Obama sees savings in spending reforms

WASHINGTON (Reuters) - President Barack Obama on Wednesday will order a crackdown on waste and cost overruns in U.S. government procurement that he estimates will save up to $40 billion (28.4 billion pound) a year, an administration official said.

Elected on campaign promises of sweeping change and greater accountability in Washington, Obama, who took office on January 20, will sign a presidential memorandum seeking to “reform our broken system of government contracting,” the official said.

The president will unveil his plan at a White House ceremony at 10 a.m. EST (3:00 p.m. British time), nine days after holding a “fiscal responsibility” summit where he pledged to make curbing procurement excesses, especially in defence spending, one of his top priorities.

The reform program also comes less than a week after Obama forecast a $1.75 trillion deficit for the 2009 fiscal year, the biggest since World War Two and stark evidence of the heavy blow the deep recession has dealt to the country’s finances.

Republican critics have condemned Obama’s budget proposal as part of a “tax-and-spend” onslaught by the new Democratic president, a charge he and his aides strongly deny.

Obama will seek to show his determination to apply fiscal discipline even as he ratchets up government spending to try to jolt the economy out of recession.

“The presidential memorandum will dramatically reform the way that we do business on contracts across the entire government,” the official said, speaking on condition of anonymity.

White House budget director Peter Orszag will be instructed to start working immediately with Cabinet officials and agency heads to develop tough, new guidance on contracting by the end of September, the official said.

“The president will say that by stopping outsourcing services that should be performed by the government, opening up the contracting process to small businesses, ending unnecessary no-bid and cost-plus contracts, and strengthening oversight to maximize transparency and accountability, we can save the American people up to $40 billion each year,” the official said.

Obama’s objective is that “the American people’s money is spent to advance their priorities, not to line the pockets of contractors who have figured out how to work the system, or to maintain projects that don’t work,” the official said.

The president will praise Defence Secretary Robert Gates for his efforts to reform Pentagon procurement, but will also say he “does not accept billions in wasteful spending.”

Obama vowed last week to crack down on costly military programs, which now routinely run far over budget. He cited a project to build a new presidential helicopter fleet as an example of the procurement process “gone amok.”

Editing by Chris Wilson