Obama aims to save billions in federal contracts

US President Barack Obama on Wednesday outlined a plan to save tens of billion dollars a year in wasteful government spending, especially targeting bloated defence contracting.

"We are spending money on things we don't need, and we are paying more than we need to pay. That's completely unacceptable," Obama said at the White House.

The US leader signed a presidential memorandum reforming the contracting system across the entire government, in line with a vow to cut unnecessary waste.

The president was flanked by Democratic Senator Carl Levin, head of the Senate Armed Services Committee, and his onetime Republican rival for the presidency, Senator John McCain, along with other US legislators and officials.

Obama said it was time to end "an era of fiscal irresponsibility so that we can sustain our recovery, enhance accountability, and avoid leaving our children a mountain of debt."

He homed in on runaway Pentagon spending, vowing that "the days of giving defence contractors a blank check are over," and highlighted steps being taken by Defence Secretary Robert Gates to overhaul military procurement at the Pentagon.

"It's time to end the extra costs and long delays that are all too common in our defence contracting," the president said, vowing to "strengthen oversight to maximise transparency and accountability."

The cost overruns were especially apparent during the war in Iraq, where "too much money has been paid out for services that were never performed, buildings that were never completed, companies that skimmed off the top."

The reforms require the White House budget director to work with cabinet members and agency heads to frame tough new guidelines on contracting work by the end of September.

Obama aims to save 40 billion dollars each year by halting outsourcing in some government jobs, and by ending "no-bid" contracts for favoured companies which proliferated in US operations in Iraq.

Last month, the US leader ordered a review into huge cost overruns on a new fleet of presidential helicopters, as McCain complained at the skyrocketing cost, raising concerns about how many military projects tend to come in well over budget.

"I don't think that there's any more graphic demonstration of how good ideas have cost taxpayers an enormous amount of money," McCain said at the time.