Reducing Service Contract Spending Can Yield Majority of Savings Required from Sequestration, Contracting Expert says

February 11, 2013

Contact:Tim Kauffman

Reducing Service Contract Spending Can Yield Majority of Savings Required from Sequestration, Contracting Expert says

Agencies can achieve 70-90% of sequestration savings without harmful personnel cuts

WASHINGTON Agencies can generate between 70 percent and 90 percent of the savings required under sequestration by reducing their substantial spending on service contracts, while avoiding harmful cuts in civilian employees and public services, a contracting expert has concluded in a new legal memorandum released by the American Federation of Government Employees.

The detailed guidance from Charles Tiefer, Professor of Law at the University of Baltimore Law School and a leading expert in government contract law, shows agencies precisely how to reduce spending on service contracts under existing authority and in compliance with procurement law.

The good news is that managers have all of the tools they need to reduce spending on service contracts, often with the consent, albeit grudging, of service contractors, Tiefer wrote. The bad news is that service contractors, like any other business, are not eager to voluntarily give up revenues, so strong leadership is required from the heads of agencies.

Federal agencies face an $85 billion cut in budget resources through sequestration unless Congress acts to cancel the cuts before March 1. In January, the Office of Management and Budget advised agencies to plan for hiring freezes, extensive furloughs of federal employees, firing of temporary and term employees and offering incentives for employees to retire early. But OMB has provided agencies with no specific recommendations for reducing spending on service contracts, which cost taxpayers about $300 billion in fiscal 2011 alone.

This brief memorandum is intended to demystify the procurement process so that managers can look to their service contractors for savings as surly as they are already looking at their federal employees for savings. In other words, I aim to provide managers with the guidance on cutting spending on service contracts that OMB did not adequately provide, Tiefer wrote.

The four-page memorandum, Reducing Spending on Service Contracts in Order to Comply with Sequestration, was released Feb. 11 during AFGEs 2013 Legislative and Grassroots Mobilization Conference. AFGE paid for the study, but the opinions and conclusions were Tiefers alone.

The memorandum recommends four established and completely legal options for reducing spending on service contracts. By applying these tools, agencies can reduce their substantial spending on service contracts to comply with sequestration, often with minimal impact on services, Tiefer concluded.

A PDF of the memorandum is available here:


The American Federation of Government Employees (AFGE) is the largest federal employee union, representing 670,000 workers in the federal government and the government of the District of Columbia. For the latest AFGE news and information, follow us on Facebook and Twitter.


Author: AFGE Local 704

Representing over 900 bargaining unit employees working at the U.S. EPA Region 5 Offices in Chicago, Ann Arbor, MI and Westlake, OH.

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