Federal procurement spending topped $523 billion in Fiscal Year 2009, with additional spending provided by the American Reinvestment and Recovery Act and the various bailout programs. Escalating an existing trend, the Obama Administration is set on a course to reallocate the risks of being a federal contractor or recipient of federal funds. Recent and planned changes will fundamentally restructure how contractors are treated. These changes are in three areas: tighter regulations, increased oversight and greater “transparency.”

On March 4, 2009, the administration issued its blueprint for government contracting. Over the past year, steps have been taken to put that plan into effect. In addition, Congress has weighed in with some of its own ideas–indeed, in many respects, Congress is involved in a free-for-all when it comes to enacting new restrictions aimed at contractors and recipients of federal funds.

First, the tighter regulations involve greater emphasis on competition and use of fixed-price contracts. Despite requirements of current law, recent studies have shown that at least one-third of the government's acquisitions are not made competitively, in particular competition has been lacking in task and delivery order type contracts. The Administration is committed to increasing competition across the government–even in circumstances where a company has already invested substantially in research and development for a government-unique product or service.

There also is a renewed emphasis on firm-fixed price contracts. The government is notoriously poor at providing a meaningful statement of its requirements that would allow a fair assessment of the potential costs. Nonetheless, pressure is now on to push the burden of uncertainties in scope of performance to contractors.

Second, numerous recent changes have dramatically increased the oversight of contractors.. There are new reporting requirements, new authorities for auditors and inspectors general, new authorities for investigators to come into a company's facilities and interview its employees in a quest for fraud, changes to the civil False Claims Act (31 U.S.C. Section 3729-3733) that allow both whistleblowers and the U.S. Department of Justice to bring treble damages suits against private entities and individuals, new whistleblower statutes and increased resources for investigators and prosecutors.

Third, “transparency” has become the watchword of the day, with the enactment of the Federal Funding and Transparency Act (“FFATA”) and the Recovery Act–both of which mandate new databases containing mind-numbing details about the recipients of funds. Recent regulations require contractors to have extensive ethics and compliance programs and to make mandatory disclosure when “credible evidence” exists of certain violations. Congress recently enacted a requirement for a new “bad actors” database to track contractor compliance with a host of federal requirements, even including damages awarded against a contractor in a civil law suit. Currently, this database is available only to Government employees, but Congress already is pressing to have it made public. .

These new provisions likely are here to stay.

More about each of theses pieces in upcoming columns.