Contract Management
Restructuring GSA's Federal Supply Service and Federal Technology Service Gao ID: GAO-04-132T October 2, 2003The General Services Administration's (GSA) Federal Supply Service (FSS) and Federal Technology Service (FTS) play an important role in assisting agencies procure a wide range of products and services. Over the past several years, FSS and FTS purchases have significantly increased, with IT products and services being the primary source of this growth. In April 2002, we identified overlap in FSS' and FTS' IT procurement programs. A management consultant similarly found overlaps in FTS' and FSS' IT sales and marketing functions and contract offerings. To enhance FSS and FTS operational efficiency and effectiveness--in both its IT and non-IT business lines--GSA has undertaken a performance improvement initiative. This testimony focuses on GSA's actions to implement its initiative. It also discusses the importance of enhancing GSA's ability to help agencies strategically purchase products and services.
In response to the management consultant's recommendations, GSA took a number of actions to improve FSS and FTS efficiency. First, GSA realigned its marketing, sales, customer account planning, and management functions. FSS now has primary responsibility for market research and marketing of all GSA products and services, including IT, while FTS has primary responsibility for sales and customer account planning and management. In addition, GSA transferred FTS contract development and maintenance responsibilities to FSS. Through this realignment, GSA hopes to eliminate inefficiencies due to overlaps and redundancies, provide best value to more federal customers, and improve customer relations. Second, GSA created a Contract Vehicle Review Board to ensure its existing contracts are rationalized and to evaluate the need for new contracts. The Board recently completed its review of IT contracts and found that for several of these contracts, the business case was not adequate to recompete them in the future. Finally, GSA created a new FTS Office of Professional Services to offer assisted procurement services beyond IT and telecommunications. By opening its assisted procurement offerings to new areas, GSA aims to expand its business base to new customers and enhance customer service. In its first 4 months, the Office of Professional Services had placed 146 task orders valued at $45 million. GSA expects to achieve $430 million in revenue by 2004. While these actions should help reduce certain inefficiencies in the federal procurement process, we believe GSA needs to take a more active role in helping federal agencies reduce the overall cost of their FSS and FTS purchases. Because agencies' processes for establishing requirements for FSS and FTS products and services are generally decentralized and uncoordinated, agencies lack knowledge of the extent to which purchases overlap and buying power is diluted. GSA is in a unique position to help agencies analyze their spending agencywide and identify opportunities to coordinate their requirements. By using a more strategic approach to FSS and FTS procurement, agencies can leverage their buying power for volume discounts and thereby reduce overall purchasing costs. A few federal agencies have begun to analyze their spending patterns and successfully use a strategic purchasing approach for selected categories of products, including IT, to leverage their buying power and save money. For example, the Air Force saved an estimated $3 million using a strategic purchasing approach to buy more than 13,000 desktop and notebook computers required for multiple units that previously bought such products separately.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-04-132T, Contract Management: Restructuring GSA's Federal Supply Service and Federal Technology Service
This is the accessible text file for GAO report number GAO-04-132T
entitled 'Contract Management: Restructuring GSA's Federal Supply
Service and Federal Technology Service' which was released on October
02, 2003.
This text file was formatted by the U.S. General Accounting Office
(GAO) to be accessible to users with visual impairments, as part of a
longer term project to improve GAO products' accessibility. Every
attempt has been made to maintain the structural and data integrity of
the original printed product. Accessibility features, such as text
descriptions of tables, consecutively numbered footnotes placed at the
end of the file, and the text of agency comment letters, are provided
but may not exactly duplicate the presentation or format of the printed
version. The portable document format (PDF) file is an exact electronic
replica of the printed version. We welcome your feedback. Please E-mail
your comments regarding the contents or accessibility features of this
document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
Testimony:
Before the Committee on Government Reform, House of Representatives:
United States General Accounting Office:
GAO:
For Release on Delivery Expected at 11:00 a.m. EDT:
Thursday, October 2, 2003:
Contract Management:
Restructuring GSA's Federal Supply Service and Federal Technology
Service:
Statement of William T. Woods, Director Acquisition and Sourcing
Management:
GAO-04-132T:
GAO Highlights:
Highlights of GAO-04-132T, a testimony before the Committee on
Government Reform, House of Representatives
Why GAO Did This Study:
The General Services Administration‘s (GSA) Federal Supply Service
(FSS) and Federal Technology Service (FTS) play an important role in
assisting agencies procure a wide range of products and services.
Over the past several years, FSS and FTS purchases have significantly
increased, with IT products and services being the primary source of
this growth. In April 2002, we identified overlap in FSS‘ and FTS‘ IT
procurement programs. A management consultant similarly found overlaps
in FTS‘ and FSS‘ IT sales and marketing functions and contract
offerings. To enhance FSS and FTS operational efficiency and
effectiveness”in both its IT and non-IT business lines”GSA has
undertaken a performance improvement initiative.
This testimony focuses on GSA‘s actions to implement its initiative.
It also discusses the importance of enhancing GSA‘s ability to help
agencies strategically purchase products and services.
What GAO Found:
In response to the management consultant‘s recommendations, GSA took a
number of actions to improve FSS and FTS efficiency.
* First, GSA realigned its marketing, sales, customer account
planning, and management functions. FSS now has primary responsibility
for market research and marketing of all GSA products and services,
including IT, while FTS has primary responsibility for sales and
customer account planning and management. In addition, GSA transferred
FTS contract development and maintenance responsibilities to FSS.
Through this realignment, GSA hopes to eliminate inefficiencies due to
overlaps and redundancies, provide best value to more federal
customers, and improve customer relations.
* Second, GSA created a Contract Vehicle Review Board to ensure its
existing contracts are rationalized and to evaluate the need for new
contracts. The Board recently completed its review of IT contracts and
found that for several of these contracts, the business case was not
adequate to recompete them in the future.
* Finally, GSA created a new FTS Office of Professional Services to
offer assisted procurement services beyond IT and telecommunications.
By opening its assisted procurement offerings to new areas, GSA aims
to expand its business base to new customers and enhance customer
service. In its first 4 months, the Office of Professional Services
had placed 146 task orders valued at $45 million. GSA expects to
achieve $430 million in revenue by 2004.
While these actions should help reduce certain inefficiencies in the
federal procurement process, we believe GSA needs to take a more
active role in helping federal agencies reduce the overall cost of
their FSS and FTS purchases. Because agencies‘ processes for
establishing requirements for FSS and FTS products and services are
generally decentralized and uncoordinated, agencies lack knowledge of
the extent to which purchases overlap and buying power is diluted. GSA
is in a unique position to help agencies analyze their spending
agencywide and identify opportunities to coordinate their
requirements. By using a more strategic approach to FSS and FTS
procurement, agencies can leverage their buying power for volume
discounts and thereby reduce overall purchasing costs. A few federal
agencies have begun to analyze their spending patterns and
successfully use a strategic purchasing approach for selected
categories of products, including IT, to leverage their buying power
and save money. For example, the Air Force saved an estimated $3
million using a strategic purchasing approach to buy more than 13,000
desktop and notebook computers required for multiple units that
previously bought such products separately.
What GAO Recommends:
We recommend that as it moves forward with its current performance
initiative, GSA develop the capability to provide its customer
agencies with information and analyses they need to leverage their
buying power to reduce procurement costs.
www.gao.gov/cgi-bin/getrpt?GAO-04-132T.
To view the full product, click on the link above. For more
information, contact William T. Woods at (202) 512-4841 or
woodsw@gao.gov.
[End of section]
Mr. Chairman, Ranking Member Waxman, and Members of the Committee:
Thank you for inviting me here today to discuss the General Services
Administration's (GSA) ongoing efforts to improve the efficiency and
effectiveness of its Federal Supply Service (FSS) and Federal
Technology Service (FTS). In fiscal year 2002, FSS and FTS helped
federal agencies buy more than $34 billion of products and services
ranging from everyday supplies, equipment, and motor vehicles to
information technology (IT), telecommunications, and travel services.
Over the past several years, FSS and FTS purchases have increased
significantly, with IT products and services being the primary source
of this growth.
In April 2002, we testified on the roles of FSS and FTS in federal
purchasing and identified overlap in their IT procurement
programs.[Footnote 1] While FSS and FTS had reoriented their purchasing
programs to provide better service to agencies, concerns about
overlapping IT acquisition programs remained, prompting GSA to hire a
management consultant to study how effectively the two were operating.
The study confirmed that while customers and industry partners
generally valued GSA, there were inefficiencies in FTS' and FSS'
overlapping IT sales and marketing functions and contract offerings. In
response to the study's recommendations, GSA announced implementation
of a performance improvement initiative to enhance FSS and FTS
operational efficiency and effectiveness--in both IT and non-IT
business lines.
My statement today will focus on the actions GSA has taken to implement
its performance improvement initiative. I will also discuss the
importance of enhancing GSA's ability to promote strategic purchasing
practices--by analyzing agencies' purchasing patterns to help identify
opportunities that could better leverage agency buying power and
thereby cut overall purchasing costs. This approach is based on our
findings of how leading companies and other federal agencies have
followed strategic purchasing practices that clearly paid off in terms
of dollar savings.
In summary, GSA has taken a number of actions to implement its
performance improvement initiative, but these actions alone will not
provide the best value for government purchasing. GSA has consolidated
and streamlined overlapping operations by restructuring FSS and FTS
marketing, sales and contracting functions, and evaluated selected
contracts to identify opportunities to eliminate duplication. If
successfully implemented, these actions should, over time, help reduce
inefficiencies in agency operations, but we believe GSA needs to do
more. To achieve greater savings, GSA needs to help agencies take a
more strategic approach to coordinating their procurement requirements
to better leverage their buying power and obtain the most advantageous
terms and conditions for their purchases.
Background:
GSA plays an important role in assisting agencies in procuring supplies
and services. FSS and FTS, in particular, facilitate a wide variety of
purchases. FSS assists federal agencies in acquiring a full range of
products--including over 4 million commonly used commercial items,
ranging from furniture, computers, tools, equipment, and motor
vehicles. FSS also assists agencies in acquiring services, such as
professional consulting, travel, transportation, and property
management. FTS provides customers with telecommunications products and
services--voice, data, and video--and a full range of IT products and
services. Over the past several years, FSS and FTS purchases have
increased significantly. In fiscal year 2002, FSS' business volume was
more than $27 billion, and is projected to grow to almost $32 billion
by fiscal year 2004. Between fiscal years 1995 and 2002, total revenues
for FTS purchasing programs more than quadrupled from $1.5 billion to
$7.1 billion. Sales of IT products and services are the primary source
of GSA sales growth.
Historically, FSS and FTS have taken different approaches to filling
agency requirements. FSS has followed a self-service business model,
using contracts that are designed to be flexible, simple to use, and
consistent with commercial buying practices. FSS negotiates master
contracts with vendors, seeking discounts off commercial list prices
that are at least as favorable as the discounts offered to their most
favored customers. FTS has followed a full-service business model,
providing assisted procurement services to help agencies define and
fill their IT and telecommunications requirements. FTS is a major user
of the FSS schedule contracts as well as a range of contract vehicles
FTS and other federal agencies have awarded--commonly known as
governmentwide acquisition contracts.
While their business models differ, FSS and FTS provide similar IT
goods and services and provide customers access to many of the same
vendors. Concerns were raised about potential inefficiencies that may
result from this overlap--particularly the additional administrative
costs incurred by vendors to prepare separate proposals for FSS and
FTS, and by GSA to evaluate and select vendors and administer the
contracts. To address these concerns, GSA commissioned a management
consulting firm to conduct a study of the structure and efficiency of
FSS and FTS and the services they provide to agency customers. The
consultant found several areas where GSA could realize efficiencies in
its operations and made several recommendations, including:
* Combine and realign certain functions--such as marketing and sales,
contract development and maintenance, and customer support--as they
relate to IT and telecommunications.
* Rationalize overlapping IT contracts currently offered--that is,
review existing IT contracts to identify redundancies and eliminate
those that do not clearly have a distinct value to GSA's customers.
* Expand FTS' assisted procurement services to GSA business lines other
than IT and telecommunications.
GSA Has Taken Actions to Streamline FSS and FTS Operations:
In response to the consultant's study, the GSA Administrator announced
in December 2002 that GSA planned to combine and realign some functions
of FSS and FTS in order to improve efficiencies and to expand FTS-
assisted procurement services for customer agencies.
First, GSA realigned its market research, marketing, customer account
planning and management, and sales functions previously carried out
separately by FSS and FTS. FSS now has primary responsibility for
market research and marketing of all GSA products and services,
including IT, while FTS has primary responsibility for sales and
customer account planning and management. Through this realignment, GSA
hopes to (1) eliminate inefficiencies due to overlaps and redundancies,
(2) provide best value to more federal customers by expanding its
market share in IT and other product and services areas, and (3)
improve customer relations. In addition, GSA transferred FTS contract
development and maintenance responsibilities to FSS.
Second, GSA created a Contract Vehicle Review Board--with
representatives from FSS, FTS, GSA's Office of Governmentwide Policy,
and its regional offices to ensure its existing contracts are
rationalized and to evaluate the need for new contracts. The Board
recently completed its review of FTS IT contracts. The Board found that
for a select number of these contracts the business case was not
adequate to recompete them in the future. However, the Board
recommended against terminating these contracts before their scheduled
expiration. Therefore, the potential efficiencies to be gained from
GSA's efforts to eliminate redundant contracts will not be realized for
several years, after these contracts expire.
Finally, GSA created a new FTS Office of Professional Services to offer
assisted procurement services beyond IT and telecommunications in three
new areas: management organization and business improvement, worldwide
logistics, and professional engineering. By opening its assisted
procurement offerings to new areas, GSA aims to expand its business
base to new customers and enhance customer service by providing
consulting and management support in a wider range of categories. In
its first 4 months, the Office of Professional Services had placed 146
task orders valued at $45 million. GSA expects to achieve $430 million
in revenue by 2004.
Improved Knowledge of FSS and FTS Purchasing Could Reveal Significant
Savings for Federal Agencies:
While GSA's recent actions should help improve the management of
federal procurement, these actions focus on achieving administrative
and process efficiencies, not on leveraging the government's buying
power to reduce the cost of government purchasing. Because processes
for establishing requirements for products and services at many
agencies are generally decentralized and uncoordinated, we believe GSA
needs to take a more active role in helping federal agencies to
coordinate their purchases and improve their ability to leverage their
buying power and obtain the most advantageous terms and conditions. A
number of leading companies and federal agencies that we have
highlighted in our recent work have used a strategic procurement
approach to achieve significant savings.
A strategic procurement approach begins with a "spend analysis" to see
who is buying what from whom. Through such an analysis, an agency can
identify similar goods and services that are being bought from numerous
suppliers, often at varying prices. With this knowledge, agencies can
coordinate their purchases to leverage their buying power and
rationalize their supplier base.
A few federal agencies have begun to successfully use a strategic
purchasing approach for selected categories of products to leverage
their buying power and save money. For example, in 2001, we reported
that the Department of Veterans Affairs (VA) and the Department of
Defense (DOD) saved over $170 million annually by jointly procuring
pharmaceuticals.[Footnote 2] VA and DOD achieved those savings by
agreeing on particular high-dollar, high-volume drugs that their
facilities would purchase and then contracting with the manufacturers
of these drugs for discounts based on their combined larger volume. The
discounts VA and DOD obtained were, on average, 33 percent lower than
FSS prices.
Strategic purchasing of IT products has been particularly promising in
achieving savings. For example, in 2003, following an Air Force-wide
spend analysis that revealed many leverage opportunities for IT
equipment, an Air Force commodity council--which includes
representatives from the major commands, several functional areas, and
the Air Staff--solicited competing offers from five IT vendors with
blanket purchase agreements[Footnote 3] in place for desktop and
notebook computers for multiple Air Force units that previously bought
such products separately. According to an Air Force official involved
in this effort, the council awarded a purchase order for about 13,000
computers to two vendors. The new purchasing approach achieved
significant savings for the Air Force--an average of about $450 per
desktop computer and over $200 for each notebook computer--for an
overall estimated savings of about $3 million. This was the first of
several anticipated IT buys under the Air Force's new strategic
purchasing approach to take advantage of overall buying power to
achieve mission needs.
Similarly, the Office of Management and Budget (OMB) projects saving as
much as $100 million annually on computer software licenses through its
SmartBUY program, launched in June 2003. According to OMB, more than 4
million desktop, laptop, and networked computers are in use across the
federal government, and federal agencies engage in thousands of
software licensing agreements annually. By coordinating the approach
federal agencies use to acquire common software licenses, OMB expects
the government can achieve significant savings from volume discounts.
GSA is managing the program for OMB through an interagency team that
was established to review the baseline analysis and inventory of
software agreements and develop a migration strategy to start replacing
those separate agreements with the first round of SmartBUY
governmentwide licenses by July 2004.
GSA could help other agencies achieve similar savings. We believe that
because most agencies have traditionally used a decentralized approach
to acquiring FSS and FTS products and services, their knowledge of the
amount spent by their program units on the same or similar FSS and FTS
products and services is limited, minimizing their ability to identify
buying practices that dilute their purchasing power and result in
unnecessary costs. GSA is in a unique position to be able to help
agencies conduct spend analyses of their FSS and FTS purchases and
provide them with the knowledge needed to identify opportunities to
better coordinate their purchases and leverage their buying power and
thereby reduce their purchasing costs. With agency purchases of FSS and
FTS products and services exceeding $34 billion in 2002, these savings
could be significant.
Conclusion:
In conclusion, with the federal government's critical budget
challenges, it is more important than ever that GSA partner with
agencies and help them get the most from every federal dollar spent.
The potential for increased procurement efficiencies and effectiveness
is significant. By learning more about their spending for products and
services on an agencywide rather than individual customer basis, GSA
can help agencies leverage their buying power, reduce purchasing costs,
and better manage their suppliers.
Recommendation:
We recommend that as it moves forward with its current performance
initiative, GSA develop the capability to provide its customer agencies
with information and analyses they need to leverage their buying power
to reduce procurement costs.
Mr. Chairman, this concludes my statement. We performed our work in
September 2003 in accordance with generally accepted government
auditing standards.[Footnote 4] I will be happy to answer any questions
you or other members of the committee may have.
Contact and Acknowledgments For further information, please contact
William T. Woods at (202) 512-4841. Individuals making key
contributions to this testimony include Ralph Dawn, Carolyn Kirby, Jose
Ramos, and Karen Sloan.
[End of section]
Related GAO Products:
Contract Management: High-Level Attention Needed to Transform DOD
Services Acquisition. GAO-03-935. Washington, D.C.: September 10, 2003.
Best Practices: Improved Knowledge of DOD Service Contracts Could
Reveal Significant Savings. GAO-03-661. Washington, D.C.: June 9, 2003.
VA and Defense Health Care: Potential Exists for Savings through Joint
Purchasing of Medical and Surgical Supplies. GAO-02-872T. Washington,
D.C.: June 26, 2002.
Contract Management: Roles and Responsibilities of the Federal Supply
Service and Federal Technology Service. GAO-02-560T. Washington, D.C.:
April 11, 2002.
Contract Management: Taking a Strategic Approach to Improving Service
Acquisitions. GAO-02-499T. Washington, D.C.: March 7, 2002.
Best Practices: Taking a Strategic Approach Could Improve DOD's
Acquisition of Services. GAO-02-230. Washington, D.C.: January 18,
2002.
DOD and VA Pharmacy: Progress and Remaining Challenges in Jointly
Buying and Mailing Out Drugs. GAO-01-588. Washington, D.C.: May 25,
2001.
FOOTNOTES
[1] U.S. General Accounting Office, Contract Management: Roles and
Responsibilities of the Federal Supply Service and Federal Technology
Service, GAO-02-560T (Washington, D.C., April 11, 2002).
[2] U.S. General Accounting Office, DOD and VA Pharmacy: Progress and
Remaining Challenges in Jointly Buying and Mailing Out Drugs, GAO-01-
588 (Washington, D.C.: May 25, 2001).
[3] A blanket purchase agreement is a simplified method of filling
anticipated repetitive needs for supplies or services by establishing
"charge accounts" with qualified sources of supply.
[4] This work followed on that which we performed from October 2002
through September 2003, as well as published GAO work.
