensure that taxpayer funds are spent wisely and 

are not subject to excessive risk. Finally, the Federal Government must 

ensure that those functions that are inherently governmental in nature are 

performed by executive agencies and are not outsourced. 

I hereby direct the Director of the Office of Management and Budget (OMB), 

in collaboration with the Secretary of Defense, the Administrator of the 

National Aeronautics and Space Administration, the Administrator of General 

Services, the Director of the Office of Personnel Management, and the heads 

of such other agencies as the Director of OMB determines to be appropriate, 

and with the participation of appropriate management councils and program 

management officials, to develop and issue by July 1, 2009, Governmentwide guidance to assist agencies in reviewing, and creating processes for 

ongoing review of, existing contracts in order to identify contracts that 

are wasteful, inefficient, or not otherwise likely to meet the agency’s needs, 

and to formulate appropriate corrective action in a timely manner. Such 

corrective action may include modifying or canceling such contracts in 

a manner and to the extent consistent with applicable laws, regulations, 

and policy. 

I further direct the Director of OMB, in collaboration with the aforementioned 

officials and councils, and with input from the public, to develop and 

issue by September 30, 2009, Government-wide guidance to: 

(1) govern the appropriate use and oversight of sole-source and other 

types of noncompetitive contracts and to maximize the use of full and 

open competition and other competitive procurement processes; 

(2) govern the appropriate use and oversight of all contract types, in 

full consideration of the agency’s needs, and to minimize risk and maximize 

the value of Government contracts generally, consistent with the regulations 

to be promulgated pursuant to section 864 of Public Law 110–417; 

(3) assist agencies in assessing the capacity and ability of the Federal 

acquisition workforce to develop, manage, and oversee acquisitions appropriately; and 

(4) clarify when governmental outsourcing for services is and is not appropriate, consistent with section 321 of Public Law 110–417 (31 U.S.C. 501 

note). 

Executive departments and agencies shall carry out the provisions of this 

memorandum to the extent permitted by law. This memorandum is not 

intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United 

States, its departments, agencies, or entities, its officers, employees, or agents, 

or any other person. 


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Federal Register / Vol. 74, No. 43 / Friday, March 6, 2009 / Presidential Documents 9757 

The Director of OMB is hereby authorized and directed to publish this 

memorandum in the Federal Register. 

THE WHITE HOUSE, 

Washington, March 4, 2009 

[FR Doc. E9–4938 

Filed 3–5–09; 8:45 am] 

Billing code 3110–01–P 


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