HispanicBusiness

President Obama on Wednesday vowed to clean up a "broken" system of government contracting, whose flaws, he said, include overspending and a tendency to award undeserving businesses with procurements without giving other competitors the benefit of a bid.

Standing beside Sen. John McCain and other lawmakers during Wednesday's press conference, President Obama said the reforms will save the American taxpayers about $40 billion a year.

"The American people's money must be spent to advance their priorities -- not to line the pockets of contractors or to maintain projects that don't work," he said.

Without naming the Bush administration, Obama said the "last eight years" have seen a doubling of government spending on contracts, to about $500 billion a year. Many of them are with the Defense Department.

On Wednesday, he signed a memorandum ordering his budget director to come up with ways by July 1 to reduce waste or fraud regarding government contracts.

By September's end, the administration is expected to roll out new rules cracking down on waste by ending unnecessary no-bid contracts and cost-plus contracts, in which contractors are paid for their expenses plus a profit upon the completion of a job. Critics have charged that cost-plus contracts can create the unintended consequence of removing incentives to be efficient.

Some of the largest overruns have been with the Defense Department.
In his remarks, President Obama cited an investigation into 95 defense contractors by the Government Accountability Office that uncovered $295 billion worth of cost overruns.

"Let me repeat: That's $295 billion in wasteful spending," he said. "And this wasteful spending has many sources. It comes from investments and unproven technologies. It comes from a lack of oversight. It comes from influence peddling and indefensible no-bid contracts that have cost American taxpayers billions of dollars."