Contracting Strategies
Data and Oversight Problems Hamper Opportunities to Leverage Value of Interagency and Enterprisewide Contracts Gao ID: GAO-10-367 April 29, 2010Agencies can use several different types of contracts to leverage the government's buying power for goods and services. These include interagency contracts--where one agency uses another's contract for its own needs--such as the General Services Administration (GSA) and the Department of Veterans Affairs multiple award schedule (MAS) contracts, multiagency contracts (MAC) for a wide range of goods and services, and governmentwide acquisition contracts (GWAC) for information technology. Agencies spent at least $60 billion in fiscal year 2008 through these contracts and similar single-agency enterprisewide contracts. However, concerns exist about duplication, oversight, and a lack of information on these contracts, and pricing and management of the MAS program. GAO was asked to assess the reasons for establishing and the policies to manage these contracts; the effectiveness of GSA tools for obtaining best MAS contract prices; and GSA's management of the MAS program. To do this, GAO reviewed statutes, regulations, policies, contract documentation and data, and interviewed officials from OMB and six agencies.
GWACs, MACs--two types of interagency contracts--and enterprisewide contracts should provide an advantage to the government in buying billions of dollars worth of goods and services. However, data are lacking and there is limited governmentwide policy to effectively leverage, manage, and oversee these contracts. The total number of MACs and enterprisewide contracts is unknown, and existing data are not sufficiently reliable to identify them. In addition, GWACs are the only interagency contracts requiring OMB approval. Agencies GAO reviewed followed statutes, acquisition regulations, and internal policies to establish and use MACs and enterprisewide contracts. Avoiding fees associated with using other agencies' contracts and more control over procurements are some of the reasons agencies cited for establishing MACs and enterprisewide contracts. However, many of the same contractors provided similar products and services on multiple contracts--a condition that increases costs to both the vendor and the government and misses opportunities to leverage the government's buying power. Recent legislation and OMB's Office of Federal Procurement Policy initiatives are expected to strengthen management of MACs, but no such initiatives exist for enterprisewide contracts. GSA's MAS program--the largest interagency contracting program--uses several tools and controls to obtain best prices, but the limited application of certain tools hinders its ability to determine whether it achieves this goal. GSA has established two regulatory pricing controls for MAS contracts: seek the best prices vendors provide to their most favored customers; and a price reduction clause that provides the government a lower price if a vendor lowers the price for similarly situated commercial customers. GSA uses other pricing tools--e.g., pre-award contract audits by its Inspector General and Procurement Management Reviews--on a limited basis. For example, the Inspector General performs pre-award audits on a small sample of MAS contracts annually, but has identified contract cost avoidance of almost $4 billion in recent years. In 2008, GSA established a MAS advisory panel that recommended changes to the pricing controls noted above; concerns remain that such changes could adversely affect GSA's ability to negotiate best prices. A lack of data, decentralized management, and limitations in assessment tools create challenges for GSA in managing the MAS program. The agency lacks data about customer agencies' use of the program, limiting its ability to determine how well the program meets customers' needs. The MAS program office lacks direct program oversight, as GSA has dispersed authority for managing MAS among nine acquisition centers under three business portfolios. Program stakeholders have identified concerns that this structure has impaired consistent policy implementation. Shortcomings in assessment tools also result in management challenges. For example, performance measures are inconsistent, including inconsistent emphasis on pricing. GSA's customer satisfaction survey has such a low response rate that its utility for evaluating program performance is limited.
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: John K. Needham Team: Government Accountability Office: Acquisition and Sourcing Management Phone: (202) 512-5274GAO-10-367, Contracting Strategies: Data and Oversight Problems Hamper Opportunities to Leverage Value of Interagency and Enterprisewide Contracts
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Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
April 2010:
Contracting Strategies:
Data and Oversight Problems Hamper Opportunities to Leverage Value of
Interagency and Enterprisewide Contracts:
GAO-10-367:
GAO Highlights:
Highlights of GAO-10-367, a report to congressional requesters.
Why GAO Did This Study:
Agencies can use several different types of contracts to leverage the
government‘s buying power for goods and services. These include
interagency contracts”where one agency uses another‘s contract for its
own needs”such as the General Services Administration (GSA) and the
Department of Veterans Affairs multiple award schedule (MAS)
contracts, multiagency contracts (MAC) for a wide range of goods and
services, and governmentwide acquisition contracts (GWAC) for
information technology. Agencies spent at least $60 billion in fiscal
year 2008 through these contracts and similar single-agency
enterprisewide contracts. However, concerns exist about duplication,
oversight, and a lack of information on these contracts, and pricing
and management of the MAS program. GAO was asked to assess the reasons
for establishing and the policies to manage these contracts; the
effectiveness of GSA tools for obtaining best MAS contract prices; and
GSA‘s management of the MAS program. To do this, GAO reviewed
statutes, regulations, policies, contract documentation and data, and
interviewed officials from OMB and six agencies.
What GAO Found:
GWACs, MACs”two types of interagency contracts”and enterprisewide
contracts should provide an advantage to the government in buying
billions of dollars worth of goods and services. However, data are
lacking and there is limited governmentwide policy to effectively
leverage, manage, and oversee these contracts. The total number of
MACs and enterprisewide contracts is unknown, and existing data are
not sufficiently reliable to identify them. In addition, GWACs are the
only interagency contracts requiring OMB approval. Agencies GAO
reviewed followed statutes, acquisition regulations, and internal
policies to establish and use MACs and enterprisewide contracts.
Avoiding fees associated with using other agencies‘ contracts and more
control over procurements are some of the reasons agencies cited for
establishing MACs and enterprisewide contracts. However, many of the
same contractors provided similar products and services on multiple
contracts”a condition that increases costs to both the vendor and the
government and misses opportunities to leverage the government‘s
buying power. Recent legislation and OMB‘s Office of Federal
Procurement Policy initiatives are expected to strengthen management
of MACs, but no such initiatives exist for enterprisewide contracts.
GSA‘s MAS program”the largest interagency contracting program”uses
several tools and controls to obtain best prices, but the limited
application of certain tools hinders its ability to determine whether
it achieves this goal. GSA has established two regulatory pricing
controls for MAS contracts: seek the best prices vendors provide to
their most favored customers; and a price reduction clause that
provides the government a lower price if a vendor lowers the price for
similarly situated commercial customers. GSA uses other pricing tools”
e.g., pre-award contract audits by its Inspector General and
Procurement Management Reviews”on a limited basis. For example, the
Inspector General performs pre-award audits on a small sample of MAS
contracts annually, but has identified contract cost avoidance of
almost $4 billion in recent years. In 2008, GSA established a MAS
advisory panel that recommended changes to the pricing controls noted
above; concerns remain that such changes could adversely affect GSA‘s
ability to negotiate best prices.
A lack of data, decentralized management, and limitations in
assessment tools create challenges for GSA in managing the MAS
program. The agency lacks data about customer agencies‘ use of the
program, limiting its ability to determine how well the program meets
customers‘ needs. The MAS program office lacks direct program
oversight, as GSA has dispersed authority for managing MAS among nine
acquisition centers under three business portfolios. Program
stakeholders have identified concerns that this structure has impaired
consistent policy implementation. Shortcomings in assessment tools
also result in management challenges. For example, performance
measures are inconsistent, including inconsistent emphasis on pricing.
GSA‘s customer satisfaction survey has such a low response rate that
its utility for evaluating program performance is limited.
What GAO Recommends:
GAO makes recommendations: to the Office of Management and Budget
(OMB) to strengthen policy, improve data and better coordinate agencies‘
awards of MACs and enterprisewide contracts; and to GSA to improve MAS
program pricing and management. Both agencies concurred with GAO‘s
recommendations.
View [hyperlink, http://www.gao.gov/products/GAO-10-367] or key
components. For more information, contact John Needham at (202) 512-
4841 or needhamjk1@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
With Insufficient and Unreliable Data and Limited Governmentwide
Policy, Agencies' Use of Interagency and Enterprisewide Contracts May
Result in Inefficient Contracting:
GSA's Efforts to Determine Whether It Obtains the Best Prices on MAS
Contracts Is Hindered by the Limited Application of Selected Pricing
Tools:
Effective MAS Program Management Is Hindered by a Lack of Data, a
Decentralized Management Structure, and Shortcomings in Assessment
Tools:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: General Services Administration Multiple Award Schedule
Pricing Process and Tools:
Appendix III: Comments from the Department of Defense:
Appendix IV: Comments from the Department of Health and Human Services:
Appendix V: Comments from the General Services Administration:
Appendix VI: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Comparison of Various Contract Vehicles Examined:
Table 2: Governmentwide Acquisition Contracts as of September 30, 2008:
Table 3: Selected Agencies' and Military Departments' Reasons for
Establishing MACs and Enterprisewide Contracts in Lieu of Using the
GSA MAS Program:
Table 4: Selected Agencies' and Military Departments' Reasons for
Establishing MACs and Enterprisewide Contracts in Lieu of Using GWACs
and MACs Identified by Agencies:
Table 5: Top 10 GWAC Vendors on GWACs, MACs, and Enterprisewide
Contracts:
Table 6: Federal Agencies and Military Departments Included in Our
Review:
Table 7: Vendors Included in Our Review:
Table 8: List of Agencies, Military Departments, and Contracting
Programs Reviewed:
Figures:
Figure 1: MAS Program Sales, Fiscal Years 1996 through 2008:
Figure 2: GSA MAS Pre-Award Audits, Fiscal Years 1998 through 2008:
Figure 3: MAS Program Organizational Chart:
Abbreviations:
DOD: Department of Defense:
DHS: Department of Homeland Security:
EAGLE: Enterprise Acquisition Gateway for Leading-Edge Solutions:
FAR: Federal Acquisition Regulation:
FAS: Federal Acquisition Service:
FPDS-NG: Federal Procurement Data System-Next Generation:
GAO: Government Accountability Office:
GSA: General Services Administration:
GWAC: Governmentwide acquisition contract:
MAC: Multiagency contract:
MAS: Multiple Award Schedule:
NASA: National Aeronautics and Space Administration:
OFPP: Office of Federal Procurement Policy:
OMB: Office of Management and Budget:
PMR: Procurement Management Review:
VA: Department of Veterans Affairs:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
April 29, 2010:
The Honorable Joseph I. Lieberman:
Chairman:
The Honorable Susan M. Collins:
Ranking Member:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
The Honorable Edolphus Towns:
Chairman:
The Honorable Darrell E. Issa:
Ranking Member:
Committee on Oversight and Government Reform:
House of Representatives:
The Honorable Claire McCaskill:
Chairman:
Subcommittee on Contracting Oversight:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
Since 2002, spending on federal contracts has more than doubled, with
approximately $530 billion obligated[Footnote 1] in fiscal year 2008.
As this spending has increased, there has been renewed focus on
maximizing efficiencies in the procurement process to achieve cost
savings. One way to accomplish this is by increasing the use of
contracts designed to leverage the government's buying power when
acquiring commercial goods and services. These include the multiple
award schedule (MAS) program contracts (also known as the Federal
Supply Schedule),[Footnote 2] multiagency contracts (MAC), and
governmentwide acquisition contracts (GWAC).[Footnote 3] The General
Services Administration (GSA) directs and manages the MAS program. It
has delegated authority to the Department of Veterans Affairs (VA) to
operate schedules for medical supplies.[Footnote 4] Other agencies
have established and operate MACs and GWACs. MAS contracts, MACs, and
GWACs are all interagency contracts.
When managed properly, interagency contracting--a process by which one
agency either uses another agency's contract directly or obtains
contracting support services from another agency--can leverage the
government's aggregate buying power and provide a simplified and
expedited method for procuring commonly used goods and services.
Enterprisewide contracts, which, according to procurement officials,
appear to have become more popular in recent years, are internal
purchasing programs established within a federal department or agency
to acquire goods and services. They are similar to interagency
contracts in that they can leverage the purchasing power of the
federal agency but generally do not allow purchases from the contract
by federal activities other than the original acquiring activity. In
fact, the Office of Management of Budget (OMB) recently reported that
20 of the 24 largest procuring activities are planning to achieve
contracting savings by implementing strategic sourcing initiatives
[Footnote 5] by using enterprisewide contracting to leverage their
buying power.[Footnote 6] These initiatives are part of OMB's goal,
announced in December 2009, of reducing contract cost by 7 percent by
September 30, 2011.
Though precise numbers are unavailable, in fiscal year 2008,
government buyers used the MAS program, MACs, and GWACs to acquire at
least $60 billion of commercial goods and services, including billions
spent through enterprisewide contracts. Some in the procurement
community have raised concerns about a proliferation of some of these
contracts, noting that without coordinated governmentwide oversight of
MACs and enterprisewide contracts it is unclear whether the use of
these contracts helps government buyers leverage their buying power.
The perceived growth in the number of these contracts and duplication
that has occurred with their growth may also adversely affect the
overall administrative efficiencies and cost savings expected with
their use. Furthermore, in recent years, we and others have
highlighted challenges with MAS program pricing and compliance with
the Federal Acquisition Regulation (FAR) to obtain the best possible
value. In this context, you requested that we address management
issues associated with the growth in use of interagency contracting
vehicles and enterprisewide contracts, and especially the management
of the GSA's MAS program contracts. Specifically, this report
addresses:
1. the data that exist to describe MACs, GWACs, and enterprisewide
contracts use governmentwide; the extent to which policies and
guidance exist to establish and manage these contracts; and the
reasons agencies use these contracts;
2. the effectiveness of tools and controls GSA uses to obtain the best
possible prices for customers of its MAS program; and:
3. the extent to which GSA has performance information and an
oversight structure in place to manage the MAS program.
We conducted this work at the Office of Federal Procurement Policy
(OFPP) within OMB, which has governmentwide procurement policy
responsibility. We also conducted work at six federal agencies
including GSA, the Department of Defense (DOD), including the three
military departments, Department of Health and Human Services,
Department of Homeland Security (DHS), VA, and the National
Aeronautics and Space Administration (NASA) because these agencies
established and or used the MAS, GWAC, MAC, or enterprisewide contract
programs and were responsible for almost 87 percent of total federal
procurement obligations in fiscal year 2008.[Footnote 7] To assess the
oversight of and benefits provided these programs, we reviewed
policies, agency directives, relevant studies, audit reports, the FAR,
and other regulations relevant to our review objectives. We
interviewed OFPP representatives responsible for overseeing
interagency contracting, the Senior Procurement Executives or their
representatives for the agencies where we conducted work, and other
agency officials responsible for multiagency and enterprisewide
contracts. To determine the magnitude of multiagency and
enterprisewide contracts, we attempted to use the Federal Procurement
Data System-Next Generation (FPDS-NG) but found that the data were not
sufficiently reliable to determine the universe and use of
MACs[Footnote 8] or enterprisewide contracts. Despite its critical
role, we have consistently reported on FPDS-NG data quality issues
over a number of years.[Footnote 9] This lack of reliability made it
impossible to determine the universe and use of these types of
contracts. Hence, we conducted literature searches and reviewed
agencies' and government contractors' Web pages to identify examples
of MACs and enterprisewide contracts. After identifying examples of
these contracts, we judgmentally selected for review 14 contracting
programs from 5 of the 6 agencies and 2 of the 3 military departments
that had at least one of the three contract types (MAC, GWAC, and
enterprisewide contracts), and met with agency officials and vendors
to confirm our identification of examples and to obtain their
perspectives on the proliferation of these vehicles. Because the MAS
program represents the single largest federal program providing
multiagency contracts, we concentrated our work on the MAS program.
Furthermore, because GSA rather than VA sets the policy for the MAS
program, we focused on GSA's management of the program. We reviewed
GSA's management structure for overseeing the program and the tools
and controls GSA established for obtaining fair and reasonable pricing
for MAS contracts. We reviewed GSA memorandums, regulations, manuals,
and other relevant documentation; interviewed agency officials; and
analyzed GSA processes and practices related to program oversight and
contract negotiations. We also conducted structured interviews with 16
vendors with high sales on the GSA MAS program and had also been
awarded GWACs, MACs, or enterprisewide contracts. The 16 vendors
represented both large and small businesses. We also judgmentally
selected 17 contracting officers from 4 of the 6 agencies selected for
review and the 3 military departments who had placed orders through
one of the reviewed contract vehicles to obtain their perspectives on
the management and pricing of the MAS contracts, MACs, GWACs and
enterprisewide contracts. We also met with representatives of several
private sector organizations--the Coalition for Government
Procurement, Jefferson Solutions, LLC, the Professional Services
Council, and the Washington Management Group--that represent vendors
and contractors to obtain their views on issues related to our review
objectives.
We conducted this performance audit from October 2008 through April
2010 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives. A more
detailed discussion of our scope and methodology is in appendix I.
Results in Brief:
Interagency and enterprisewide contracts should provide an advantage
to the government in buying billions of dollars worth of goods and
services, yet OMB and agencies lack reliable, comprehensive data to
effectively leverage, manage, and oversee these contracts. The total
number of MACs and enterprisewide contracts currently in use by
agencies is unknown because the federal government's official
procurement database, FPDS-NG, is not sufficiently reliable for
identifying these contracts. This has been a longstanding problem.
Furthermore, we found there is limited governmentwide policy for
establishing and overseeing MACs and enterprisewide contracts. The
agencies we reviewed followed statutes, FAR, and their own internal
policies and guidance to justify, establish, and operate MACs and
enterprisewide contracts. Currently, GWACs are the only contracts
requiring approval from and annual reporting to OMB. We also found
that some agencies' policies or guidance have encouraged the use of
enterprisewide contracts over the use of other contracts, including
the GSA MAS program contracts. We found that departments and agencies
establish, justify, and use their own MACs and enterprisewide
contracts rather than other established interagency contracts for a
variety of reasons, which include avoiding fees paid for the use of
other agencies' contracts, gaining more control over procurements made
by organizational components, and allowing for the use of cost
reimbursement contracts. Under these conditions, many of the same
vendors provided similar products and services on multiple contracts,
which increases costs to both the vendor and the government and can
result in missed opportunities to leverage the government's buying
power. Recent legislation and OFPP initiatives are expected to
strengthen oversight and management of MACs, but no initiatives are
underway to strengthen oversight of enterprisewide contracts.
GSA's MAS program--the largest interagency contracting program with
approximately 17,000 contracts--uses several tools and controls in the
contract award and administration process to obtain and maintain best
prices for its contracts, but applies some of the tools on a limited
basis. This hinders GSA's ability to determine whether it achieves the
MAS program goal of obtaining best prices. GSA has established two key
regulatory controls to obtain and maintain best prices throughout the
life of all MAS contracts. The first is the provision that, prior to
award, GSA seeks to obtain the best price that a vendor provides to
their most favored customer,[Footnote 10] and the second is the use of
a price reduction clause in each MAS contract that allows the
government to receive a lower contract price after award if the vendor
lowers its price to similarly situated commercial customers. However,
GSA does not collect information to determine if the price reduction
clause is working as intended. GSA also uses other tools to leverage
the government's buying power, evaluate compliance with program
pricing policies, and ensure the quality of contract negotiations
primarily for larger contracts. These include pre-award audits of MAS
contracts by the GSA Inspector General, clearance panel reviews of
contract negotiation objectives, and Procurement Management Reviews.
However, GSA applies these tools to a small number of MAS contracts.
For example, the GSA Inspector General performed pre-award audits of
69 contracts in fiscal year 2008, but does not target hundreds of
other contracts that are eligible for audit. Nevertheless, with an
investment of a few million dollars annually, the Inspector General
recommended almost $4 billion in cost avoidance through these audits
from fiscal years 2004 through 2008--cost avoidance would result from
lower prices paid by government buyers. We also found several
instances where required clearance panel reviews were not held, and
GSA officials said that they do not check whether contracts that met
the appropriate threshold received a panel review as required, thus
limiting the effectiveness of this tool. GSA also conducts Procurement
Management Reviews to assess contracts' compliance with statutory
requirements and internal policy and guidance. However, GSA only
selects a small number of contracts for review and at the time of our
fieldwork did not use a risk-based selection methodology, which does
not permit GSA to derive any trends based on the review findings. In
2008, GSA established an advisory panel to review MAS program pricing
provisions, which has recommended changes to the pricing provisions,
among other things. These changes include elimination of the price
reduction clause and clarifying the price objective for MAS contracts,
which could potentially remove "most favored customer" as the pricing
goal for MAS contracts. However, concerns remain that eliminating
these provisions could adversely affect GSA's ability to negotiate
best prices.
A lack of comprehensive data, a decentralized management structure,
and limitations in assessment tools create challenges for GSA to
manage the MAS program effectively and have a program wide perspective
on its operations. Our prior work has highlighted the importance of
having comprehensive data as part of a strategic approach to
procurement, noting that the use of procurement data to identify
buyers and how much is being spent for goods and services can identify
opportunities to save money and improve performance. However, GSA
lacks data about the use of the MAS program by customer agencies.
Without this data, GSA is limited in its ability to determine how well
the MAS program meets its customers' needs and to help its customers
obtain the best value through MAS contracts, among other things. In
addition, the decentralized management structure for the MAS program
hinders consistent implementation of the MAS program within GSA, as
well as program oversight. GSA established a MAS program office in
2008 to manage strategic and policy issues for the program. However,
it lacks direct oversight authority for the MAS program--program
oversight is not addressed in its charter. Rather, GSA has dispersed
responsibility for the management of individual contract schedules
among nine acquisition centers under three business lines. Some MAS
program officials and vendors we met with pointed out that as a result
of this structure, a lack of communication and consistency exists
among the acquisition centers, which has impaired the consistent
implementation of policies across the MAS program and the sharing of
best practices, and the GSA Inspector General has identified issues
with oversight of the MAS program. Finally, shortcomings in assessment
tools also result in management challenges. For example, performance
measures are inconsistent across the GSA organizations that manage MAS
contracts, including inconsistent emphasis on pricing. GSA's MAS
customer satisfaction survey also has an extremely low response rate
that limits its utility as a means for evaluating program performance.
We make five recommendations to OMB to strengthen policy, improve data
and better coordinate agencies' awards of MACs and enterprisewide
contracts. We also make eight recommendations to GSA to improve MAS
program pricing and management. Both OMB and GSA agreed with our
recommendations. DOD pointed out in its comments on the draft of this
report that it is the largest purchasing organization in the federal
government and the largest customer of GSA and looks forward to
working with the OMB's Administrator for OFPP and with GSA on their
efforts to implement the recommendations. The Department of Health and
Human Services concurred with our findings and recommendations.
Likewise, NASA stated that our draft report was complete, concise, and
accurate and provided a balanced view of issues. DHS and VA elected
not to provide comments on a draft of the report.
Background:
Government buyers generally use three types of available interagency
contracts--MACs, GWACs, and MAS program contracts--all of which
leverage the government's buying power when acquiring goods and
services. These interagency contracts can be established under several
statutory authorities, including: (1) the Economy Act,[Footnote 11]
which authorizes agencies to place orders for goods and services with
another government agency; (2) the Clinger-Cohen Act of 1996,[Footnote
12] which authorizes GWACs; and (3) the Federal Property and
Administrative Services Act of 1949, as amended,[Footnote 13] which
provides authority for GSA's MAS program.
The Federal Acquisition Streamlining Act of 1994[Footnote 14], also
has a bearing on interagency contracting, since its enactment, along
with that of the Clinger-Cohen Act of 1996, authorized fundamental
changes in the management of government acquisition programs. These
statutes (1) made it easier for federal agencies to purchase
commercial items; (2) streamlined the processes for making small
purchases; (3) eliminated GSA as the sole authority for all federal
information technology acquisitions; and (4) allowed for establishment
of GWACs and other contracting vehicles including enterprisewide
contracts. Since then, some agencies have established and operated
MACs, GWACs, and enterprisewide contracts, while GSA operates the MAS
program. Agencies, including GSA and VA for the MAS program, usually
charge their customer agencies fees for using their GWACs, MACs, and
schedule contracts. These fees are usually a percentage of the value
of the procurement to cover the costs of administering the contract.
Table 1 describes the various contract types we examined, including
the number in existence and fees charged when known, and their fiscal
year 2008 sales.
Table 1: Comparison of Various Contract Vehicles Examined:
Enterprisewide contracts: Interagency contracts: Federal Property and
Administrative Services Act of 1949 as amended. GSA delegated
authority to VA: [Empty].
Enterprisewide contracts: Authority: [Empty].
Authority:
Interagency contracts: Multiple award schedules: GSA/VA: Federal
Property and Administrative Services Act of 1949 as amended. GSA
delegated authority to VA;
Interagency contracts: MACs: Economy Act;
Interagency contracts: GWACs: Clinger-Cohen Act;
Enterprisewide contracts: Various authorities to include the Economy
Act and the Federal Acquisition Streamlining Act.
Purpose:
Interagency contracts: Multiple award schedules: GSA/VA: To provide
comparable commercial goods and services at varying prices and a
streamlined process to obtain these goods and services at prices
associated with volume buying;
Interagency contracts: MACs: To obtain goods or services by interagency
acquisition which cannot be obtained as conveniently;
or economically by contracting directly with a private source;
Interagency contracts: GWACs: To provide a broad range of information
technology goods and services;
Enterprisewide contracts: Provide authority for placement of orders
between major organizational units within an agency and establishing a
general preference for use of multiple awards.
Number of schedules/programs:
Interagency contracts: Multiple award schedules: GSA: 49 schedules;
Interagency contracts: Multiple award schedules: VA: 9 schedules;
Interagency contracts: MACs: Unknown;
Interagency contracts: GWACs: 16 programs;
Enterprisewide contracts: Unknown.
Sales in 2008 (in billions):
Interagency contracts: Multiple award schedules: GSA: $37.6;
Interagency contracts: Multiple award schedules: VA: $9.2;
Interagency contracts: MACs: Unknown[A];
Interagency contracts: GWACs: $5.3;
Enterprisewide contracts: Unknown[B].
Number of contracts:
Interagency contracts: Multiple award schedules: GSA/VA: Approximately;
19,000;
Interagency contracts: MACs: Unknown;
Interagency contracts: GWACs: 1,031;
Enterprisewide contracts: Unknown.
Fee Structure;
Interagency contracts: Multiple award schedules: GSA: 0.75%;
Interagency contracts: Multiple award schedules: VA: 0.50%;
Interagency contracts: MACs: Unknown;
Interagency contracts: GWACs: 0.25-1.75%;
Enterprisewide contracts: Not applicable.
Source: GAO analysis of statutes, regulations and agency data. Dollars
and numbers are from fiscal year 2008 data.
[A] The four MAC programs reviewed had obligations totaling $2.5
billion in fiscal year 2008.
[B] The three enterprisewide contract programs reviewed had
obligations totaling $4.8 billion in fiscal year 2008.
[End of table]
In fiscal year 2008, as shown in table 1, federal agencies used GWACs,
MACs, and the MAS program to buy at least $60 billion of goods and
services to support their operations including some agencies spending
billions using enterprisewide contracts. GWACs, MACs, the
enterprisewide contracts we examined, and contracts under the MAS
program are all indefinite delivery/indefinite quantity (ID/IQ)
contracts--contracts that are established to buy goods and services
when the exact times and exact quantities of future deliveries are not
known at the time of award.[Footnote 15] Once known, an agency places
individual delivery orders for goods and task orders for services
against these contracts.
MACs and GWACs:
MACs and GWACs provide advantages to both agencies and vendors. For
agencies, they provide a means of procuring goods and services without
the time and expense of a full and open solicitation for each order.
For vendors, the FAR requires agencies to provide a fair opportunity
to be considered for orders exceeding $3,000.[Footnote 16] The Economy
Act, along with other authorities, allows an agency to enter into a
MAC and then make it available for other government agencies to place
task or delivery orders to obtain a variety of goods and services.
[Footnote 17] The Economy Act is applicable to orders placed under
MACs, with the exception of MACs for information technology that are
established pursuant to the Clinger-Cohen Act. Per the FAR guidance
for the Economy Act, an agency planning to place an order against
another agency's MAC must document that the servicing agency has an
appropriate pre-existing contract available for use or that it has the
capabilities or expertise to enter into a contract for the required
goods or services, which is not available within the requesting
agency.[Footnote 18] MACs are established within their respective
agencies and no external reporting on their use is required. As a
result, governmentwide comprehensive data on the number of MACs and
dollars involved with their use are not readily available.
GWACs provide a broad range of information technology goods and
services and resources for agency activities.[Footnote 19] Each GWAC
is operated by an executive agent designated by OMB.[Footnote 20] The
Economy Act does not apply when placing orders under GWACs. As of
March 30, 2010, four agencies--GSA, NASA, the Department of Health and
Human Services, and the Environmental Protection Agency--had OMB
authorization to operate GWACs. As shown in table 2 below, these
agencies were responsible from 1 to 11 GWAC programs having
obligations in fiscal year 2008 totaling almost $5.3 billion.
Table 2: Governmentwide Acquisition Contracts as of September 30, 2008:
Executive agency: General Services Administration;
Number of GWAC Programs: 11;
Total fiscal year 2008 sales (billions): $2.93.
Executive agency: National Aeronautics and Space Administration;
Number of GWAC Programs: 1;
Total fiscal year 2008 sales (billions): $1.32.
Executive agency: Department of Health and Human Services, National
Institutes of Health;
Number of GWAC Programs: 3;
Total fiscal year 2008 sales (billions): $1.04.
Executive agency: Environmental Protection Agency;
Number of GWAC Programs: 1;
Total fiscal year 2008 sales (billions): $0.00[A].
Source: GAO analysis of agency information.
[A] Sales against the Environmental Protection Agency GWAC in fiscal
year 2008 totaled less than $63,000.
[End of table]
Obligations placed against GWACs have ranged from about $5 to $6
billion annually, but have declined slightly in recent years from $5.8
billion in fiscal year 2004 to $5.3 billion in fiscal year 2008.
Enterprisewide Contracts:
Along with using interagency contracts to leverage their buying power,
a number of large departments--DOD and DHS in particular--are turning
to enterprisewide contracts as well to acquire goods and services.
Enterprisewide contracting programs are IDIQ contracts established
solely for the use of the establishing agency and can be used to
reduce contracting administrative overhead, provide information on
agency spending, meet various requirements across the agency, and
avoid the fees charged for using interagency contracts, such as a
GWAC. Creating enterprisewide contracts can also be a method to
support strategic sourcing within the agency and a means of tailoring
requirements for agency-unique purposes. They can also be used to
specify and enforce specific contract terms and conditions and bring
more consistency into the agency contracting processes. Three
significant enterprisewide contracting programs are DHS's Enterprise
Acquisition Gateway for Leading-Edge Solutions (EAGLE) and FirstSource
programs and the Department of the Navy's SeaPort Enhanced program.
EAGLE and FirstSource provide contracts with 64 vendors for
information technology services and commodities, respectively, for the
16 components that make up DHS and obligated over $1.2 billion in
fiscal year 2008. The Department of the Navy's SeaPort Enhanced
program provides contracts for procuring engineering, technical,
programmatic, and professional support services. Currently the program
has contracts with over 1,800 vendors and obligated almost $3.6
billion in fiscal year 2008.
MAS Program:
GSA has had a prominent role in providing goods and services to
federal agencies for decades as part of its responsibility for
administering supplies for federal agencies. Through its MAS program
(also referred to in this report as the schedules program), GSA
provides federal agencies with a simplified method for procuring
various quantities of a wide range of commercially available goods and
services. As the largest interagency contracting program, the MAS
program provides advantages to both federal agencies and vendors.
[Footnote 21] Agencies, using the simplified methods of procurement of
the schedules, avoid the time expenditures and administrative costs of
other methods. Vendors receive wider exposure for their commercial
products and expend less effort to selling these products. Moreover,
the MAS program is the primary governmentwide buying program aimed at
helping the federal government leverage its significant buying power
when buying commercial goods and services.
Together, GSA and VA operate 58 schedules. GSA operates 49 schedules,
which offer a wide range of goods and services such as office
furniture and supplies, personal computers, scientific equipment,
library services, network support, laboratory testing services, and
management and advisory services. GSA delegated to the VA the
authority to solicit, negotiate, award, and administer contracts for
selected schedules. VA has seven schedules for various categories of
medical/surgical supplies and equipment and pharmaceuticals, and two
schedules for various health care services including professional
health care and staffing services and laboratory testing and analysis
services.
In August 1997, after passage of FASA and the Clinger-Cohen Act, GSA
revised its acquisition regulations to promote greater use of
commercial buying practices, and streamline the purchasing process for
its customers.[Footnote 22] GSA expected these changes to lead to more
participation by both large and small businesses, and to increased
competition, thereby providing federal agencies a wider range of goods
and services at competitive prices. As of December 2009, there were
almost 19,000 available contracts providing goods and services on the
GSA and VA schedules. While MAS sales by both GSA and VA have grown
significantly since 1998, sales have leveled off in recent years, as
shown in figure 1.
Figure 1: MAS Program Sales, Fiscal Years 1996 through 2008:
[Refer to PDF for image: stacked vertical bar graph]
Fiscal year: 1996;
GSA multiple award schedule program: $6.6 billion;
VA multiple award schedule program: $0.5 billion.
Fiscal year: 1998;
GSA multiple award schedule program: $9.9 billion;
VA multiple award schedule program: $2.4 billion.
Fiscal year: 2000;
GSA multiple award schedule program: $18.3 billion;
VA multiple award schedule program: $3.2 billion.
Fiscal year: 2002;
GSA multiple award schedule program: $26.9 billion;
VA multiple award schedule program: $6.1 billion.
Fiscal year: 2004;
GSA multiple award schedule program: $37.3 billion;
VA multiple award schedule program: $8 billion.
Fiscal year: 2006;
GSA multiple award schedule program: $37.7 billion;
VA multiple award schedule program: $8.5 billion.
Fiscal year: 2008;
GSA multiple award schedule program: $37.6 billion;
VA multiple award schedule program: $9.2 billion.
Note: Sales are presented in fiscal year 2009 dollars.
[End of figure]
Over the last several years, GSA initiated several changes within the
MAS program. In late 2006, the agency reorganized and created the
Federal Acquisition Service (FAS), which combined the duties of the
Federal Technology Service and the Federal Supply Service. As part of
this reorganization, GSA established three primary FAS business
portfolios--General Supplies and Services; Integrated Technology
Services; and Travel, Motor Vehicle, and Card Services--and gave them
management and operational control over the MAS schedules. Within
these portfolios, nine acquisition centers located throughout the
United States award and manage MAS contracts. GSA also established
within FAS the Office of Acquisition Management, which is responsible
for ensuring that GSA activities comply with federal laws,
regulations, and policies, and that operating practices are consistent
across business lines and acquisition centers. In July 2008, within
the Office of Acquisition Management, GSA created the MAS Program
Office to develop and implement acquisition policy and guidance,
define systems requirements, and coordinate program-wide improvements.
VA manages its portion of the MAS program from its National
Acquisition Center, located in Hines, Illinois. The MAS Governance
Council, established in 2008 as part of the creation of the MAS
Program Office, includes representatives from both GSA and VA, and is
responsible for addressing and coordinating MAS program issues that
affect both GSA and VA.
In 2008, GSA also established a MAS Advisory Panel to provide
independent advice and recommendations on MAS program pricing policies
and provisions in the context of commercial pricing practices. The
panel is made up of representatives from GSA and other federal
agencies as well as industry associations. The panel issued its report
in February 2010, and made numerous recommendations to GSA regarding
the MAS program pricing provisions, competition requirements, and data
collection, among other things.[Footnote 23]
Prior Reviews of Interagency Contracts and the MAS Program Raised
Concerns:
Prior reviews and audits of interagency contracting and the MAS
program by GAO and inspectors general have highlighted several
management challenges and concerns. Between 1999 and 2009, we and
agencies' inspectors general issued 12 audit reports identifying a
lack of competition for task and delivery orders issued under ID/IQ
contracts. These reports addressed task and delivery orders awarded
under the MAS program, GWACs, MACs, and enterprisewide contracts and
found that the orders were either not competed, did not provide for
fair opportunity, and/or restricted competition. For example, in 2004,
we found that contracting officers waived competition requirements for
nearly half--34 out of 74--of MAS orders reviewed.[Footnote 24]
In early 2005, we reported that the use of interagency contracting
vehicles had grown rapidly and numerous issues had surfaced, including
problems with internal controls, inadequate competition, unclear
definitions of roles and responsibilities, and inadequate training of
contracting personnel. As a result, we designated the management of
interagency contracting as high risk in 2005.[Footnote 25] We stated
in our 2005 high risk report that the government needed to bolster
oversight and control over interagency contracting so that it would be
well-positioned to realize the benefits of these contracts. Even
though interagency contracting remains on our list of high-risk areas,
there has been an improvement. In 2009, we reported that OMB and
federal agencies have made progress toward improving the use of
interagency contracting. For example, we reported that OMB issued
policy guidance designed to improve the use of interagency contracting
across the government.[Footnote 26]
In 2005, we also reported on GSA's schedules program pointing out
several problems related to schedule contract pricing based on GSA's
review of selected MAS contract files from fiscal year 2004.[Footnote
27] Nearly 60 percent of the contract files GSA reviewed lacked the
documentation needed to establish clearly that GSA had effectively
negotiated schedule prices. GSA was also not effectively using pricing
tools such as pre-award audits, to meet its pricing objectives. In
response to a recommendation in our report, GSA significantly
increased the number of annual pre-award audits resulting in a total
of almost $4 billion in cost avoidances over a five year period.
In 2007, the Acquisition Advisory Panel--often referred to as the SARA
panel--reported in fiscal year 2004, FPDS-NG data showed that total
obligations for interagency contracting reached $142 billion, or 40
percent of the total obligated governmentwide on contracts that year.
[Footnote 28] The panel concluded that pressures and incentives for
agencies to establish and use interagency contracting vehicles,
coupled with little oversight or transparency, had created an
environment that allowed the uncoordinated proliferation of
interagency contracts, which in turn hampered the government's ability
to maximize the effectiveness of these contracts While the panel
report provided an estimate of the total obligations for interagency
contracts in fiscal year 2004, it also stated that the FPDS-NG data
used to make this estimate and analyze interagency contracts were not
reliable at the detailed level.[Footnote 29]
In 2009, the DOD's Inspector General found problems with
enterprisewide contracting reporting that the Department of the Navy's
SeaPort Enhanced internal controls were not adequate.[Footnote 30]
Furthermore, the Inspector General found that the SeaPort Enhanced
program office did not ensure that task orders were open for bidding
for the length of time specified and deviated from FAR criteria by not
performing adequate market research. In another report issued in 2009,
the DOD Inspector General reported that 72 percent--21 out of 29--of
the task orders awarded under a GWAC valued at $13.9 million had
insufficient competition.[Footnote 31]
With Insufficient and Unreliable Data and Limited Governmentwide
Policy, Agencies' Use of Interagency and Enterprisewide Contracts May
Result in Inefficient Contracting:
Interagency and enterprisewide contracts should provide an advantage
to the government in buying billions of dollars worth of goods and
services, yet OMB and agencies cannot be sure they are leveraging this
buying power because they lack the necessary comprehensive, reliable
data to effectively manage and oversee these contracts. Additionally,
the government's lack of an overarching governmentwide policy to
ensure that leveraging happens further exacerbates the problem. Absent
governmentwide data and policy, agencies have created numerous MACs
and enterprisewide contracts using existing statutes, the FAR, and
agency-specific policies. The creation of these contracts is based on
a number of rationales and reasons including avoiding fees that would
be paid for using interagency contracts, allowing for cost-
reimbursement contracts, and getting more control over the procurement
actions of their sub-components. Under these conditions, however,
duplication of similar contracts and inefficiencies have occurred.
Both government contracting officials and representatives of vendors
expressed concerns about this condition. While some steps are being
taken to improve this condition, more can be done to improve the
government's buying power.
The Identification and Use of MACs and Enterprisewide Contracts Is
Unknown:
Prior attempts by the acquisition community to identify interagency
and enterprisewide contracts have not resulted in a reliable database
useful for identifying or providing governmentwide oversight on those
contracts. In 2003, a FAR rule established an interagency contracting
directory to collect information on interagency contracting vehicles.
[Footnote 32] In 2006, OFPP started the Interagency Contracting Data
Collection Initiative to identify and list the available GWACs, MACs,
and enterprisewide contracts. OFPP requested that all federal agencies
with interagency contracts report the number of contracts available
with a description of what was available on each contract, which
agencies could use it, the reason for creating it, and whether or not
there was a completed business case analysis on the contract. Twenty-
two of the 24 major federal agencies responded to OMB. The initiative
was a one-time effort and thus has not been updated since.
In conducting this review, we could not identify the universe of MACs
and enterprisewide contracts because the data available in the
official government contracting data system, FPDS-NG, were
insufficient and unreliable. Despite its critical role, we have
consistently reported on FPDS-NG data quality issues over a number of
years and found problems.[Footnote 33] In 2009, we testified that OMB
has taken steps to address some of these problems; however, the
quality of some FPDS-NG data remains an issue.[Footnote 34] The fiscal
year 2009 National Defense Authorization Act requires that the
Director of OMB direct improvements to the FPDS-NG to collect more
complete and reliable data on interagency contracting
actions.[Footnote 35] These requirements, however, do not call for
capturing data on enterprisewide contracts, which are now being used
to achieve savings as part of the governmentwide strategic sourcing
initiative.
Most of the senior procurement executives, acquisition officials and
vendors we spoke with believed a publicly available source of
information on these contracts is necessary. Senior procurement
executives from DHS and DOD stressed the usefulness of a
governmentwide clearinghouse of information on existing contracts.
Sixteen of the 17 contracting officers we spoke with stated that
having a publicly available listing of contracts, for example, could
reduce their market research time. For instance, one official stated
that it is a "hunt and search" effort to find contract vehicles and
that a central database would reduce market research time and allow
contract actions to be processed faster. An official from GSA told us
there is not enough information on currently available contracts,
which requires their contracting officers to rely on Internet searches
and informal discussions to locate contract vehicles. Furthermore, a
number of vendors we spoke with also stated they would favor a central
source of information on available contracts and believe this source
would help increase transparency.
Agency officials we spoke with said that if agencies could easily find
an existing contract they would avoid unnecessary administrative time
to enter into a new contract, which they said could be significant.
One official stated that if there were an awareness of what was
available to use, it would help to reduce their acquisition lead time.
A Department of the Navy procurement official told us that by awarding
fewer larger contracts, the Department of the Navy and DOD have
created efficiencies resulting in lower prices. The SARA panel report
previously noted some of these concerns, stating that too many choices
without information related to the performance and management of these
contracts make the cost-benefit analysis and market research needed to
select an appropriate acquisition vehicle impossible. This is
particularly important given OMB's June 2008 guidance on interagency
contracting that requires agencies to make a determination that using
an interagency contracting vehicle is in their best interest; taking
into account factors such as whether the vehicle is suitable to meet
their needs and provides the best value.[Footnote 36]
Governmentwide Policy on MACs and Enterprisewide Contracts Is Limited;
Agencies Use Various Procedures to Establish and Manage These
Contracts:
Federal agencies operate with limited governmentwide policy that
addresses the establishment and use of MACs and enterprisewide
contracts. Federal regulations generally provide that an agency should
consider existing contracts to determine if they might meet its needs.
[Footnote 37] In contrast, GWAC creation and management has
governmentwide oversight. OFPP, as part of OMB, exercises statutory
approval authority regarding establishment of a GWAC. Once
established, agencies provide annual reports to OFPP, as part of OMB,
on GWACs. The senior procurement executives we spoke with had mixed
views on the proper role of OFPP in providing clarification and
oversight to agencies establishing their own contract vehicles. For
example, Army senior acquisition officials representing the senior
procurement official told us that the policy on interagency
contracting is not cohesive. In their view, OFPP should provide policy
and guidance that agencies would be required to follow. They also
think surveillance of interagency contracts is a major issue since
proper oversight is sometimes lacking. Similarly, officials from the
Office of the Under Secretary of Defense for Acquisition, Technology,
and Logistics stated that OFPP is the right agency to take the
leadership role on strategic sourcing for services. They added,
however, that OFPP might not have sufficient staff to do so. In
contrast, the Senior Procurement Executive for the Department of the
Navy pointed to agency-specific circumstances or requirements that
create uncertainty about the utility of broad OFPP guidance.
The six federal agencies and the three military departments we
reviewed, responsible for almost 87 percent of total federal
procurement obligations in fiscal year 2008, have policies that
require approval and review for acquisition planning involving
contracts for large dollar amounts which would generally include the
establishment of MACs and enterprisewide contracts. The review process
varies from agency to agency. For example, an official from the Office
of the Under Secretary of Defense for Acquisition, Technology, and
Logistics told us that any new DOD contract estimated at over $100
million would be required to go through a review process to ensure
that no other contract exists that could fulfill the new requirement.
As another example, DHS requires that the senior procurement executive
approve the establishment of each enterprisewide contract. The policy
requires that each enterprisewide contract coordinate requirements
between operating entities and determine administrative costs prior to
approval.
Furthermore, agencies have issued guidance encouraging the use of
enterprisewide contracts rather than using interagency contracts. DOD
guidance on acquisition of services--accounting for over 50 percent of
DOD's obligated contract dollars--advises that contracting officers
consider the use of internal DOD contract vehicles to satisfy
requirements for services prior to placing an order against another
agency's contract vehicle. Similarly, DHS senior procurement
executives told us that DHS policy requires buyers to consider EAGLE
and FirstSource--both DHS enterprisewide contracts--before they go to
other sources to fulfill information technology requirements. In fact,
OMB recently reported that 20 of the 24 largest procuring activities
are planning on reducing procurement spending by implementing
strategic sourcing initiatives by using enterprise contracting to
leverage their buying power.[Footnote 38] These initiatives are part
of the administration's goal of reducing contract spending by 7
percent over the next 2 years.
Departments and Agencies Cite a Variety of Reasons for Establishing
MACs and Enterprisewide Contracts Instead of Using Existing Contracts:
Agencies we met with cited several reasons for establishing their own
MACs and enterprisewide contracts including cost avoidance through
lower prices, and fewer fees compared to other vehicles, mission
specific requirements, and better control over the management of
contracts. As shown in tables 3 and 4 below, when deciding to award a
MAC or an enterprisewide contract, agencies listed a number of reasons
in the acquisition plans for not using existing contracts.
Table 3: Selected Agencies' and Military Departments' Reasons for
Establishing MACs and Enterprisewide Contracts in Lieu of Using the
GSA MAS Program:
Multiagency contracts and enterprisewide contracts: MAC: Army Desktop
and Mobile Computing-2 (ADMC-2) (Approved August 2005);
Purpose and Reason: Provide commercial information technology
equipment to integrate, modernize, and refresh the Army's existing
architecture while providing standardized interfaces;
GSA prices too high: [Empty];
Technology refresh delays due to dependence on changes to MAS
contracts: [Empty];
Does not allow a range of contract types, i.e., cost type contracts or
include required contract terms and conditions: [Empty];
Would require large number of schedules: [Empty];
Cannot ensure products are in compliance with DOD standards: [Empty];
Outside the continental United States: [Empty];
Review and approval for the use of non-DOD contract vehicles: [Empty].
Multiagency contracts and enterprisewide contracts: MAC: Army
Information Technology Enterprise Solutions-2 Hardware (ITES-2H)
(Approved June 2006);
Purpose and Reason: Support the Army enterprise infrastructure with a
full range of state-of-the-market information equipment and incidental
integration services. Scope encompasses all requirements for
information technology;
GSA prices too high: [Empty];
Technology refresh delays due to dependence on changes to MAS
contracts: [Empty];
Does not allow a range of contract types, i.e., cost type contracts or
include required contract terms and conditions: [Empty];
Would require large number of schedules: [Empty];
Cannot ensure products are in compliance with DOD standards: [Empty];
Outside the continental United States: [Empty];
Review and approval for the use of non-DOD contract vehicles: [Empty].
Multiagency contracts and enterprisewide contracts: MAC: Army
Information Technology Enterprise Solutions-2 Services (ITES-2S)
(Approved September 2005);
Purpose and Reason: Support the Army enterprise infrastructure with a
full range of information technology services;
GSA prices too high: [Empty][A];
Technology refresh delays due to dependence on changes to MAS
contracts: [Empty];
Does not allow a range of contract types, i.e., cost type contracts or
include required contract terms and conditions: [Empty];
Would require large number of schedules: [Empty];
Cannot ensure products are in compliance with DOD standards: [Empty];
Outside the continental United States: [Empty];
Review and approval for the use of non-DOD contract vehicles: [Empty].
Multiagency contracts and enterprisewide contracts: MAC: Defense
Information Systems Agency Encore II (Approved December 2005);
Purpose and Reason: Support the agency mission area resulting in
contracting solutions that provide support of all functional
requirements including Command and Control, Intelligence, and Mission
support areas, and to all elements of the Global Information Grid;
GSA prices too high: [Empty];
Technology refresh delays due to dependence on changes to MAS
contracts: [Empty];
Does not allow a range of contract types, i.e., cost type contracts or
include required contract terms and conditions: [Empty];
Would require large number of schedules: [Empty];
Cannot ensure products are in compliance with DOD standards: [Empty];
Outside the continental United States: [Empty];
Review and approval for the use of non-DOD contract vehicles: [Empty].
Multiagency contracts and enterprisewide contracts: Enterprisewide
contracts: Acquisition of Services in support of the Department of the
Navy and Marine Corps SeaPort Enhanced (SeaPort-e) (Approved May 2005);
Purpose and Reason: Facilitate the implementation of an enterprisewide
approach to the acquisition of services to implement cost-effective
and integrated business practices to better support the Department of
the Navy.[B];
GSA prices too high: [Empty];
Technology refresh delays due to dependence on changes to MAS
contracts: [Empty];
Does not allow a range of contract types, i.e., cost type contracts or
include required contract terms and conditions: [Empty];
Would require large number of schedules: [Empty];
Cannot ensure products are in compliance with DOD standards: [Empty];
Outside the continental United States: [Empty];
Review and approval for the use of non-DOD contract vehicles: [Empty].
Multiagency contracts and enterprisewide contracts: Enterprisewide
contracts: Homeland Security Enterprise Acquisition Gateway for
Leading-Edge Solutions (EAGLE)(Approved August 2005);
Purpose and Reason: Provide a comprehensive range of information
technology support services for use throughout the agency through a
centrally managed program;
GSA prices too high: [Empty];
Technology refresh delays due to dependence on changes to MAS
contracts: [Empty];
Does not allow a range of contract types, i.e., cost type contracts or
include required contract terms and conditions: [Empty];
Would require large number of schedules: [Empty];
Cannot ensure products are in compliance with DOD standards: [Empty];
Outside the continental United States: [Empty];
Review and approval for the use of non-DOD contract vehicles: [Empty].
Multiagency contracts and enterprisewide contracts: Enterprisewide
contracts: Homeland Security First Source (Approved September 2005);
Purpose and Reason: Provide access to a wide variety of information
technology products for use throughout the agency through a centrally
managed program;
GSA prices too high: [Empty];
Technology refresh delays due to dependence on changes to MAS
contracts: [Empty];
Does not allow a range of contract types, i.e., cost type contracts or
include required contract terms and conditions: [Empty];
Would require large number of schedules: [Empty];
Cannot ensure products are in compliance with DOD standards: [Empty];
Outside the continental United States: [Empty];
Review and approval for the use of non-DOD contract vehicles: [Empty].
Source: GAO analysis of agencies' acquisition plans.
[A] Can more effectively leverage industry to partner with the Army as
opposed to utilizing GSA schedules to conduct a large number of
smaller acquisitions.
[B] Analysis of alternatives was not discussed in the acquisition
strategy.
[End of table]
Table 4: Selected Agencies' and Military Departments' Reasons for
Establishing MACs and Enterprisewide Contracts in Lieu of Using GWACs
and MACs Identified by Agencies:
Multiagency contracts and enterprisewide contracts: MAC: Army Desktop
and Mobile Computing-2 (ADMC-2) (Approved August 2005);
Purpose and Reason: Provide commercial information technology
equipment to integrate, modernize, and refresh the Army's existing
architecture while providing standardized interfaces;
GWAC prices too high: [Empty];
Criticism regarding Agency reliance governmentwide acquisition
contracts: [Empty];
Confusing for ordering activities: [Empty];
Cannot ensure products are in compliance with DOD standards: [Empty];
Outside the continental United States: [Empty];
Review and approval for the use of non-DOD contract vehicles: [Empty];
Create dependence on external agencies: [Empty];
Vehicles do not include required contract terms and conditions:
[Empty].
Multiagency contracts and enterprisewide contracts: MAC: Army
Information Technology Enterprise Solutions-2 Hardware (ITES-2H)
(Approved June 2006);
Purpose and Reason: Support the Army enterprise infrastructure with a
full range of state-of-the-market information equipment and incidental
integration services. Scope encompasses all requirements for
information technology;
GWAC prices too high: [Empty];
Criticism regarding Agency reliance governmentwide acquisition
contracts: [Empty];
Confusing for ordering activities: [Empty];
Cannot ensure products are in compliance with DOD standards: [Empty];
Outside the continental United States: [Empty];
Review and approval for the use of non-DOD contract vehicles: [Empty];
Create dependence on external agencies: [Empty];
Vehicles do not include required contract terms and conditions:
[Empty].
Multiagency contracts and enterprisewide contracts: MAC: Army
Information Technology Enterprise Solutions-2 Services (ITES-2S)
(Approved September 2005);
Purpose and Reason: Support the Army enterprise infrastructure with a
full range of information technology services[A];
GWAC prices too high: [Empty];
Criticism regarding Agency reliance governmentwide acquisition
contracts: [Empty];
Confusing for ordering activities: [Empty];
Cannot ensure products are in compliance with DOD standards: [Empty];
Outside the continental United States: [Empty];
Review and approval for the use of non-DOD contract vehicles: [Empty];
Create dependence on external agencies: [Empty];
Vehicles do not include required contract terms and conditions:
[Empty].
Multiagency contracts and enterprisewide contracts: MAC: Defense
Information Systems Agency Encore II (Approved December 2005);
Purpose and Reason: Support the agency mission area resulting in
contracting solutions that provide support of all functional
requirements including Command and Control, Intelligence, and Mission
support areas, and to all elements of the Global Information Grid;
GWAC prices too high: [Empty];
Criticism regarding Agency reliance governmentwide acquisition
contracts: [Empty];
Confusing for ordering activities: [Empty];
Cannot ensure products are in compliance with DOD standards: [Empty];
Outside the continental United States: [Empty];
Review and approval for the use of non-DOD contract vehicles: [Empty];
Create dependence on external agencies: [Empty];
Vehicles do not include required contract terms and conditions:
[Empty].
Multiagency contracts and enterprisewide contracts: Enterprisewide
contracts: Acquisition of Services in support of the Department of the
Navy and Marine Corps SeaPort Enhanced (SeaPort-e) (Approved May 2005);
Purpose and Reason: Facilitate the implementation of an enterprisewide
approach to the acquisition of services to implement cost-effective
and integrated business practices to better support the Department of
the Navy.[B];
GWAC prices too high: [Empty];
Criticism regarding Agency reliance governmentwide acquisition
contracts: [Empty];
Confusing for ordering activities: [Empty];
Cannot ensure products are in compliance with DOD standards: [Empty];
Outside the continental United States: [Empty];
Review and approval for the use of non-DOD contract vehicles: [Empty];
Create dependence on external agencies: [Empty];
Vehicles do not include required contract terms and conditions:
[Empty].
Multiagency contracts and enterprisewide contracts: Enterprisewide
contracts: Homeland Security Enterprise Acquisition Gateway for
Leading-Edge Solutions (EAGLE) (Approved August 2005);
Purpose and Reason: Provide a comprehensive range of information
technology support services for use throughout the agency through a
centrally managed program;
GWAC prices too high: [Empty];
Criticism regarding Agency reliance governmentwide acquisition
contracts: [Empty];
Confusing for ordering activities: [Empty];
Cannot ensure products are in compliance with DOD standards: [Empty];
Outside the continental United States: [Empty];
Review and approval for the use of non-DOD contract vehicles: [Empty];
Create dependence on external agencies: [Empty];
Vehicles do not include required contract terms and conditions:
[Empty].
Multiagency contracts and enterprisewide contracts: Enterprisewide
contracts: Homeland Security FirstSource (Approved September 2005);
Purpose and Reason: Provide access to a wide variety of information
technology products for use throughout the agency through a centrally
managed program;
GWAC prices too high: [Empty];
Criticism regarding Agency reliance governmentwide acquisition
contracts: [Empty];
Confusing for ordering activities: [Empty];
Cannot ensure products are in compliance with DOD standards: [Empty];
Outside the continental United States: [Empty];
Review and approval for the use of non-DOD contract vehicles: [Empty];
Create dependence on external agencies: [Empty];
Vehicles do not include required contract terms and conditions:
[Empty].
Source: GAO analysis of agencies' acquisition plans.
[A] The analysis of alternatives did not discuss GWACs or other MACs
in the acquisition strategy.
[B] Analysis of alternatives was not discussed in the acquisition
strategy.
[End of table]
The following examples provide more detail about why agencies created
MACs and enterprisewide contracts shown in tables 3 and 4.
* The Army cited several reasons for establishing their ITES-2S and
ITES-2H contracts--MACs for information technology hardware and
services-in 2005 and 2006. The Army wanted to standardize its
information technology contracts so each contract would include the
required Army and DOD security parameters. According to the Army, GSA
contracts do not automatically include these security requirements and
using a GSA contract would require adding these terms to every order.
The Army also cited timeliness concerns with GSA contracts and GSA
fees as reasons for establishing their own contracting vehicles.
* The Department of the Navy cited numerous reasons for setting up its
SeaPort Enhanced program, an enterprisewide contract, established in
April 2001. According to the Department of the Navy Senior Procurement
Executive, the Department of the Navy created this program to reduce
costs associated with buying services. Program officials stated there
were problems with interagency contracting and wanted to make sure
they had more control over their procurements. They stated further
that GSA's fees made its schedules programs cost prohibitive. The
Department of the Navy officials also stated they wanted more insight
into their procurements, which they could not gain when using the GSA
schedules. Finally, the Department of the Navy also wanted to be able
to use cost-reimbursable contracts, which are not allowed by the GSA's
MAS program. The Department of the Navy felt this prohibition hindered
their efforts to make their acquisitions efficient.
* In 2005, DHS established EAGLE and FirstSource contracting programs
that both involve enterprisewide contracts used for information
technology products and services. Officials stated the main reason
these programs were established was to avoid the fees associated with
using other contract vehicles and save money through volume pricing.
In addition, the programs centralized procurements for a wide array of
mission needs among its many agencies. EAGLE was approved around the
time of Hurricane Katrina and DHS determined it would be easier to
coordinate assistance if the department had contractors together under
one program, which would allow DHS to better manage them. Furthermore,
DHS officials stated they wanted to be able to coordinate the people
managing the contracts, which did not happen when using GSA contracts.
Other departments and agencies are moving toward awarding their own
contracts. For example, in late 2009, VA was in the process of
establishing a new MAC to provide an array of information technology
services, including program management, systems engineering,
cybersecurity and enterprise network systems. VA officials stated that
this new contracting program--called the Transformation Twenty-One
Total Technology (T4)--will help VA and others procure services at a
lower fee than what VA would pay by ordering through the GSA schedules
program or the NASA GWAC.
Vendors and Agency Officials Expressed Concerns about Contract
Duplication and Associated Management Efforts and Costs:
We found the same vendors, on many different contract vehicles
providing information technology goods or services, which may be
resulting in duplication of goods and services being offered. See
table 5 below showing that the top 10 GWAC vendors, based on sales to
the government, offer their goods and services on a variety government
contracts that all provide information technology goods and services.
For example, of the 13 different contract vehicles, 5 of the 10
vendors were on 10 or more of these.
Table 5: Top 10 GWAC Vendors on GWACs, MACs, and Enterprisewide
Contracts:
Type of contract by agency or military department:
Selected GWACs: General Services Administration: Alliant. Designed to
provide information technology solutions to federal agencies;
Vendor: 1: [Check];
Vendor: 2: [Check];
Vendor: 3: [Check];
Vendor: 4: [Check];
Vendor: 5: [Empty];
Vendor: 6: [Check];
Vendor: 7: [Check];
Vendor: 8: [Check];
Vendor: 9: [Check];
Vendor: 10: [Empty].
Selected GWACs: General Services Administration: Applications'N
Support for Widely-diverse End-user Requirements (ANSWER) Expired. Can
support an array of information technology services;
Vendor: 1: [Check];
Vendor: 2: [Check];
Vendor: 3: [Check];
Vendor: 4: [Empty];
Vendor: 5: [Empty];
Vendor: 6: [Empty];
Vendor: 7: [Check];
Vendor: 8: [Check];
Vendor: 9: [Check];
Vendor: 10: [Empty].
Selected GWACs: General Services Administration: Millennia. Provides
information technology support for large system integration and
development. Expired;
Vendor: 1: [Check];
Vendor: 2: [Empty];
Vendor: 3: [Check];
Vendor: 4: [Check];
Vendor: 5: [Empty];
Vendor: 6: [Check];
Vendor: 7: [Check];
Vendor: 8: [Empty];
Vendor: 9: [Check];
Vendor: 10: [Empty].
Selected GWACs: General Services Administration: Millennia Lite.
Provides information technology solutions;
Vendor: 1: [Check];
Vendor: 2: [Check];
Vendor: 3: [Check];
Vendor: 4: [Check];
Vendor: 5: [Empty];
Vendor: 6: [Check];
Vendor: 7: [Check];
Vendor: 8: [Check];
Vendor: 9: [Empty];
Vendor: 10: [Empty].
Selected GWACs: National Aeronautics and Space Administration:
Scientific and Engineering Workstation Procurement (SEWP). Provides
information technology products;
Vendor: 1: [Empty];
Vendor: 2: [Empty];
Vendor: 3: [Empty];
Vendor: 4: [Empty];
Vendor: 5: [Check];
Vendor: 6: [Empty];
Vendor: 7: [Empty];
Vendor: 8: [Empty];
Vendor: 9: [Empty];
Vendor: 10: [Check].
Selected GWACs: National Institutes of Health, Department of Health
and Human Services: Chief Information Officer-Solutions and Partner 2
innovations (CIO-SP2i). Provides wide range of information technology
products, services, and solutions;
Vendor: 1: [Check];
Vendor: 2: [Check];
Vendor: 3: [Check];
Vendor: 4: [Check];
Vendor: 5: [Empty];
Vendor: 6: [Check];
Vendor: 7: [Check];
Vendor: 8: [Check];
Vendor: 9: [Check];
Vendor: 10: [Empty].
Selected GWACs: National Institutes of Health, Department of Health
and Human Services: Electronic Commodities Store III (ECS III). Offers
computer hardware and software;
Vendor: 1: [Empty];
Vendor: 2: [Check];
Vendor: 3: [Empty];
Vendor: 4: [Empty];
Vendor: 5: [Check];
Vendor: 6: [Empty];
Vendor: 7: [Empty];
Vendor: 8: [Empty];
Vendor: 9: [Empty];
Vendor: 10: [Check].
Selected GWACs: General Services Administration Multiple Award
Schedules: Information Technology;
Vendor: 1: [Check];
Vendor: 2: [Check];
Vendor: 3: [Check];
Vendor: 4: [Check];
Vendor: 5: [Check];
Vendor: 6: [Check];
Vendor: 7: [Check];
Vendor: 8: [Check];
Vendor: 9: [Check];
Vendor: 10: [Check].
Selected MACs: Army: Information Technology Enterprise Solutions-2
(ITES-2). Provides information technology service solutions and the
purchase or lease of hardware;
Vendor: 1: [Check];
Vendor: 2: [Check];
Vendor: 3: [Check];
Vendor: 4: [Check];
Vendor: 5: [Check];
Vendor: 6: [Empty];
Vendor: 7: [Check];
Vendor: 8: [Check];
Vendor: 9: [Check];
Vendor: 10: [Check].
Selected GWACs: Defense Information Systems Agency: ENCORE II.
Provides information technology requirements;
Vendor: 1: [Check];
Vendor: 2: [Empty];
Vendor: 3: [Check];
Vendor: 4: [Check];
Vendor: 5: [Empty];
Vendor: 6: [Check];
Vendor: 7: [Check];
Vendor: 8: [Check];
Vendor: 9: [Check];
Vendor: 10: [Empty].
Selected GWACs: Department of Treasury: Total Information Processing
Support Services (TIPSS-3). Provides a broad range of information
technology services;
Vendor: 1: [Check];
Vendor: 2: [Check];
Vendor: 3: [Check];
Vendor: 4: [Check];
Vendor: 5: [Empty];
Vendor: 6: [Empty];
Vendor: 7: [Check];
Vendor: 8: [Empty];
Vendor: 9: [Check];
Vendor: 10: [Empty].
Selected enterprisewide contracts: Department of Homeland Security:
Enterprise Acquisition Gateway for Leading-Edge Solutions (EAGLE).
Provides information technology service solutions;
Vendor: 1: [Check];
Vendor: 2: [Check];
Vendor: 3: [Check];
Vendor: 4: [Check];
Vendor: 5: [Empty];
Vendor: 6: [Check];
Vendor: 7: [Check];
Vendor: 8: [Check];
Vendor: 9: [Check];
Vendor: 10: [Empty].
Selected enterprisewide contracts: Department of Justice: Information
Technology Support Services-3 (ITSS-3). Procurement of information
technology services;
Vendor: 1: [Check];
Vendor: 2: [Check];
Vendor: 3: [Empty];
Vendor: 4: [Check];
Vendor: 5: [Empty];
Vendor: 6: [Check];
Vendor: 7: [Check];
Vendor: 8: [Empty];
Vendor: 9: [Empty];
Vendor: 10: [Empty].
Type of contract by agency or military department: Total;
Vendor: 1: 11;
Vendor: 2: 10;
Vendor: 3: 10;
Vendor: 4: 10;
Vendor: 5: 4;
Vendor: 6: 8;
Vendor: 7: 11;
Vendor: 8: 8;
Vendor: 9: 9;
Vendor: 10: 4.
Source: GAO analysis of vendors' and agencies' data.
Note: Not all of the agencies or contract programs were included in
our review.
[End of table]
Vendors and agency officials we met with expressed concerns about
duplication of effort among the MACs, GWACs, and enterprisewide
contracts across government, which they said can result in increased
procurement costs and an increased workload for the acquisition
workforce. A number of vendors we spoke with told us they offer
similar products and services on multiple contract vehicles and that
the effort required to be on multiple contracts results in extra costs
to the vendor, which they pass to the government through the prices
they offer. The vendors stated that the additional cost of being on
multiple contract vehicles ranged from $10,000 to $1,000,000 due to
increased bid and proposal and administrative costs. One vendor stated
that they provide similar goods and services on the Department of the
Navy's Seaport Enhanced contract and their GSA schedule. In addition,
we found one vendor offering the exact same goods and services on both
their GSA schedule and the NASA's GWAC and offering lower prices on
the GWAC. Another vendor stated that getting on multiple contract
vehicles can be cost-prohibitive for small businesses and forces them
to not bid on a proposal or to collaborate with a larger business in
order to be on a contract vehicle. Finally, a third vendor stated that
GSA vehicles compete with enterprisewide or agency-specific vehicles,
and from industry's perspective, it has introduced redundant buying
capacity.
Government procurement officials expressed additional concerns. For
example, an official from OFPP has stated that such duplication of
effort only complicates the problem of an already strained acquisition
workforce. GSA officials have also remarked on the growth of
multiagency and enterprisewide contracts, which often compete directly
with GSA schedule contracts. The FAS Deputy Commissioner stated that
while the agencies cite GSA fees as a reason for creating their own
vehicles, agencies fail to consider the duplication of effort and cost
of doing these procurements. Rather, these agencies need to consider
the GSA fee as an opportunity cost for the agency if they do not have
to create their own contract. In addition, he noted that creating
additional contracts can place unnecessary demands on an already
strained acquisition workforce.
Legislation Requires the FAR to be Amended to Provide Requirements for
a Business Case Analysis for MACs, but Does Not Address Enterprisewide
Contracts:
Recent legislation and OFPP initiatives are expected to strengthen
oversight and management of MACs, but these initiatives do not address
enterprisewide contracts. The 2009 National Defense Authorization Act
required, one year after its enactment, that the FAR be amended to
require that any MAC entered into by an executive agency after the
amendment's effective date be supported by a business case
analysis.[Footnote 39] Under the act, the FAR requirement for the
business case is to include an analysis of all direct and indirect
costs to the federal government of awarding and administering a
contract and the impact it would have on the ability of the federal
government to leverage its buying power. However, the act is silent on
what steps an agency should take to examine the effect a new contract
will have on the ability of the government to leverage its buying
power. Additionally, the act does not address similar requirements for
enterprisewide contracts. Under the act, the pending FAR rule relating
to this legislation was required to be issued by October 15, 2009;
however, the rule was still in progress as of January 29,
2010.[Footnote 40] The act also requires an amendment of FAR to
require that all interagency acquisitions include a written agreement
between the requesting agency and the servicing agency that assigns
responsibility for the administration and management of the contract
and a determination that the acquisition is the best procurement
alternative.
Senior procurement executives we met with were generally in favor of
this new requirement for MACs. For example, DOD representatives said
that the requirement would help them better manage MACs because it
will create metrics with which they can measure success. The NASA
Senior Procurement Executive noted that the new requirement could
better ensure that other agencies properly use the NASA contract
vehicles. However, VA officials representing the department's Senior
Procurement Executive expressed concern about the time it might take
to approve a contract and ensure that agencies comply with the new
requirement.
Nevertheless, a business case analysis approach for MACs has the
potential to provide a governmentwide approach to awarding MACs as was
pointed out by the SARA panel. The panel reported that proper business
planning requires management deliberation and accountability,
identification of the roles and responsibilities of the requiring and
servicing agency, and the means to communicate this to approving
officials. The panel noted that the OFPP review and approval process
for GWACs could serve as a good business model for approving MACs.
Using the GWAC process as a model, the full business case analysis as
described by the SARA panel, would need to include measures to track
direct and indirect costs associated with operating a MAC. It would
also include a discussion about the purpose and scope, and the amount
and source of demand. Further, the business case would need to
identify the benefit to the government along with metrics to measure
this benefit. Moreover, the agency seeking approval to establish a MAC
would be required to identify the planned contracting practices, the
division of responsibilities between the servicing agency and the
customer agency, and the management structure.
GSA's Efforts to Determine Whether It Obtains the Best Prices on MAS
Contracts Is Hindered by the Limited Application of Selected Pricing
Tools:
GSA's MAS program is the largest government interagency contracting
program, with approximately 17,000 of the 19,000 contracts involved in
the federal supply schedules program, but GSA's limited application of
selected pricing tools hinders its ability to determine whether it
obtains the best MAS contract prices. Because vendors do not compete
against each other to receive MAS contracts, GSA uses two regulatory
controls to obtain the best prices for its customers throughout the
existence of the MAS contracts they use. The first is the goal that
GSA obtain the best prices for MAS contracts that vendors offer their
most favored customers. The second is a price reduction clause in each
MAS contract that generally operates to reduce the MAS contract price
after contract award whenever the vendor lowers its prices for its
similarly situated commercial customers. GSA also uses tools such as
pre-award audits and clearance panel reviews to negotiate best prices
and ensure the quality of contract negotiations, respectively, but the
use of these tools is limited to a relatively small number of MAS
contracts, thus hindering their effectiveness. We also found several
instances where GSA acquisition centers did not hold clearance panel
reviews as required. An advisory panel established by GSA has made
recommendations that could result in changes to the program's pricing
controls and tools but concerns remain that these changes could
adversely affect GSA's ability to negotiate best prices.
GSA Has Established Two Key Regulatory Controls to Obtain Vendors'
Best Prices:
The goal of the MAS program, according to internal GSA guidance, is to
use commercial terms and conditions and the leverage of the
government's volume buying to negotiate the best possible prices and
terms for customers and taxpayers.[Footnote 41] Vendors do not compete
against each other to receive MAS contracts. Instead, GSA evaluates a
vendor's offer under a multiple award schedule solicitation by
comparing the terms and conditions of the MAS contract solicitation to
the terms and conditions of the vendor's agreements with its
commercial customers, taking into account factors such as prices and
discounts offered to the vendor's commercial customers, sales volume,
and contract length, in order to establish price negotiation
objectives.[Footnote 42] Additional information on the MAS contract
award process is available in appendix II.
The negotiation objective described above, which calls for comparing
prices and discounts that a vendor offers the government with the
prices and discounts that a vendor offers its similarly situated
commercial customers, is done as part of GSA's goal to receive "most
favored customer" pricing for MAS contracts. When trying to achieve
this negotiation objective, GSA seeks to obtain the best price a
vendor provides its most favored customer while recognizing that there
may be legitimate reasons why the best price is not achieved given
that terms and conditions of commercial sales vary.[Footnote 43] For
example, a vendor may incur more expenses selling to the government
than to a customer who receives the vendor's best prices, which could
justify a smaller price discount for the government. Most favored
customer pricing is one of the two key regulatory provisions that GSA
has established in its acquisition regulations that work together to
obtain the best prices throughout the life of MAS contracts. The
second pricing provision is the inclusion of a price reduction clause
in MAS contracts.[Footnote 44] This provision provides price
protection for the government following contract award if a vendor
lowers its prices to commercial customers during the contract period.
[Footnote 45] However, GSA officials we spoke with said that they do
not collect data to show how often the price reduction clause is
invoked to reduce schedule prices, as the data they track on price
adjustments for MAS contracts does not specify whether the price is
increased or reduced. Consequently, it is difficult to assess whether
the clause accomplishes its objective over the life of the various
schedule contracts. Despite this lack of data, several vendors and MAS
acquisition center officials we met with expressed concerns about the
resources and administrative burden required for vendors to comply
with the current pricing provisions. For example, representatives of
one vendor we met with noted the difficulty in defining and tracking
labor categories across a large company in order to comply with the
most favored customer pricing provision. On the other hand, GSA
Inspector General Officials we spoke with said that the pricing
provisions are essential tools to ensuring that GSA can negotiate best
prices for its customers.
Limited Use of Certain MAS Pricing Tools Hinders Their Effectiveness:
In addition to its regulatory pricing controls, GSA also uses pre-
award audits, prenegotiation clearance panels and procurement
management reviews (PMR) as tools to negotiate favorable pricing
outcomes and ensure the quality of MAS contract negotiations. These
tools also provide information on MAS contracts' compliance with the
regulatory pricing controls discussed above. However, GSA uses these
tools primarily for a small number of larger dollar value contracts,
thus limiting its ability to evaluate the effectiveness of the
regulatory pricing controls and obtain the best prices under MAS
contracts.
One of these tools is the pre-award audit, conducted by the GSA
Inspector General. These audits enable contract negotiators to verify
that vendor-supplied pricing information is accurate, complete, and
current before contract award. Ultimately, the pre-award audits can
result in lower prices for the users of MAS contracts by identifying
opportunities for GSA to negotiate more favorable price discounts when
awarding contracts based on an analysis of the prices, terms, and
conditions offered to the vendor's most favored customer. For example,
a pre-award audit of an office furniture vendor's MAS contract with an
estimated value of approximately $700 million identified the potential
for greater discounts that could result in savings of approximately
$20 million over the contract period given that the government was the
vendor's largest customer. For contract extensions, these audits can
also review compliance with the price reduction clause in the prior
contract period.
Following a decline in the number of pre-award audits--and associated
cost avoidance--in the early 2000s compared to earlier years, GSA
increased the number of pre-award audits in recent years by providing
additional funding to the GSA Inspector General to perform the
reviews, allocating $5 million annually for pre-award audits.[Footnote
46] As a result, the GSA Inspector General has identified almost $4
billion in potential cost avoidance through pre-award audits from
fiscal years 2004 through 2008. Figure 2 below shows the increase in
identified MAS contract cost avoidance as the number of pre-award
audits has increased in recent years:
Figure 2: GSA MAS Pre-Award Audits, Fiscal Years 1998 through 2008:
[Refer to PDF for image: combined vertical bar and line graph]
Fiscal year: 1998;
Cost Avoidance: $337 million;
Number of MAS Pre-Award Audits: 21.
Fiscal year: 1999;
Cost Avoidance: $424 million;
Number of MAS Pre-Award Audits: 24.
Fiscal year: 2000;
Cost Avoidance: $338 million;
Number of MAS Pre-Award Audits: 24.
Fiscal year: 2001;
Cost Avoidance: $68 million;
Number of MAS Pre-Award Audits: 13.
Fiscal year: 2002;
Cost Avoidance: $158 million;
Number of MAS Pre-Award Audits: 11.
Fiscal year: 2003;
Cost Avoidance: $10 million;
Number of MAS Pre-Award Audits: 14.
Fiscal year: 2004;
Cost Avoidance: $432 million;
Number of MAS Pre-Award Audits: 40.
Fiscal year: 2005;
Cost Avoidance: $1,163 million;
Number of MAS Pre-Award Audits: 63.
Fiscal year: 2006;
Cost Avoidance: $918 million;
Number of MAS Pre-Award Audits: 77.
Fiscal year: 2007;
Cost Avoidance: $927 million;
Number of MAS Pre-Award Audits: 69.
Fiscal year: 2008;
Cost Avoidance: $572 million;
Number of MAS Pre-Award Audits: 69.
Source: GSA Inspector General data.
Note: Cost avoidance data are presented in fiscal year 2009 dollars.
[End of figure]
While the number of pre-award audits and identification of potential
cost avoidance has increased in recent years, GSA could be missing
additional opportunities for cost savings on MAS contracts by not
targeting for review more contracts that are eligible for audit. GSA
guidance instructs contract negotiators to request audit assistance
for new contract offers and extensions as appropriate when a
contract's estimated sales exceed $25 million for the 5-year contract
period.[Footnote 47] However, not all contracts that meet this
threshold receive an audit, and the current number of audits
represents a very small number of contracts relative to the size of
the MAS program. For example, 69 pre-award audits were completed in
fiscal year 2008. In addition, for the GSA Inspector General's audit
planning effort for the two year period of 2009 through 2011, more
than 250 contracts that exceeded the $25 million threshold were not
selected for audit due to resource constraints, compared to 145
contracts that were. These 145 contracts, with an award value of
approximately $4.7 billion, represent only 2 percent of the total
award dollars for all MAS contracts.
GSA uses other tools designed to improve the quality of MAS contract
negotiations, but their effectiveness is limited by incomplete
implementation and a narrow scope. In 2003, GSA established an
Acquisition Quality Measurement and Improvement Program, which was
designed to create management controls to assess and improve the
quality of MAS contract negotiations. This program included a
prenegotiation clearance panel process to help MAS acquisition center
management ensure the quality of its most significant contract
negotiations. Under this initiative, MAS acquisition centers hold
meetings on contracts that meet a defined dollar threshold to review
the contract's negotiation objectives with an emphasis on pricing.
[Footnote 48]
MAS acquisition center officials we spoke with said the panel reviews
were a valuable tool to ensure that contract negotiators have done a
proper market analysis to support the contract's pricing and that the
processes used within an acquisition center to negotiate and award
contracts are consistent. Nevertheless, we found that acquisition
centers had not fully implemented the panel reviews, thus limiting
their effectiveness. We identified several instances of contracts that
met their acquisition center's dollar threshold where there was no
indication that a panel review was held. These ranged from one
contract for consulting services with an estimated value of $12.5
million to another for information technology equipment and services
with an estimated value of approximately $276 million. GSA officials
we spoke with regarding the panel reviews said that they do not check
whether contracts that met the appropriate threshold received a panel
review, even though this is supposed to be done as part of the panel
reporting process. In addition, the GSA Inspector General recently
reported that GSA had not clearly defined management reporting
responsibilities for the panel reviews following the reorganization of
the FAS, further limiting the intended benefits of the initiative. In
response to these issues, GSA has begun the process of updating its
prenegotiation clearance panel guidance to reflect the current FAS
management structure and review whether panel reviews were completed
for contracts that met or exceeded the panel thresholds, which it
plans to finalize in 2010.
GSA also conducts PMRs through its Office of the Chief Acquisition
Officer to assess the quality of contract negotiations through a
review of selected contract files' compliance with statutes,
regulations, and internal policy and guidance. The reviews replaced a
similar effort that was part of the Acquisition Quality Measurement
and Improvement Program, and cover a number of acquisition
organizations within GSA, including MAS acquisition centers. In terms
of MAS contract pricing, the PMRs review whether a contract's
discounts, terms and conditions are equal to or better than those for
the vendor's most favored customer, and whether the contract
negotiator properly documented how the contract's price was determined
to be fair and reasonable, among other things. Following the review,
the acquisition center receives a report that includes the review's
findings, as well as recommendations for improvement that require
corrective action plans. In PMR reports we reviewed from fiscal years
2008 and 2009, we found several examples of PMR findings relating to
deficiencies in MAS contract pricing including: insufficient file
documentation to support price reasonableness; files that did not
clearly establish the price/discount relationship with vendors'
categories of customers; and contract files that did not address which
of the vendor's customers would serve as the basis for the price
reduction clause.
While the PMRs can be a valuable tool for identifying areas for
improvement in MAS contract negotiations and pricing, the scope of the
reviews has been limited to a small number of MAS contracts, thus
minimizing their usefulness for assessing trends in MAS contracts'
compliance with GSA policy and guidance. In the PMR reports we
reviewed, GSA's PMR team selected samples of between 12 and 16
contracts for review at each MAS acquisition center, a small amount
relative to the universe of approximately 17,000 MAS program
contracts, and at the time of our fieldwork, the selection methodology
did not focus on risk or yield a statistical sample of contracts for
review. GSA officials that manage the PMR process said that the number
of contracts in each sample they review makes it difficult to derive
trends from the PMR review findings, although a subsequent update to
GSA's PMR methodology to focus on attempting to select a statistical
sample of contracts for review could address this issue.
Advisory Panel Recommendations on Pricing Provisions Raise Concerns:
Recently, GSA has attempted to examine the relevance of GSA's pricing
controls established to obtain the best available pricing for MAS
contracts in the current marketplace. In 2008, GSA established an
advisory panel to examine the MAS program's most favored customer and
price reduction regulatory provisions in the context of current
commercial pricing practices. The panel, comprised of both government
and industry representatives, met 16 times, receiving testimony from
30 program stakeholders. The panel issued its report in February 2010,
which contained 20 recommendations regarding the MAS program, several
of which address GSA's MAS pricing provisions. Specifically, the panel
recommended that GSA eliminate the price reduction clause for MAS
services and product contracts on the basis that new statutory
competition requirements (known as "fair opportunity" requirements)
[Footnote 49] and additional data collection on MAS orders should
ensure that the government receives competitive prices.[Footnote 50]
Regarding the price objective for MAS contracts, the panel recommended
that GSA issue clear guidance to implement the price objective for MAS
contracts to obtain fair and reasonable prices at the time of contract
award. MAS Advisory Panel members and program stakeholders we spoke
with stated that this could mean that the "most favored customer"
price would no longer be the objective for the MAS program. Senior
Procurement Executives from GSA and VA, with whom we spoke, both
members of the panel, had differing opinions on the panel's draft
recommendations. The GSA Senior Procurement Executive noted that the
pricing provisions had not served their intended purpose, and that
competition for orders would make the provisions irrelevant. The VA
Senior Procurement Executive, however, was in favor of retaining the
price reduction clause for products, and said that the most favored
customer price objective provides some assurance of market pricing for
goods and services. He also said that the elimination of the price
reduction clause would have a negative impact on cost recoveries from
VA's pre-and post-award audits for its schedule contracts.
GSA will need to consider several issues as it evaluates the panel's
recommendations. First, while the panel made efforts to collect data
to assist it in its deliberations, there is minimal quantitative data
in the panel's report to support its conclusions. For example,
although the panel reported that those who testified before it said
that the price reduction clause is rarely triggered, GSA (as noted
earlier) does not track data on the number of contract modifications
due to price reductions.
Second, while the panel reported that competition for MAS orders is
the best way to ensure that the government receives competitive
prices, there may be risks in relying solely on competition as a
substitute for these pricing provisions. For example, DOD, the largest
MAS customer, has been subject to fair opportunity competition
requirements since 2002, but DOD's analysis of competition data for
fiscal year 2008 shows that fair opportunity was not given on more
than one-third of DOD's MAS orders, which totaled approximately $3.6
billion.[Footnote 51] Our prior work and numerous DOD Inspector
General reviews have also identified problems with the implementation
of this requirement, such as issues with excessive waivers of the
requirement and repeated instances of orders that did not provide for
sufficient competition.[Footnote 52]
Third, changes to the MAS program pricing objective could also have an
adverse impact on the program's pricing tools. For example,
elimination of most favored customer as the pricing objective could
impair the ability of the GSA Inspector General to identify potential
cost avoidance in its pre-award audits of MAS contracts. GSA Inspector
General representatives told us that the most favored customer pricing
objective is critical to their evaluation of vendors' price proposals.
Moreover, they said that if GSA adopts the panel's proposals, their
ability to continue identifying potential cost avoidance for MAS
contracts would depend on whether GSA establishes another negotiation
objective as a replacement for "most favored customer." Our prior work
has also highlighted the importance of having a price objective that
leverages the government's buying power, as agencies may not pursue
additional discounts when placing MAS contract orders. In our recent
review of 336 blanket purchase agreements based on MAS contracts,
[Footnote 53] agencies did not seek price discounts when they
established blanket purchase agreements in almost half of the
instances reviewed,[Footnote 54] despite the fact that they are
required to do so.[Footnote 55]
Effective MAS Program Management Is Hindered by a Lack of Data, a
Decentralized Management Structure, and Shortcomings in Assessment
Tools:
GSA lacks data about the use of the MAS program by customer agencies
that it could use to determine how well the MAS program meets its
customers' needs and to help its customers obtain the best value in
using MAS contracts. In addition, the decentralized management
structure for the MAS program hinders consistent implementation of the
MAS program within GSA, as well as program wide oversight. The MAS
Program Office, established in 2008 to manage strategic and policy
issues, lacks direct oversight authority for the MAS program, as GSA
has dispersed responsibility for the management of individual contract
schedules among nine different acquisition centers under three
business portfolios. According to some MAS program officials, this has
impaired the consistent implementation of policies across the MAS
program and the sharing of best practices, and the GSA Inspector
General has identified issues with oversight of the MAS program.
Finally, there are shortcomings in assessment tools that also result
in management challenges. For example, MAS performance measures are
inconsistent across the GSA organizations that manage MAS contracts,
including inconsistent emphasis on pricing, which limits GSA's ability
to have a program wide perspective on its operations.
GSA Lacks Important Data to Strategically Manage MAS Contracts and
Pricing:
GSA lacks important data that would facilitate more strategic
management of the MAS program. GSA officials told us that because
agency customers generally bypass GSA and place their orders directly
with MAS vendors, they lack data on the orders placed under MAS
contracts; as a result, GSA also lacks data on the actual prices paid
relative to the MAS contract prices. GSA does offer two electronic
procurement tools, GSA Advantage and e-Buy, which permit agencies to
place MAS contract orders with vendors and post requests for quotes
with vendors. GSA Advantage also has a spend analysis reporting tool
that provides agencies with sales and statistical data on their orders
through the system. However, these tools account for a very small
percentage of overall MAS program sales and have other limitations in
their use, thus restricting the amount of data available. In fiscal
year 2008, customer sales through GSA Advantage totaled approximately
$559 million, representing only 1.5 percent of total program sales,
and GSA officials we spoke with said that its use is limited to
procuring goods as opposed to services. GSA officials also said that
while customers can use e-Buy to post requests for quotes of any size
and fulfill fair opportunity competition requirements, they do not
generally use e-Buy to place orders due to its inability to process
orders greater than the micro-purchase threshold of $3,000.
There are several drawbacks to the lack of available transactional
data on the goods and services ordered under the MAS program and the
prices paid. First, it hinders GSA's ability to evaluate program
performance and manage the program strategically. Our prior work has
highlighted the importance of having comprehensive spend data as part
of a successful approach to procurement, noting that the use of
procurement data to determine how much is being spent for goods and
services and to identify buyers and suppliers can identify
opportunities to leverage buying, save money, and improve performance.
[Footnote 56] Several GSA officials acknowledged that it is difficult
for GSA to know whether the MAS program meets their customers' needs
without data on who uses MAS contracts and what they are buying.
Furthermore, the GSA Inspector General has recommended that GSA take
steps to collect this data to use in evaluating customer buying
patterns and competition at the order level in order to adopt a more
strategic management approach.[Footnote 57] We have made similar
observations in prior reports going back several decades.[Footnote 58]
Secondly, the lack of data could limit the ability of GSA and its
customers to achieve the best value in terms of MAS prices. Some GSA
officials informed us that they could possibly use transactional data
to negotiate better prices on MAS contracts. For example, one MAS
acquisition center official said that if they saw large percentage
discounts off the contract price on orders, they would question the
price during the next contract option period. Program stakeholders
also expressed concerns regarding the lack of MAS program data.
Several of the agency contracting officers we spoke with cited
benefits of having additional transactional data on MAS orders. For
example, one contracting officer said additional data could improve
their negotiating position when buying goods and services, while two
others said it would increase visibility over their purchases.
Similarly, the MAS Advisory Panel has recommended that GSA make order-
level pricing information available to MAS contract negotiators and
agency contracting officers to conduct market research and assist in
price reasonableness determinations. In addition, a number of the
senior acquisition officials at agencies in our review said that they
considered the prices on MAS contracts to be too high, and without
additional data from GSA, it was difficult to see the value in the MAS
program and the prices that GSA negotiates. As noted earlier in this
report, agencies we met with cited similar concerns over GSA's prices
as a reason they created new MAC and enterprisewide contracts. A
number of these officials also said that GSA should play a role in
providing this data to its customers to assist in their strategic
procurement efforts.
MAS vendors, GSA officials and agency contracting officers we met with
had mixed opinions on the best way to collect this data, which might
include collecting data from MAS vendors, customer agencies, or
through greater use of electronic ordering portals like GSA Advantage.
GSA officials also told us that they have initiated a process
improvement initiative to collect more transactional data in the
future, as they make improvements to information systems that support
the MAS program. However, this initiative is currently in its early
stages.
Decentralized Management Structure Limits Consistent Program
Implementation and Oversight:
Responsibility for management of the MAS program is dispersed among
several different organizations in FAS, which has resulted in program
management challenges due to inconsistent implementation of policies
and guidance and program oversight weaknesses. Following the
reorganization of GSA that created FAS, the agency established the MAS
Program Office in July 2008 to provide a structure for consistent
implementation of the MAS program. The program office's charter
provides it broad responsibility for MAS program policies and
strategy, and established a Governance Council comprised of
representatives from across FAS as well as VA to help foster
collaboration in the MAS program. To date, the office has undertaken
several initiatives to fulfill its charter. The Governance Council
recently developed a set of strategic priorities for the MAS program
for the upcoming years, including the development of additional
training on the MAS program for both GSA and agency contracting
personnel, expanded customer outreach, and the improvement of
information systems that support the program. As part of its
responsibility to support process improvement efforts, the program
office has also undertaken initiatives to digitize MAS contract files
and implemented a pilot program to process MAS contract modifications
electronically.
While the MAS Program Office is responsible for ensuring consistency
in the MAS program, responsibility for managing the operation of
individual schedules resides with nine different acquisition centers
under three business portfolios. None of these business portfolios--
which manage other acquisition programs in addition to the MAS
program--or the MAS acquisition centers that award and manage MAS
contracts are under the direct management of the MAS Program Office.
In addition, the program office's charter does not specifically
provide it with direct oversight of the business portfolios' and
acquisition centers' implementation of the MAS program. Figure 3 below
depicts the organizational structure of the MAS program.
Figure 3: MAS Program Organizational Chart:
[Refer to PDF for image: organizational chart]
Top level: Federal Acquisition Service:
Second level, reporting to Federal Acquisition Service:
* Integrated Technology Services;
- Center for IT Schedule Programs;
* General Supplies and Services;
- Center for Innovative Acquisition Development;
- Center for Facilities Maintenance and Hardware;
- Greater Southwest Acquisition Center;
- Management Services Center;
- Integrated Workplace Acquisition Center;
- National Administrative Services and Office Supplies Acquisition
Center;
* Travel, Motor Vehicle, and Card Services;
- Office of Vehicle Acquisition and Leasing Services;
- Center for Travel and Transportation;
* Acquisition Management;
- MAS Program Office.
Source: GSA.
[End of figure]
MAS Program Office officials stated that despite not having direct
authority over the organizations that manage the MAS program, they are
able to work through issues that arise with the business portfolios.
However, GSA officials in MAS acquisition centers as well as some MAS
vendors we spoke with had varying opinions about the program's current
management structure. Some MAS program officials, vendors, and program
stakeholders gave positive feedback on the Program Office's efforts to
date. For example, one vendor stated that the electronic modification
effort had made processing contract updates easier and more
transparent. Furthermore, some GSA officials and industry
representatives we spoke with said that the program office's
governance council provided the acquisition centers with input on
policy and strategy issues, and that the program office was making
progress with the strategic management of the MAS program. However,
other MAS program officials stated that the program is still not
managed in a coordinated way and that there is a lack of communication
and consistency among MAS acquisition centers which impairs the
consistent implementation of policies across the program and the
sharing of information between business portfolios. For example, one
MAS acquisition center official we spoke with said that the lack of
communication among portfolios has hindered their ability to respond
to vendor questions relating to schedules under other portfolios. The
GSA Inspector General has expressed similar concerns, noting in a
recent report that inconsistent pricing policy among MAS acquisition
centers had contributed to instances in which the government did not
have assurance of the reasonableness of MAS contract pricing, and that
there were opportunities for a more consistent approach in pursuing
volume discounts for MAS contracts.[Footnote 59] The report also found
that a lack of clearly defined responsibilities within the new FAS
organization has harmed national oversight of the MAS program and may
have affected the sharing of best practices between acquisition
centers. While at the time of our work the MAS Program Office was a
relatively new organization within FAS, the issues identified with
consistency of program implementation and the use of pricing tools
identified earlier in this report highlight the challenges the office
will face in providing coherent program oversight in the future.
Limitations in Assessment Tools That Focus on Internal Operations and
MAS Customers Also Hinder Effective Program Management:
In addition to a lack of data and a decentralized management
structure, shortcomings in assessment tools also create MAS program
management challenges. Our prior work on performance measurement in
the federal government noted that when complex program goals are
broken down into a set of performance measures, it is important to
ensure that the measures sufficiently cover the key aspects of an
agency's performance, and that the overall measurement of performance
does not become biased by measures that assess some priorities while
neglecting others.[Footnote 60] GSA has developed performance measures
for the organizations that manage the MAS program to establish
accountability for program performance and drive continual
improvement. They include measures for sales volume, program costs,
and time to complete contracting actions such as processing contract
offers and modifications. While these may be valid measures of program
performance, the measures are inconsistent among the organizations and
do not place as much emphasis on pricing, a key aspect of the program,
making it difficult to have a program wide perspective of MAS program
performance. For example, the fiscal year 2009 performance scorecard
for the Information Technology Schedule has a performance measure to
track state and local government sales, while the General Supplies and
Services business portfolio, which also manages a schedule that state
and local governments can use, does not. Furthermore, the Travel,
Motor Vehicle, and Card Services business portfolio has a draft
performance measure for fiscal year 2010 related to the quality of
documentation in contract files, but the Information Technology
Schedule and the General Supplies and Services business portfolio do
not.
There are also inconsistencies in the extent to which the
organizations measure performance as it relates to MAS contract
pricing. The Information Technology Schedule has tracked price
competitiveness for its products by comparing prices for MAS vendors
on GSA Advantage to prices for the same products in the private
sector, with a goal for GSA's prices to be at least 10 percent less.
Similarly, the Travel, Motor Vehicle, and Card Services business
portfolio has established a performance measure that will track how
its prices compare against a baseline of prices paid for similar
products in the private sector. However, the General Supplies and
Services business portfolio does not track any measures related to
pricing. A GSA official in the FAS Office of Strategic Business
Planning and Process Improvement, which oversees performance
management, noted that they are in the early stages of internal
discussions regarding the development of performance measures related
to quality, which would address pricing, as well as developing a
separate scorecard for the MAS program.
GSA also uses an annual MAS customer satisfaction survey to assess MAS
customers' perspectives on MAS prices, information available on the
MAS program, and training efforts, among other things. The results of
such surveys can be used to monitor trends in customer satisfaction
over time and identify areas for improvement. OMB guidance for federal
agencies on statistical surveys advises that agencies should aim to
achieve the highest practical response rate, and conduct a nonresponse
analysis when response rates do not reach 80 percent, as lower
response rates increase the risk of bias in the survey results.
[Footnote 61] However, the MAS customer satisfaction survey reports we
reviewed for fiscal years 2007 through 2009 had a response rate of 1
percent or less, and did not include a nonresponse analysis, raising
concerns over the use of the surveys' results to measure MAS program
performance. A GSA official who oversees the survey acknowledged that
the low response rate is an indicator that GSA should improve its
survey methodology.
Conclusions:
Billions of taxpayer dollars flow through MACs, GWACs, the MAS
program, and enterprisewide contracts; however, the federal government
does not have a clear comprehensive view of who is using these
contracts and if they are being used in an efficient and effective
manner--one that minimizes duplication and advantages the government's
buying power by taking a more strategic approach to buying goods and
services. Longstanding problems with the quality of FPDS-NG data on
these contracts and the lack of consistent governmentwide policy on
the creation, use, and costs of awarding and administering of some of
these contracts are hampering the government's ability to realize the
strategic value of using these contracts. Furthermore, departments and
agencies may be contracting for the same goods and services across a
myriad of contracts--MACs, GWACs, the MAS program, and enterprisewide
contracts. A more comprehensive business case analysis for MACs and
enterprisewide contracts could help ensure that these contracts are
being established and used in an efficient and effective manner.
Agencies are sometimes reluctant to turn to the GSA MAS program
because they are not confident that GSA prices are as low as they
could be and, as a result, create their own contracts. While GSA has
established pricing provisions and tools to use to ensure that it
obtains the best prices that vendors offer to their commercial
customers and takes advantage of price decreases after it awards its
MAS contracts, some of these tools are not applied effectively.
Consequently, it is difficult for both GSA and federal agencies to
know whether MAS prices truly achieve the program's goal of providing
best prices. Furthermore, the proposal to eliminate the most favored
customer price objective and price reduction clause could further
weaken GSA's ability to negotiate best prices. In addition, GSA's
decentralized program management structure and shortcomings in program
assessment tools and data create oversight challenges that prevent GSA
from obtaining reliable feedback from its customers and managing the
MAS program more strategically. Furthermore, given that the MAS
program is the government's leading interagency contracting program,
it is important that OFPP stay informed of GSA's plans to address
these issues, in order to identify potential lessons learned that
could be relevant for other interagency contracting programs.
Until these issues with interagency and enterprisewide contracts and
the MAS program are addressed, we believe the government will continue
to miss opportunities to minimize duplication and take advantage of
the government's buying power through more efficient and more
strategic contracting.
Recommendations for Executive Action:
To provide better transparency and a coordinated approach in awarding
MACs and enterprisewide contracts, we recommend that the Director of
the Office of Management and Budget direct the Administrator of the
Office of Federal Procurement Policy to take the following five
actions in conjunction with the agencies' senior procurement
executives:
* Survey departments and agencies to update the 2006 Office of Federal
Procurement Policy Interagency Contracting Data Collection Initiative
to identify the universe of MACs and enterprisewide contracts in use
throughout federal departments and agencies and assess their utility
for maximizing procurement resources across agencies;
* Ensure that departments and agencies use the survey data to
accurately record these contracts in FPDS-NG;
* Establish a policy and procedural framework in conjunction with
agencies for establishing, approving, and reporting on new MACs and
enterprisewide contracts on an ongoing basis; the framework should
stress the need for a consistent approach to leveraging the
government's buying power across departments and agencies while
continuing to use their statutory authorities for buying goods and
services;
* Assess the feasibility of establishing and maintaining a centralized
database, which could provide sufficient information on GWACs, MACs,
and enterprisewide contracts, for contracting officers to conduct
market research and make informed decisions on the availability of
existing contracts to meet the agencies' requirements; and:
* As part of developing the pending FAR rule to implement the 2009
National Defense Authorization Act, ensure that departments and
agencies complete a comprehensive business case analysis as described
by the SARA panel, and include a requirement to address potential
duplication with existing contracts, before new MACs and
enterprisewide contracts are established.
To strengthen GSA MAS program pricing and management, we recommend
that the Administrator of the General Services Administration take the
following eight actions:
* In coordination with the GSA Inspector General, target the use of
pre-award audits to cover more contracts that meet the audit threshold;
* Fully implement the process that has been initiated to ensure that
vendors that meet the pre-negotiation clearance panel threshold
receive a panel review;
* When considering the MAS Advisory Panel recommendations to clarify
the price objective and eliminate the price reduction clause, ensure
that any alternative means to negotiate and determine best prices are
validated and in place before eliminating these pricing provisions,
* Collect transactional data on MAS orders and prices paid, possibly
through the expanded use of existing electronic tools or through a
pilot data collection initiative for selected MAS schedules and make
the information available to MAS contract negotiators and customer
agencies,
* Establish more consistent performance measures across the MAS
program, including measures for pricing;
* Take steps to increase the MAS customer survey response rate by
using a methodologically sound means to identify bona fide program
users and employing survey techniques that produce meaningful and
actionable information that can lead to program improvements;
* Clarify and strengthen the MAS program office's charter and
authority so that it has clear roles and responsibilities to
consistently implement guidance, policies, and best practices across
GSA's acquisition centers including policies and practices related to
the above recommendations; and:
* Report GSA's plans to address these recommendations to the
Administrator of the Office of Federal Procurement Policy.
Agency Comments and Our Evaluation:
We provided a draft of this report to OMB, DOD, Department of Health
and Human Services, DHS, VA, GSA, and NASA. We received email comments
from OMB. We also received email comments from DHS, VA and NASA noting
that they had no technical comments. We received written comments from
DOD, the Department of Health and Human Services, and GSA, which are
included as appendixes III-V.
OMB concurred with our recommendations in its response. NASA's
response stated that it found our report to be complete, concise, and
accurate and provided a balanced view of issues. In their written
responses, GSA and the Department of Health and Human Services
concurred with our recommendations and DOD stated that it looks
forward to working with the OMB's Administrator for OFPP and with GSA
on their efforts to implement the recommendations. In addition, the
GSA Inspector General provided technical comments on the topic of pre-
award audits that we incorporated into the report as appropriate.
In its comments on a draft of this report, OMB agreed with our
assessment that interagency and enterprisewide contracts should
provide an advantage to the government by leveraging the government's
buying power and maximizing efficiencies in the procurement process.
OMB also stated that the growth in the use of interagency contracting
vehicles raises concerns about potential duplication and redundancy of
effort and capacity. OMB further stated that it is actively engaged in
initiatives to improve transparency into these vehicles as well as the
governance, reporting and regulations covering the establishment,
management, and use of interagency contracts. Finally, OMB stated that
it agrees that governmentwide guidance in this area will help the
government to effectively leverage, manage, and oversee these
contracts.
In written comments on a draft of this report, GSA stated that it
agreed with our findings and recommendations pertaining to GSA and
agreed to make additional efforts to improve MAS program pricing and
management. GSA also stated that it plans to brief the Administrator
of the OFPP on its plans to implement the recommendations. In
addition, GSA noted the key role that competition plays in helping
agencies achieve the best value through the MAS program. Specifically,
GSA stated that the pre-award audit cost avoidance amounts identified
by the GSA IG do not account for additional price reductions that
might be realized from other regulatory procedures in the FAR that
call for users of the MAS program to seek competition and additional
price reductions on MAS orders. As noted in our report, the pre-award
amounts reflect cost avoidance in the negotiated contract-level prices
for MAS contracts as opposed to order-level prices, which GSA
acknowledges are challenging to collect information on. In addition,
GSA stated in its written comments that the requirement for ordering
activities to seek price discounts at the order level is an additional
key regulatory pricing control for the MAS program. While competition
and requirements to seek additional price discounts are key aspects of
ensuring that agencies can achieve the best value through the MAS
program, we note that our objective was to evaluate the effectiveness
of the tools and controls GSA uses to obtain the best possible prices
for its customers in negotiating MAS contract prices, as opposed to
tools used at the ordering level by agencies. Finally, as noted in our
report, our recent review of 336 MAS blanket purchase agreements found
that agencies did not seek additional price discounts as required by
the FAR in almost half of the instances reviewed. These points
highlight the importance of GSA's role in using pricing tools to
negotiate the best possible prices up front for its MAS contracts.
OFPP, DOD, Department of Health and Human Services, and GSA also
provided technical comments, which were incorporated as appropriate.
As agreed with your offices, unless you publicly announce the contents
of this report earlier, we plan no further distribution of it until 30
days from the date of this report. We will then send copies of this
report to interested congressional committees; the Director of the
Office of Management and Budget; the Secretaries of Defense, Health
and Human Services, Homeland Security, and Veterans Affairs; and the
Administrators of the General Services Administration and the National
Aeronautics and Space Administration. The report also is available at
no charge on the GAO Web site at [hyperlink, http://www.gao.gov. If
you or your staff have any questions about this report, please contact
me at (202) 512-4841 or needhamjk1@gao.gao. Contact points for our
offices of Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff who made key contributions to
this report are listed on appendix VI.
Signed by:
John K. Needham:
Director Acquisition and Sourcing Management:
[End of section]
Appendix I: Scope and Methodology:
Our overall objective was to address management issues associated with
the growth in the use of interagency contracting vehicles and
enterprisewide contracts, and especially the management of the General
Services Administration's (GSA) multiple award schedule (MAS) program
contracts. To conduct this review we selected agencies that
established or used the MAS, governmentwide acquisition contract
(GWAC), multiagency contract (MAC) or enterprisewide contract
programs. The six agencies and three military departments selected in
our review were responsible for almost 87 percent of total federal
procurement obligations in fiscal year 2008. We met with
representatives from the Office of Management and Budget's Office of
Federal Procurement Policy (OFPP), selected agencies' Senior
Procurement Executives or representatives, and selected Heads of
Contracting Activities and contracting officers at the departments and
agencies included in our review. We also met with vendors and several
private sector organizations that represent the vendor community. See
table 6 below for a list of agencies, reason for selection, and
contracting activities included in our review.
Table 6: Federal Agencies and Military Departments Included in Our
Review:
Agency/military department: Office of Management and Budget, Office of
Federal Procurement Policy;
Reason for selection: Responsible for governmentwide procurement
guidance and policies;
Contracting activities reviewed: [Empty].
Agency/military department: Department of Defense[A];
Reason for selection: Responsible for Department of Defense-wide
procurement guidance and policies;
Contracting activities reviewed: Washington Headquarters Services,
Washington D.C.
Agency/military department: Department of the Air Force;
Reason for selection: Responsible for the Enterprise Information
Technology Acquisition (EITA) contract.[B];
Contracting activities reviewed: District of Washington Acquisition
Division, Contracting, Washington D.C;
Electronic Systems Center Hanscom Air Force Base, Massachusetts.
Agency/military department: Department of the Army;
Reason for selection: Responsible for multiagency contracts;
Contracting activities reviewed: Army Medical Research and Materiel
Command, Medical Research Acquisition Activity, Ft. Detrick, Maryland.
Agency/military department: Department of the Navy;
Reason for selection: Responsible for an enterprisewide contract-
SeaPort Enhanced;
Contracting activities reviewed: Space and Naval Warfare Systems
Command, San Diego, California;
Space and Naval Warfare Systems Center Atlantic, North Charleston,
South Carolina.
Agency/military department: Department of Health and Human Services,
National Institutes of Health;
Reason for selection: Responsible for three governmentwide acquisition
contract programs;
Contracting activities reviewed: Centers for Medicare and Medicaid
Services, Baltimore, Maryland.
Agency/military department: Department of Homeland Security;
Reason for selection: Responsible for two enterprisewide contract
programs-Enterprise Acquisition Gateway for Leading-Edge Solutions and
FirstSource;
Contracting activities reviewed: Federal Law Enforcement Training
Center, Glynco, Georgia; Federal Emergency Management Agency,
Washington D.C.
Agency/military department: Department of Veterans Affairs;
Reason for selection: Delegated responsibility for a portion of the
multiple award schedule program;
Contracting activities reviewed: [Empty].
Agency/military department: General Services Administration;
Reason for selection: Directs and manages the multiple-award schedule
program and a number of governmentwide acquisition contract programs;
Contracting activities reviewed: Mid-Atlantic Region, Acquisition
Operations Division, Philadelphia, Pennsylvania.
Agency/military department: National Aeronautics and Space
Administration;
Reason for selection: Responsible for the governmentwide acquisition
contract, Solutions for Enterprise-Wide Procurement IV;
Contracting activities reviewed: [Empty].
Source: GAO analysis.
[A] Within the Department of Defense, we also reviewed the Defense
Information Systems Agency responsible for a number of MAC programs.
[B] It was determined that the Air Force contract program was neither
a MAC nor an enterprisewide contract program.
[End of table]
In addition, we used a structured interview process to discuss our
review objectives with a mix of 16 large and small vendors with high
sales on the GSA MAS program and also awarded GWACs, MACs, or
enterprisewide contracts. Table 7 identifies the vendors included in
our review.
Table 7: Vendors Included in Our Review:
Booz Allen Hamilton, Incorporated, McLean, Virginia:
Computer Sciences Corporation, Falls Church, Virginia:
Business Technologies and Solutions, Incorporated, Beavercreek, Ohio:
Dell Federal Systems Corporation, Round Rock, Texas:
General Dynamics Information Technology, Fairfax, Virginia:
Government Acquisitions, Incorporated, Cincinnati, Ohio:
International Business Machines Corporation, Bethesda, Maryland:
MELE Associates, Incorporated, Rockville, Maryland:
MicroTech, Incorporated, Vienna, Virginia:
Orbis, Incorporated, Mount Pleasant, South Carolina:
Presidio Networked Solutions, Greenbelt, Maryland:
Raytheon Company, Arlington, Virginia:
Science and Technology Corporation, Hampton, Virginia:
Science Applications International Corporation, McLean, Virginia:
SPARTA, Incorporated, Lake Forest, California:
SRA International, Incorporated, Fairfax, Virginia:
Source: GAO presentation of vendor's data.
[End of table]
To determine the magnitude of interagency contracting and the extent
to which policies and guidance exist to establish, oversee, and manage
MACs, GWACs, and enterprisewide contracts, we tried to identify the
universe of these contract vehicles. We found that an official central
list of these vehicles did not exist. We also tried to use the Federal
Procurement Data System-New Generation (FPDS-NG) to identify these
vehicles but found this system did not adequately identify these
vehicles. To determine if the data on interagency contracts were
reliable we tried to verify some of the data generated from FPDS-NG.
For instance, FPDS-NG includes a data field that is intended to
identify GWACs but we found a number of instances where known GWACs
were coded incorrectly. For example, the Environmental Protection
Agency has a number of GWACs but when we searched on the contract
numbers in FPDS-NG, none of the GWAC contracts were correctly coded as
a GWAC. Similarly, some of the National Institutes of Health GWAC
contracts were not correctly coded. We also searched the system by
contract number for MACs that we were aware of and found similar
issues, with some contracts coded properly as MACs and some
not.[Footnote 62] This lack of reliability with FPDS-NG data made it
impossible to determine the universe of these types of contracts.
Despite its critical role, we have consistently reported on FPDS-NG
data quality issues over a number of years.[Footnote 63] Accordingly,
we conducted literature searches, reviewed 13 agencies' and
departments' Web pages and also selected the ten largest government
contractors' which received the most GWACs procurement obligations in
fiscal year 2008 and reviewed their Web pages to identify examples of
MACs, GWACs, and enterprisewide contracts. This produced a list of 14
MAC programs, 9 GWAC programs, and 7 enterprisewide contracting
programs, but we acknowledge that it likely understates the total
number of these programs. Based on this list, we judgmentally selected
to review 14 contracting programs in 5 agencies and the 2 military
departments to provide a broad perspective on agencies use. Table 8
lists the MAC, GWAC, enterprisewide contract programs, and agencies
responsible for the vehicles that we selected to obtain additional
information.
Table 8: List of Agencies, Military Departments, and Contracting
Programs Reviewed:
Agency, military department and contracting program: Department of
Defense, Defense Information Systems Agency:
* Encore II;
Type of contracting vehicle: Multiagency contract.
Agency, military department and contracting program: Department of the
Army:
* Information Technology Enterprise Solutions-2 Services;
Type of contracting vehicle: Multiagency contract.
Agency, military department and contracting program: Department of the
Army:
* Information Technology Enterprise Solutions-2 Hardware;
Type of contracting vehicle: Multiagency contract.
Agency, military department and contracting program: Department of the
Army:
* Army Desktop and Mobile Computing-2;
Type of contracting vehicle: Multiagency contract.
Agency, military department and contracting program: Department of
Health and Human Services, National Institutes of Health:
* Chief Information Officer-Solutions and Partners 2 innovations;
Type of contracting vehicle: Governmentwide acquisition contract.
Agency, military department and contracting program: Department of
Health and Human Services, National Institutes of Health:
* Electronic Commodities Store III;
Type of contracting vehicle: Governmentwide acquisition contract.
Agency, military department and contracting program: Department of
Health and Human Services, National Institutes of Health:
* Image World 2 New Dimensions;
Type of contracting vehicle: Governmentwide acquisition contract.
Agency, military department and contracting program: Department of
Homeland Security:
* Enterprise Acquisition Gateway for Leading-Edge Solutions;
Type of contracting vehicle: Enterprisewide.
Agency, military department and contracting program: Department of
Homeland Security:
* FirstSource;
Type of contracting vehicle: Enterprisewide.
Agency, military department and contracting program: Department of the
Navy:
* SeaPort Enhanced;
Type of contracting vehicle: Enterprisewide.
Agency, military department and contracting program: General Services
Administration:
* Alliant;
Type of contracting vehicle: Governmentwide acquisition contract.
Agency, military department and contracting program: General Services
Administration:
* Millennia;
Type of contracting vehicle: Governmentwide acquisition contract.
Agency, military department and contracting program: General Services
Administration:
* Veterans Technology Services;
Type of contracting vehicle: Governmentwide acquisition contract.
Agency, military department and contracting program: National
Aeronautics Space Administration:
* Solutions for Enterprise-Wide Procurement IV;
Type of contracting vehicle: Governmentwide acquisition contract.
Source: GAO analysis.
Note: We did not select or review contract programs at the Air Force
or Veterans Affairs because we were not able to determine if either
departments had MAC or enterprisewide contract programs.
[End of table]
We met with OFPP officials to assess their role in agencies awarding
MACs, GWACs, and enterprisewide contracts. We also met with agency
officials responsible for these types of contracts and discussed their
reasons and the rational for not using other existing contracts. We
also obtained and reviewed the program's acquisition plans and
business cases if they were available. Since GWACs are the only type
of interagency contract receiving governmentwide oversight from OFPP,
we obtained and reviewed the agencies' annual reports to OFPP
discussing how they are achieving their goals as prescribed by the
Office of Management and Budget and the direct/indirect costs
associated with management of these contracts. We met with selected
agencies' Heads of Contracting Activities as well as the agencies'
Senior Procurement Executives or their representatives to obtain their
assessment on the use and awarding of these vehicles. We also
judgmentally selected 17 contracting officers from 4 agencies and 3
military departments (see table 6 above) in our review who had placed
orders through one of the reviewed contract vehicles. In our
discussions with these contracting officers, we used a structured
interview process to discuss how they identify available contracts
and, then, determine which contract to use. In discussions with
vendors, we used a structured interview process to obtain their views
on potential duplications of products and services provided on these
contracts and the costs associated with being on different contracts
that provide similar products and services. In addition, to assess the
oversight of and benefits provided by GWACs, MACs, and the MAS
program, we reviewed policies, agency directives, relevant studies,
audit reports, the Federal Acquisition Regulation (FAR), and other
regulations relevant to our review objectives. We also met with
representatives of several private sector organizations--the Coalition
for Government Procurement, Jefferson Solutions, LLC, the Professional
Services Council, and the Washington Management Group--that represent
vendors and contractors to obtain their views on issues related to our
review objectives.
To determine the effectiveness of tools, controls, and information GSA
uses to obtain the best possible prices for its customers, we reviewed
GSA policies and guidance for MAS contract negotiations, including
GSA's Acquisition Manual, specific guidance on contract price
negotiations, and guidance for compliance reviews of MAS contracts.
[Footnote 64] We discussed implementation of GSA's policies and
guidance as they pertain to MAS contract pricing with representatives
of GSA's headquarters components and the Federal Acquisition Service
(FAS) at:
* GSA Office of Acquisition Management, Arlington, Va.;
* MAS Program Office, Arlington, Va.;
* Office of the Chief Acquisition Officer, Washington, D.C.; and:
* GSA's Office of Inspector General, Arlington, Va.
We also obtained, analyzed, and discussed acquisition center policies
and procedures for negotiating MAS contracts with MAS Acquisition
Center officials located at GSA's:
* Center for Innovative Acquisition Development, Arlington, Va.;
* Center for Information Technology Schedule Programs, Arlington, Va.;
* Integrated Workplace Acquisition Center, Arlington, Va.;
* Office of Travel, Motor Vehicle, and Card Services, Arlington, Va.;
* Management Services Center, Auburn, Wa.; and:
* Greater Southwest Acquisition Center, Fort Worth, Tx.
Further, we obtained and reviewed information on compliance with GSA
pricing policies and guidance, including prenegotiation clearance
panel reports, GSA Inspector General reports, and GSA Procurement
Management Review Reports, as well as information on GSA Inspector
General pre-award audits and cost avoidance estimates. Further, we
reviewed information on recommended changes to the MAS program by the
MAS Advisory Panel, and discussed the recommendations with seven of
the MAS Advisory Panel members. We also discussed the recommendations
with the selected vendors and agency contracting officers noted above,
as well as with MAS Acquisition Center officials. We also obtained and
analyzed data from the Department of Defense on the implementation of
fair opportunity competition requirements. To help ensure the
reliability of this data, we interviewed relevant DOD personnel and
performed electronic testing for missing data and obvious errors. We
determined the data were sufficiently reliable for the purposes of our
review.
To determine the extent to which GSA has an oversight structure in
place to manage the MAS program we reviewed and analyzed documentation
on the MAS program organizational structure and its Program Office
charter and minutes of the MAS program Governance Council. We also
obtained and reviewed information on the MAS Program Office's
improvement initiatives. We discussed the organizational structure and
MAS Program Office initiatives with program office representatives,
numerous MAS acquisition center officials, and the selected vendors.
We also reviewed GSA Inspector General reports related to the FAS
reorganization. Further, we obtained and reviewed information on GSA's
electronic tools for placing and processing MAS orders and discussed
the use of these tools with representatives of the FAS Office of the
Chief Information Officer as well as the selected vendors and agency
contracting officers noted above. We also reviewed and compared
information on performance measures for the MAS program across FAS
business portfolios. We obtained and reviewed MAS customer
satisfaction survey reports for fiscal years 2007 through 2009. We
used OMB guidance on standards for statistical surveys in executive
branch agencies to evaluate the usefulness of the reports.
Finally, we reviewed and analyzed selected GAO and Inspector General
reports issued since 1999 that addressed issues associated with
interagency and enterprisewide contracts. In particular, we reviewed
information in these reports that addressed agencies' compliance with
competition requirements for these types of contracts.
We conducted this performance audit from October 2008 through April
2010 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
[End of section]
Appendix II: General Services Administration Multiple Award Schedule
Pricing Process and Tools:
[Refer to PDF for image: illustration]
Process step: 1. Solicitation of others.
Process step: 2. Vendor submits proposal;
Management controls and tools:
* Offer entered into database;
* Proposal checked for completeness (check sheet);
* Detailed administrative, technical, debarment, past performance, and
financial reviews;
* Internet/Web site searches.
Process step: 3. Analysis of terms and conditions and price completed
to establish price negotiations objective;
Management controls and tools:
* Market research;
* Sales history;
* Commercial sales practices sheet;
Pre-award audit;
* Invoices and references.
Process step: 4. Prenegotiation memo developed;
Management controls and tools:
* Supervisory review;
* Prenegotiation clearance panel review,
Process step: 5. Negotiations conducted.
Process step: 6. Final offer submitted by vendor;
Management controls and tools:
* Contracting officer and supervisory signatures.
Process step: 7. Offer Accepted.
Process step: 8. Price negotiation memo signed;
Management controls and tools:
* Supervisory review.
Process step: 9. Vendor notified of award.
Source: GAO analysis of General Services Administration data.
[End of section]
Appendix III: Comments from the Department of Defense:
Office Of The Under Secretary Of Defense:
Acquisition, Technology And Logistics:
3000 Defense Pentagon:
Washington, DC 20301-3000:
April 28, 2010:
Mr. John K. Needham:
Director, Acquisition and Sourcing Management:
U.S. Government Accountability Office:
441 G Street, N.W.
Washington, DC 20548:
Dear Mr. Needham:
This is the Department of Defense (DoD) response to the GAO draft
report, GAO-10-367, "Contracting Strategies: Data and Oversight
Problems Hamper Opportunities to Leverage Value of Interagency and
Enterprisewide Contracts," dated March 16, 2010.
Thank you for providing us the opportunity to review and respond to
the draft report. Although, there are no recommendations for the
Department of Defense in the report, as the largest purchasing
organization in the Federal Government and the largest customer of the
General Services Administration (GSA), we look forward to working with
the Office of Management and Budget's Administrator of the Office of
Federal Procurement Policy and GSA on their efforts with regard to the
audit recommendations.
Technical comments will be provided separately for your consideration.
Should you have any questions, please contact Mr. Michael Canales,
MichaeLCanales@osd.mil, 703-695-8571.
Sincerely,
Signed by:
Shay D. Assad:
Director, Defense Procurement and Acquisition Policy:
[End of section]
Appendix IV: Comments from the Department of Health and Human Services:
Department Of Health & Human Services:
Office Of The Secretary:
Assistant Secretary for Legislation:
Washington, DC 20201:
April 16, 2010:
John K. Needham, Director:
Acquisition and Sourcing Management:
U.S. Government Accountability Office:
441 G Street N.W.
Washington, DC 20548:
Dear Mr. Needham:
Enclosed are comments on the U.S. Government Accountability Office's
(GAO) report entitled: "Contracting Strategies: Data and Oversight
Problems Hamper Opportunities to Leverage Value of Interagency and
Enterprisewide Contracts" (GAO-10-367).
The Department appreciates the opportunity to review this report
before its publication.
Sincerely,
Signed by:
Andrea Palm:
Acting Assistant Secretary for Legislation:
Enclosure:
[End of letter]
General Comments Of The Department Of Health And Human Services (HHS)
On The Government Accountability Office'S (GAO) Draft Report Entitled:
"Contracting Strategies: Data And Oversight Problems Hamper
Opportunities To Leverage Value Of Interagency And Enterprisewide
Contracts" (GA0-10-367):
The Department appreciates the review conducted by GAO and the
opportunity to provide comments on this draft report. HHS concurs with
the GAO report findings and recommendations, and respectfully submits
the following general comments and clarifications.
1. NIH has structured its GWACs in accordance with OMB's principles
for government-wide acquisitions of information technology. This
ensures structuring of orders that promote the use of performance-
based acquisition, maximum utilization of small and small
disadvantaged business, fair opportunity and transparency, and
provides the management controls necessary for responsible contract
and financial management.
2. Pages 19 ” 20: Section "The Identification and Use of MACs and
Enterprisewide Contracts Is Unknown"
In coordination with educational outreach efforts, NIH has increased
participation in various forums and events to increase awareness in
the federal acquisition community of its interagency contracts.
3. Pages 26 ” 28: Section "Vendors and Agency Officials Expressed
Concerns About Contract Duplication and Associated Management Efforts
and Costs"
The NIH contracts have a distinctive health related component
differentiating them from other interagency contract vehicles. NIH
established the NIH Information Technology Acquisition and Assessment
Center (NITAAC) for the sole purpose of providing quality health-
related IT products and services through use of innovative government-
wide acquisition contracts. The goal was and continues to be one of
providing support to the NIH research community and other federal
agencies with their health IT requirements. In the CIO-SP2i contract,
a number of the task areas support interoperable health IT which is
one of the primary goals of the Federal Health Architecture (FHA).
4. Pages 46 ” 47: Section "Conclusions"
NIH strives for transparency in operation of its GWACs. Available on
the NITAAC website are reports that show all awards since inception
for each contract. The RFQ ordering tool for ECS III commodities
contract is highly encouraged for use by client agencies, while the
ordering system known as eGOS is mandatory for IT services
requirements under CIO-SP2i. Both of these systems enhance the fair
opportunity, competitive environment.
[End of section]
Appendix V: Comments from the General Services Administration:
GSA Administrator:
U.S. General Services Administration:
1800 F Street NW:
Washington, DC 20405-0032:
Telephone: (202) 501-0800:
Fax: (202) 219-1243:
[hyperlink, http://www.gsa,gov]
April 15, 2010:
The Honorable Gene L. Dodaro:
Acting Comptroller General of the United States:
Government Accountability Office:
Washington, DC 20548:
Dear Mr. Dodaro:
Thank you for the opportunity to comment on the U.S. Government
Accountability Office (GAO) draft report, "Contracting Strategies:
Data and Oversight Problems Hamper Opportunities to Leverage Value of
Interagency and Enterprisewide Contracts" (GA0-10-367).
The U.S. General Services Administration (GSA) agrees with the GAO
findings and recommendations pertaining to GSA and agrees to make
additional efforts to improve the Multiple Award Schedule program
pricing and management. Additional clarification has been provided in
the enclosure.
Should you have any additional questions, please do not hesitate to
contact me. Staff inquiries may be directed to Mr. Houston Taylor,
Acting Assistant Commissioner, Office of Acquisition Management. He
can be reached at (703) 605-2759.
Sincerely,
Signed by:
Martha Johnson:
Administrator:
Enclosure:
cc:
Mr. John Needham:
Director:
Acquisition and Sourcing Management:
General Accountability Office:
[End of letter]
GSA Comments on GAO Draft Report:
Contracting Strategies Data and Oversight Problems Hamper
Opportunities to Leverage Value of Interagency and Enterprisewide
Contracts" (GA0-10-367):
1. In the recommendations section of the report on page 48, GAO
states, "In coordination with the GSA Inspector General, target the
use of pre-award audits to cover more contracts that meet the audit
threshold."
GSA Comment:
GSA concurs. Contract audits are one of many valuable tools for the
MAS Procuring Contracting Officers (PCO) to enable them to negotiate
fair and reasonable pricing at the Schedule contract level.
The Report notes that the GSA OIG identified $4 billion in potential
cost avoidance through pre-award audits from 2004 through 2008. While
the pre-award audits supply information to MAS PCOs when they are
negotiating improved contract pricing, terms and conditions at the
Schedule contract level, the cost avoidance figure does not accurately
account for a vital structure of the MAS program. Specifically, FAR
Subpart 8.4, details regulatory procedures for ordering activities to
seek competition and additional price reductions on task and delivery
orders issued under the MAS program. These ordering procedures will
result in improved prices, terms and conditions for the government
based on the specific requirements of ordering activity. Although the
OIG figure is based upon Schedule contract level prices, it does not
account for actual prices, terms and conditions received at the order
level, which the Report cites challenges surrounding capturing this
level of data.
The Federal Acquisition Service (FAS) Office of Acquisition Management
and the OIG Office of Audits hold a monthly senior level working group
to discuss mutual areas of concern and opportunities. In this venue,
the annual audit plan can be discussed. This would include, among
other topics, the process for selecting the contracts for pre-award
audits and a review of the advice and assistance required by the PCOs.
2. In the recommendations section of the report on page 48, GAO
states, "Fully implement the process that has been initiated to ensure
that vendors that meet the pre-negotiation clearance panel threshold
receive a panel review."
GSA Comment:
GSA concurs. GSA is already in the process of implementing this
recommendation. In response to the GSA OIG Management Audit, Review of
Consistency in Implementing Policy Across Acquisition Centers (Report
Number A070118), FAS is drafting an Instructional Letter to clarify
the implementation of the pre-negotiation clearance panel process for
the MAS program within the context of the FAS organization. In
addition, FAS is developing system requirements to capture data and
information on panels to improve and increase oversight over the pre-
negotiation clearance panel process.
3. In the recommendations section of the report on page 48, GAO
states, When considering the MAS Advisory Panel recommendations to
clarify the price objective and eliminate the price reduction clause,
ensure that any alternative means to negotiate and determine best
prices are validated and in place before eliminating these pricing
provisions."
GSA Comment:
GSA concurs. The Report clearly describes the MAS program negotiation
objective on page 31:
"The negotiation objective described above, which calls for comparing
prices and discounts that a vendor offers the government with the
prices and discounts that a vendor offers its similarly situated
commercial customers, is done as part of GSA's goal to receive 'most
favored customer' pricing for MAS contracts. When trying to achieve
this negotiation objective, GSA seeks to obtain the best price a
vendor provides its most favored customer while recognizing that there
may be legitimate reasons why the best price is not achieved given
that terms and conditions of commercial sales vary."
With the award of fair and reasonable prices as well as terms and
conditions at the Schedule contract level, the MAS contract serves as
the commercial contract vehicle for customer agencies to meet their
procurement requirements through streamlined acquisition procedures.
The Report states that the Program contains only two regulatory
pricing controls for MAS contracts ” the price reduction clause and
most favored customer pricing. However a third and key regulatory
pricing control for the MAS contracts is the requirement for ordering
activity to seek additional discounts at the order level. The Schedule
PCO will award the contract at fair and reasonable prices based upon a
contractor's business practices, however it is the contracting officer
at the ordering level that must assess best value for the government
in terms of the specific requirement.
To meet GSA's imperative of acquisition excellence within GSA itself,
and across the federal government, GSA will strive to educate the
acquisition workforce that best value at the order level should be
achieved by employing the full range of competitive tools available
through the schedules: price comparisons through the GSA Advantage
eTool, Request for Quotes (RFQ) competed on eBuy, issuing Blanket
Purchase Agreements (BPA) for recurring requirements, and seeking
price reductions at the task order and (BPA) level.
Furthermore GSA agrees that identification and collection of further
data is needed to thoughtfully consider and potentially move forward
with changes to the MAS pricing objective and price reduction clause.
4. In the recommendations section of the report on page 48, GAO
states, "Collect transactional data on MAS orders and prices paid,
possibly through the expanded use of existing electronic tools or
through a pilot data collection initiative for selected MAS schedules
and make the information available to MAS contract negotiators and
customer agencies."
GSA Comment:
GSA concurs. At this time, GSA has limited transactional data for MAS
orders that are consummated in the etools provided by GSA to customer
agencies and the limited vendor reporting to GSA.
As the Report notes, GSA etools are used as a source for market
research, as a means for seeking competition through the posting of
RFQs, and to a lesser extent, for order placement. As a result,
transactional data primarily resides with vendors and customer
agencies. In the past, GSA attempted to gather ordering level data
from the customer agencies' contract writing systems. However the lack
of data standardization and variation in levels to which agency
systems capture order level data made aggregating the data very
difficult. This prevents GSA from providing actionable business
intelligence to help customer agencies better acquire products,
services, and solutions.
Furthermore, GSA, who co-chairs the Federal Strategic Sourcing
Initiative (FSSI), has several current and new FSSI procurements that
have been or are currently being conducted through BPAs against the
MAS program. These FSSI BPAs contain vendor reporting requirements to
provide GSA with standard transactional spend data on orders issued
against the BPAs. This data is used to analyze spending and help
customer agencies make business decisions about acquiring commodities
and services more effectively and efficiently.
GSA will continue to partner with customer agencies to analyze and
understand their transactional spend data needs and develop tools to
maximize their effective and efficient use of the MAS program. In
addition, GSA will continue to work with the Office of Federal
Procurement Policy (OFPP) in implementing FSSI to help customer
agencies acquire commodities and services more effectively and
efficiently.
5. In the recommendations section of the report on page 48, GAO
states, "Establish more consistent performance measures across the MAS
program, including measures for pricing."
GSA Comment:
GSA concurs. The FAS Office of Strategy Management and the MAS Program
Office within the Office of Acquisition Management have been working
through the MAS Governance Council to create a MAS program-wide
balanced scorecard. The scorecard will utilize performance measures as
a means of sharing information on overall MAS program performance
across business portfolios and acquisition centers and to help drive
strategic alignment across the MAS program. Currently, the MAS
scorecard tracks all of the individual business portfolio MAS measures
and establishes MAS program-wide measures, including placeholder
measures, for each business portfolio office to see their contribution
to MAS program-wide performance.
In regard to measures for pricing, in response to a management audit
by the GSA 01G, Review of Program Performance Measurement for
Procurement (Report Number A070171), and to address this Report's
recommendation, the Office of Strategy Management is already leading
efforts to drive toward more consistent acquisition performance
measures across FAS. To do this, a FAS cross-organizational team
consisting of the Office of Strategy Management, the Office of the
Acquisition Management and each of the business portfolio offices
is working to define a performance measure that considers pricing to
be used across the MAS Program.
6. In the recommendations section of the report on page 48, GAO
states, "Take steps to increase the MAS customer survey response rate
by using a methodologically sound means to identify bona fide program
users and employing survey techniques that produce meaningful and
actionable information that can lead to program improvements."
GSA Comment:
GSA concurs. GSA will review the methodologies for the data collection
plan for the MAS Customer Survey and adjust as required.
7. In the recommendations section of the report on page 49, GAO
states, "Clarify and strengthen the MAS Program Office's Charter and
authority so that it has clear roles and responsibilities to
consistently implement guidance, policies, and best practices across
GSA's acquisition centers including policies and practices related to
the above recommendations."
GSA Comment:
GSA concurs. The MAS Program Office promotes innovation and
acquisition excellence by setting the strategic direction for the
program, developing and implementing program-wide policy, engaging in
continuous process improvement and business process reengineering, and
developing system requirements for keyed shared applications
supporting the MAS program.
As previously noted, the Office of Strategy Management has been
assisting the MAS Program Office within the Office of Acquisition
Management as they work with the MAS Governance Council on creating a
MAS program-wide balanced scorecard. However, the decentralization of
MAS acquisition operations and lack of centralized authority for the
MAS Program presents challenges to establishing consistent performance
measures as well as consistent program implementation and oversight.
In light of this Report's findings that the decentralized management
structure limits consistent program implementation and oversight, as
noted by customers, vendors, and MAS program officials, GSA will
examine and strengthen the MAS Program Office Charter and authority.
This will provide for improved capacity and ability to drive
consistency, where appropriate, program implementation and strengthen
program oversight in the MAS Program.
8. In the recommendations section of the report on page 49, GAO
states, "Report GSA's plans to address these recommendations to the
Administrator of the Office of Federal Procurement Policy."
GSA Comment:
GSA concurs. GSA will brief the Administrator of the Office of Federal
Procurement Policy on its plan to implement these recommendations.
[End of section]
Appendix VI: GAO Contact and Staff Acknowledgments:
GAO Contact:
John Needham (202) 512-4841 or Needhamjk1@Gao.Gov:
Staff Acknowledgments:
In addition to the name above, Jim Fuquay, Assistant Director; Marie
Ahearn; Lauren Heft; Kathy Hubbell; Keith Hudson; Julia Kennon;
Victoria Klepacz; Susan Neill; Kenneth Patton; and Russ Reiter made
key contributions to this report.
[End of section]
Footnotes:
[1] In this report, we use procurement dollars reported by federal
agencies which are considered obligations and data from vendors which
are reported in sales. Therefore, we have used dollars obligated and
sales data interchangeably.
[2] MAS means contracts awarded by the General Services Administration
or the Department of Veterans Affairs for similar or comparable goods
or services, established with more than one supplier, at varying
prices. Federal Acquisition Regulation (FAR) § 8.401.
[3] MACs are task-order or delivery-order contracts established by an
agency that can be used for governmentwide use to obtain goods and
services, consistent with the Economy Act. FAR § 2.101. GWACs are
considered multiagency contracts but, unlike other multiagency
contracts, are not subject to the same requirements and limitations,
such as documenting that the contract is in the best interest of the
government, set forth under the Economy Act. The Clinger-Cohen Act of
1996 authorized GWACs to be used to buy information technology goods
and services. 40 U.S.C. § 11314(a)(2). These contracts are operated by
an executive agent designated by the Office of Management and Budget.
FAR § 2.101.
[4] VA operates its portion of the schedules program under a
delegation of authority from GSA. Although GSA has delegated to VA the
authority to contract for medical supplies services under various MAS,
GSA has not delegated to VA the authority to prescribe the policies
and procedures that govern the MAS program.
[5] An approach to leverage buying power, reduce costs, better manage
suppliers, and improve the quality of goods and services acquired.
[6] Office of Management and Budget, Acquisition and Contracting
Improvement Plans and Pilots: Saving Money and Improving Government
(Washington D.C.: Dec. 2009).
[7] Franchise funds and interagency assisting entities that undertake
some or all of the contracting function for an agency, typically on a
"fee-for-service" basis, are not part of this review. See GAO,
Interagency Contracting: Franchise Funds Provide Convenience, but
Value to DOD Is Not Demonstrated, [hyperlink,
http://www.gao.gov/products/GAO-05-456] (Washington, D.C.: July 29,
2005).
[8] To determine if the data on interagency contracts were reliable we
tried to verify some of the data generated from FPDS-NG. For instance,
FPDS-NG includes a data field that is intended to identify GWACs but
we found a number of instances where known GWACs were coded
incorrectly. We also searched the system by contract number for MACs
that we were aware of and found similar issues, with some contracts
coded properly as MACs and some not. In addition, to identify a
contract as a MAC, we searched for indefinite delivery contracts that
were coded as being governed by the Economy Act--which most MACs are--
and determined if the contract was also used by any agency other than
the one that entered into the contract.
[9] We have previously reported on data reliability issues with FPDS-
NG. See, e.g., GAO, Federal Contracting: Observations on the
Government's Contracting Data Systems, [hyperlink,
http://www.gao.gov/products/GAO-09-1032T] (Washington, D.C.: Sept. 29,
2009); Contract Management: Minimal Compliance with New Safeguards for
Time-and-Materials Contracts for Commercial Services and Safeguards
Have Not Been Applied to GSA Schedules Program, [hyperlink,
http://www.gao.gov/products/GAO-09-579] (Washington, D.C.: June 24,
2009); Interagency Contracting: Need for Improved Information and
Policy Implementation at the Department of State, [hyperlink,
http://www.gao.gov/products/GAO-08-578] (Washington, D.C.: May 8,
2008); Department of Homeland Security: Better Planning and Assessment
Needed to Improve Outcomes for Complex Service Acquisitions,
[hyperlink, http://www.gao.gov/products/GAO-08-263] (Washington, D.C.:
April 22, 2008); Federal Acquisition: Oversight Plan Needed to Help
Implement Acquisition Advisory Panel Recommendations, [hyperlink,
http://www.gao.gov/products/GAO-08-160] (Washington, D.C.: Dec. 20,
2007), Improvements Needed to the Federal Procurement Data System-Next
Generation, [hyperlink, http://www.gao.gov/products/GAO-05-960R]
(Washington, D.C.: Sept. 27, 2005); Reliability of Federal Procurement
Data, [hyperlink, http://www.gao.gov/products/GAO-04-295R]
(Washington, D.C.: Dec. 30, 2003); OMB and GSA: FPDS Improvements,
[hyperlink, http://www.gao.gov/products/GAO/AIMD-94-178R] (Washington,
D.C.: Aug. 19, 1994); The Federal Procurement Data System--Making It
Work Better, [hyperlink, http://www.gao.gov/products/GAO/PSAD-80-33]
(Washington, D.C.: Apr. 18, 1980); and The Federal Procurement Data
System Could Be an Effective Tool for Congressional Surveillance,
[hyperlink, http://www.gao.gov/products/GAO/PSAD-79-109] (Washington,
D.C.: Oct. 1, 1979).
[10] Most favored customers are customers or categories of customers
that receive the best price from vendors (48 C.F.R. 538.270(a),
538.271, and 538.272). The pursuit of most favored customer pricing is
consistent with the objective of negotiating a fair and reasonable
price (Final rule, 62 Fed. Reg 44,518, 44,519 (Aug. 21, 1997)).
[11] 31 U.S.C. § 1535.
[12] 40 U.S.C § 11314(a)(2).
[13] 41 U.S.C. § 251 et seq. and 40 U.S.C. § 501.
[14] Pub. L. No. 103-355.
[15] Based on FPDS-NG data, in fiscal year 2008, $161 billion (over 30
percent of total federal procurement) was obligated using ID/IQ
contracts.
[16] Fair opportunity requires a contracting officer to provide each
awardee a fair opportunity to be considered for each order exceeding
$3,000 issued under multiple ID/IQ contracts unless (1) the agency
need for the goods or services is so urgent that providing a fair
opportunity would result in unacceptable delays, (2) only one awardee
is capable of providing the goods or services required at the level of
quality required because they are unique or highly specialized, (3)
the order must be issued on a sole-source basis in the interest of
economy and efficiency because it is a logical follow-on to an order
already issued under the contract provided that all awardees were
given fair consideration for the original order, or (4) it is
necessary to place an order to satisfy a minimum guarantee. FAR
§16.505(b).
[17] The Economy Act, authorizes an agency to place orders for goods
and services with another government agency when the head of the
requesting (i.e., ordering) agency determines that it is in the best
interest of the government and decides it cannot order goods or
services by contract with a commercial enterprise as conveniently or
cheaply. 31 U.S.C. § 1535.
[18] FAR §§ 17.503, 17.504.
[19] GWACs are considered MACs, but unlike other MACs, they are not
subject to the Economy Act. FAR § 2.101.
[20] OFPP, within OMB, is responsible for the overall management of
the GWAC program.
[21] While GSA, in its regulations uses the term "offeror," for
purposes of this report we use the term "vendor."
[22] 62 Fed. Reg. 44,518 (Aug. 21, 1997).
[23] Multiple Award Schedule Advisory Panel Final Report (Feb. 2010).
[24] GAO, Contract Management: Guidance Needed to Promote Competition
for Defense Task Orders, [hyperlink,
http://www.gao.gov/products/GAO-04-874] (Washington D.C.: July 30,
2004).
[25] GAO, High-Risk Series: An Update, [hyperlink,
http://www.gao.gov/products/GAO-05-207] (Washington, D.C.: Jan. 2005).
[26] GAO, High-Risk Series: An Update, [hyperlink,
http://www.gao.gov/products/GAO-09-271] (Washington, D.C.: Jan. 2009).
[27] GAO, Contract Management: Opportunities to Improve Pricing of GSA
Multiple Award Schedules Contracts, [hyperlink,
http://www.gao.gov/products/GAO-5-229] (Washington, D.C.: Feb. 11,
2005).
[28] The panel was established by Section 1423 of the Services
Acquisition Reform Act of 2003, which was enacted as part of the
National Defense Authorization Act for Fiscal Year 2004 (Pub. L. No.
108-136, (2003). The statute tasked the panel, among other things, to
review governmentwide policies regarding the use of governmentwide
contracts. We did not assess the reliability of the data reported by
the panel.
[29] Report of the Acquisition Advisory Panel to the Office of Federal
Procurement Policy and the United States Congress (Washington, D.C.:
Jan. 2007). Chap. 3 and Chap. 7.
[30] Inspector General, Department of Defense, SeaPort Enhanced
Program, D-2009-082 (Arlington, Va.: May 6, 2009).
[31] Inspector General, Department of Defense, FY 2007 DOD Purchases
Made Through the National Institutes of Health, D-2009-064 (Arlington,
Va.: March 24, 2009).
[32] 68 Fed. Reg. 43,859 (July 24, 2003). This rule added new FAR
subpart 5.6, Publicizing Multiagency Use Contracts, which (1) provides
the Internet address to access the database (i.e., [hyperlink,
http://www.contractdirectory.gov]); (2) requires contracting
activities to enter information into the database within 10 days of
award of a procurement instrument intended for use by multiple
agencies; and (3) required contracting activities to enter information
into the database by October 31, 2003, on all contracts and other
procurement instruments intended for multiple agency use existing at
the time of the FAR amendment.
[33] We made a number of narrowly focused recommendations on FPDS-NG
data quality in 2005. While these recommendations have been addressed,
our subsequent work shows that FPDS-NG data reliability remains an
issue.
[34] GAO, Federal Contracting: Observations on the Government's
Contracting Data Systems, [hyperlink,
http://www.gao.gov/products/GAO-09-1032T] (Washington, D.C.: Sept. 29,
2009).
[35] The data to be collected is to contain information on interagency
contracting actions at the task or delivery order level and other
transactions, including the initial contract and any subsequent
modifications awarded or orders issued. Pub. L. No. 110-417 § 874
(2008).
[36] OMB interagency contracting guidance issued in 2008 discusses how
to use and manage interagency contracts including how to place orders
off of an existing contract. This guidance provides that agencies
shall ensure that decisions to use interagency acquisitions are
supported by best interest determinations before placing orders
against other agencies contracts. OMB Memorandum, Improving the
Management and Use of Interagency Acquisitions (June 6, 2008).
[37] FAR § 7.105.
[38] Office of Management and Budget, Acquisition and Contracting
Improvement Plans and Pilots: Saving Money and Improving Government
(Washington D.C.: Dec. 2009).
[39] Duncan Hunter National Defense Authorization Act for Fiscal Year
2009, Pub. L. No. 110-417 § 865 (2008).
[40] Open FAR Case No. 2008-032, "Preventing Abuse of Interagency
Contracts." On the Open FAR Cases, as of January 29, 2010, this case
is described as to implement Section 865 of the National Defense
Authorization Act for Fiscal Year 2009 (Pub. L. No. 110-417), which
addresses issues relating to interagency acquisitions. Also, on the
Open FAR Cases, the status of the case as of January 21, 2010, is
stated as "OFPP identified draft interim FAR rule issues" and "OFPP,
FAR and DAR staff resolving issues."
[41] GSA, Federal Supply Schedule Procurement Information Bulletin 04-
2 (Jan. 30, 2004).
[42] 48 C.F.R. § 538.270(c).
[43] Most favored customers are customers or categories of customers
that receive the best prices or discounts from vendors for similar
purchases. 48 C.F.R. §§ 538.270; 538.271; and 538.272. GSA recognizes
that the pursuit of most favored customer pricing is consistent with
the objective of negotiating a fair and reasonable price. (62 Fed. Reg
44,518, 44,519 (Aug. 21, 1997).) GSA regulations permit awards at
prices greater than the most favored customer price so long as the
award is in the best interest of the government and the price is fair
and reasonable. 48 C.F.R.§ 538.270(a) and (d).
[44] 48 C.F.R. §§ 538.272 and 552.238-75.
[45] The price reduction clause requires the contractor to maintain
the negotiated price/discount relationship between the government and
the vendor's customer or category of customers on which the contract
was predicated, as identified in the MAS contract. The clause is
triggered if the vendor lowers its price following contract award for
the customer that served as the basis of negotiation for the contract.
48 C.F.R. §§ 538.272, 538.271(c). The clause does not apply to several
categories of sales: (1) sales to commercial customers under firm
fixed-price definite quantity contracts with specified delivery in
excess of the MAS contract's maximum order threshold; (2) sales to
federal agencies; (3) sales to state and local government entities
under a MAS contract where the state or local government is the
customer that is the basis of award; or (4) sales caused by an error
in quotation or billing. 48 C.F.R. § 552.238-75(d).
[46] Beginning in fiscal year 2009, GSA moved to fund pre-award audits
through direct appropriations to the GSA Inspector General instead of
reimbursable funding from GSA.
[47] Contracts that fall below the $25 million threshold may also be
selected for audit based on issues such as a specific concern with a
vendor's MAS contract.
[48] Among the MAS Acquisition Centers we reviewed, the prenegotiation
clearance panel thresholds ranged from $1.8 million to $25 million in
estimated annual sales.
[49] The panel recommended that GSA eliminate the price reduction
clause for services immediately and eliminate the clause in phases for
goods on the assumption that GSA will develop a solution to collect
additional data and information on pricing at the order level for use
by GSA and other federal agencies, another panel draft recommendation.
The information would then be used to conduct market research,
determine fair and reasonable pricing at the contract level and
competition at the order level. The panel envisioned that the phasing
in of this recommendation would occur as contract options are
exercised or recompeted.
[50] Section 863 of the Fiscal Year 2009 National Defense
Authorization Act (Pub. L. No. 110-417) extended "fair opportunity"
competition requirements from the Department of Defense to all
executive agencies. Under these requirements, which previously applied
to the Department of Defense (DFARS 208.405-70), agencies are required
to make purchases of goods and services on a competitive basis by
providing all contractors under a multiple award contract notice of
the intent to make the purchase and to afford all contractors an
opportunity to make an offer. Notice can be provided to fewer than all
contractors offering the goods or services if notice is provided to as
many contractors as practicable. However, a purchase cannot be made
under a notice provided to fewer than all contractors unless offers
were received from at least three qualified contractors or a
determination is made that no additional qualified contractors were
able to be identified despite reasonable efforts to do so.
[51] DOD, Department of Defense's Competition Report for FY 2008
(Washington, D.C.: Mar. 4, 2009).
[52] GAO, Contract Management: Guidance Needed to Promote Competition
for Defense Task Orders, [hyperlink,
http://www.gao.gov/products/GAO-04-874] (Washington, D.C.: July 30,
2004). Department of Defense Office of Inspector General, Summary of
DOD Office of Inspector General Audits of Acquisition and Contract
Administration (Arlington, Va.: Apr. 22, 2009).
[53] Agencies may establish blanket purchase agreements under the MAS
program. Blanket purchase agreements are intended to be a simplified
method of fulfilling repetitive needs for supplies and services that
also provide an opportunity to seek reduced pricing from vendors' MAS
contracts
[54] GAO, Contract Management: Agencies Are Not Maximizing
Opportunities for Competition or Savings Under Blanket Purchase
Agreements Despite Significant Increase in Usage, [hyperlink,
http://www.gao.gov/products/GAO-09-792] (Washington, D.C.: Sept. 9,
2009).
[55] FAR Subpart 8.4 requires ordering activities to seek price
discounts from MAS vendors when establishing blanket purchase
agreements.
[56] GAO, Best Practices: Using Spend Analysis to Help Agencies Take a
More Strategic Approach to Procurement, [hyperlink,
http://www.gao.gov/products/GAO-04-870] (Washington, D.C.: Sept. 16,
2004).
[57] General Services Administration Office of Inspector General,
Review of Multiple Award Schedule Program Contract Workload Management
(Kansas City, Mo.: July 31, 2007).
[58] GAO, Management of Federal Supply Service Procurement Programs
Can Be Improved, [hyperlink,
http://www.gao.gov/products/GAO/PSAD-75-32] (Washington, D.C.: Dec.
31, 1974); and Ineffective Management of GSA's Multiple Award Schedule
Program--A Costly, Serious, and Longstanding Problem, [hyperlink,
http://www.gao.gov/products/GAO/PSAD-79-71] (Washington, D.C.: May 2,
1979).
[59] General Services Administration Office of Inspector General,
Review of Consistency in Implementing Policy Across Acquisition
Centers (Arlington,Va.: Sept. 2009).
[60] GAO, The Results Act: An Evaluator's Guide to Assessing Agency
Annual Performance Plans, [hyperlink,
http://www.gao.gov/products/GAO/GGD-10.1.20] (Washington, D.C.: April
1998).
[61] Office of Management and Budget, Standards and Guidelines for
Statistical Surveys (Washington, D.C., 2006).
[62] To identify a contract as a multiagency contract we searched for
indefinite delivery contracts (IDC) that were also coded as being
governed by the Economy Act--which most MACs are--and also if that
contract was used by an agency other than the agency that entered into
the contract.
[63] We have previously reported on data reliability issues with FPDS-
NG. See, e.g., GAO, Federal Contracting: Observations on the
Government's Contracting Data Systems, [hyperlink,
http://www.gao.gov/products/GAO-09-1032T] (Washington, D.C.: Sept. 29,
2009); Contract Management: Minimal Compliance with New Safeguards for
Time-and-Materials Contracts for Commercial Services and Safeguards
Have Not Been Applied to GSA Schedules Program, [hyperlink,
http://www.gao.gov/products/GAO-09-579] (Washington, D.C.: June 24,
2009); Interagency Contracting: Need for Improved Information and
Policy Implementation at the Department of State, [hyperlink,
http://www.gao.gov/products/GAO-08-578] (Washington, D.C.: May 8,
2008); Department of Homeland Security: Better Planning and Assessment
Needed to Improve Outcomes for Complex Service Acquisitions,
[hyperlink, http://www.gao.gov/products/GAO-08-263] (Washington, D.C.:
April 22, 2008); Improvements Needed to the Federal Procurement Data
System-Next Generation, [hyperlink,
http://www.gao.gov/products/GAO-05-960R] (Washington, D.C.: Sept. 27,
2005); Reliability of Federal Procurement Data, [hyperlink,
http://www.gao.gov/products/GAO-04-295R] (Washington, D.C.: Dec. 30,
2003); OMB and GSA: FPDS Improvements, [hyperlink,
http://www.gao.gov/products/GAO/AIMD-94-178R] (Washington, D.C.: Aug.
19, 1994); The Federal Procurement Data System--Making It Work Better,
[hyperlink, http://www.gao.gov/products/GAO/PSAD-80-33] (Washington,
D.C.: Apr. 18, 1980); and The Federal Procurement Data System Could Be
an Effective Tool for Congressional Surveillance, [hyperlink,
http://www.gao.gov/products/GAO/PSAD-79-109] (Washington, D.C.: Oct.
1, 1979).
[64] Because GSA rather than the Department of Veterans Affairs is the
agency setting policy for and overseeing the MAS program, we focused
on GSA's management of the program. VA operates its portion of the
schedules program under a delegation authority from GSA for the
purchase of medical supplies.
[End of section]
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