Yesterday, I had the opportunity to testify before the House Committee on Oversight & Government Reform at a hearing entitled, “Government Spending: How Can We Best Address the Billions of Dollars Wasted Every Year?” Indeed, billions of our tax dollars are wasted every year in programs spanning the federal government. I told lawmakers they should focus their efforts on ways to improve particular government spending practices that would make any self-respecting accountant cringe.

A good many of these improvements involve the government's widespread use of private contractors. The Pentagon alone buys more than $400 billion in goods and services from private contractors every year. The Department of Energy spends almost 90 percent of its yearly budget on contractors. And as anyone who has had to manage contractors knows—whether for your business or your home—if you are not paying attention, you will lose your shirt.

The National Nuclear Security Administration, which manages the facilities that manufacture and maintain nuclear weapons, accounts for nearly 40 percent of DOE's yearly budget. All of the laboratories and production plants that comprise our national nuclear weapons “complex” are actually operated and managed by private corporations. The arrangements these corporations work under, known as “Government-Owned, Contractor Operated” contracts, have had persistent problems of inflated overhead costs, security breaches, and construction cost overruns.

Across federal agencies, a common thread among major acquisition failures over the last decade was the use of Lead System Integrators or LSIs, where the government doesn't know exactly how to meet its needs and relies on a contractor instead. Rear Admiral Jake Korn, assistant commandant for acquisition, summed it up in his post mortem for the Coast Guard's Deepwater acquisition program, observing: “In the end, the general consensus is that we ceded too much responsibility to the contractor, including some functions that should have been reserved for government employees.” The sad truth is that his analysis applies to too many federal programs. The problem of allowing contractors to help define the needs of the government has grown through a series of euphemistically named practices, from “spiral contracting” to LSIs to “knowledge based contracting.”

Recent efforts to better manage contract spending have not been encouraging. The Department of Defense  recently announced the cancellation of the Expeditionary Combat Support System, a modified off-the-shelf computer program that was supposed to consolidate the Air Force's accounting and logistics systems in order to meet 2017 audit requirements. Instead, after seven years and more than $1 billion, the Air Force pulled the plug because it was going to spend another $1 billion to get a product that delivered only a quarter of what it was supposed to do originally. And we still had to pay $8.2 million to terminate the contract!

Reforms at the Pentagon matter—it is the largest purchaser of goods and services in the federal government. And we know there are some efforts within the Pentagon to make changes for the better. Last November, DOD released a 2.0 version of its “Better Buying Power” contracting reforms, which took on many valuable targets such as lack of competition, requirements creep, and weak enforcement of cost constraints. However, the 2.0 reforms turned away from the emphasis on fixed-price contracts that the previous reforms adopted in reaction to contract cost overruns. Most of the Pentagon's largest contractors are reliant on the government for the vast majority of their business. Yes, contracts are not one-size-fits-all, but is anyone really worried that billions of taxpayer dollars aren't sufficient incentive for a company to control costs? We need to take much tougher line in order to rein in the money wasted year after year by the Pentagon.

As I reminded lawmakers today, it is true that we waste billions of dollars every year, but there are some common-sense things we can do to stop it. Improving the way our government buys goods and services is an ongoing challenge, but also an area where the right improvements can go a long way. It will take more work than simply eliminating a weapon, office, or other government product, but will save taxpayer dollars for years to come.

Written by: Ryan Alexander, president of Taxpayers for Common Sense