Contract Management
Roles and Responsibilities of the Federal Supply Service and Federal Technology Service Gao ID: GAO-02-560T April 11, 2002The General Services Administration's (GSA) Federal Supply Service (FSS) and Federal Technology Service (FTS) help agencies to purchase telephone and computer systems, motor vehicles, travel, and everyday supplies valued at more than $30 billion annually. FSS and FTS take different approaches to filling agency customers' requirements but, in the information technology area, they provide similar goods and services and deal with many of the same vendors. Although overlapping programs with similar services would appear to create the potential for inefficiencies, GSA has little hard data with which to assess the situation. GSA has begun to provide more useful information on the performance of FSS and FTS and to identify more efficient operations. If successful, these initiatives also may provide a road map for assessing the performance of other interagency purchasing programs.
GAO-02-560T, Contract Management: Roles and Responsibilities of the Federal Supply Service and Federal Technology Service
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United States General Accounting Office:
GAO:
Testimony:
Before the Subcommittee on Technology and Procurement Policy,
Committee on Government Reform, House of Representatives:
For Release on Delivery:
Expected at 9:30 a.m.
Thursday, April 11, 2002:
Contract Management:
Roles and Responsibilities of the Federal Supply Service and Federal
Technology Service:
Statement of David E. Cooper:
Director, Acquisition and Sourcing Management:
GAO-02-560T:
Mr. Chairman and Members of the Subcommittee:
Thank you for inviting me to participate in the subcommittee's hearing
on the roles and responsibilities of the General Services
Administration's (GSA) Federal Supply Service (FSS) and Federal
Technology Service (FTS). As the government's business arm, GSA plays
an important role in assisting agencies in procuring goods and
services. FSS and FTS, in particular, facilitate a wide range of
purchases, including telephone and computer systems, motor vehicles,
travel, and everyday supplies, and do more than $30 billion in
business each year. They are not the only interagency purchasing
programs available, but they are the most prominent.
Today, I would like to discuss the similarities and differences
between the FSS and FTS purchasing programs and highlight GSA
initiatives to assess how they are functioning. Briefly, FSS and FTS
take different approaches to filling agency customers' requirements
but, in the area of information technology (IT), they provide a
similar range of goods and services and deal with many of the same
vendors. On the face of it, maintaining overlapping programs to
provide similar services to agency customers would appear to create
the potential for inefficiencies. GSA, though, has little hard data to
assess whether inefficiencies have been created. To its credit, GSA
has embarked on initiatives designed to provide more useful
information to assess the performance of FSS and FTS and identify more
efficient ways of operating. If successfully implemented, these
initiatives also may provide a road map for assessing the performance
of other interagency purchasing programs.
Background:
FSS and FTS are the principal GSA programs that assist agencies in
acquiring products and services. FSS is responsible for a much wider
range of business lines than FTS, yet both do billions of dollars in
business. Both programs are funded by the fees they charge customers,
and both receive only minor amounts of appropriated funding.
FSS:
FSS assists federal agencies in acquiring supplies, furniture,
computers, tools, equipment, and a variety of services. Its business
lines include purchasing and leasing motor vehicles, acquiring travel
and transportation services, and managing personal property.
Purchasing activities are centered in its commercial acquisition
business line, through which FSS provides agencies access to over 4
million items of commonly-used commercial supplies and services.
Sales under FSS's federal supply schedule program have increased
significantly in recent years, and sales of IT products and services
have been a principal source of this growth. As figure 1 shows, total
sales under the schedule program increased from $6.1 billion (in
constant fiscal year 2001 dollars) in fiscal year 1997 to about $16.5
billion in fiscal year 2001. Sales under the IT schedule increased
from $3.0 billion to $10.9 billion, while increases in sales under
other schedules were less substantial.
Figure 1: Sales under FSS Schedule Contracts”Fiscal Years 1997 to 2001:
[Refer to PDF for image: stacked vertical bar graph]
Constant fiscal year 2001 dollars in billions are depicted for fiscal
years 2997 through 2001 for the following:
* Information technology schedule;
* Other schedules.
Source: GSA.
[End of figure]
FTS:
FTS provides customers with network services and IT solutions. Its
network services program specifically provides global voice, data, and
video communication services. Its information technology solutions
program provides a full range of IT products and services.
At FTS, IT products and services have accounted for virtually all the
increase in revenues in recent years. As figure 2 shows, total
revenues for FTS purchasing programs increased from $2.7 billion (in
constant fiscal year 2001 dollars) in fiscal year 1997 to $6.2 billion
in fiscal year 2001. Revenues from IT products and services increased
from $1.7 billion to $5.1 billion, while revenues from
telecommunications services increased only modestly.
Figure 2: Revenues under FTS Purchasing Programs”Fiscal Years 1997 to
2001:
[Refer to PDF for image: stacked vertical bar graph]
Constant fiscal year 2001 dollars in billions are depicted for fiscal
years 2997 through 2001 for the following:
* Information technology;
* Telecommunications.
Source: GSA.
[End of figure]
Both FSS and FTS have reoriented their purchasing programs in recent
years to provide better service to the federal agencies that are their
customers. FSS, for example, has pursued efforts to expand access to
commercial products and services and to reengineer its processes to
implement commercial buying practices and streamline purchasing for
customers. FTS, for its part, focuses on providing superior service to
customers, analyzing emerging technologies to identify attractive new
service offerings, and taking advantage of the flexibility offered by
acquisition reform to bring these technologies to the government
marketplace as rapidly as possible.
FSS and FTS Pursue Distinct Business Models but Offer Similar Products
and Services:
FSS and FTS offer some similar products and services, but they take
very different approaches to doing so. Views on whether the overlap is
beneficial or inefficient vary.
Both programs offer federal agencies a full range of IT service
contracts, including networking, information systems analysis and
design, and installation. Further, the two organizations provide
customer agencies with access to many of the same vendors. In fact, as
figure 3 shows, 8 of the top 10 suppliers of IT to the federal
government held FSS schedule contracts and non-schedule contracts used
by FTS during fiscal year 2000. Overall, according to data in the
governmentwide prime contract database, over 300 vendors received
awards under both FSS schedule contracts and nonschedule contracts
used by FTS during fiscal year 2000.
Figure 3: Overlap Between FSS Schedule Contracts and Nonschedule
Contracts Used by FTS for the Federal Government's Top 10 IT Suppliers”
Fiscal Year 2000:
[Refer to PDF for image: illustration]
Holders of non-schedule contracts used by FTS:
Hughes Global Services, Incorporated.
Holders of FSS schedule contracts:
Dell Computer Corporation.
Overlap:
Computer Science Corporation;
Electronic Data Systems Corporation;
Federal Data Corporation;
GTSI Corporation;
Litton Industries, Incorporated;
Lockheed Martin Corporation;
Science Applications International Corporation;
Unisys Corporation.
Source: GAO Analysis of Federal Procurement Data System Information.
[End of figure]
Decisions made in the mid-1990s led to the two organizations having
overlapping IT acquisition programs. Until that time, GSA had
governmentwide responsibility for supervising IT acquisitions. GSA
carried out this oversight responsibility through its Information
Resource Management Service (IRMS), which also administered all IT
contracts awarded by GSA. In 1996, the Congress, through the Clinger-
Cohen Act,[Footnote 1] eliminated GSA's governmentwide
responsibilities over IT acquisitions. Following this congressional
action, GSA decided to disband IRMS and distribute IT contracts to its
other organizations. Certain IRMS contracts that were structured like
federal supply schedule contracts were transferred to FSS, and the
remaining contracts were transferred to FTS.
Although both FSS and FTS provide IT products and services to customer
agencies, the two organizations take different approaches to
delivering products and services. FSS follows a "self-service"
business model and considers its primary mission to be making
attractive contract vehicles for acquisition of commercial products
and services available to customers. Its federal supply schedule
contracts are designed to be flexible, simple to use, and to embody
commercial buying practices. FSS negotiates master contracts with
vendors, seeking discounts off commercial list prices that are at
least as favorable as those vendors offer their most favored
customers. Once FSS has negotiated these master contracts, personnel
in customer agencies may place orders against them and, if they have
large requirements, seek additional price discounts beyond those FSS
has negotiated.
FTS follows a "full-service" business model and manages the
acquisition of information technology and telecommunications products
and services on behalf of federal agencies. FTS contracting officers
help agency customers fill their requirements using contracts FTS has
awarded competitively to vendors that offer the most favorable
combinations of quality and value. FTS contracting officers also have
the discretion to select the contract vehicle they consider most
advantageous for filling a requirement. For example, FTS is a major
user of the FSS federal supply schedule contracts, and also uses a
range of contract vehicles other federal agencies have awarded”
commonly known as governmentwide acquisition contracts. FTS provides
agency customers support in overseeing the entire acquisition process,
including helping customers with defining requirements, placing orders
to fill requirements, and administering orders.
Views on Overlapping Differ:
Concerns have been raised about whether GSA's procurement programs are
operating efficiently. For example, one industry association, noting
that duplicative contract vehicles exist throughout the government,
has criticized duplication of efforts between FSS and FTS. In
particular, the association took issue with FTS's decision to award
separate contracts for seat management services,[Footnote 2] even
though the services could have been acquired through FSS schedule
contracts. According to the association, companies incurred additional
costs to prepare proposals to win these separate contracts, and FTS
incurred additional costs to evaluate proposals and select the winning
contractors. The association argued that administrative costs for both
companies and the government could have been reduced had FTS chosen to
negotiate agreements to provide seat management services under
existing FSS schedule contracts. However, the association did not
provide firm estimates of how much costs could have been reduced.
During our work, we found no comprehensive analysis conducted by GSA
of how the overlap between FSS and FTS has affected administrative
costs or the prices the government pays for products and services.
However, the GSA Inspector General (IG) interviewed a limited number
of IT vendors and federal agency customers and reported that these
parties had a favorable view of the overlap. Vendors, the IG reported,
were willing to accept the increased cost of administering overlapping
contract vehicles because they viewed these vehicles as opportunities
to win more federal business. Agency customers viewed the overlapping
vehicles as providing them procurement options. Nonetheless, the
diverging views regarding the impact of overlap between FSS and FTS
contracts indicate a need for GSA to take a hard look at how
effectively its procurement programs are operating.
GSA Has Begun Initiatives to Assess How Well Its Procurement Programs
Are Performing:
GSA has recently begun two initiatives that will provide better
information on how well its procurement programs are operating. The
first focuses on building better performance measures; the second on
assessing the structure and efficiency of FSS and FTS and their
services.
First, GSA is encouraging the managers of its procurement programs to
develop performance measures that can support an assessment of whether
the best value is being achieved. GSA already has measures for these
programs, but they focus on increasing revenues and customer
satisfaction and not specifically on the question of whether quality
products and services are being provided at competitive prices and
significant savings to the government.[Footnote 3]
To date, FSS has proposed two measures that would provide information
on its ability to achieve cost savings. The first of these would
examine price competitiveness, as reflected in the discounts obtained
when negotiating master contracts. The second would examine the
additional discounts that customers obtained when negotiating
individual orders. FSS officials, however, noted that implementing
this second measure is not currently practical because the
organization does not receive information on discounts customers have
negotiated. Officials anticipate that customers and vendors will find
the burden of routinely reporting this information unacceptable and
are considering whether collecting information on a limited sample of
orders would be a more appropriate approach.
FTS, for its part, has proposed a number of measures that should shed
light on whether it is achieving customers' timeliness, quality, and
cost goals. Specifically, FTS is proposing to measure how frequently
it is able to award orders by the dates agreed to with customers and
how frequently products it purchases are delivered by the dates agreed
to with customers. These two measures should provide useful
information on timeliness. In addition, FTS is proposing to compare
the prices it negotiates with vendors to independent government cost
estimates for the products and services purchased. This measure will
provide some insight into whether FTS is obtaining good prices. FTS
officials, however, acknowledged that the validity of government
estimates, which they propose to use as a measurement benchmark,
depends heavily on the skills and capabilities of the estimators,
which in their experience has varied.
Second, GSA has chartered a study of the structure and efficiency of
FSS and FTS and the services they provide agency customers. This study
was initiated through award of a contract to a well-known management-
consulting firm. The consulting firm will survey key current and
potential customers of GSA's procurement programs to identify their
needs for IT and telecommunications services. The consulting firm will
then analyze GSA's current approach to filling these needs and
identify high-potential alternative approaches to doing so. The
study's ultimate objective is to develop strategies to improve GSA's
capability to serve the federal technology market.
We believe both initiatives are good steps toward answering the
questions this subcommittee is asking today. They will be challenging
in view of the potential reluctance of customers and vendors to comply
with additional reporting burdens and difficulties associated with
producing independent cost estimates. But it is important for GSA to
work through these issues to gain assurance that its programs are
delivering value to the government and to identify opportunities to
increase their efficiency.
Moreover, any success that GSA achieves with these initiatives can
also be applied to numerous other interagency contract vehicles.
Little is known about these vehicles”specifically whether they are
providing high quality and best value and whether, from a
governmentwide perspective, the right mix of options is available to
agencies.
Conclusion:
In conclusion, FSS and FTS are similar in that they provide a broad
range of IT products and services and access to many of the same
vendors. They differ in that one provides a full range of support
services to help agencies manage acquisitions while the other simply
provides access to flexible, convenient contract vehicles. Some would
suggest that maintaining overlapping procurement programs gives rise
to inefficiencies and others that doing so provides agencies desirable
flexibility. As these programs have grown in size and significance and
as more agencies take on similar programs, it is becoming increasingly
critical to answer this question. We support GSA's efforts to do so
and believe that their results could also be beneficial in terms of
looking at this issue from a governmentwide perspective.
Mr. Chairman and members of the subcommittee, that concludes my
statement. I will be happy to address any questions you may have.
Contact and Acknowledgment:
For further information, please contact David E. Cooper at (202) 512-
4841. Individuals making key contributions to this testimony include
Cristina Chaplain, Ralph Dawn, Linda D. Koontz, Mary T. Marshall,
Monty Peters, and Jeffrey V. Rose.
[End of section]
Footnotes:
[1] P.L. 104-106, Feb. 10, 1996.
[2] Contracts for seat management services typically call for a single
vendor to provide all hardware, software, and management and support
services needed to operate an agency's in-house desktop computer
network for a fixed monthly fee, instead of the agency acquiring these
products and services separately from various sources.
[3] The Government Performance and Results Act of 1993 requires
agencies to set goals, measure performance, and report on their
accomplishments. We recently reported on the performance goals GSA had
established for selected key outcomes in its Annual Performance Plan
for Fiscal Year 2002, including the planned outcome "Quality products
and services are provided to federal agencies at competitive prices
and significant price savings to the government." We reported that
performance goals for this outcome were generally measurable and
quantifiable. See U.S. General Accounting Office, General Services
Administration: Status of Achieving Key Outcomes and Addressing Major
Management Challenges, [hyperlink,
http://www.gao.gov/products/GAO-01-931] (Washington, D.C.: Aug. 3,
2001).
[End of section]
