Contracting Strategies
Better Data and Management Needed to Leverage Value of Interagency and Enterprisewide Contracts Gao ID: GAO-10-862T June 30, 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. GAO was asked to testify on the management and oversight of interagency contracts, and how the government can ensure that interagency contracting is efficient and transparent. GAO's testimony is based on its recent report, Contracting Strategies: Data and Oversight Problems Hamper Opportunities to Leverage Value of Interagency and Enterprisewide Contracts (GAO-10-367, April 2010). In that report, GAO made 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.
Interagency and enterprisewide contracts should provide an advantage to government agencies when buying billions of dollars worth of goods and services, yet OMB and agencies lack reliable and comprehensive data to effectively leverage, manage, and oversee these contracts. More specifically, the total number of MACs and enterprisewide contracts currently approved and in use by agencies is unknown because the federal government's official procurement database is not sufficient or reliable for identifying these contracts. Departments and agencies cite a variety of reasons to establish, justify, and use their own MACs and enterprisewide contracts rather than use other established interagency contracts--reasons that 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. However, concerns remain about contract duplication--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. Furthermore, limited governmentwide policy is in place for establishing and overseeing MACs and enterprisewide contracts. Recent legislation and OMB's Office of Federal Procurement Policy initiatives are expected to strengthen oversight and management of MACs, but no initiatives are underway to strengthen approval and oversight of enterprisewide contracts. GSA faces a number of challenges in effectively managing the MAS program, the federal government's largest interagency contracting program. GSA lacks data on orders placed under MAS contracts that it could use to help determine how well the MAS program meets its customers' needs and help its customers obtain the best prices in using MAS contracts. In addition, GSA makes limited use of selected pricing tools, such as pre-award audits of MAS contracts, which make it difficult for GSA to determine whether the program achieves its goal of obtaining the best prices for customers and taxpayers. In 2008, GSA established a program office with broad responsibility for MAS program policy and strategy, but the program continues to operate under a decentralized management structure that some program stakeholders are concerned has impaired the consistent implementation of policies across the program and the sharing of information among the business portfolios. In addition, performance measures were inconsistent across the GSA organizations that manage MAS contracts, including inconsistent emphasis on pricing, making it difficult to have a programwide perspective of MAS program performance. Finally, GSA's MAS customer satisfaction survey has had a response rate of 1 percent or less in recent years that limits its utility as a means for evaluating program performance.
GAO-10-862T, Contracting Strategies: Better Data and Management Needed to Leverage Value of Interagency and Enterprisewide Contracts
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Testimony:
Before the Subcommittee on Contracting Oversight, Committee on
Homeland Security and Governmental Affairs, U.S. Senate:
United States Government Accountability Office:
GAO:
For Release on Delivery:
Expected at 2:30 p.m. EDT:
Wednesday, June 30, 2010:
Contracting Strategies:
Better Data and Management Needed to Leverage Value of Interagency and
Enterprisewide Contracts:
Statement of John K. Needham, Director:
Acquisition and Sourcing Management:
GAO-10-862T:
GAO Highlights:
Highlights of GAO-10-862T, a testimony before the Subcommittee on
Contracting Oversight, Committee on Homeland Security and Governmental
Affairs, U.S. Senate.
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.
GAO was asked to testify on the management and oversight of
interagency contracts, and how the government can ensure that
interagency contracting is efficient and transparent. GAO‘s testimony
is based on its recent report, Contracting Strategies: Data and
Oversight Problems Hamper Opportunities to Leverage Value of
Interagency and Enterprisewide Contracts (GAO-10-367, April 2010). In
that report, GAO made 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.
What GAO Found:
Interagency and enterprisewide contracts should provide an advantage
to government agencies when buying billions of dollars worth of goods
and services, yet OMB and agencies lack reliable and comprehensive
data to effectively leverage, manage, and oversee these contracts.
More specifically, the total number of MACs and enterprisewide
contracts currently approved and in use by agencies is unknown because
the federal government‘s official procurement database is not
sufficient or reliable for identifying these contracts. Departments
and agencies cite a variety of reasons to establish, justify, and use
their own MACs and enterprisewide contracts rather than use other
established interagency contracts”reasons that 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. However, concerns remain
about contract duplication”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. Furthermore, limited governmentwide policy is in place for
establishing and overseeing MACs and enterprisewide contracts. Recent
legislation and OMB‘s Office of Federal Procurement Policy initiatives
are expected to strengthen oversight and management of MACs, but no
initiatives are underway to strengthen approval and oversight of
enterprisewide contracts.
GSA faces a number of challenges in effectively managing the MAS
program, the federal government‘s largest interagency contracting
program. GSA lacks data on orders placed under MAS contracts that it
could use to help determine how well the MAS program meets its
customers‘ needs and help its customers obtain the best prices in
using MAS contracts. In addition, GSA makes limited use of selected
pricing tools, such as pre-award audits of MAS contracts, which make
it difficult for GSA to determine whether the program achieves its
goal of obtaining the best prices for customers and taxpayers. In
2008, GSA established a program office with broad responsibility for
MAS program policy and strategy, but the program continues to operate
under a decentralized management structure that some program
stakeholders are concerned has impaired the consistent implementation
of policies across the program and the sharing of information among
the business portfolios. In addition, performance measures were
inconsistent across the GSA organizations that manage MAS contracts,
including inconsistent emphasis on pricing, making it difficult to
have a programwide perspective of MAS program performance. Finally,
GSA‘s MAS customer satisfaction survey has had a response rate of 1
percent or less in recent years that limits its utility as a means for
evaluating program performance.
View [hyperlink, http://www.gao.gov/products/GAO-10-862T] or key
components. For more information, contact John Needham at (202) 512-
4841 or needhamjk1@gao.gov.
[End of section]
Madam Chairman and Members of the Subcommittee:
I am pleased to be here to discuss the management and oversight of
contracts designed to leverage the government's buying power when
acquiring commercial goods and services. To address these issues, I
will discuss our recent report that addressed the need for better data
and management to effectively oversee the awarding and use of
interagency and enterprisewide contracts. Collectively, federal
agencies used these types of contracts to buy at least $60 billion in
goods and services during fiscal year 2008. When managed properly,
interagency contracting--a process by which one agency uses another
agency's contract directly or obtains contracting support services
from another agency--can provide several benefits for federal
agencies. These include the ability to leverage the government's
aggregate buying power for commercial goods and services and provide a
simplified and expedited procurement method. Enterprisewide contracts,
although not interagency contracts, are also intended to leverage a
particular agency's buying power and appear to have become more
popular in recent years according to procurement officials, as
internal purchasing programs established within a federal department
or agency to acquire goods and services. Benefits of enterprisewide
contracts can include the ability to reduce contracting administrative
overhead within an agency and provide information on agency spending.
To realize the benefits of using interagency contracts--including the
multiple award schedule (MAS) program, multiagency contracts (MACs),
and governmentwide acquisition programs (GWACs)--as well as single-
agency enterprisewide contracts, the government will have to take
steps to address identified shortcomings in the management of and
amount of data available on both interagency and enterprisewide
contracts that currently make it difficult to determine whether they
are being used in an efficient and effective manner. A basic problem
is the lack of data about the number and sponsors of both MACs and
enterprisewide contracts. Given that there has been renewed focus on
maximizing efficiencies in the procurement process to achieve cost
savings, we believe the federal government will continue to miss
opportunities to leverage its vast purchasing power when buying
commercial goods and services unless it takes steps to improve the
management and oversight of these contracts.
In response to this Subcommittee's interest in improving the use of
these contracts, I will draw primarily on our recent report to discuss
(1) issues related to transparency and the framework for managing
GWACs, MACs, and enterprisewide contracts, and (2) management and
pricing issues associated specifically with the MAS program.[Footnote
1]
We conducted this work at the Office of Federal Procurement Policy
(OFPP) within the Office of Management and Budget (OMB), which has
governmentwide procurement policy responsibility. We also conducted
work at six federal agencies including the General Services
Administration (GSA), the Department of Defense (DOD), including the
three military departments, Department of Health and Human Services,
Department of Homeland Security (DHS), Department of Veterans Affairs
(VA), and the National Aeronautics and Space Administration (NASA). We
also met with Senior Procurement Executives or their representatives
from these agencies, 16 vendors that have been awarded these
contracts, and 17 contracting officers from a number of the agencies
in our review to obtain their perspectives on interagency and
enterprisewide contracts. The report that formed the basis for this
statement was prepared 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 that the evidence obtained provides a
reasonable basis for our findings and conclusions based on our audit
objectives.
Background:
The largest of the interagency contracting vehicles is the MAS program
(also known as the Federal Supply Schedule or the schedules program).
[Footnote 2] GSA directs and manages the MAS program.[Footnote 3] MACs
and GWACs are also interagency contracts.[Footnote 4] Government
buyers usually pay a fee for using other agencies' GWACs, MACs, and
schedule contracts. These fees are usually a percentage of the value
of the procurement, which are paid to the sponsoring agency and are
expected to cover the costs of administering the contract.
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 contracts 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 outside of the
original acquiring activity.
Enterprisewide contracting programs can be used to reduce contracting
administrative overhead, provide information on agency spending,
support strategic sourcing initiatives, and avoid the fees charged for
using interagency contracts.
All of these contracts are indefinite delivery/indefinite quantity
(ID/IQ) contracts. ID/IQ contracts 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. Once the times and
quantities are known, agencies place task and delivery orders against
the contracts for goods and services.
In fiscal year 2008, federal agencies spent at least $60 billion
through GWACs, MACs, the MAS program, and enterprisewide contracts to
buy goods and services to support their operations:
* about $46.8 billion was spent on the MAS program;
* about $5.3 billion was spent on GWACs;
* at least $2.5 billion was spent on MACs although the actual amount
could be much higher;[Footnote 5] and:
* at least $4.8 billion was spent on the three enterprisewide
contracts we reviewed, although, like MACs, the actual amount spent on
all enterprisewide contracts could be higher.[Footnote 6]
Sales under the MAS program have been relatively flat in recent years,
and obligations under GWACs have declined slightly in recent years.
However, the total amount of money spent in fiscal year 2008 using the
three enterprisewide contracting programs included in our review is
approaching the amount spent for GWACs during the same
period.[Footnote 7] In addition, as OMB recently reported, numerous
agencies are planning to increase their use of enterprisewide
contracts as a means of addressing the administration's goal of
reducing the amount agencies spend on contracting by 7 percent through
fiscal year 2011.
Nevertheless, GSA's MAS program is still the primary governmentwide
buying program aimed at helping the federal government leverage its
significant buying power when buying commercial goods and services. As
the largest interagency contracting program, the MAS program provides
advantages to both federal agencies and vendors.[Footnote 8] Agencies,
using the simplified methods of procurement of the schedules, can
avoid the time, expenditures, and administrative costs of other
methods. And vendors receive wider exposure for their commercial
products and expend less effort in selling these products.
A Lack of Transparency and Limited Governmentwide Policy May Result in
Duplication and Inefficient Contracting:
Interagency and enterprisewide contracts should provide an advantage
to government agencies when buying billions of dollars worth of goods
and services, yet OMB and agencies lack reliable and comprehensive
data to effectively leverage, manage, and oversee these contracts.
More specifically,
* The total number of MACs and enterprisewide contracts currently
approved and in use by agencies is unknown because the federal
government's official procurement database is not sufficient or
reliable for identifying these contracts,
* Departments and agencies cite a variety of reasons to establish,
justify, and use their own MACs and enterprisewide contracts rather
than use other established interagency contracts--reasons that 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,
* Concerns remain about contract duplication--vendors and agency
officials expressed concerns about duplication of effort among these
contracts, and in our review we found many of the same vendors
provided similar products and services on many different contract
vehicles. This could be resulting in duplication of products and
services being offered, increased costs to both the vendor and the
government, and missed opportunities to leverage the government's
buying power,
* Limited governmentwide policy is in place for establishing and
overseeing MACs and enterprisewide contracts.
* Recent legislation and OFPP initiatives are expected to strengthen
oversight and management of MACs, but no similar initiatives are
underway to strengthen oversight of enterprisewide contracts. In April
2010, we made five recommendations to OMB to improve data, strengthen
policy, and better coordinate agencies' awards of MACs and
enterprisewide contracts, and OMB concurred with all of our
recommendations.
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 2006, OFPP started the Interagency Contracting Data
Collection Initiative to identify and list the available GWACs, MACs,
and enterprisewide contracts. However, the initiative was a one-time
effort and has not been updated since. In conducting our review, we
were not able to identify the universe of MACs and enterprisewide
contracts because the data available in the official government
contracting data system, the Federal Procurement Data System-Next
Generation (FPDS-NG), were insufficient and unreliable. 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. Despite its critical role, we
have consistently reported on problems with FPDS-NG data quality over
a number of years.[Footnote 9]
Most of the senior procurement executives, acquisition officials, and
vendors we spoke with as part of our review believed a publicly
available source of information on these contracts is necessary. For
example, senior procurement executives from DHS and DOD stressed the
usefulness of a governmentwide clearinghouse of information on
existing contracts. Agency officials we spoke with said that if
agencies could easily find an existing contract, which they cannot do,
they would avoid unnecessary administrative time to enter into a new
contract, which they said could be significant. The report of the
Acquisition Advisory Panel--often referred to as the SARA panel
[Footnote 10]--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.[Footnote 11]
Recommendations to OFPP:
To improve the transparency of and data available on these contracts,
we made three recommendations to OFPP:
1. Survey departments and agencies to update its 2006 data collection
initiative to identify the universe of MACs and enterprisewide
contracts in use and assess their utility for maximizing procurement
resources across agencies.
2. Ensure that departments and agencies use the survey data to
accurately record these contracts in FPDS-NG.
3. Assess the feasibility of establishing and maintaining a
centralized database to provide sufficient information on GWACs, MACs,
and enterprisewide contracts for contracting officers to use to
conduct market research and make informed decisions on the
availability of using existing contracts to meet agencies'
requirements.
Departments and Agencies Cite a Variety of Reasons for Establishing
New MACs and Enterprisewide Contracts:
Agencies cited several reasons for establishing their own MACs and
enterprisewide contracts including cost avoidance through lower
prices, fewer fees compared to other vehicles, mission specific
requirements, and better control over the management of contracts. For
example:
* The Army cited several reasons for establishing their 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.
* In 2005, DHS established the EAGLE and FirstSource contracting
programs. 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 DHS' many agencies. Furthermore, DHS officials
stated they wanted to be able to coordinate the people managing the
contracts, which did not happen when using GSA contracts.
Concerns Exist About Contract Duplication:
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. Table 1
below shows that the top 10 GWAC vendors, based on sales to the
government, offer their goods and services on a variety of government
contracts that all provide information technology goods and services.
For example, of the 13 different contract vehicles listed in Table 1,
5 of the 10 vendors were on 10 or more of these.
Table 1: Top 10 GWAC Vendors on GWACs, MAS, MACs, and Enterprisewide
Contracts:
Selected GWACs: General Services Administration:
Type of contract by agency or military department: 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].
Type of contract by agency or military department: 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].
Type of contract by agency or military department: 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].
Type of contract by agency or military department: 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:
Type of contract by agency or military department: 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:
Type of contract by agency or military department: 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].
Type of contract by agency or military department: 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].
General Services Administration Multiple Award Schedules:
Type of contract by agency or military department: 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:
Type of contract by agency or military department: 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 MACs: Defense Information Systems Agency:
Type of contract by agency or military department: 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 MACs: Department of Treasury:
Type of contract by agency or military department: 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:
Type of contract by agency or military department: 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:
Type of contract by agency or military department: 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.
[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. 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.
Interestingly, 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.
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. The GSA Federal Acquisition Service 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.
Governmentwide Policy on MACs and Enterprisewide Contracts Is Limited:
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 12] The six federal agencies and the three military
departments we reviewed have policies that require approval and review
for acquisition planning involving large dollar amount contracts 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.
In contrast, GWAC creation and management have governmentwide
oversight, as OFPP exercises statutory approval authority regarding
establishment of a GWAC. 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.
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.
Furthermore, agencies have issued guidance encouraging the use of
enterprisewide contracts rather than using interagency contracts. For
example, DOD guidance 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. Moreover, OMB recently reported that 20 of the 24 largest
procuring activities are planning on reducing procurement spending by
using enterprise contracting to leverage their buying power, as part
of the administration's goal of reducing contract spending by 7
percent over the next 2 years.[Footnote 13]
Recommendation to OFPP:
To provide a more coordinated approach in awarding MACs and
enterprisewide contracts, we recommended that OFPP take steps to
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 governmentwide
buying power while allowing agencies to continue to use their
statutory authorities for buying goods and services.
Legislation Requires 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, 1 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 14] 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 June 11, 2010.
A business case analysis approach for MACs has the potential to
provide a consistent governmentwide approach to awarding MACs as was
pointed out by the SARA panel. 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.
Recommendation to OFPP:
We recommended that as OFPP develops the pending FAR rule to implement
the business case analysis requirement above, it ensures 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.
Management and Pricing Issues Hinder MAS Program Effectiveness:
Our work identified a number of challenges GSA faces in effectively
managing the MAS program, the federal government's largest interagency
contracting program. More specifically, GSA:
* Lacks transactional data about its customers' use of MAS contracts,
which would provide GSA insight to facilitate more effective
management of the program;
* Makes limited use of selected pricing tools that make it difficult
for GSA to determine whether the program achieves its goal of
obtaining the best prices for customers and taxpayers;
* Uses a decentralized management structure for the MAS program in
conjunction with deficient program assessment tools, which create
obstacles for effective program management.
In April 2010, we made a number of recommendations to GSA to improve
MAS program management and pricing, with which GSA concurred.
GSA Needs Transactional Data to Strategically Manage MAS Contracts and
Negotiate Pricing:
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 prices in
using MAS contracts. 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. While GSA does have a spend analysis
reporting tool through its GSA Advantage system that provides agencies
with sales and statistical data on their orders, it accounts for a
very small percentage of overall MAS program sales, thus restricting
the amount of data available.
There are two drawbacks to the lack of available transactional data on
the goods and services ordered under the MAS program and the prices
paid:
The lack of data hinders GSA's ability to evaluate program performance
and manage the program strategically. 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. The GSA Inspector General has
recommended that GSA take steps to collect these data to use in
evaluating customer buying patterns and competition at the order level
in order to adopt a more strategic management approach.[Footnote 15]
We have made similar observations in prior reports going back several
decades.[Footnote 16]
The lack of data could limit the ability of GSA and its customers to
achieve the best prices through the MAS program. Some GSA officials
informed us that they could possibly use transactional data to
negotiate better prices on MAS contracts. Several agency contracting
officers we spoke with cited benefits of having additional
transactional data on MAS orders to improve their negotiating position
when buying goods and services, and increasing visibility over the
purchases their respective agency makes. 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.
GSA officials 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.
Recommendation to GSA:
We recommended that GSA take steps to collect transactional data on
MAS orders and prices paid and provide this information to contract
negotiators and customer agencies, potentially through the expanded
use of existing electronic tools or through a pilot data collection
initiative for selected schedules.
GSA Makes Limited Use of Selected Pricing Tools:
GSA uses several tools and controls in the contract award and
administration process to obtain and maintain best prices for its
contracts. These tools include:
* pre-award audits of MAS contracts by the GSA Inspector General,
* clearance panel reviews of contract negotiation objectives, and:
* Procurement Management Reviews.
However, it applies these tools to a small number of contracts, which
hinders GSA's ability to determine whether it achieves the program's
goal of obtaining best prices.
For example, the GSA Inspector General performs pre-award audits of
MAS contracts, which enable contract negotiators to verify that vendor-
supplied pricing information is accurate, complete, and current before
contract award. These audits can also result in lower prices for MAS
customers by identifying opportunities for GSA to negotiate more
favorable price discounts prior to award. From fiscal year 2004
through 2008, the GSA Inspector General identified almost $4 billion
in potential cost avoidance through pre-award audits. However, we
found that GSA could be missing additional opportunities for cost
savings on MAS contracts by not targeting for review more contracts
that are eligible for audit. While 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, more than 250 contracts that
exceeded this threshold were not selected for audit for the 2-year
period of 2009 through 2011 due to resource constraints.[Footnote 17]
In addition, the 145 contracts that were selected for audit represent
only 2 percent of the total award dollars for all MAS contracts.
GSA uses other tools to improve the quality of contract negotiations,
but we found that their effectiveness was limited by incomplete
implementation and a narrow scope. GSA established a prenegotiation
clearance panel process to ensure the quality of GSA's most
significant contract negotiations by reviewing the contract's
negotiation objectives with an emphasis on pricing, prior to contract
award for contracts that meet certain defined dollar thresholds.
However, we found several instances where clearance panel reviews were
not held for contracts that met these thresholds, and GSA officials
said that they do not check whether contracts that met the appropriate
threshold received a panel review, thus limiting the effectiveness of
this tool. GSA has begun the process of updating its prenegotiation
clearance panel guidance to address this issue.
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. 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.
Recommendations to GSA:
We recommended that GSA, in coordination with its Inspector General,
target the use of pre-award audits to cover more contracts that meet
the audit threshold. In addition, we recommended that GSA fully
implement the process that has been initiated to ensure that vendors
who require a prenegotiation clearance panel receive a panel review.
Decentralized Management Structure and Limitations in Assessment Tools
Limit Effective Program Management:
The decentralized management structure for the MAS program and
shortcomings in assessment tools also create MAS program management
challenges. GSA 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.
Responsibility, however, for managing the operation of individual
schedules resides with nine different acquisition centers under three
business portfolios. None of these business portfolios 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. GSA officials and program
stakeholders we spoke with had varying opinions about this management
structure, with some noting 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. The GSA Inspector General has
expressed similar concerns, noting in a recent report 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.[Footnote 18]
We also found that performance measures were inconsistent across the
GSA organizations that manage MAS contracts, including inconsistent
emphasis on competitiveness of pricing, making it difficult to have a
programwide perspective of MAS program performance. Finally, GSA's MAS
customer satisfaction survey has had a response rate of one percent or
less in recent years that limits its utility as a means for evaluating
program performance.
Recommendations to GSA:
We recommended that GSA 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 , establish more
consistent performance measures across the MAS program to include
measures for pricing, and take steps to increase the MAS customer
survey response rate.
Concluding Observations:
Billions of taxpayer dollars flow through interagency and
enterprisewide contracts; however, the federal government does not
have a clear and 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. Long-standing 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 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 unknowingly contracting for the same goods and
services across a myriad of contracts--MACs, GWACs, the MAS program,
and enterprisewide contracts. In addition, GSA's shortcomings in data,
program assessment tools, and use of pricing tools create oversight
challenges that prevent GSA from managing the MAS program more
strategically and knowing whether the MAS program provides best
prices. In agreeing with our recommendations, OMB and GSA recognize
the importance of addressing these problems, but until they are
resolved, 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.
Madam Chairman, this concludes my prepared statement. I would be happy
to respond to any questions you or the other members of the
subcommittee may have at this time.
Contacts and Staff Acknowledgments:
For further information regarding this testimony, please contact John
Needham at (202) 512-4841 or needhamjk1@gao.gov. Contact points for
our Offices of Congressional Relations and Public Affairs may be found
on the last page of this product. Individuals making key contributions
to this statement were James Fuquay (Assistant Director); Marie
Ahearn; Lauren Heft; and Russ Reiter.
[End of section]
Footnotes:
[1] GAO, Contracting Strategies: Data and Oversight Problems Hamper
Opportunities to Leverage Value of Interagency and Enterprisewide
Contracts, [hyperlink, http://www.gao.gov/products/GAO-10-367]
(Washington, D.C.: Apr. 29, 2010).
[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] The Department of Veterans Affairs operates schedules for medical
supplies and services. VA operates its portion of the schedules
program under a delegation authority from GSA. Although GSA has
delegated to VA the authority to contract for medical supplies and
services under various MAS, GSA has not delegated to VA the authority
to prescribe the policies and procedures that govern the MAS program.
[4] 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). They are task or delivery-order
contracts established by one agency that can be used for
governmentwide use that are operated by an executive agent designated
by the Office of Management and Budget. FAR § 2.101.
[5] The four MAC programs in our review had obligations totaling $2.5
billion in fiscal year 2008.
[6] The three enterprisewide contract programs in our review had
obligations totaling $4.8 billion in fiscal year 2008.
[7] These 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. The program had
contracts with over 1,800 vendors and obligated almost $3.6 billion in
fiscal year 2008.
[8] While GSA, in its regulations uses the term "offeror," for
purposes of this testimony we use the term "vendor."
[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).
[10] 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.
[11] Report of the Acquisition Advisory Panel to the Office of Federal
Procurement Policy and the United States Congress (Washington, D.C.:
January 2007).
[12] FAR § 7.105.
[13] Office of Management and Budget, Acquisition and Contracting
Improvement Plans and Pilots: Saving Money and Improving Government
(Washington, D.C.: December 2009).
[14] Duncan Hunter National Defense Authorization Act for Fiscal Year
2009, Pub. L. No. 110-417 § 865 (2008).
[15] General Services Administration Office of Inspector General,
Review of Multiple Award Schedule Program Contract Workload Management
(Kansas City, Mo.: July 31, 2007).
[16] 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).
[17] 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.
[18] General Services Administration Office of Inspector General,
Review of Consistency in Implementing Policy Across Acquisition
Centers (Arlington,Va.: September 2009).
[End of section]
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