Contract Management
Agencies Can Achieve Significant Savings on Purchase Card Buys Gao ID: GAO-04-430 March 12, 2004From 1994 to 2003, the use of government purchase cards exploded from $1 billion to $16 billion. Most purchase card transactions are for small purchases, less than $2,500. While agencies estimate that using purchase cards saves hundreds of millions of dollars in administrative costs, the rapid growth of the purchase card presents opportunities for agencies to negotiate discounts with major vendors, thereby better leveraging agencies' buying power. To discover whether agencies were doing this, we examined program management and cardholder practices at the Departments of Agriculture, Army, Navy, Air Force, Interior, Justice, Transportation, and Veterans Affairs. GAO also examined why agencies may not have explored these opportunities.
Although some agencies have begun to take actions to achieve savings through their purchase card programs, most have not identified and taken advantage of opportunities to obtain more favorable prices on purchase card buys--opportunities that could yield hundreds of millions of dollars in savings. For example, most agencies have established some discount agreements with major purchase card vendors (those vendors with whom they did more than $1 million in purchase card business in fiscal year 2002), but these agreements cover only a few of the hundreds of major vendors and a limited number of products. Further, because agency purchase card training programs lack practical information to help cardholders take advantage of existing discount agreements or GSA's Federal Supply Schedule contracts, cardholders paid higher prices than necessary. The agencies that have taken steps to obtain better prices by negotiating discounts with their major vendors have achieved notable savings on purchase card buys. For example, in fiscal year 2003, the Agriculture Department negotiated a discount agreement for office supplies that yielded savings of $1.8 million--about 10 percent off Schedule contract prices--and the Interior Department recently negotiated agreements with information technology vendors for discounts up to 35 percent off Schedule prices. A conservative approach indicates that, if the agencies we reviewed obtained discounts of only 10 percent with their major vendors, annual savings of up to $300 million could be achieved. Most agencies have not more aggressively pursued savings through the purchase card because of a lack of management focus--simply put, this issue has not been the center of attention for managers. Further, the Office of Management and Budget has not leveraged its governmentwide oversight role by collecting and disseminating information on the successful initiatives some agencies have undertaken. Agency officials also expressed concerns that imposing additional requirements on cardholders would undermine the program's intent to streamline acquisitions and that pursuing discount agreements with large suppliers would limit their ability to provide opportunities for small businesses. They also cited poor data as a barrier to identifying savings opportunities. However, as individual agencies have demonstrated, these concerns are not insurmountable. For example, the Air Force's Air Mobility Command provides its cardholders a list of community vendors--many of which are small businesses--that offer discounts, making it easy for the cardholders to obtain discounts from local small businesses. Despite data limitations, information such as vendor sales reports could be used to identify major vendors with whom to pursue discount agreements and to provide insight into cardholder activity.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-04-430, Contract Management: Agencies Can Achieve Significant Savings on Purchase Card Buys
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Report to Congressional Requesters:
United States General Accounting Office:
GAO:
March 2004:
CONTRACT MANAGEMENT:
Agencies Can Achieve Significant Savings on Purchase Card Buys:
GAO-04-430:
GAO Highlights:
Highlights of GAO-04-430, a report to congressional requesters
Why GAO Did This Study:
From 1994 to 2003, the use of government purchase cards exploded from
$1 billion to $16 billion. Most purchase card transactions are for
small purchases, less than $2,500. While agencies estimate that using
purchase cards saves hundreds of millions of dollars in administrative
costs, the rapid growth of the purchase card presents opportunities
for agencies to negotiate discounts with major vendors, thereby better
leveraging agencies‘ buying power.
To discover whether agencies were doing this, we examined program
management and cardholder practices at the Departments of Agriculture,
Army, Navy, Air Force, Interior, Justice, Transportation, and Veterans
Affairs. GAO also examined why agencies may not have explored these
opportunities.
What GAO Found:
Although some agencies have begun to take actions to achieve savings
through their purchase card programs, most have not identified and
taken advantage of opportunities to obtain more favorable prices on
purchase card buys”opportunities that could yield hundreds of millions
of dollars in savings. For example, most agencies have established
some discount agreements with major purchase card vendors (those
vendors with whom they did more than $1 million in purchase card
business in fiscal year 2002), but these agreements cover only a few
of the hundreds of major vendors and a limited number of products.
Further, because agency purchase card training programs lack practical
information to help cardholders take advantage of existing discount
agreements or GSA‘s Federal Supply Schedule contracts, cardholders
paid higher prices than necessary. The agencies that have taken steps
to obtain better prices by negotiating discounts with their major
vendors have achieved notable savings on purchase card buys. For
example, in fiscal year 2003, the Agriculture Department negotiated a
discount agreement for office supplies that yielded savings of $1.8
million”about 10 percent off Schedule contract prices”and the Interior
Department recently negotiated agreements with information technology
vendors for discounts up to 35 percent off Schedule prices. A
conservative approach indicates that, if the agencies we reviewed
obtained discounts of only 10 percent with their major vendors, annual
savings of up to $300 million could be achieved.
Most agencies have not more aggressively pursued savings through the
purchase card because of a lack of management focus”simply put, this
issue has not been the center of attention for managers. Further, the
Office of Management and Budget has not leveraged its governmentwide
oversight role by collecting and disseminating information on the
successful initiatives some agencies have undertaken. Agency officials
also expressed concerns that imposing additional requirements on
cardholders would undermine the program‘s intent to streamline
acquisitions and that pursuing discount agreements with large
suppliers would limit their ability to provide opportunities for small
businesses. They also cited poor data as a barrier to identifying
savings opportunities. However, as individual agencies have
demonstrated, these concerns are not insurmountable. For example, the
Air Force‘s Air Mobility Command provides its cardholders a list of
community vendors”many of which are small businesses”that offer
discounts, making it easy for the cardholders to obtain discounts from
local small businesses. Despite data limitations, information such as
vendor sales reports could be used to identify major vendors with whom
to pursue discount agreements and to provide insight into cardholder
activity.
What GAO Recommends:
GAO is making several recommendations to each of the agencies as well
as the Office of Management and Budget and the General Services
Administration (GSA), aimed at encouraging agencies to begin taking
steps to achieve savings through the purchase card program. GAO
received comments on a draft of this report, either written or via
e-mail, from the Departments of Agriculture, Defense, the Interior,
Transportation, and Veterans Affairs and from GSA. In general, the
agencies agreed with GAO‘s findings and recommendations.
www.gao.gov/cgi-bin/getrpt?GAO-04-430.
To view the full product, including the scope and methodology, click
on the link above. For more information, contact David Cooper at (202)
512-5841 (cooperd@gao.gov) or Greg Kutz at (202) 512-9505.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Agencies Generally Have Not Taken Advantage of Opportunities to Obtain
Savings:
Lack of Management Focus Has Limited Efforts to Capture Savings:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Comments from the Department of Defense:
Appendix III: Comments from the General Services Administration:
Appendix IV: Comments from the Department of the Interior:
Appendix V: Comments from the Department of Veterans Affairs:
Appendix VI: Information on Purchase Card Expenditures:
Appendix VII: GAO Contacts and Staff Acknowledgments:
Related GAO Products:
Tables:
Table 1: Purchase Cards and Purchase Card Expenditures, Fiscal Year
2002:
Table 2: Purchase Card Expenditures and Expenditures with Major
Vendors, Fiscal Year 2002:
Table 3: Department of Agriculture Purchase Card Expenditures by
Transaction Dollar Value, Fiscal Year 2002:
Table 4: Department of Defense Military Services Purchase Card
Expenditures by Transaction Dollar Value, Fiscal Year 2002:
Table 5: Department of the Interior Purchase Card Expenditures by
Transaction Dollar Value, Fiscal Year 2002:
Table 6: Department of Justice Purchase Card Expenditures by
Transaction Dollar Value, Fiscal Year 2002:
Table 7: Department of Transportation Purchase Card Expenditures by
Transaction Dollar Value, Fiscal Year 2002:
Table 8: Department of Veterans Affairs Purchase Card Expenditures by
Transaction Dollar Value, Fiscal Year 2002:
Figure:
Figure 1: Purchase Card Expenditures--Fiscal Years 1994 to 2003:
Abbreviations:
FAR: Federal Acquisition Regulation:
FASA: Federal Acquisition Streamlining Act:
GSA: General Services Administration
JWOD: Javits-Wagner-O'Day Act
OMB: Office of Management and Budget:
United States General Accounting Office:
Washington, DC 20548:
March 12, 2004:
The Honorable Susan M. Collins:
Chairman:
Committee on Governmental Affairs:
United States Senate:
The Honorable Russell D. Feingold:
United States Senate:
The Honorable Janice Schakowsky:
House of Representatives:
The introduction of government purchase cards fundamentally changed the
way agencies make small, routine purchases of goods and services. The
vast majority of purchase card transactions are micropurchases,
purchases in amounts not greater than $2,500. Purchase card use has
increased significantly over the past decade--from less than $1 billion
in fiscal year 1994 to more than $16 billion in fiscal year 2003. This
explosive growth has presented both challenges and opportunities. While
estimates indicate that the use of government purchase cards could save
taxpayers hundreds of millions of dollars in administrative costs over
time, our office has reported that inadequate controls over purchase
card programs left agencies vulnerable to fraud, waste, and abuse.
Agencies are working, under the guidance of the Office of Management
and Budget (OMB), to strengthen these controls.
Given the rapid growth of this program, we and agency inspectors
general have recently raised concerns about whether agencies and
individual cardholders are seizing the opportunity to obtain discounts
commonly available in the commercial marketplace for large volume
purchasers.[Footnote 1] Recognizing the potential for increased
savings, you asked us to (1) determine whether agencies are taking
advantage of opportunities to help cardholders obtain more favorable
purchase card prices and (2) if not, identify the reasons why.
We examined purchase card program management practices at eight federal
agencies that account for over 85 percent of the government's purchase
card spending: the Departments of Agriculture; the Interior; Justice;
Transportation; Veterans Affairs; and within the Department of Defense
(DOD), the Departments of the Army, Navy, and Air Force.[Footnote 2] In
addition, we reviewed selected fiscal year 2002 purchase card
transactions, at or below the micropurchase level, with major vendors
at the eight agencies and compared prices paid to prices available
through the General Services Administration's (GSA) Federal Supply
Schedule (Schedule)[Footnote 3] and telecommunications contracts.
Although these transactions were selected at random from the population
of micro-purchase[Footnote 4] transactions with vendors having the
highest purchase card sales at the eight agencies, we cannot project
the results to the population of transactions governmentwide. We also
engaged the Dun and Bradstreet Corporation to perform a spend analysis
of the Interior Department's fiscal year 2002 purchase card
transactions to illustrate how a detailed analysis could begin to
identify opportunities for purchase card savings. We conducted our work
in accordance with generally accepted government auditing standards.
For more information on our scope and methodology, see appendix I.
Results in Brief:
Although we found some initiatives under way to obtain vendor
discounts, the agencies we reviewed generally had not seized
opportunities to obtain more favorable prices on purchase card buys--
opportunities that could yield hundreds of millions of dollars in
savings. Agency efforts were generally fragmentary and incomplete. For
example, most agencies had established some agencywide discount
agreements with major purchase card vendors, but the agreements
generally covered only a few of the hundreds of major vendors--those
with whom an agency spent $1 million or more using the purchase card.
Some discount agreements did not cover the full range of products
cardholders purchased from the vendors. In addition, most agency
training has appropriately focused on internal controls, but the
training has not focused on incorporating practical information to help
cardholders take advantage of existing discount agreements or Schedule
contracts. Consequently, we found that some cardholders paid higher
prices than necessary. For example, hundreds of Interior Department
purchase card transactions with three major office supply vendors were
for a particular model of ink cartridge, but most of these purchases
were made at prices higher than the vendors' Schedule prices. The
experience of some agencies demonstrates agencies can achieve
significant savings on purchase card buys. For example, the Agriculture
Department negotiated a discount agreement for office supplies that
yielded savings of $1.8 million--or about 10 percent off Schedule
contract prices--during fiscal year 2003. Interior recently negotiated
agreements with information technology vendors that give cardholders
discounts of up to 35 percent off Schedule prices. If the agencies we
reviewed negotiated and properly executed agreements providing
discounts of just 10 percent off of Schedule prices with the major
purchase card vendors from whom they currently buy in volume, a
conservative approach indicates that $300 million in savings could be
realized annually.[Footnote 5]
Agencies have not taken advantage of potential opportunities to capture
purchase card savings because of a lack of management focus and
oversight. The opportunity simply has not been the center of attention
for most agency managers, who have been absorbed in improving internal
controls and other priorities. Further, OMB has not leveraged its
governmentwide oversight role by collecting and disseminating
information on the successful initiatives some agencies have
undertaken. In addition, agency officials identified several challenges
that, in their view, have hindered them from more aggressively pursuing
savings through the purchase card program. First, agencies are
reluctant to impose additional requirements on cardholders, fearing
that the intent of the program as a streamlined acquisition process
would be subverted. Second, agency officials told us that actively
pursuing discount agreements with large suppliers would provoke
concerns about their ability to comply with socioeconomic requirements
such as providing opportunities for small businesses. Third, officials
cited the lack of detailed information on the specific products and
services purchased as a hindrance to analyzing purchase card trends.
These concerns are not insurmountable, and, in fact, individual
agencies have been successful in addressing them. For example, some
cardholders found Schedule contract and discount agreement vendors an
effective and convenient way to fill their needs rather than a burden.
The Air Force's Air Mobility Command provided its cardholders a list of
community vendors--many of which were small businesses--that offered
discounts, making it easy for the cardholders to obtain discounts from
local small businesses. Further, despite the data limitations, agencies
can fairly easily identify major vendors with whom they could pursue
discount agreements. Vendor reports on sales under discount agreements
can provide insight into whether cardholders are using the agreements.
To encourage agencies to begin taking steps to capitalize on
opportunities for savings through the purchase card program, we are
making recommendations to OMB, GSA, and the Departments of Agriculture,
Defense, the Interior, Justice, Transportation, and Veterans Affairs
concerning actions that could be taken to increase management attention
on purchase card pricing issues, such as negotiating discount
agreements with major vendors, improving cardholder training, and
developing mechanisms for evaluating cardholder buying practices to
assess whether cardholders are receiving favorable pricing. GSA and the
Departments of Agriculture, Defense, and Veterans Affairs generally
agreed with our recommendations. The Departments of Transportation and
the Interior did not explicitly agree or disagree with our
recommendations but offered several observations on our report. We did
not receive comments from the Departments of Homeland Security or
Justice or from OMB. The written comments we received are reproduced in
appendixes II through V.
Background:
Through the purchase card program, agency personnel can acquire the
goods and services they need directly from vendors. GSA, which manages
the purchase card program governmentwide, has awarded contracts to
banks to provide standard commercial charge cards for use by federal
employees. When GSA first pilot-tested the purchase card in the late
1980s, its use was restricted to procurement personnel. In 1994,
however, the Federal Acquisition Streamlining Act (FASA)[Footnote 6]
defined micropurchases as purchases in amounts not greater than $2,500.
The act authorized cardholders to make micropurchases without obtaining
competitive quotations if they considered the price reasonable and
directed that purchases be distributed equitably among qualified
suppliers. The Federal Acquisition Regulation (FAR) designated the
purchase card as the preferred method of making
micropurchases.[Footnote 7] By shifting authority for small purchases
from procurement offices to individual cardholders, agencies
dramatically improved their ability to acquire quickly and easily items
that were needed for day-to-day operations and to reduce administrative
costs.
Since the passage of FASA, the dollar value of goods and services
acquired through the purchase card has exploded, as figure 1 shows.
This growth was accompanied by an increase in the number of personnel
using the purchase card.
Figure 1: Purchase Card Expenditures--Fiscal Years 1994 to 2003:
[See PDF for image]
[End of figure]
Table 1 provides information on fiscal year 2002 purchase card activity
for the eight agencies we reviewed. Purchase card transactions at these
agencies account for over 85 percent of the government's purchase card
spending. While purchase cards may be used to make payments under
established contracts in addition to making micropurchases, an
overwhelming majority of transactions are micropurchases. At the eight
agencies reviewed, micropurchases represented 98 percent of
transactions and accounted for 63 percent of the dollars expended.
Appendix VI provides additional information on purchase card activity
at the agencies we reviewed.
Table 1: Purchase Cards and Purchase Card Expenditures, Fiscal Year
2002:
Agency: Department of Agriculture;
Purchase cards (as of Sept. 30, 2002): 23,448;
Expenditures (dollars in thousands): $592,296.
Agency: Department of Defense: Air Force;
Purchase cards (as of Sept. 30, 2002): 77,318;
Expenditures (dollars in thousands): 1,604,367.
Agency: Department of Defense: Army;
Purchase cards (as of Sept. 30, 2002): 101,398;
Expenditures (dollars in thousands): 2,739,612.
Agency: Department of Defense: Navy;
Purchase cards (as of Sept. 30, 2002): 22,594;
Expenditures (dollars in thousands): 1,784,128.
Agency: Department of the Interior;
Purchase cards (as of Sept. 30, 2002): 88,736[A];
Expenditures (dollars in thousands): 487,282.
Agency: Department of Justice;
Purchase cards (as of Sept. 30, 2002): 16,274;
Expenditures (dollars in thousands): 593,576.
Agency: Department of Transportation;
Purchase cards (as of Sept. 30, 2002): 22,243;
Expenditures (dollars in thousands): 425,431.
Agency: Department of Veterans Affairs;
Purchase cards (as of Sept. 30, 2002): 32,421;
Expenditures (dollars in thousands): 1,560,309[B].
Total;
Purchase cards (as of Sept. 30, 2002): 384,432;
Expenditures (dollars in thousands): $9,787,001.
Source: GSA, GAO analysis.
[A] The Department of the Interior has an integrated card program, with
a single card being used for purchases, travel, or fleet expenditures.
Data represent the total number of charge cards.
[B] Does not include about $2.7 billion in purchase card transactions
under Veterans Affairs' prime vendor program.
[End of table]
GSA, whose mission is to help federal agencies better serve the public
by offering acquisition services at the best value, has created several
tools that can help cardholders obtain more favorable pricing for goods
and services. The most common of these is the Schedule program, which
offers discounted prices on a wide range of commercial goods and
services from multiple vendors.[Footnote 8] The GSA Advantage on-line
shopping service allows agencies to compare prices under various
Schedule contracts, place orders, and make payments over the Internet.
In addition, GSA has awarded contracts that offer federal agencies
discounted prices on telecommunications services.
Our prior work found that weak internal controls left purchase card use
at DOD and several civilian agencies vulnerable to fraud and abuse. The
list of Related Products at the end of this report identifies recent
work in this area. To address these concerns, Congress has enacted
legislation that directs DOD to improve program management by limiting
the number of purchase cards, providing appropriate training to
purchase card officials and cardholders, monitoring purchase card
activity, disciplining cardholders who misuse the purchase card, and
assessing the credit worthiness of cardholders.[Footnote 9] We recently
reported[Footnote 10] that DOD has taken a number of actions to improve
the controls over the purchase card program based on congressional
action and our recommendations. To improve management of the purchase
card program governmentwide, the proposed Purchase Card and Travel Card
Accountability Act of 2003[Footnote 11] would require the Administrator
of the Office of Federal Procurement Policy to prescribe a
governmentwide policy regarding the appropriate and inappropriate uses
of the purchase and travel cards. In addition, the proposed Credit Card
Abuse Prevention Act of 2003[Footnote 12] would require civilian
agencies to promulgate regulations to establish safeguards and internal
controls to prevent fraud, misuse, and abuse.
Agencies Generally Have Not Taken Advantage of Opportunities to Obtain
Savings:
Although we found some initiatives under way to obtain vendor discounts
from major purchase card vendors, agencies generally had not seized
opportunities to obtain more favorable prices on purchase card buys--
opportunities that could yield hundreds of millions of dollars in
savings. Agency efforts to obtain more favorable prices for purchase
cardholders had generally been limited to a few agencywide agreements
with major vendors--that is, vendors with whom an agency spent $1
million or more in fiscal year 2002. Further, training for cardholders
usually focused on internal controls and regulatory policies and did
not provide practical information about steps cardholders can take to
get better prices. As a result, cardholders often paid higher prices
than necessary. The successful initiatives taken within some agencies
demonstrate that, if agencies negotiated effective discount agreements
with major purchase card vendors and improved communications to
cardholders about how to obtain more favorable prices, significant
savings could be realized.
Scope and Coverage of Negotiated Discount Agreements Varied:
We found a wide variation in the number of agencywide discount
agreements that the eight agencies we reviewed had negotiated with
their major purchase card vendors. For example, Veterans Affairs had
negotiated agencywide discount agreements with 37 of its 196 major
purchase card vendors--the largest number of any of the agencies
reviewed. The Army, Navy, and Air Force each had agencywide agreements
with several major information technology vendors and one or more
office supply vendors. Agriculture, Interior, and Justice each had a
few agencywide agreements, which covered information technology
products or office supplies. Transportation's senior procurement
executive told us this agency had no discount agreements that could be
used agencywide. As shown in table 2, cardholders at the agencies we
reviewed are using the purchase card to a great extent to buy items
from major purchase card vendors, an indication that opportunities
exist to negotiate additional discount agreements with these vendors.
Table 2: Purchase Card Expenditures and Expenditures with Major
Vendors, Fiscal Year 2002:
Agency: Agriculture;
Total expenditures[A] (dollars in thousands): $592,296;
Number of major purchase card vendors: 34;
Expenditures with major purchase card vendors: Dollars (thousands):
$71,932;
Expenditures with major purchase card vendors: Percent of total: 12%.
Agency: Defense: Army;
Total expenditures[A] (dollars in thousands): $2,739,612;
Number of major purchase card vendors: 217;
Expenditures with major purchase card vendors: Dollars (thousands):
$774,361;
Expenditures with major purchase card vendors: Percent of total: 28%.
Agency: Defense: Navy;
Total expenditures[A] (dollars in thousands): $1,784,128;
Number of major purchase card vendors: 145;
Expenditures with major purchase card vendors: Dollars (thousands):
$395,142;
Expenditures with major purchase card vendors: Percent of total: 22%.
Agency: Defense: Air Force;
Total expenditures[A] (dollars in thousands): $1,604,367;
Number of major purchase card vendors: 130;
Expenditures with major purchase card vendors: Dollars (thousands):
$444,928;
Expenditures with major purchase card vendors: Percent of total: 28%.
Agency: Interior;
Total expenditures[A] (dollars in thousands): $487,282;
Number of major purchase card vendors: 32;
Expenditures with major purchase card vendors: Dollars (thousands):
$85,161;
Expenditures with major purchase card vendors: Percent of total: 17%.
Agency: Justice;
Total expenditures[A] (dollars in thousands): $593,576;
Number of major purchase card vendors: 56;
Expenditures with major purchase card vendors: Dollars (thousands):
$153,578;
Expenditures with major purchase card vendors: Percent of total: 26%.
Agency: Transportation;
Total expenditures[A] (dollars in thousands): $425,431;
Number of major purchase card vendors: 27;
Expenditures with major purchase card vendors: Dollars (thousands):
$73,732;
Expenditures with major purchase card vendors: Percent of total: 17%.
Agency: Veterans Affairs;
Total expenditures[A] (dollars in thousands): $1,560,309;
Number of major purchase card vendors: 196;
Expenditures with major purchase card vendors: Dollars (thousands):
$822,153;
Expenditures with major purchase card vendors: Percent of total: 53%.
Agency: Total;
Total expenditures[A] (dollars in thousands): $9,787,001;
Number of major purchase card vendors: [Empty];
Expenditures with major purchase card vendors: Dollars (thousands):
$2,820,987;
Expenditures with major purchase card vendors: Percent of total: 29%.
Source: GAO analysis of bank-provided data.
[A] Does not include about $2.7 billion in purchase card transactions
under Veterans Affairs' prime vendor program.
[End of table]
The effectiveness of the agreements that are in place also varied
widely, and we found a number of ways in which agencies had not
maximized their agreements' potential to capture additional savings.
First, agencies did not always take full advantage of competitive
forces to ensure that their discount agreements with large vendors
offered the most favorable prices, as shown in the following examples.
* The Army did not follow a competitive process awarding office supply
discount agreements, but simply negotiated agreements with 12 office
supply vendors that expressed interest in doing business with the Army.
However, according to the results of an Army survey, cardholders found
that the selected vendors offered high prices and poor service. The
Army is now pursuing a formal competitive approach to establish new
agreements that will replace the existing agreements.
* Agriculture competitively awarded a discount agreement with an office
supply vendor-and points to $1.8 million in savings in fiscal year 2003
as a result-but the agreement does not establish a specific expiration
date. Because the benefits of the initial competition may not continue
indefinitely, Agriculture cannot be assured that the agreement will
continue to be the most advantageous source for office supplies.
Second, some agency discount agreements covered a limited range of
products and therefore did not provide cardholders more favorable
prices on all the items they purchase from a vendor. Overall, in 18 of
the 27 transactions we reviewed where agencies had a discount agreement
in place, the agreement did not cover the specific items that
cardholders purchased, as demonstrated in the following examples.
* The agencywide Veterans Affairs discount agreements that we examined
covered single products or product types-specimen containers, bandages,
or washcloths-instead of the vendors' full product line. Estimated
sales for the agreements we reviewed were relatively low, ranging from
$27,000 to $1.6 million. According to agency officials, the intent of
the agreements was to standardize specific products or product types
throughout the agency, not to pursue savings from a vendor's entire
product line. Veterans Affairs has identified its highest dollar value
products and is standardizing these items to achieve savings.
* The Army's discount agreement with an information technology vendor
covered only selected models of desktop and laptop computers and
accessories and upgrades for these models. We found that one cardholder
had bought computer accessories that were covered under the discount
agreement, which provided cardholders a discount of about 29 percent
off the vendor's Schedule price. Yet another cardholder bought several
monitors that were not covered under the agreement, and this cardholder
received no discount. According to an Army official, the discount
agreement had been negotiated to cover the items the officials
considered users would most likely order.
Finally, some discount agreements were not well-coordinated within the
agency, creating the potential for overlap, as shown in the following
example. Representatives of a number of agency components told us that,
while they believed that their regional and local organizations had
negotiated some discount agreements, they had no information on these
agreements.
* Regional and local Veterans Affairs contracting centers had negotiated
separate discount agreements with 18 of the same major purchase card
vendors with whom the national contracting center also had agencywide
discount agreements. In total, these 18 vendors had negotiated 94
separate agreements with local, regional, and national contracting
centers. A Veterans Affairs task force recently recommended that
regional and local contracting centers coordinate with the national
center before initiating separate agreements with contractors.
Officials at the national contracting center told us that they are now
exploring the benefits of consolidating agreements with vendors to
reduce the number of potentially overlapping contracts to ensure that
cardholders have access to the best prices.
Most Guidance and Training Did Not Provide Practical Information on
Obtaining Favorable Pricing:
Each of the agencies we reviewed had developed guidance and training
programs for their cardholders that focused on regulatory policies and
internal controls intended to prevent misuse of the purchase card.
However, most of the guidance and training programs did not provide
cardholders with practical information to help them get better pricing
by using Schedule contracts or agency discount agreements, as in the
following examples.
* The Air Force's instruction on the purchase card assigned local program
coordinators responsibility for training cardholders on various
subjects, such as available sources-including Schedule contracts-that
cardholders should consider when making purchases. (The FAR, Section
8.002, identifies a number of sources that government buyers must
consider-such as excess agency inventories, non-profit agencies serving
people who are blind or severely handicapped, and Schedule contracts.
FAR also establishes the priority order in which buyers must consider
these sources.) However, the Air Force instruction did not direct the
local program coordinators to tell cardholders how to access the
Schedule contracts.
* Guidance manuals issued by Agriculture, Interior, Veterans Affairs, and
the Army provided Internet addresses for the Schedule program or the
GSA Advantage on-line shopping service, but they did not provide
additional information on how to access or use these services.
* Veterans Affairs' purchase card program handbook simply stated that
cardholders should distribute purchases equitably among qualified
suppliers and use required sources when applicable.
* DOD required Army, Navy, and Air Force cardholders to complete a 4-hour
Web-based training course. However, the course simply noted that
Schedule contracts and other discount agreements negotiated by the
cardholder's organization can provide lower prices. While the course
also mentioned the GSA Advantage on-line shopping service, coverage of
the service was limited to a brief description and a link that allowed
students to view the service's main Web page.
* Several civilian agency components told us that they also required
cardholders to complete a shorter Web-based training program developed
by GSA's purchase card program office. This course, however, simply
noted that contracts negotiated by the cardholder's agency can provide
good prices, service, and quality, and advised cardholders to check
with their local contracting office for more information.
Some training programs, however, had successfully communicated
practical information to their cardholders on how to seek better
prices, as in the following examples.
* An Agriculture cardholder found that training provided by a Natural
Resources Conservation Service state program coordinator was invaluable
and enabled him to obtain discounted Schedule prices on the transaction
we reviewed. The training discussed discounts available to the agency
and included a demonstration of how to register as a federal purchaser
with an office supply vendor's on-line ordering system in order to
receive Schedule contract prices.
* Another cardholder at Agriculture's Forest Service told us the program
coordinator for her regional office had recently provided training that
described several office supply vendors that had Schedule contracts and
provided information on toll-free numbers and Internet addresses for
placing phone and on-line orders with these vendors. According to the
cardholder, she has found that these vendor phone and on-line ordering
services are convenient and save the government money compared to
retail store prices.
* Officials at the Air Force's Air Mobility Command developed an
extensive briefing that highlights the importance of comparison-
shopping to identify more favorable pricing and introduces the GSA
Advantage on-line shopping service as a tool for researching and
comparing prices offered by Schedule vendors. The briefing also
illustrates how cardholders can achieve savings by providing numerous
examples of the varying prices vendors charge for common items at their
on-line shopping portals and through their Schedule contracts. Finally,
because some cardholders had experienced difficulty using GSA
Advantage, the command invited GSA training teams to its installations
to explain the features of GSA Advantage and demonstrate how to use the
system. Command officials told us that in addition to providing
cardholders with practical tools to help them be effective buyers, the
enhanced training increased cardholder awareness of the importance of
comparison-shopping.
Lacking Information, Cardholders Paid More Than Necessary:
Dun and Bradstreet's analysis of fiscal year 2002 Interior
transactions, conducted on our behalf, illustrates that cardholders
frequently paid more than necessary. For example, the company analyzed
Interior purchases from three office supply vendors that provided
product descriptions along with their purchase card billing
information. This analysis showed that ink cartridges were the most
frequently purchased product. For one specific model of ink cartridge,
411 of 791 purchases were made at prices higher than the Schedule
prices the vendors offered, indicating that cardholders had generally
not taken advantage of discounts available through Schedule contracts.
The prices paid for the same cartridge model ranged from $20.00 to
$34.99.
Our review of selected transactions also showed that, because they
lacked practical information on how to achieve savings on purchases,
cardholders paid more than necessary, as highlighted in the following
examples. Some cardholders we talked to were simply unaware of the
savings potential of using Schedule contracts or agency discount
agreements. Of the transactions we reviewed where items were available
through a GSA contract, a number of cardholders were unaware that the
items could have been purchased through the GSA contract.
* A Veterans Affairs cardholder, who purchased office supplies at a
price 12 percent higher than the prices available under the vendor's
Schedule contract, told us that she had not been aware that the vendor
offered lower prices under its Schedule contract.
* A Navy cardholder who was not aware of an information technology
vendor's Schedule contract purchased a spare laptop battery for 14
percent more than he would have paid by using the vendor's Schedule
contract.
Some cardholders appeared to not understand their fundamental
responsibility for getting reasonable prices, as in the following
examples.
* A Transportation cardholder paid about 20 percent more than the
Schedule contract price for office supply items. The cardholder
admitted he knew that the vendor had a Schedule contract, but did not
offer reasons why he had not requested the Schedule discount.
* A Veterans Affairs cardholder paid about 12 percent more than the
Schedule prices for office supply items. He was aware that Schedule
contracts offered discounts, but stated that he preferred to do his
shopping at local vendor locations.
* An Agriculture cardholder, who paid about 13 percent more for
cellular telecommunications service than the GSA contract price, told
us that her only role in the transaction was to pay the monthly bill
for the cell phone user.
Other cardholders purchased products that were not available through
the particular vendor's Schedule contract. Because the cardholders did
not consider whether products that met their needs were available from
other Schedule vendors, they were unable to take advantage of lower,
discounted prices these vendors might have offered, as shown in the
following examples. Of the 135 transactions we reviewed, 70 included
items that were unavailable through the selected vendor's GSA contract.
* One Agriculture cardholder purchased six cases of copy paper from an
office supply vendor that did not offer this item through a Schedule
contract because, according to a vendor representative, the brand did
not meet federal standards for recycled material content. The
cardholder did not take advantage of discounted Schedule prices for
acceptable recycled paper.
* An Army cardholder purchased word-processing software from an office
supply vendor's retail store. The vendor did not offer the software
through its Schedule contract, but the cardholder did not consider
whether other vendors might offer discounts on the software through
their Schedule contracts.
* A Veterans Affairs cardholder purchased various items-including
paper, batteries, and computer data storage media-at an office supply
vendor's retail store. Although most of the items purchased were not
available through the vendor's Schedule contract, a few were, at a
price about 10 percent less than the cardholder paid. This cardholder
told us she had not reviewed the vendor's Schedule contract offerings
because she preferred the convenience of shopping at local retail
stores.
* A Transportation cardholder ordered a computer monitor from a
particular information technology vendor because a user asked the
cardholder to purchase the monitor from that vendor. The cardholder
assumed that she received the Schedule contract price because she
placed the order through the vendor's Web site; however, the vendor did
not offer the monitor under its Schedule contract. The cardholder did
not research other vendors to compare prices.
Other cardholders appeared to be confused about whether they were
getting favorable prices.
* An Army cardholder purchased office supplies through a vendor's
retail store, where prices were 20 percent higher than those under the
same vendor's Schedule contract. The cardholder told us that while she
had not actually checked Schedule prices she had believed that the
retail store prices were generally lower than Schedule prices.
* An Agriculture cardholder purchased an item through an information
technology vendor's federal Internet site, assuming that he would
receive discounted Schedule contract prices. However, to obtain these
discounts, customers must access a specific section of this vendor's
federal Internet site-a step the cardholder was not aware of and did
not complete. As a result, the cardholder paid about 20 percent more
than Schedule contract prices for the item.
* An Air Force cardholder told us that a co-worker had checked the
Schedule prices for certain information technology items before he
ordered the items to ensure that he was paying reasonable prices.
Despite this, the vendor he ordered the items from offered them under a
Schedule contract for 7 percent less than the cardholder paid.
* An Interior cardholder purchased office supplies through a vendor's
retail store and paid prices 20 percent higher than prices under the
same vendor's Schedule contract. The cardholder told us that she had
checked Schedule prices for the items before making this purchase, and
recalled that the Schedule prices had been about the same or somewhat
higher than prices at the retail store.
We also found cardholders who were not aware that they had received
significant discounts, as in the following cases.
* A Veterans Affairs cardholder purchased computer data storage media
from an information technology vendor for about 56 percent less than
the Schedule contract price. A vendor representative told us that the
company had lowered the price on the item in response to competitive
pressures and had neglected to update the Schedule price.
* An Interior cardholder purchased a desktop computer from a vendor
offering a promotional discount for 30 percent less than the Schedule
contract price. However, the cardholder was unaware that he had
benefited from promotional pricing.
* An Agriculture cardholder used her card to pay the monthly billing
for 4 cellular telephones used by a fire-fighting team in a national
forest. Team members had asked various cellular telecommunications
service providers about discounts their federal agency might qualify
for. One service provider offered the team a 20 percent discount on the
monthly service charges, a much greater discount that this provider's
GSA contract offered. At the same time this firefighting team received
the 20 percent discount, other Agriculture cardholders who used the
same service provider were paying regular consumer rates.
Experience at Some Agencies Suggests Significant Savings Are Possible:
Several agencies or agency components reported significant savings from
their initiatives to leverage their buying power by negotiating
discount agreements with major vendors, suggesting the potential for
significant savings governmentwide. In all cases, the discount
agreements are available to cardholders. Several examples follow.
* The Air Mobility Command initiated a program to promote the use of
Schedule contracts by cardholders and to obtain customary trade
discounts from local merchants in the vicinity of its installations.
The command reported estimated savings of $189,000 in the first 3
months after starting this program and anticipates that annual savings
could reach $13 million-out of total purchase card expenditures of $260
million-when the program is fully implemented.
* Veterans Affairs anticipates annual sales of $36.9 million under the
discount agreements its National Acquisition Center awarded to vendors
of medical and surgical supplies during fiscal years 2002 and 2003.
Pricing under the agreements represents an estimated annual savings of
$8.5 million-or about 19 percent-from prices the department had been
paying.
* Sales under Agriculture's discount agreement for office supplies
totaled $15.4 million during fiscal year 2003, and the agency achieved
savings of $1.8 million, or about 10 percent off of Schedule prices.
* Interior recently awarded several agencywide discount agreements for
information technology products. These agreements provided for savings
of about 8 percent compared to Schedule prices for desktop computers
and servers and savings ranging from 20 to 35 percent for laptop
computers.
While the scope of our work did not include developing a governmentwide
estimate of the potential savings from leveraging purchase card buying
power, these examples indicate that the potential for savings could be
significant. Given the range of savings under discount agreements
currently in place with major vendors (8 to 35 percent) at the agencies
we reviewed, a conservative approach indicates that, if these agencies
were to achieve savings of just 10 percent on their purchase card
expenditures with major vendors, annual savings of $300 million could
be realized.
Lack of Management Focus Has Limited Efforts to Capture Savings:
The primary reason that agencies have not taken advantage of potential
opportunities to capture savings through the purchase card program is
the lack of management focus on this issue. Further, OMB has not
leveraged its governmentwide oversight role by collecting and
disseminating information on the successful initiatives some agencies
have undertaken. In addition, agency officials identified several
challenges that, in their view, have hindered them from more
aggressively pursuing savings through the purchase card program. First,
they noted that the purchase card is intended to streamline buying, and
they are reluctant to impose requirements on cardholders that would
undermine the simple, quick purchase card buying process. Officials
also cited the need to balance governmentwide socioeconomic
requirements--including providing opportunities for small businesses
and purchasing products manufactured by non-profit agencies for the
blind or severely handicapped (referred to as "JWOD" products)[Footnote
13]--with efforts to get better purchase card prices. Finally,
officials noted that little detailed information is available on the
specific products and services purchased through the purchase card,
hampering efforts to analyze trends in order to achieve more savings.
Although agency officials consistently identified these challenges, our
review suggests that the challenges are not insurmountable, as
evidenced by individual agency initiatives to address them.
Agencies and OMB Have Not Focused on Opportunities for Savings:
Agency purchase card managers have yet to turn their attention to
capturing opportunities for savings in their purchase card programs. In
the mid-1990s, managers were focusing on capturing the savings in
administrative costs that use of the purchase card made possible and
reengineering administrative processes that discouraged use of the
card. In more recent years, our work and the work of agency inspectors
general highlighted weaknesses in internal controls that left purchase
card use vulnerable to fraud and abuse. Agency managers have made a
concerted effort to address these internal control weaknesses, but have
not paid similar attention to capitalizing on opportunities for savings
on purchase card buys. In general, the agency management structures and
processes do not establish departmentwide goals for the effectiveness
of micropurchase activity, such as savings goals.
To monitor agencies' progress in implementing better internal controls,
OMB requires agencies to report quarterly on such topics as
investigations of potential fraud, disciplinary actions for fraudulent
or improper card use, and initiatives to improve program management.
However, OMB's reporting requirement does not include gathering
information on agency efforts to save money on purchase card buys.
Consequently, governmentwide information on opportunities to achieve
savings is not available.
OMB representatives stated that they would consider the benefits of
having agencies share information on leveraging purchasing power. They
believe that increased focus on purchase card pricing issues is
appropriate and mentioned that periodic cross-agency forums, sponsored
by GSA, could be one mechanism for agencies to share successes they
have had in negotiating discounts with major vendors. They also
acknowledged that the currently-required quarterly reports could be
used to gather information on the steps agencies are taking to better
leverage their purchase card buying. Most of the agency officials we
met with expressed interest in learning of steps being taken within the
government to capture purchase card savings, particularly in light of
the challenges discussed below.
Steps to Capture Savings Need Not Burden Cardholders:
Several agency officials noted that promoting--or in some cases,
requiring--the use of specific vendors with whom they have negotiated
discount agreements could hinder cardholders from meeting their needs
in the simplest, most expeditious manner. They fear that cardholders,
who are generally not procurement officials, would be expected to spend
more time seeking better prices--time that should be spent meeting
mission requirements. While the FAR requires agencies to obtain
reasonable prices, it limits the actions agencies need to take to
verify price reasonableness. Given the wide variety of missions that
cardholders must meet on a daily basis, they must retain the
flexibility to make their purchases in a way that meets their needs.
Our work showed that in some cases, as those shown below, Schedule
contracts and discount agreements were not effective in meeting
cardholder needs. In these cases, the cardholders took advantage of the
purchase card's flexibility to find other ways to fill their
requirements.
* The Army had in place 12 mandatory discount agreements for office
supplies and required cardholders to purchase office supplies through
an on-line shopping service known as "DOD e-Mall." According to the
results of an Army survey, cardholders perceived this service as
customer unfriendly and as requiring too much effort to place simple
orders, and many bought office supplies through other channels. All
stakeholders are now committed to making the service easier to use.
* One Interior cardholder found that receiving orders from national
office supply vendors under a Schedule contract was unpredictable
because the vendors used a next-day delivery express service that did
not visit the cardholder's remote, mountainous location on a daily
basis. The cardholder now buys office supplies at a retail store in a
town about 45 miles from her location.
* An Air Force cardholder was on a travel assignment near Canterbury,
England and needed supplies to complete his mission assignment. Because
he needed the supplies urgently, and was not aware of any sources that
offered Schedule contract discounts at his location, he purchased the
supplies through a retail store.
* A Transportation cardholder normally takes advantage of Schedule prices
when purchasing supplies to restock the vessel he is responsible for.
However, the cardholder told us that if the vessel is about to depart
on patrol and supplies are low, he makes purchases at a local retail
store to ensure the vessel is fully stocked before it sails.
On the other hand, some cardholders were pleased with the Schedule
contracts and agency discount agreements they used. Cardholders were
able to easily place orders with the vendor, and the vendor filled
their orders promptly and reliably, as in the following examples.
* An Agriculture cardholder stationed in Atlanta, Georgia, routinely
places orders under Agriculture's agencywide discount agreement for
office supplies. According to the cardholder, the vendor's delivery
service is prompt and reliable and saves him effort because the vendor
delivers directly to the agency supply room rather than to the building
loading dock. When the occasional delivery problems occur, the vendor's
customer service representatives have been able to resolve them.
* Customers completing a satisfaction survey issued by a vendor that has
a discount agreement with a Justice component were generally satisfied
with the overall performance of the vendor. In particular, respondents
were satisfied with the ease of ordering from the vendor.
* A Transportation cardholder told us he had positive experiences with a
Schedule contract information technology vendor. According to the
cardholder, the vendor was easy to work with, provided quick turn-
around on orders, and offered competitive prices.
* A Justice cardholder expressed satisfaction with a Schedule contract
information technology vendor, saying that the vendor had a good track
record. Further, according to the cardholder, the vendor often offered
him additional discounts from Schedule prices, even though his agency
did not have a discount agreement with the vendor.
GSA is working to further simplify cardholder access to discounted
prices. To receive Schedule discounts, cardholders generally must place
orders with a vendor through the GSA Advantage on-line shopping service
or other designated ordering procedures. Some of GSA's Schedule
contracts, however, provide vendors the option of offering cardholders
discounts at the point of sale in the vendors' retail stores. For
example, one GSA contracting officer modified a vendor's contract to
provide for point-of-sale discounts. The vendor then programmed cash
registers in its retail stores to recognize a federal government
purchase card when a shopper presents one and to apply the appropriate
Schedule discount to the shopper's order. GSA has partnered with DOD
purchase card program officials to explore ways to increase the number
of vendors that offer point-of-sale discounts to federal purchasers.
Civilian agency officials expressed strong interest in this approach to
facilitating cardholder access to Schedule discounts.
Concerns about Balancing Governmentwide Socioeconomic Policies with
Purchase Card Savings Initiatives Can Be Mitigated:
Balancing governmentwide socioeconomic policies--such as providing
federal contracting opportunities to small businesses--with
initiatives to leverage agency buying power has also been a recurring
concern for agencies. Although agencies are not required to reserve
micropurchases for award to small businesses, officials we met with
repeatedly noted that because large national vendors would be in the
best position to win agencywide discount agreements, concerns would be
raised that opportunities for small, local vendors could be reduced.
Officials similarly raised concerns about the effect agencywide
discount agreements would have on their ability to meet requirements to
purchase JWOD products.
Despite these concerns, some agencies have been able to leverage
purchasing power while providing opportunities for small businesses, as
highlighted in the following examples.
* The Army negotiated additional agreements with small business vendors
in response to complaints that its agreements with large office supply
vendors excluded small office supply vendors. The Army is considering a
variety of other approaches to ensure that it purchases office supplies
from small businesses, such as establishing separate agreements for
selected high-volume products that would be reserved for these
businesses.
* The Air Mobility Command initiative, discussed above, is supporting
small businesses while generating savings through use of the purchase
card. After the Command contacted local suppliers-many of which were
small businesses-to determine whether they were willing to extend their
customary trade discounts to cardholders, the command provided a
listing of these suppliers and the discounts they provided to
cardholders. Cardholders were encouraged to request the applicable
discount-typically about 10 percent-when dealing with these suppliers.
According to Air Force officials, this exercise was relatively simple
because it did not involve negotiating formal contract arrangements
with the suppliers.
* In response to concerns expressed by small businesses that its
agencywide discount agreement for office supplies had adversely
affected them, Agriculture officials explained to the small businesses
that cardholders are free to patronize a small business if they find
that it offers a better value.
Further, agency experience indicates that appropriately structured
discount agreements can help ensure that cardholders purchase JWOD
products when required, as in the following cases.
* Agriculture negotiated a discount agreement with a national office
supply vendor that is an authorized distributor of MOD products. The
vendor was selected, in part, because it had developed a system that
screens orders and blocks delivery of a commercial product when a MOD
product is available. According to agency officials, as sales under
this discount agreement have increased, so have agency purchases of MOD
products. In addition, because the vendor's ordering system helps
ensure that USDA employees purchase MOD products when required, agency
expenses for training employees on the importance of purchasing MOD
products have been reduced.
* During the first 3 months after a Justice component awarded a
discount agreement to an authorized distributor of MOD products, about
26 percent of the items sold were MOD products.
Available Data, Though Limited, Can Be Used to Identify Potential
Savings:
Agency officials point to the lack of adequate data as a barrier to
taking steps to analyze purchase card activity. They raised concerns
about their ability to analyze purchase trends due to a lack of
detailed information on the specific products and services purchased,
known as "level 3" data.[Footnote 14] The banks that provide the
agencies' purchase cards generally do not have such data. For example,
our analysis of Interior's fiscal year 2002 transaction data indicated
that less than 15 percent of all transactions included descriptions of
the items and services purchased. Dun and Bradstreet found that many
merchants have not invested in the electronic point-of-sale devices
needed to transmit item descriptions along with other transaction
information. A common reason offered by major vendors for not providing
level 3 data is that their customers--the ordering agencies--have not
requested it. Agency officials told us, however, that they have made
clear to the banks that issue their purchase cards that access to level
3 information would be very helpful to them in gaining an understanding
of what their cardholders are buying.
GSA and other agencies are pursuing initiatives to provide agencies
better data on their purchase card activity. GSA's contracts with the
banks that provide purchase cards, for example, require summary and
analytical reports on agency purchase card activity, including
information on the top 100 vendors by agency and on the types of
vendors. According to the GSA purchase card program manager, these
reports were intended to provide GSA with data it could use to help
agencies gain insight into their purchase card expenditures and
identify opportunities to leverage their purchasing power. The program
manager indicated, however, that reports from the banks have frequently
not been provided, not been provided timely, or not been provided in a
format that facilitates analysis. For example, until the most recent
reporting period, GSA had not received even basic information, such as
the top 100 purchase card vendors, from some banks. The GSA program
manager is pursuing efforts to encourage the banks to provide more
useful reporting so that GSA will be able to provide more effective
assistance to agencies, such as negotiating point-of-sale discounts
with vendors. Other initiatives are also in place. GSA is working with
DOD and other agencies to determine what barriers limit the level 3
data agencies receive and to explore ways to overcome these barriers.
In addition, the Air Force Materiel Command is piloting a system
intended to accumulate more consistent and specific information on
purchase card transactions.
While the lack of level 3 data is a valid concern, agencies can use the
information that is available to start taking steps to get better
prices. For example, we obtained from the banks a listing of all fiscal
year 2002 purchase card transactions for each agency we reviewed. Using
this listing, we summarized information on the vendors with whom
cardholders at each agency had done $1 million or more in business
during fiscal year 2002. All agencies have access to these data. When
we shared this information with agency officials, several indicated
that simply being able to identify major vendors was a useful first
step in identifying opportunities to leverage their buying power.
Several agencies have taken the initiative to begin analyzing their
purchase card expenditures to identify opportunities for additional
savings, although these initiatives in some cases had limitations, as
in the following examples.
* Agriculture hired a management consulting firm to conduct an
agencywide analysis of purchase expenditures. This analysis considered
all Agriculture purchasing activity, including contracts and purchase
orders as well as purchase card transactions and identified several
commodity categories-including telecommunications equipment, office
technology, medical supplies and equipment, and office supplies and
paper-where, due to the large number of transactions and/or amount of
expenditures, the potential for leveraging the purchase card warranted
further analysis. Agriculture is currently organizing teams to perform
more detailed analysis of expenditures in selected commodity categories
and develop acquisition strategies for capturing savings.
* Veterans Affairs is trying to achieve savings by identifying the
medical and surgical products it spends the most money on and inviting
vendors to compete to become the agency's nationwide source for those
products. Officials told us that since their data system often does not
include specific details on the items bought using the purchase card,
the agency's analyses do not capture all purchase card activity.
* Interior has recently completed an analysis of contract and purchase
card expenditures and identified information technology products,
architect-engineer services, guard services, and relocation services as
categories where savings can be achieved. Additional analyses in future
years should identify more categories that cardholders typically buy,
according to an agency official.
* About half of the Navy's major component organizations reported some
efforts to identify high-volume vendors within their organizations. The
Naval Sea Systems Command reported that purchase card coordinators at
some of its installations had reviewed transactions to identify high
volume vendors and that the command was beginning to do this command-
wide.
* The Air Force had not completed a servicewide analysis of purchase
card expenditures, but eight Air Force commands reported having
performed such analyses.
While analyses conducted by agency components can provide useful
insight into opportunities to leverage their purchasing power, they do
not reflect the bigger picture of agencywide expenditures or agencywide
opportunities to capture savings.
Several of the agency discount agreements we reviewed require vendors
to report periodically on sales made under discount agreements. This
information can help agencies determine whether cardholders are taking
advantage of favorable pricing.
* In the case of the Army's discount agreements for office supplies,
data submitted by the vendors indicated that sales of about $8.6
million had been made through the agreements during the first 8 months
of fiscal year 2003. Because the Army identified total purchase card
expenditures of $36.8 million over the same period for the same general
class of supplies, it concluded that the agreements had not had the
success anticipated.
* Under a Justice component's discount agreement for office supplies,
the vendor reports periodically on total sales and on sales by regional
office-data that can be used to assess whether cardholders are taking
advantage of the agreement. In addition, the vendor's report separately
identifies sales of certain higher-volume items on which the agreement
provides for larger discounts.
Conclusions:
Agencies have just begun to tap the potential of leveraging the
purchase card for better pricing. If greater management attention were
paid to capitalizing on the opportunities to obtain more favorable
prices, hundreds of millions of dollars in savings could be realized
annually. Given the volume of purchase card activity, agencies could
take advantage of these opportunities without sacrificing the ability
to acquire items quickly or compromising socioeconomic goals. If
agencies were to build on their initial experiences and duplicate these
steps governmentwide, they would have the opportunity to save the
taxpayer almost $300 million annually. OMB should take the lead in
focusing management attention on this opportunity and guiding agencies
towards capturing these savings.
Recommendations for Executive Action:
We are making the following eight recommendations to OMB, GSA, and the
agencies we reviewed:
To focus governmentwide management attention on taking advantage of
opportunities to achieve savings on purchase card buys, we recommend
that the director of OMB take the following two actions:
* Require agencies to report--either through the current quarterly
reports or another mechanism--on the steps they are taking to leverage
their purchase card buys in areas such as:
* negotiating discount agreements with major purchase card vendors,
* implementing initiatives to better inform cardholders of
opportunities to achieve savings,
* conducting analyses to identify such opportunities, and:
* assessing, through mechanisms such as vendor reports, whether
cardholders are taking advantage of savings opportunities.
* Annually report to Congress on the government's progress in
identifying and taking advantage of opportunities for savings on
purchase card micropurchases.
To assist agencies in identifying opportunities to achieve savings on
purchase card buys and to facilitate cardholder access to discounted
prices, we recommend that the administrator of GSA direct the purchase
card program manager to take the following three actions:
* continue efforts to improve reporting by the banks that provide
purchase cards so that GSA will have the data it needs--including basic
information such as top vendors and level 3 data where feasible--to
assist agencies in effectively identifying opportunities to leverage
their purchasing power;
* work with GSA's acquisition center contracting officers to pursue
point-of-sale discounts with large vendors; and:
* as part of the existing cross-agency forums for purchase card
discussions, encourage agencies to share information on their successes
in leveraging the purchase card to obtain better prices as well as
strategies for overcoming challenges that could hinder agencies'
ability to achieve purchase card savings.
To more effectively capture the significant potential for savings that
agencies can achieve, we recommend that the Secretaries of Agriculture,
Defense, the Interior, Justice, Transportation, and Veterans Affairs
direct their purchase card program managers--in coordination with
officials responsible for procurement, finance, small business
utilization, and other appropriate stakeholders--to take the following
three actions:
* Develop mechanisms that provide cardholders more favorable pricing
from major vendors or for key commodity groups, such as agencywide
discount agreements with major vendors or simpler mechanisms that
capitalize on trade discounts offered by local merchants. In designing
such mechanisms, purchase card program managers should consider the
need to:
* take full advantage of competitive forces to assure the most
favorable prices,
* ensure that agreements cover an adequate range of the products
cardholders are likely to buy,
* coordinate negotiation activities within the department to reduce
duplication of effort, and:
* ensure that agreements appropriately support agencies' efforts to
meet governmentwide socioeconomic requirements.
* Revise programs for communicating with cardholders to ensure that the
programs provide cardholders the information they need to effectively
take advantage of mechanisms the agency has established to achieve
savings. Such information would include telling cardholders about:
* the GSA Schedule contracts or agency-specific agreements chosen as
vehicles for leveraging the agency's buying power, and:
* procedures cardholders should follow to access and use these vehicles
when they plan to make a purchase from these vendors.
* To the extent possible using available data, such as information on
major vendors, analyze purchase card expenditure patterns to identify
opportunities to achieve additional savings and to assess whether
cardholders are getting good prices. Where available data are not
sufficient for such analyses, investigate the feasibility of gathering
additional information. In evaluating options for gathering additional
information, purchase card program managers should carefully consider
the costs and benefits of obtaining comprehensive information and
imposing unwarranted burdens on cardholders, vendors, and other
stakeholders.
Agency Comments and Our Evaluation:
We received written comments on a draft of this report from DOD, GSA,
the Department of the Interior, and the Department of Veterans Affairs.
We received comments via e-mail from the Departments of Agriculture and
Transportation. The Department of Homeland Security, the Department of
Justice, and OMB did not provide comments.
DOD concurred with our recommendation that the department develop
mechanisms that provide cardholders more favorable prices, but stated
that negotiating agencywide discount agreements might impede achieving
the department's small business goals. Accordingly, DOD intends to
emphasize installation-level initiatives to obtain discounts from local
vendors and to pursue point-of-sale discounts with larger vendors. DOD
also concurred with our recommendation to revise programs for
communicating with cardholders and partially concurred with our
recommendation to analyze purchase card expenditure patterns to
identify opportunities for savings. DOD stated that, until data on
specific purchases is widely available, the feasibility of developing
informed and cost-effective strategic sourcing decisions is
questionable. Our recommendation, however, contemplated agencies using
readily available data to gain insight into their purchase card
expenditure patterns. Analysis of available purchase card transaction
data could provide agencies a clearer understanding of which vendors
are significant to their purchase card program. DOD's written comments
are reproduced in appendix II.
GSA concurred with our findings and recommendations and stated that the
report provides an objective analysis of the savings that agencies can
obtain through the Schedule program and purchase card program. GSA's
written comments are reproduced in appendix III.
The Department of the Interior did not specifically agree or disagree
with our recommendations, but offered several observations on our
report. The department took exception to our statement that lack of
management focus and oversight had led to agencies' not taking
advantage of opportunities to capture purchase card savings. This
statement was intended to portray the general picture at all the
agencies we reviewed, and our report discusses the instances we noted
where agencies had focused management attention on capturing savings
and the benefits agencies obtained by doing so. Interior also commented
that our recommendation that departments develop mechanisms to provide
cardholders with more favorable prices should be directed to GSA rather
than Interior, and that GSA's buying programs should be revised to
incorporate greater price reductions and be expanded to cover more
vendors. We did not audit GSA's buying programs as part of this report;
however, recognizing the benefits of point-of-sale discounts, we have
made a recommendation to GSA to pursue these discounts with large
vendors. At the same time, we found that individual agencies could
achieve savings in the short term by negotiating discount agreements,
such as Interior has done for information technology products.
Interior--pointing to convenience and simplicity as key benefits of the
purchase card program--also commented that we should further highlight
in our recommendations the need for purchase card managers to take into
account the costs and benefits of obtaining comprehensive information
and imposing unwarranted burden on cardholders and others. We believe
that our recommendations, as stated, afford program managers sufficient
flexibility to develop mechanisms for more favorable pricing while not
inconviencing cardholders. Finally, Interior recommended that we
incorporate into the report a table of "best practices." The scope of
our work did not include gathering information to verify that the
agreements agencies have negotiated represent best practices.
Interior's written comments are reproduced in appendix IV.
The Department of Veterans Affairs concurred with our recommendations
and cited a number of planned and ongoing actions intended to provide
cardholders with more favorable prices. In addition, Veterans Affairs
expressed concern that our recommendation to OMB would impose a
cumbersome and costly data-gathering burden on agencies. Veterans
Affairs is apparently interpreting our recommendation as requiring
agencies to report on discounts obtained on specific transactions. We
agree that the availability of data to prepare such a report may be an
issue and therefore are not recommending that OMB require such a
report. Instead, we recommend that OMB require agencies to report on
initiatives they have taken, such as analyzing purchase card
expenditure patterns and negotiating discount agreements that
cardholders can use. Veterans Affairs also endorsed our recommendation
that GSA pursue point-of-sale discounts with large vendors and
suggested that GSA consider encouraging vendors to program point-of-
sale devices to recognize that federal purchases are exempt from sales
taxes. Veterans Affairs' comments are reproduced in appendix V.
In comments sent via e-mail, the Department of Agriculture concurred
with our recommendations and outlined a number of steps the department
will take to implement them. Commenting on our finding that
Agriculture's discount agreement for office supplies did not take full
advantage of competitive forces to ensure the most favorable prices,
Agriculture stated that it reviews this agreement annually and will re-
compete the agreement when these annual reviews indicate that re-
competition is warranted. We believe that periodic--but not annual--re-
competitions would provide the best information for assessing whether
the agreement continues to offer the most advantageous prices for
office supplies.
In comments sent via e-mail, the Department of Transportation did not
specifically agree or disagree with our recommendations, but noted that
our report could benefit by explicitly recognizing that the greatest
savings could by achieved by pooling the buying power of the entire
federal government. We agree that leveraging governmentwide buying
power would result in the greatest savings. While this would be the
best end-state, we see this as a long-term effort with many obstacles
to be overcome before it can be achieved. Our work identified
initiatives--relatively simple to implement--that agencies can begin
now to start achieving savings. In addition, Transportation commented
that our report does not adequately depict the fundamental difficulties
of complying with JWOD purchase requirements while at the same time
achieving best value. We believe our report appropriately reflects the
concerns agency officials expressed to us about complying with
socioeconomic requirements, including JWOD, and we provide several
examples of how some agencies have taken steps appropriately structure
discount agreements so that they help ensure that cardholders purchase
JWOD products when required. In addition, Transportation commented that
the report should discuss some of the positive accomplishments of the
purchase card program. Our report acknowledges that the purchase card
has fundamentally changed the way agencies make small, routine,
purchases and we believe the report appropriately reflects the
administrative cost savings and convenience purchase cards have
provided. Finally, Transportation suggested a technical correction,
which we have incorporated in the report.
As arranged with your offices, unless you publicly announce its
contents earlier, we plan no further distribution of this report until
30 days from its issue date. At that time, we will send copies of this
report to the Secretaries of Agriculture, DOD, Homeland Security, the
Interior, Justice, Transportation, and Veterans Affairs; the director
of OMB; the administrator of GSA; and other interested congressional
committees. We will provide copies to others on request. This report
will also be available at no charge on GAO's Web site at http://
www.gao.gov.
If you or your staffs have any questions about this report or need
additional information please call David Cooper at (202) 512-4841
(cooperd@gao.gov) or Gregory Kutz at (202) 512-9505 (kutzg@gao.gov).
Key contributors to this report are acknowledged in appendix VII.
Signed by:
David E. Cooper,
Director,
Acquisition and Sourcing Management:
Gregory D. Kutz,
Director,
Financial Management and Assurance:
[End of section]
Appendix I: Scope and Methodology:
We reviewed laws and regulations relating to the purchase card program,
held discussions with GSA officials responsible for governmentwide
program management and OMB representatives responsible for program
policy and oversight, and reviewed governmentwide policy and guidance
for the program. We also performed our work at the Departments of
Agriculture, Defense (DOD), the Interior, Justice, Transportation, and
Veterans Affairs. These agencies accounted for over 85 percent of
governmentwide purchase card expenditures during fiscal year 2002.
Within DOD, we focused our work at the Departments of the Army, the
Navy, and the Air Force, which represented 92 percent of all DOD
purchase card expenditures during fiscal year 2002. We contacted all
major component agencies--referred to as major commands in the Army and
Air Force and as major claimants in the Navy. At the civilian
departments, we contacted the component agencies that were the largest
users of purchase cards.
To determine whether agencies had taken advantage of opportunities to
obtain more favorable purchase card prices, we held discussions with
officials responsible for the purchase card program at each department
to obtain information on (1) efforts to identify opportunities to
obtain more favorable prices, (2) efforts to negotiate discount
agreements that made more favorable prices available to cardholders,
and (3) guidance and training provided to cardholders to inform them of
opportunities to obtain more favorable prices. We reviewed policy and
guidance manuals, training materials, and other agency documentation
that provided information on these topics. We also contacted the
components responsible for the largest volume of purchase card activity
within each department. Finally, to assess cardholder buying practices
and gain insight into whether they were obtaining favorable prices, we
selected a limited number of fiscal year 2002 micropurchase
transactions at each department for review. We obtained and reviewed
documentation relating to the transactions, such as invoices, and
discussed the transactions with cardholders.
To identify the reasons why agencies had not taken advantage of
opportunities to obtain more favorable purchase card prices, we
discussed these issues with officials responsible for departmental
purchase card programs and reviewed applicable agency documentation.
To select transactions for review, we first obtained data files of
fiscal year 2002 purchase card transactions from the banks that
provided purchase cards to each of the departments reviewed. (In the
case of the military services, we obtained data files from the Defense
Manpower Data Center, which had previously obtained the files from the
applicable banks.) We reviewed these files to determine that they did
not contain any apparent erroneous data and then summarized the total
number and dollar value of transactions for each department. We
reconciled these totals with totals reported by GSA for each
department. Having determined that the data files were generally
reliable, we summarized the data to determine the total number and
dollar value of transactions by vendor and identified major purchase
card vendors at each department. We defined major purchase card vendors
as those vendors where the department had purchase card expenditures of
$1 million or more in fiscal year 2002.
We then combined the data on major purchase card vendors for the eight
departments and summarized the number and dollar value of transactions
by vendor to identify those vendors where the eight departments had the
highest purchase card expenditures. From this combined listing, we
determined that vendors providing information technology products,
office supplies, and cellular telecommunications services were among
the top vendors at all eight departments. Accordingly, we selected two
of the top information technology vendors, two of the top office supply
vendors, and two of the top cellular telecommunications service
providers as the vendors for which we would select transactions for
review.
For each department, we identified the population of micropurchase
transactions with the selected vendors. If a department did not have $1
million or more in micropurchase transactions with the vendor, we
excluded that vendor's transactions from further analysis at that
department. We then identified, for each vendor, the subpopulation of
micropurchase transactions valued at $100.00 or more for information
technology and office supply vendors or $25.00 or more for cellular
telephone service providers at each department.[Footnote 15] We
selected--using a random selection process--3 transactions with each
vendor at each department for a total of 135 transactions. Although
these transactions were selected at random, we cannot project the
results of the selected transactions to the population of transactions.
To assess the prices cardholders had paid on a transaction, we
ascertained whether the vendor had a GSA contract or agency-negotiated
discount agreement applicable to the items or services purchased. We
obtained information on prices for the items or services under these
contracts or agreements and used these prices as benchmarks for
assessing whether the cardholder had obtained favorable pricing. In
addition to making these price comparisons, we contacted the
cardholders to discuss the transaction and gain insight into their
buying practices and awareness of vehicles that provide favorable
pricing.
To assess the potential magnitude of savings that agencies can achieve
by negotiating discount agreements with their major purchase card
vendors, we considered the discounts individual departments had
obtained on the agencywide discount agreements we reviewed during our
work. Discounts offered under these agreements varied--for example, 8
percent under an Interior agreement for desktop computers, 10 percent
under an Agriculture agreement for office supplies, and 35 percent
under an Interior agreement for laptop computers. We considered the 10
percent discount that Agriculture obtained to represent a reasonable
and conservative benchmark for the potential discounts departments
could obtain from their major vendors.
Our analysis showed that the agencies reviewed spent about $2.8 with
major purchase card vendors in fiscal year 2002. Although some of these
expenditures would have been covered by discount agreements the
departments had negotiated, we found that agency discount agreements
often did not cover all the items that cardholders purchased from those
vendors. Further, we found that cardholders did not always know of, or
take advantage of, the discounts agreements agencies had negotiated. A
number of the transactions we reviewed were made at retail prices. If
the agencies we reviewed obtained discounts of about 10 percent on the
$2.8 billion spent with their major purchase card vendors, their
savings would amount to about $282 million. Actual discounts would vary
with factors such as sales volume, profit margin, and competitiveness
of the industry. If agencies obtained discounts equivalent to the high
end of the range we saw during our work, savings would amount to almost
$1 billion, although it is unrealistic to expect savings of this
magnitude. Nonetheless, we believe it is reasonable to anticipate that
the federal government could save hundreds of millions of dollars if
agencies negotiated discounts with major purchase card vendors.
Finally, we engaged the Dun and Bradstreet Corporation to perform a
spend analyses of Interior's fiscal year 2002 purchase card
transactions to illustrate how a detailed analysis could begin to
identify opportunities for purchase card savings. In addition to
performing analyses of Interior's purchase card transactions, Dun and
Bradstreet gathered information on the costs and benefits to merchants
and other stakeholders of providing "level 3" data--which includes
descriptions of the items and services purchased--and on barriers to
vendors providing this information.
We conducted our review between March 2003 and January 2004 in
accordance with generally accepted government auditing standards.
[End of section]
Appendix II: Comments from the Department of Defense:
Note: Page numbers in the draft report may differ from those in this
report.
ACQUISITION, TECHNOLOGY AND LOGISTICS:
OFFICE OF THE UNDER SECRETARY OF DEFENSE:
3000 DEFENSE PENTAGON
WASHINGTON, DC 20301-3000:
Mr. Gregory D. Kutz
Director:
Financial Management and Assurance
United States General Accounting Office
Washington, DC 20548:
MAR 01 2004:
Dear Mr. Kutz:
This is the Department of Defense (DoD) response to the GAO draft
report, "CONTRACT MANAGEMENT: Agencies Could Achieve Significant
Savings on Purchase Card Buys," dated February 9, 2003 (GAO Code
192082/GAO-04-430). Enclosed are DoD's detailed comments regarding the
three recommendations on pages 25 and 26 of your draft report.
My point of contact for this report is Mr. Dennis Hudner, 703-681-3315
or dennis.hudner@saalt.army.mil. We appreciate the opportunity to
review and comment on your findings.
Sincerely,
Signed for Deidre A. Lee:
Deidre A. Lee:
Director, Defense Procurement and Acquisition Policy:
GAO DRAFT REPORT DATED FEBRUARY 9, 2004 GAO-04-430 (GAO CODE 192082):
"CONTRACT MANAGEMENT: AGENCIES COULD ACHIEVE SIGNIFICANT SAVINGS ON
PURCHASE CARD BUYS":
DEPARTMENT OF DEFENSE COMMENTS TO THE GAO RECOMMENDATIONS:
RECOMMENDATION 1: The GAO recommended that the DoD - in coordination
with officials responsible for procurement, finance, small business
utilization, and other appropriate stakeholders - develop mechanisms
that provide cardholders more favorable pricing from major vendors or
for key commodity groups, such as agency-wide discount agreements with
major vendors or simpler mechanisms that capitalize on trade discounts
offered by local merchants. (p. 25/GAO Draft Report):
DOD RESPONSE: Concur. The Department believes that a full range of
measures should be utilized to more fully leverage our purchasing
volume in the market-place. However, the Department believes that less
emphasis should be placed on agency-wide contract agreements which are
costly to establish and maintain and may work at cross purposes to the
Department's small business goals. We believe that the same results can
be achieved through less formal measures both at the local level and on
a Department-wide basis. For example, your report cites the efforts of
a number of Air Force bases to elicit significant discounts from local
vendors who value the business opportunity provided by these DoD
activities. We intend to promote this best practice and encourage
similar efforts across DoD. In addition, we are in exploratory
discussions with both card associations to determine the potential for
negotiating DoD-wide pricing discounts at the point-of-sale (register)
with our larger purchase card vendors. Our view is that this could be
fairly easily applied at the register based on the recognition of the
standard number (BIN) assigned to each DoD purchase card. Recognition
of the Government purchase card BIN would trigger the agreed-to
discount.
RECOMMENDATION 2: The GAO recommended that the DoD - in coordination
with officials responsible for procurement, finance, small business
utilization, and other appropriate stakeholders - revise programs for
communicating with cardholders to insure that the programs provide
cardholders the information they need to effectively take advantage of
mechanisms the agency has established to achieve savings. (p. 25/Draft
Report):
DOD RESPONSE: Concur. The Department has developed a web-based tutorial
that is used to train all "new" cardholders and billing officials.
Included in this tutorial is a section which prioritizes the use of
various sources of supply for purchase card buys. Additionally,
detailed instructions are provided in the training tutorial regarding
the accessing and use of GSA Advantage and other Federal Supply
Schedules.
RECOMMENDATION 3: The GAO recommended that the DoD - in coordination
with officials responsible for procurement, finance, small business
utilization, and other appropriate stakeholders - analyze purchase card
expenditure patterns to identify opportunities to achieve additional
savings and to assess whether cardholders are getting good prices. The
GAO recommends that where available data are not sufficient for such
analyses, the DoD investigate the feasibility of gathering additional
information.
(p. 26/Draft Report):
DOD RESPONSE: Partially concur. Until transaction level 3 data is
widely available, a persuasive business case associated with this
recommendation cannot be constructed which would result in informed and
cost-effective strategic sourcing decisions. However, targeting our
largest purchase card suppliers for point-of-sale discount agreements
will largely have the same impact without the associated infrastructure
burden.
[End of section]
Appendix III: Comments from the General Services Administration:
GSA:
GSA Administrator:
March 3, 2004:
The Honorable David M. Walker
Comptroller General of the United States
General Accounting Office
Washington, DC 20548:
Dear Mr. Walker:
Thank you for providing us with the opportunity to comment on the
General Accounting Office (GAO) draft report entitled, "Contract
Management: Agencies Could Achieve Significant Savings on Purchase Card
Buys" (GAO-04-430), dated February 2004.
The draft report recommends that the General Services Administration
(GSA): (1) continue efforts to improve reporting by the GSA SmartPay[R]
banks so that GSA will have the data it needs to effectively assist
agencies in identifying opportunities to leverage purchasing power, (2)
pursue point of sale discounts with large vendors, and
(3) encourage agencies to share information on their successes in
leveraging the purchase card to obtain better prices, as well as
strategies for overcoming challenges that could hinder their ability to
achieve purchase card savings. GSA concurs with the draft report
findings and recommendations.
The draft report provides an objective analysis of the savings that can
be obtained by agencies through the use of our GSA Schedules and GSA
SmartPay[R] programs. The report duly notes the history of Government
purchase card program initiatives that have, until recently, superseded
efforts to leverage spending opportunities. The use of purchase cards
to improve process efficiency and reduce procurement cycle time has
evolved from a mid-1990's best practice to a common practice today, and
the annual administrative savings to the Government are tremendous -
approximately $1.4 billion in fiscal year 2003 alone. In more recent
years, the focus of Government purchase card programs has been on
improving the management, control, and oversight of agency programs.
Obtaining
better data about spending and leveraging spending to obtain more
favorable pricing are emerging goals that GSA will meet through the
implementation of GAO's recommendations.
Sincerely,
Stephen A. Perry
Administrator:
cc:
Mr. David E. Cooper
Director:
Acquisition and Sourcing Management
United States General Accounting Office
Washington, DC 20548:
Mr. Greg Kutz
Director:
Financial Management and Assurance
United States General Accounting Office
Washington, DC 20548:
[End of section]
Appendix IV: Comments from the Department of the Interior:
United States Department of the Interior:
OFFICE OF THE ASSISTANT SECRETARY POLICY, MANAGEMENT AND BUDGET
Washington, D.C. 20240:
FEB 27 2004:
Mr. David Cooper:
Director, Acquisition and Sourcing Management:
United States General Accounting Office
441 G Street, NW
Washington, DC 20548:
Dear Mr. Cooper:
Thank you for providing the United States Department of the Interior
(DOI) with the opportunity to review and comment on the General
Accounting Office's (GAO) draft report entitled, Contract Management:
Agencies Could Achieve Significant Savings On Purchase Card Buys (GAO-
04-430, February 2004).
Enclosed for your consideration and possible inclusion in the final
report are our comments on the draft report's findings and
recommendations.
Thank you again for providing us with the opportunity to comment on the
draft report. If you have any questions regarding our response, please
contact Debra Sonderman, Director, Office of Acquisition and Property
Management on 202-208-6352.
Sincerely,
Signed by:
P. Lynn Scarlett:
Assistant Secretary-Policy, Management and Budget:
Enclosure:
United States Department of the Interior
Comments on General Accounting Office Draft Report
"Contract Management: Agencies Could Achieve Significant Savings on
Purchase Card Buys" (GAO-04-430, February 2004):
1. Page 3: In the course of the subject audit, Debra Sonderman,
Director, Office of Acquisition and Property Management, and members of
her staff, DOI Bureau Procurement Chiefs and representatives from their
procurement and charge card program communities, spent considerable
time with Messrs. Kelly and Peters, GAO, and representatives from Dun &
Bradstreet in which they shared background and the Department's on-
going efforts to use the purchase card effectively, efficiently, and in
a manner compliant with laws and regulations.
We appreciate the draft report's reference (on page 22) to Interior's
management initiative and analyses examining ways to leverage buying
power and realize savings through consolidated buying in a number of
product/service categories; and the reference on page 15, to Interior's
agency-wide discount agreements for information technology products,
which utilize the purchase card and have already realized significant
savings for the agency.
In addition, as a pilot program, the Bureau of Land Management recently
established a Blanket Purchase Agreement (BPA) with a small, woman-
owned business for the purchase of toner and laser jet cartridges. The
average savings from General Services Administration schedule prices is
estimated at 49 percent. The BPA will be made available to all BLM
purchase cardholders, and, depending on the pilot's results, will
likely be expanded to all DOI purchase cardholders.
These initiatives did not develop overnight. They have been planned and
considered for some time. Granted, implementation has been recent,
simply because management's first duty was to ensure program soundness
from an internal control standpoint. We have concentrated significant
resources in the development of charge card-related training and
reporting programs. Therefore, we take issue with the comment on page
3, that "agencies have not taken advantage of potential opportunities
to capture purchase card savings due to lack of management focus and
oversight," and request that it be deleted. The next line, beginning
with the sentence, "The opportunity simply has not been the center of
attention for most agency managers, who have been absorbed in improving
internal controls and other priorities" is a more accurate and fair
assessment.
2. Recommendations for Executive Action: Second bullet on Page 25,
third sub-bullet : "...coordinate negotiation activities to reduce
duplication of effort":
The draft report encourages individual agencies to establish agency-
wide discount agreements. We believe that this recommendation would
have far greater benefit and:
realize greater savings if extended beyond the six agencies to which it
is addressed. Making an effort like this practical for purchase
cardholders nation-wide (and even world-wide) would require the
development of an on-line centralized list of vendors, products, and
discounted prices by each of the six agencies. To a large extent, this
already exists through the General Services Administration (GSA)
Federal Supply Schedules and on-line GSA-Advantage programs, which
leverage the entire Government's buying power and offer common
discounts and easy on-line shopping to all Federal agencies. These
programs have generally proven to be a useful and cost effective
approach and they incorporate Government socio-economic programs and
environmentally preferable products and services. Especially given the
recent anti-bundling regulations, which prohibit the bundling of
requirements unless measurably substantial benefits can be realized, we
believe that the existing GSA programs should serve as the baseline and
the area of focus for the incorporation of greater price reductions and
delivery terms that will benefit purchase cardholders Governmentwide.
Having the GSA expand these buying programs to include more national
commercial vendors, coupled with purchase card point-of-sale discounts,
will minimize the burden and increase the benefits for vendors,
purchase cardholders and agencies.
Therefore, we recommend that the bulleted paragraphs on page 25
beginning with "Develop mechanisms that provide cardholders with more
favorable pricing ...," and on page 26 beginning with "To the extent
possible ..." should be moved to the previous section on page 24 under
the GSA actions. This falls in line with the existing recommendation
that the GSA purchase card program manager "work with GSA's acquisition
center contracting officers to pursue point-of-sale discounts with
large vendors.":
3. Page 26, first paragraph, last line: "... purchase card program
managers should carefully consider the costs and benefits of obtaining
comprehensive information and imposing unwarranted burdens on
cardholders, vendors and other stakeholders.":
We believe that this is an important overriding concept. Some of the
key benefits of the purchase card program have been its ability to meet
the needs of highly decentralized organizations and programs, and its
convenience and simplicity in use, as outlined in Federal Acquisition
Regulation subpart 13.2. This efficient process, authorized under the
Federal Acquisition Streamlining Act of 1994, must remain that-a
streamlined, efficient process. Because it is a primary considerations,
we recommend that the above wording from page 26 be moved the very
beginning of the recommendation section for agency consideration in
determining the appropriate course(s) of action, i.e., move to the top
of page 24.
4. Page 15, table: Although referenced in the table, we recommend that
a "best practices" table be added to the report to include the
following pertinent details regarding DOI's negotiated agreements for
information technology:
The Blanket Purchase Agreements (BPA) for the purchase of computers and
related items, were awarded against GSA Federal Supply Schedules.
The BPAs include on-line ordering and payment by Departmental IT
managers and procurement personnel (using their purchase cards),
delivery of asset management reports, staggered shipping, single
invoicing, and the potential for increased discounts on large orders.
The BPAs also require the contractor to provide upgrades to the
equipment as IT changes. To ensure compliance with the Department of
the Interior IT architecture, ordering under the BPAs is mandatory. The
BPAs provide the following additional discounts off of related GSA
Federal Supply Schedules:
* 30 percent discount for standard computer configuration with monitor;
19 percent discount for standard computer configuration without
monitor;
20 percent discount for laptop computers; and:
* 16 percent savings on servers:
The total estimated savings to the Department is $5 million.
Once the BPAs were awarded, the Bureau of Land Management provided
training to all DOI information technology managers on the use of the
BPAs.
[End of section]
Appendix V: Comments from the Department of Veterans Affairs:
THE SECRETARY OF VETERANS AFFAIRS
WASHINGTON:
March 1, 2004:
Mr. David Cooper, Director:
Acquisition and Sourcing Management Team
Mr. Greg Kutz, Director:
Financial Management and Assurance Team
U.S. General Accounting Office:
441 G Street, NW
Washington, DC 20548:
Dear Messrs. Cooper and Kutz:
The Department of Veterans Affairs (VA) has reviewed your draft report,
CONTRACT MANAGEMENT. Agencies Could Achieve Significant Savings On
Purchase Card Buys (GAO-04-430) and agrees with your findings. VA also
concurs with those report recommendations that are directed
specifically to VA for action.
VA is recognized within the Federal community as a leading user and
effective manager of the Department's credit card program. VA continues
to take actions internally and with other agencies, commercial vendors,
and the credit card industry to ensure ongoing improvement. VA supports
the General Accounting Office's findings overall and agrees with the
report's focus on cost savings potential through efforts to obtain best
pricing. As an example of VA's efforts in this area, VHA's Office of
Clinical Logistics (CLO) was created to lead VHA in establishing
efficient, cost-saving procurement processes in all areas of medical
purchasing. The CLO office works closely with VA's Office of
Acquisition and Materiel Management to ensure consistent acquisition
policy.
The enclosure provides comments specific to those recommendations
directed to VA as well as comments to those recommendations directed to
the Office of Management and Budget and the General Services
Administration. The Department also shares information on challenges VA
faces in achieving its goal of obtaining best pricing.
I appreciate the opportunity to review and comment on your draft
report.
Enclosure:
Sincerely yours,
Signed by:
Anthony J. Principi:
Enclosure:
THE DEPARTMENT OF VETERANS AFFAIRS COMMENTS TO GAO DRAFT REPORT
CONTRACT MANAGEMENT. Agencies Could Achieve Significant Savings on
Purchase Card Buys (GAO-04-430):
To more effectively capture the significant potential for savings that
agencies could achieve, GAO recommends that the Secretary of Veterans
Affairs direct its purchase card program manager-in coordination with
officials responsible for procurement, finance, small business
utilization and other appropriate stakeholders-to take the following
three actions:
Develop mechanisms that provide card holders more favorable pricing
from major vendors or for key commodity groups, such as agency-wide
discount agreements with major vendors or simpler mechanisms that
capitalize on trade discounts offered by local merchants. In designing
such mechanisms, purchase card program managers should consider the
need to:
1. Take full advantage of competitive forces to assure the most
favorable prices;
2. Ensure that agreements cover an adequate range of the products
cardholders are likely to buy;
3. Coordinate negotiation activities to reduce duplication of effort;
and:
4. Ensure that agreements appropriately support agencies' efforts to
meet governmentwide socioeconomic requirements.
Concur - VA will continue to develop schedules and agreements to
achieve the most favorable pricing. VA has instituted a hierarchy of
contracting authority, which all procurement personnel and cardholders
are required to follow. The first sources for procuring goods are from
national contracts and Blanket Purchase Agreements (BPA) to achieve the
best available price. In addition, all local BPAs are reviewed at VA's
National Acquisition Center for possible application at the national
level. All Veterans Health Administration (VHA) staff involved in
procurement is required to receive and certify that they have received
appropriate training on this hierarchy.
In addition, VHA's Office of the Chief Financial Officer has developed
a series of oversight monitors for the purchase card program.
Cardholders, for example, must comply with a checklist of required
actions for each transaction. The first two items on the checklist
address adherence to GSA contracts or agency-specific agreements, while
also stipulating that potential competitively priced vendors are not
excluded from business transactions with VA.
THE DEPARTMENT OF VETERANS AFFAIRS COMMENTS TO GAO DRAFT REPORT
CONTRACT MANAGEMENT: Agencies Could Achieve Significant Savings on
Purchase Card Buys (GAO-04-430) (Continued):
VA's National Cemetery Administration (NCA) will provide guidance to
its cardholders to seek out sources that provide favorable pricing and
enter into agreements where possible to gain favorable pricing for
volume purchases. INCA will also network with other VA elements to
determine what agreements exist that NCA may use to obtain potential
price discounts.
Revise programs for communicating with cardholders to insure that the
programs provide cardholders the information they need to effectively
take advantage of mechanisms the agency has established to achieve
savings. Such information would include telling cardholders about:
1. the GSA contracts or agency-specific agreements chosen as vehicles
for leveraging the agency's buying power, and:
2. procedures cardholders should follow to access and use these
vehicles when they plan to make a purchase from these vendors:
Concur-VA's Office of Management (OM) will modify the guidance provided
to VA staff on the need to take effective advantage of mechanisms that
will achieve cost savings objectives. OM staff will also work with all
other VA elements on the guidance provided to field facilities. The
Department has established a web-based searchable database that
provides item price comparisons, as well as each vendor's socioeconomic
rating.
In addition, VHA's Clinical Logistics Officer (CLO) maintains a website
that provides all the necessary information for medical/surgical
procurement products that have been standardized at the national level.
Several communication tools are used in conveying information to the
purchase card holder, including instructions provided during training
sessions and during new employee orientation. VHA's purchase card
directive and the Department's purchase card handbook set policy
requiring all cardholders to pay only reasonable prices and to provide
justification for any outlier purchases that are made.
Annually, NCA will review how information is gathered to help ascertain
which programs are successful and which programs should be curtailed.
NCA will share the results of its review both internally and with other
VA elements to identify beneficial programs as well as those that do
not provide pricing advantages.
THE DEPARTMENT OF VETERANS AFFAIRS COMMENTS TO GAO DRAFT REPORT
CONTRACT MANAGEMENT. Agencies Could Achieve Significant Savings on
Purchase Card Buys (GAO-04-430) (Continued):
* To the extent of possible using available data, such as information on
major vendors, analyze purchase card expenditure patterns to identify
opportunities to achieve additional savings and to assess whether
cardholders are getting good prices. Where available data are not
sufficient for such analyses, investigate the feasibility of gathering
additional information. In evaluating options for gathering additional
information, purchase card program managers should carefully consider
the costs and benefits of cardholders, vendors, and other stakeholders.
Concur - VA will direct the program office responsible for the purchase
card program to work with the Office of Acquisition and Materiel
Management staff and other VA offices to identify additional
opportunities for savings. For example, VHA's CLO office regularly
analyzes weekly summaries of all Citibank transactions. The CLO office
reviews compliance with nationally standardized products as well as
identifies potential opportunities to add for national standardization.
Price comparisons of like products from the same company, but with
different costs to different medical facilities, also provide leverage
in contract negotiations with vendors.
In addition, NCA will instruct purchase cardholders to review quarterly
their purchases to identify repeat sources and the socioeconomic groups
where purchases are being made and how to capture the data. NCA
officials will also require purchase card program managers to
consolidate quarterly reviews from the cardholders and analyze
purchases to determine opportunities for consolidation of purchases,
which will result in savings. Finally, annually, a consolidated report
will be created to compare quarterly purchases so that trends can be
analyzed to determine long term savings or if adjustments need to be
made.
In addition to the recommendations directed to the Department of
Veterans Affairs, VA offers the following comments to GAO's other two
major report recommendations:
It is recommended that the Director of OMB "(1) require agencies to
report - either through the current quarterly reports or through
another mechanism - on the steps they are taking to leverage their
purchase card buys...," and °(2) annually report to Congress on the
Government's progress in identifying and taking advantage of
opportunities for savings on purchase card micropurchases.":
THE DEPARTMENT OF VETERANS AFFAIRS COMMENTS TO GAO DRAFT REPORT
CONTRACT MANAGEMENT. Agencies Could Achieve Significant Savings on
Purchase Card Buys (GAO-04-430) (Continued):
Comment - VA manages a large decentralized operation. Gathering this
information on a quarterly basis would be a cumbersome and costly task.
As noted in the report, the availability of data may also be an issue.
Identification of scheduled or discounted purchases is not easily done.
Reporting this type of information would likely yield little useful
data. It is for these reasons that VA believes GAO should change the
recommendation to have OMB request agencies to submit a plan to OMB on
how they propose to address these issues.
It is also recommended that the Administrator of GSA direct the
purchase card program manager to "(3) continue efforts to improve
reporting by banks that provide purchase cards so that GSA will have
the data it needs ... to effectively assist agencies in identifying
opportunities to leverage their purchasing power," °(4) work with GSA's
acquisition center contracting officers to pursue point-of-sale
discounts with large vendors," and "(5) encourage agencies to share
information on their successes in leveraging the purchase card to
obtain better prices...":
Comment - Based on paper invoices received at VA's Financial Services
Center, Austin, TX, vendors offer discounts on purchase card
transactions, but no mechanism currently exists to take the discounts.
The recommendation to use program vendor point of sale (POS) systems
with an ability to take a discount based on the purchase card number
would pay dividends. VA recommends considering programming these POS
systems to recognize Government purchase card transactions as exempt
from sales taxes, where appropriate. Expanding the Level 3 data
availability would also provide agencies with better data with which to
analyze payment volumes. VA also recommends that cardholder training on
how to take advantage of existing discount arrangements include
guidance regarding the exclusion of Government purchases from sales
taxes.
[End of section]
Appendix VI: Information on Purchase Card Expenditures:
Table 3: Department of Agriculture Purchase Card Expenditures by
Transaction Dollar Value, Fiscal Year 2002:
Dollar value range: $0.00 to $2,500.00;
Number: 1,584,822;
Transactions: Percent: 98.4;
Dollar value: $396,797;
Expenditures (dollars in thousands): Percent: 67.0.
Dollar value range: $2,500.01 to $25,000;
Number: 25,221;
Transactions: Percent: 1.6;
Dollar value: $158,630;
Expenditures (dollars in thousands): Percent: 26.8.
Dollar value range: Over $25,000;
Number: 793;
Transactions: Percent: [A];
Dollar value: $36,869;
Expenditures (dollars in thousands): Percent: 6.2.
Dollar value range: All transactions;
Number: 1,610,836;
Dollar value: $592,296.
Source: GAO analysis.
[A] Less than 0.1 percent.
[End of table]
Table 4: Department of Defense Military Services Purchase Card
Expenditures by Transaction Dollar Value, Fiscal Year 2002:
Army;
Dollar value range: $0.00 to $2,500.00;
Number: 4,512,803;
Transactions: Percent: 98.1;
Expenditures (dollars in thousands): Dollar value: $1,683,207;
Expenditures (dollars in thousands): Percent: 61.4.
Army;
Dollar value range: $2,500.01 to $25,000;
Number: 81,670;
Transactions: Percent: 1.8;
Expenditures (dollars in thousands): Dollar value: $585,759;
Expenditures (dollars in thousands): Percent: 21.4.
Army;
Dollar value range: Over $25,000;
Number: 7,710;
Transactions: Percent: 0.2[B];
Expenditures (dollars in thousands): Dollar value: $470,646;
Expenditures (dollars in thousands): Percent: 17.2.
Army;
Dollar value range: All Transactions;
Number: 4,602,183;
Expenditures (dollars in thousands): Dollar value: $2,739,612.
Navy;
Dollar value range: $0.00 to $2,500.00;
Number: 2,545,170;
Transactions: Percent: 97.6;
Expenditures (dollars in thousands): Dollar value: $1,141,762;
Expenditures (dollars in thousands): Percent: 64.0.
Navy;
Dollar value range: $2,500.01 to $25,000;
Number: 57,595;
Transactions: Percent: 2.2;
Expenditures (dollars in thousands): Dollar value: $407,594;
Expenditures (dollars in thousands): Percent: 22.8.
Navy;
Dollar value range: Over $25,000;
Number: 4,451;
Transactions: Percent: 0.2;
Expenditures (dollars in thousands): Dollar value: $234,772;
Expenditures (dollars in thousands): Percent: 13.2.
Navy;
Dollar value range: All Transactions;
Number: 2,607,216;
Expenditures (dollars in thousands): Dollar value: $1,784,128.
Air Force;
Dollar value range: $0.00 to $2,500.00;
Number: 2,938,898;
Transactions: Percent: 97.5;
Expenditures (dollars in thousands): Dollar value: $1,022,646;
Expenditures (dollars in thousands): Percent: 63.7.
Air Force;
Dollar value range: $2,500.01 to $25,000;
Number: 75,587;
Transactions: Percent: 2.5;
Expenditures (dollars in thousands): Dollar value: $532,522;
Expenditures (dollars in thousands): Percent: 33.2.
Air Force;
Dollar value range: Over $25,000;
Number: 971;
Transactions: Percent: [A];
Expenditures (dollars in thousands): Dollar value: $49,199;
Expenditures (dollars in thousands): Percent: 3.1.
Dollar value range: All Transactions;
Number: 3,015,456;
Expenditures (dollars in thousands): Dollar value: $1,604,367.
Source: GAO analysis:
[A] Less than 0.1 percent.
[B] Exceeds 100 percent due to rounding.
[End of table]
Table 5: Department of the Interior Purchase Card Expenditures by
Transaction Dollar Value, Fiscal Year 2002:
Dollar value range: $0.00 to $2,500.00;
Transactions: 1,334,245;
Transactions: Percent: 98.7;
Expenditures (dollars in thousands): $356,082;
Expenditures (dollars in thousands): Percent: 73.1.
Dollar value range: $2,500.01 to $25,000;
Transactions: 17,438;
Transactions: Percent: 1.3;
Expenditures (dollars in thousands): 103,500;
Expenditures (dollars in thousands): Percent: 21.2.
Dollar value range: Over $25,000;
Transactions: 545;
Transactions: Percent: [A];
Expenditures (dollars in thousands): 27,700;
Expenditures (dollars in thousands): Percent: 5.7.
Dollar value range: All Transactions;
Transactions: 1,352,228;
Expenditures (dollars in thousands): $487,282.
Source: GAO analysis.
[A] Less than 0.1 percent.
[End of table]
Table 6: Department of Justice Purchase Card Expenditures by
Transaction Dollar Value, Fiscal Year 2002:
Dollar value range: $0.00 to $2,500.00;
Number of transactions: 897,028;
Number of transactions: Percent: 96.9;
Expenditures (dollars in thousands): $390,784;
Expenditures (dollars in thousands): Percent: 65.8.
Dollar value range: $2,500.01 to $25,000;
Number of transactions: 28,988;
Number of transactions: Percent: 3.1;
Expenditures (dollars in thousands): 195,883;
Expenditures (dollars in thousands): Percent: 33.0.
Dollar value range: Over $25,000;
Number of transactions: 146;
Number of transactions: Percent: [A];
Expenditures (dollars in thousands): 6,909;
Expenditures (dollars in thousands): Percent: 1.2.
Dollar value range: All Transactions;
Number of transactions: 926,162;
Number of Expenditures (dollars in thousands): $593,576.
Source: GAO analysis.
[A] Less than 0.1 percent.
[End of table]
Table 7: Department of Transportation Purchase Card Expenditures by
Transaction Dollar Value, Fiscal Year 2002:
Dollar value range: $0.00 to $2,500.00;
Transactions: 935,892;
Transactions: Percent: 97.9;
Expenditures (dollars in thousands): $279,300;
Expenditures (dollars in thousands): Percent: 65.7.
Dollar value range: $2,500.01 to $25,000;
Transactions: 19,823;
Transactions: Percent: 2.1;
Expenditures (dollars in thousands): 120,034;
Expenditures (dollars in thousands): Percent: 28.2.
Dollar value range: Over $25,000;
Transactions: 439;
Transactions: Percent: [A];
Expenditures (dollars in thousands): 26,097;
Expenditures (dollars in thousands): Percent: 6.1.
Dollar value range: All Transactions;
Transactions: 956,154;
Expenditures (dollars in thousands): $425,431.
Source: GAO analysis.
[A] Less than 0.1 percent.
[End of table]
Table 8: Department of Veterans Affairs Purchase Card Expenditures by
Transaction Dollar Value, Fiscal Year 2002:
Dollar value range: $0.00 to $2,500.00;
Transactions: 2,540,159;
Transactions: Percent: 96.6;
Expenditures (dollars in thousands): $920,137;
Expenditures (dollars in thousands): Percent: 59.0.
Dollar value range: $2,500.01 to $25,000;
Transactions: 87,739;
Transactions: Percent: 3.3;
Expenditures (dollars in thousands): 506,769;
Expenditures (dollars in thousands): Percent: 32.5.
Dollar value range: Over $25,000;
Transactions: 2,620;
Transactions: Percent: 0.1;
Expenditures (dollars in thousands): 133,403;
Expenditures (dollars in thousands): Percent: 8.5.
Dollar value range: All Transactions;
Transactions: 2,630,518;
Expenditures (dollars in thousands): $1,560,309.
Source: GAO analysis.
Note: Data do not include about $2.7 billion in purchase card
transactions under Veterans Affairs' prime vendor program.
[End of table]
[End of section]
Appendix VII: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
John Kelly (202) 512-6926 Michele Mackin (202) 512-4309:
Acknowledgments:
In addition to the individuals named above, Robert Ackley, Victoria
Klepacz, James Moses, Jerrod O'Nelio, Monty Peters, Jose Ramos, Harold
Reich, Sanford Reigle, Kenneth Roberts, Sylvia Schatz, Quan Thai,
Najeema Washington, and Gary Wiggins made key contributions to this
report.
[End of section]
Related GAO Products:
Products concerning purchase card internal controls:
Purchase Cards: Steps Taken to Improve DOD Program Management, but
Actions Needed to Address Misuse, GAO-04-156 (Washington, D.C.: Dec. 2,
2003).
Audit Guide: Auditing and Investigating the Internal Control of
Government Purchase Card Programs, GAO-04-87G (Washington, D.C.: Nov.
1, 2003).
Forest Service Purchase Cards: Internal Control Weaknesses Resulted in
Instances of Improper, Wasteful, and Questionable Purchases, GAO-03-
786 (Washington, D.C.: Aug. 11, 2003).
HUD Purchase Cards: Poor Internal Controls Resulted in Improper and
Questionable Purchases, GAO-03-489 (Washington, D.C.: Apr. 11, 2003).
FAA Purchase Cards: Weak Controls Resulted in Instances of Improper and
Wasteful Purchases and Missing Assets, GAO-03-405 (Washington, D.C.:
Mar. 21, 2003).
Purchase Cards: Control Weaknesses Leave the Air Force Vulnerable to
Fraud, Waste, and Abuse, GAO-03-292 (Washington, D.C.: Dec. 20, 2002).
Purchase Cards: Navy Is Vulnerable to Fraud and Abuse but Is Taking
Action to Resolve Control Weaknesses, GAO-02-1041 (Washington, D.C.:
Sept. 27, 2002).
Purchase Cards: Control Weaknesses Leave Army Vulnerable to Fraud,
Waste, and Abuse, GAO-02-732 (Washington, D.C.: June 27, 2002).
FAA Alaska: Weak Controls Resulted in Improper and Wasteful
Purchases, GAO-02-606 (Washington, D.C.: May 30, 2002).
Government Purchase Cards: Control Weaknesses Expose Agencies to Fraud
and Abuse, GAO-02-676T (Washington, D.C.: May 1, 2002).
Purchase Cards: Control Weaknesses Leave Two Navy Units Vulnerable to
Fraud and Abuse, GAO-02-32 (Washington, D.C.: Nov. 30, 2001).
Products concerning strategic purchasing:
Contract Management: Restructuring GSA's Federal Supply Service and
Federal Technology Service, GAO-04-132T (Washington, D.C.: Oct. 2,
2003).
Best Practices: Improved Knowledge of DOD Service Contracts Could
Reveal Significant Savings, GAO-03-661 (Washington, D.C.: June 9,
2003).
Contract Management: Taking a Strategic Approach to Improving Service
Acquisitions, GAO-02-499T (Washington, D.C.: Mar. 7, 2002):
Best Practices: Taking a Strategic Approach Could Improve DOD's
Acquisition of Services, GAO-02-230 (Washington, D.C.: Jan. 18, 2002):
FOOTNOTES
[1] For example, see U.S. General Accounting Office, Purchase Cards:
Navy Is Vulnerable to Fraud and Abuse but Is Taking Action to Resolve
Control Weaknesses, GAO-02-1041 (Washington D.C.: Sept. 27, 2002), 42-
43; and Department of Veterans Affairs, Office of Inspector General,
Evaluation of The Department of Veterans Affairs Purchasing Practices,
Report No. 01-01855-75, (Washington, D.C.: May 15, 2001).
[2] We also met with officials of the Department of Homeland Security
because certain components of the Departments of Agriculture, Justice,
and Transportation were transferred to the new department in March
2003.
[3] The Schedule program offers a large group of commercial products
and services ranging from office supplies to information technology
services.
[4] Micropurchases are acquisitions of supplies or services the
aggregate amount of which does not exceed the micropurchase threshold.
Generally, the micropurchase threshold is $2,500, but for certain
purchases the Federal Acquisition Regulation defines a different
threshold (FAR 2.101).
[5] See appendix I, "Scope and Methodology."
[6] P.L. 103-355, Sec. 4301.
[7] FAR 13.201(b). Further, FAR 13.301 establishes guidelines for the
use and management of the purchase card.
[8] Although GSA negotiates to obtain discounted prices on its Schedule
contracts, the GSA Inspector General has raised concerns about whether
GSA is getting the best possible prices from vendors. GSA is currently
examining options to address these concerns.
[9] Bob Stump National Defense Authorization Act for Fiscal Year 2003,
P.L. 107-314, Sec. 1007; Department of Defense Appropriations Act,
2003, P.L. 107-248, Sec. 8149 as amended by Department of Defense
Appropriations Act, 2004, P. L.108.87, Sec.8144.
[10] U.S. General Accounting Office, Purchase Cards: Steps Taken to
Improve DOD Program Management, but Actions Needed to Address
Misuse, GAO-04-156 (Washington, D.C.: Dec. 2, 2003).
[11] H.R. 3165, Sec. 2.
[12] H.R. 3329, Sec. 2(b)(c).
[13] The Javits-Wagner-O'Day (JWOD) Act established the Committee for
Purchase from People Who Are Blind or Severely Disabled and charters
the Committee to develop a procurement list of commodities produced and
services provided by nonprofit agencies (41 U.S.C. Sec. 46, Sec. 47).
GSA's proposal instructions for office supply Schedule contracts
require vendors that are authorized JWOD distributors to describe the
procedures they have in place to ensure that federal customers do not
purchase commercial items when JWOD products are available. The act
also directs agencies to buy items or services on the procurement list
from nonprofit agencies for the blind or severely handicapped if the
items are available within the period required by the government. (41
U.S.C. Sec. 48).
[14] Level 1 data include basic information about the transaction, such
as the date and amount and basic identifying information about the
merchant. Level 2 data include information on sales tax charged and
additional information about the merchant. Level 3 data include details
on the descriptions, quantities, and prices of items purchased. Our
report --U.S. General Accounting Office, Contract Management:
Government Faces Challenges in Gathering Socioeconomic Data on Purchase
Card Merchants, GAO-03-56, (Washington, D.C: Dec. 13, 2002)--discussed
the lack of detailed purchase card transaction data.
[15] We excluded transactions valued at less than $100.00 to limit our
investment in researching transactions involving minimal amounts of
money. We included smaller cellular telecommunications transactions
because these are normally monthly, recurring charges that involve an
annual amount greater than $25.00.
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