Interagency Contracting
Improvements Needed in Setting Fee Rates for Selected Programs Gao ID: GAO-11-784 September 9, 2011Federal agencies spend over $50 billion annually on goods and services using interagency contracts, which leverage the government's buying power, simplify procuring commonly used goods and services, and allow agencies to use the contracts and expertise of other agencies. Agencies that operate interagency contracts and provide assisted acquisition services for other agencies recover their costs by charging a fee to their customers. In response to questions about fee rates and their composition, GAO assessed for selected interagency contracting programs (1) the current fee rates and trends in the fee rates, sales, costs, and revenues; (2) the extent to which programs subsidize, or are subsidized by, other programs; (3) the extent to which agencies identify, track, and forecast costs and revenues, manage reserves, and obtain approval for fee-rate changes; and (4) the extent to which agencies use contractor personnel to supplement program staffing. GAO analyzed data on six interagency contract programs at four agencies--General Services Administration (GSA), Department of the Interior (DOI), National Aeronautics and Space Administration (NASA) and National Institutes of Health (NIH); reviewed agency policies; and interviewed officials from the agencies' program, policy, and financial offices.
Fee rates for the selected interagency contract programs range from 0.25 percent to 12.0 percent of the value of the order for fiscal year 2011 and vary depending on the level of service and type of acquisition services provided. Some programs with lower fee rates provide only minimal support services while the customer agency places direct orders through an online system. Other programs provide more support services or function as the acquisition office for the customer agency. The fee rates have remained stable since fiscal year 2007 at four of the six programs reviewed--three at GSA and one at DOI. Two programs--one at NASA and one at NIH--lowered their rates. During this same period, sales have generally increased across programs, and most of the programs have generated revenue in excess of program costs. Excess revenue in a given year is permitted; however, GSA's Multiple Award Schedules (MAS) program has consistently accumulated excess revenue. All but NASA's program allow for subsidization since they are managed along with other programs under revolving funds. Subsidization allows agencies to ensure that their revolving funds remain solvent, even if they must subsidize across programs if some programs cannot cover all their costs with revenue generated by their fee rates. NASA is managed as a stand-alone program. Agencies follow key elements of the fee-setting process, but weaknesses exist in some programs. The weaknesses include inadequate cost identification, inadequate attention to growing reserve balances, and not following internal approval processes. For example, GSA does not track Networx costs at the contract level, and does not monitor the growth of reserve balances at the program level. DOI does not assign its overhead costs proportionately between its offices. Therefore, these agencies cannot ensure that all their fee rates are set appropriately and may be missing opportunities to identify program inefficiencies. Use of contractor personnel for support services in interagency contract programs varied widely, ranging from 5 percent of total staffing for the GSA MAS to 92 percent of staffing at NASA. In general, agencies use contractor personnel to provide acquisition support or management support. Agency officials said using contractor personnel allows them flexibility to adjust to changing workloads. NASA officials said that they will continue to review the extent to which functions should be performed by federal employees or by contractor personnel. GAO recommends that GSA improve its tracking of costs and management of reserves and that DOI improve its assignment of overhead costs. GSA and DOI concurred with GAO's recommendations.
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: William T. Woods Team: Government Accountability Office: Acquisition and Sourcing Management Phone: (202) 512-8214GAO-11-784, Interagency Contracting: Improvements Needed in Setting Fee Rates for Selected Programs
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United States Government Accountability Office:
GAO:
Report to Congressional Committees:
September 2011:
Interagency Contracting:
Improvements Needed in Setting Fee Rates for Selected Programs:
GAO-11-784:
GAO Highlights:
Highlights of GAO-11-784, a report to congressional committees.
Why GAO Did This Study:
Federal agencies spend over $50 billion annually on goods and services
using interagency contracts, which leverage the government‘s buying
power, simplify procuring commonly used goods and services, and allow
agencies to use the contracts and expertise of other agencies.
Agencies that operate interagency contracts and provide assisted
acquisition services for other agencies recover their costs by
charging a fee to their customers.
In response to questions about fee rates and their composition, GAO
assessed for selected interagency contracting programs (1) the current
fee rates and trends in the fee rates, sales, costs, and revenues; (2)
the extent to which programs subsidize, or are subsidized by, other
programs; (3) the extent to which agencies identify, track, and
forecast costs and revenues, manage reserves, and obtain approval for
fee-rate changes; and (4) the extent to which agencies use contractor
personnel to supplement program staffing.
GAO analyzed data on six interagency contract programs at four
agencies-”General Services Administration (GSA), Department of
Interior (DOI), National Aeronautics and Space Administration (NASA)
and National Institutes of Health (NIH); reviewed agency policies; and
interviewed officials from the agencies‘ program, policy, and
financial offices.
What GAO Found:
Fee rates for the selected interagency contract programs range from
0.25 percent to 12.0 percent of the value of the order for fiscal year
2011 and vary depending on the level of service and type of
acquisition services provided. Some programs charge lower fee rates
because the customer agency may place direct orders through an online
system or the provider agency offers only minimal support services.
Other programs provide more support services or function as the
acquisition office for the customer agency. The fee rates have
remained stable since fiscal year 2007 at four of the six programs
reviewed”three at GSA and one at DOI. Two programs”one at NASA and one
at NIH”lowered their rates. During this same period, sales have
generally increased across programs, and most of the programs have
generated revenue in excess of program costs. Excess revenue in a
given year is permitted; however, GSA‘s Multiple Award Schedules (MAS)
program has consistently accumulated excess revenue.
Table: Fee Rates for Selected Interagency Contract Programs”Fiscal
Year 2011:
Agency: Interagency contract program: DOI: Assisted Acquisition
Services Program;
Fee rate: 2.0% to 5.0%.
Agency: Interagency contract program: GSA: Assisted Acquisition
Services Program;
Fee rate: 1.0% to 12.0%.
Agency: Interagency contract program: GSA: Multi-agency Contract-”
Networx;
Fee rate: 7.0%.
Agency: Interagency contract program: GSA: Multiple Award Schedules
(MAS) Program;
Fee rate: 0.75%.
Agency: Interagency contract program: NASA: Governmentwide Acquisition
Contract-”Solutions for Enterprise-Wide Procurement;
Fee rate: 0.45%.
Agency: Interagency contract program: NIH: Governmentwide Acquisition
Contracts:
” Chief Information Officer Solutions and Partners 2 Innovations;
Fee rate: 0.5% to 1.0%.
” Image World2 New Dimensions;
Fee rate: 0.25% to 1.0%.
” Electronic Commodities Store III;
Fee rate: 0.5%.
Source: GAO analysis of agency information.
[End of table]
All but NASA‘s program allow for subsidization since they are managed
along with other programs under revolving funds. Subsidization allows
agencies to ensure that their revolving funds remain solvent, even if
they must subsidize across programs if some programs cannot cover all
their costs with revenue generated by their fee rates. NASA is managed
as a stand-alone program.
Agencies follow key elements of the fee-setting process, but
weaknesses exist in some programs. The weaknesses include inadequate
cost identification, inadequate attention to growing reserve balances,
and not following internal agency approval processes. For example, GSA‘
s Networx program does not track all costs, and GSA does not have
sufficient guidance on growth of reserve balances. DOI does not assign
its overhead costs proportionately between its offices. Therefore,
these agencies cannot ensure that all their fee rates are set
appropriately and may be missing opportunities to identify program
inefficiencies.
Use of contractor personnel for support services in interagency
contract programs varied widely, ranging from 5 percent of total
staffing for the GSA MAS to 92 percent of staffing at NASA. In
general, agencies use contractor personnel to provide acquisition
support or management support. Agency officials said using contractor
personnel allows them flexibility to adjust to changing workloads.
NASA officials said that they will continue to review the extent to
which functions should be performed by federal employees or by
contractor personnel.
What GAO Recommends:
GAO recommends that GSA improve its tracking of costs and management
of reserves and that DOI improve its assignment of overhead costs. GSA
and DOI concurred with GAO‘s recommendations.
View [hyperlink, http://www.gao.gov/products/GAO-11-784] or key
components. For more information, contact Bill Woods at (202) 512-4841
or WoodsW@gao.gov.
[End of section]
Contents:
Letter:
Background:
Interagency Contract Fee Rates Vary, and Revenues Generally Exceed
Costs:
Most Interagency Contract Programs:
Are Managed Jointly with Other Programs and Allow Subsidization of
Program Costs:
Agencies Follow Key Elements of the Fee-Setting Process, but
Weaknesses Exist in Some Programs:
Use of Contractor Staff to Support the Programs Varies:
Conclusion:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Multiple Award Products (MAS) Data Sheet General Services
Administration (GSA):
Appendix II: Government Acquisition Contract (GWAC) Data Sheet
National Aeronautic and Space Administration (NASA):
Appendix III: Government Acquisition Contract (GWAC) Data Sheet
National Institutes of Health (NIH):
Appendix IV: Multi-agency Contract (MAC) Data Sheet General Services
Administration (GSA):
Appendix V: Assisted Acquisition Services Data Sheet General Services
Administration (GSA):
Appendix VI: Assisted Acquisition Services Data Sheet Department of
Interior (DOI):
Appendix VII: Comments from the General Services Administration:
Appendix VIII: Comments from the Department of Interior:
Appendix IX: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Statutory Revolving Fund Authorities Used by Selected
Interagency Contract Programs:
Table 2: Financial Management Guidance for Interagency Contracting Fee
Rates:
Table 3: Fee Rates for Selected Interagency Contract Programs--Fiscal
Year 2011:
Table 4: Sales through Selected Interagency Contract Programs--Fiscal
Years 2007 through 2010 and Percentage Change:
Table 5: GSA MAS Program Operating Results--Fiscal Years 2007-2010:
Table 6: GSA Acquisition Services Fund Balances--Fiscal Years 2007-
2010:
Table 7: GSA MAS Program Fee Rates--Fiscal Years 2007-2011:
Table 8: NASA GWAC Program Operating Results--Fiscal Years 2007-2010:
Table 9: NASA Working Capital Fund Balances--Fiscal Years 2007-2010:
Table 10: NASA GWAC Program Fee Rates--Fiscal Years 2007-2011:
Table 11: NIH GWAC Program Contracts:
Table 12: NIH GWAC Program Operating Results--Fiscal Years 2007-2010:
Table 13: NIH GWAC Service and Supply Fund Balances--Fiscal Years 2007-
2010:
Table 14: NIH GWAC Program Fee Rates--Fiscal Years 2007-2011:
Table 15: GSA MAC Program Contracts:
Table 16: GSA MAC Program Estimated Operating Results--Fiscal Years
2007-2010:
Table 17: GSA Acquisition Services Fund Balances--Fiscal Years 2007-
2010:
Table 18: GSA MAC Program Fee Rates--Fiscal Years 2007-2011:
Table 19: GSA Assisted Acquisition Services Program Operating Results--
Fiscal Years 2007-2010:
Table 20: GSA Acquisition Services Fund Balances--Fiscal Years 2007-
2010:
Table 21: DOI Assisted Acquisition Services Program Operating Results--
Fiscal Years 2007-2010:
Table 22: DOI Interior Franchise Fund and Working Capital Fund
Balances--Fiscal Years 2007-2010:
Figures:
Figure 1: Relationship among the Fee Rate and Program Costs and
Revenues:
Figure 2: Key Elements of the Fee-Setting Process:
Figure 3: Average Annual Sales Orders on Selected Interagency Contract
Programs--Fiscal Years 2007 through 2010:
Figure 4: Fee Revenues versus Costs for Selected Interagency Contract
Programs--Fiscal Years 2007 through 2010:
Figure 5: GSA Federal Acquisition Service Reserve Fund Balances--
Fiscal Years 2007 through 2010:
Figure 6: DOI Franchise Fund Reserve Fund Balances for the Acquisition
Services Directorate--Fiscal Years 2008 through 2010:
Figure 7: Use of Contractor Personnel at Selected Interagency Contract
Programs--Fiscal Year 2010:
Abbreviations:
CFO: Chief Financial Officers Act:
CIO-SP2i: Chief Information Officer Solutions and Partners 2
Innovations:
DOI: Department of the Interior:
ECS III: Electronic Commodities Store III:
GAO: Government Accountability Office:
GSA: General Services Administration:
GWAC: Governmentwide Acquisition Contract:
IW2nd: Image World 2 New Dimensions:
MAC: Multi-agency Contract:
MAS: Multiple Award Schedule:
NASA: National Aeronautics and Space Administration:
NIH: National Institutes of Health:
OMB: Office of Management and Budget:
SEWP: Solutions for Enterprise-Wide Procurement:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
September 9, 2011:
The Honorable Joseph Lieberman:
Chairman:
The Honorable Susan Collins:
Ranking Member:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
The Honorable Darrell Issa:
Chairman:
The Honorable Elijah Cummings:
Ranking Member:
Committee on Oversight and Government Reform:
United States House of Representatives:
In recent years, federal agencies have used interagency contracts to
procure over $50 billion of goods and services annually. Interagency
contracts are intended to leverage the government's aggregate buying
power and provide a simplified and expedited method for procuring
commonly used goods and services. Interagency contracting allows
agencies to use contracts or the acquisition expertise of other
agencies rather than contracting on their own. Agencies operating
interagency contracts and providing assisted acquisition services for
other agencies seek to recover the costs of administering these
contracts and providing acquisition services by charging a fee to
their customer agencies. The fee is typically expressed as a fee rate,
which is a percentage of the dollar value of the order.
In response to interest in the fees charged for using interagency
contracts and assisted acquisition services, you asked us to review
selected agencies' management of interagency contract fee rates, as
well as the revenues generated by the fees. Specifically, this report
addresses the following questions for selected interagency contract
programs:
1. What are the current fee rates and what were the trends in these
fee rates and program sales, costs, and revenues from fiscal year 2007
through fiscal year 2010?
2. To what extent are interagency contracting programs subsidizing, or
being subsidized by, other agency programs?
3. To what extent do agencies identify, track, and forecast costs and
revenues, manage reserve contributions and balances, and obtain
approval for fee rate changes as part of their fee-setting processes?
4. To what extent do agencies use contractor personnel to supplement
program staffing?
For purposes of our review, we are defining interagency contract
programs to include multi-agency contracts (MAC),[Footnote 1]
governmentwide acquisition contracts (GWAC),[Footnote 2] and multiple
award schedules (MAS),[Footnote 3] as well as Assisted Acquisition
Services programs,[Footnote 4] which provide a full range of contract
award, management, and oversight services on behalf of other agencies.
We selected agencies for review that would provide examples of each
type of interagency contract program across a variety of agencies.
Altogether, we selected six programs that we estimate represented more
than 90 percent of interagency contract sales for fiscal year 2010.
These included three programs at the General Services Administration
(GSA)--MAS, GSA's Assisted Acquisition Services, and one of GSA's
MACs; the Assisted Acquisition Services program at the Department of
the Interior (DOI); the GWAC program at the National Aeronautics and
Space Administration (NASA); and the GWAC program at the Department of
Health and Human Services' National Institutes of Health
(NIH).[Footnote 5] To address our objectives we analyzed cost and
revenue data on the selected interagency contract programs for fiscal
years 2007 through 2010. Unless otherwise noted, all dollar figures
are presented in nominal amounts--that is they are not adjusted for
inflation. To determine how the agencies are managing their
interagency contract programs, corresponding fee rates, and reserve
balances, we reviewed agency financial data, policies, and guidance.
We also interviewed officials from the agencies' program, policy, and
financial offices. We assessed the reliability of the agencies'
financial data through interviews with agency officials knowledgeable
about the data. We also reviewed information about the data systems,
including the most recent financial statement audit. We determined the
data were sufficiently reliable for the purposes of this report. We
also reviewed relevant Federal Financial Accounting Standards, the
authorizing statutes for the selected interagency contract programs,
and the related funding statutes that established the revolving funds
used to operate the programs.[Footnote 6] We reviewed relevant Office
of Management and Budget (OMB) policy and met with representatives of
its Office of Federal Procurement Policy to discuss governmentwide
interagency contract guidance and oversight.
We conducted this performance audit from November 2010 through July
2011 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 process of managing and setting fee rates for interagency contract
programs involves balancing the costs of operating the program and the
revenues needed to cover these costs. Although simple in concept,
creating this balance can be complex because of a variety of factors
including: the types of interagency contract programs, the operational
constraints created by the statutes authorizing their establishment
and funding, and whether the program is managed and funded
independently or along with other programs. Consequently, the
management of interagency contract programs varies from program to
program and agency to agency.
Interagency Contract Program Types and Statutory Authorities:
Government buyers generally use three types of available interagency
contracts--MAS program contracts, GWACs, and MACs--all of which can
help leverage the government's buying power when acquiring goods and
services. These contracts are all indefinite-delivery, indefinite-
quantity contracts.[Footnote 7] Along with these interagency
contracts, agencies may rely on more involved acquisition assistance
to fulfill their needs through Assisted Acquisition Services programs.
* GSA's MAS program consists of thousands of contracts that are
grouped into 31 schedules. The MAS program is the federal government's
largest interagency contracting program. Customer agencies may choose
from millions of commercial goods and services available on these pre-
established contracts. See appendix I for more detailed information on
GSA's MAS program.
* GWACs provide a broad range of information technology goods and
services for agency activities. The establishment of a GWAC program
must be approved by OMB through an executive agent designation. The
Environmental Protection Agency, GSA, NASA, and NIH are the only
agencies permitted to operate GWACs. NASA's GWAC provides information
technology products, while NIH's GWACs offers information technology
services and products. See appendix II and appendix III for more
detailed information on the NASA and NIH GWAC programs respectively.
* MACs are established by one agency, but other agencies are allowed
to place orders against the contract.[Footnote 8] Until 2010, no
business case analysis was required to establish a MAC and, as of July
2011, no external reporting on a MAC's use was required.[Footnote 9]
As a result, comprehensive data on the number of MACs governmentwide
and the dollars involved with their use are not readily available. GSA
operates several MACs, one of which involves the Networx program,
which provides telecommunications services. See appendix IV for more
detailed information on GSA's Networx MAC program.
* Assisted Acquisition Services programs, such as those provided by
GSA--at its information technology assistance center (FEDSIM) and its
nine regional offices--and by DOI--at both its Herndon, Virginia,
office and its Sierra Vista, Arizona, office--are established to allow
one agency to assist other agencies with various acquisition tasks,
such as defining the scope of work, and awarding and administering a
contract, task order, or delivery order. When providing these
acquisition services, GSA and DOI often assist customer agencies in
selecting a pre-existing interagency contract to meet their needs.
Since most of these contracts have a fee for use, agencies that use
Assisted Acquisition Services often pay two fees--one for the
servicing agency's assistance and one for using an existing
interagency contract. See appendix V and appendix VI for more detailed
information on the GSA and DOI Assisted Acquisition Services programs
respectively.
These interagency contract programs have been established under
several statutory authorities, including: (1) the Economy Act of 1932,
[Footnote 10] which authorizes agencies to obtain goods and services
through another government agency; (2) the Clinger-Cohen Act of 1996,
[Footnote 11] which authorizes establishing information technology
GWACs in accordance with OMB guidance; (3) the Federal Property and
Administrative Services Act of 1949,[Footnote 12] as amended, which
provides authority for GSA to operate all of its programs, including
the MAS program and its MAC; and (4) the Government Management Reform
Act of 1994, as amended,[Footnote 13] which allows agencies to provide
common administrative support services such as assisted acquisition
services.
Funding Statutes and Cost Recovery:
Each agency operates its interagency contract program through a
specific revolving fund. These revolving funds--which include
franchise funds, supply funds, and working capital funds--finance
businesslike operations for their associated programs. Table 1 shows
the specific revolving fund statutory authority that governs each of
the agencies' interagency contract programs in our review.
Table 1: Statutory Revolving Fund Authorities Used by Selected
Interagency Contract Programs:
Program: Assisted Acquisition Services;
Agency--program: GSA - Assisted Acquisition Services;
Statutory authority for revolving fund for interagency contract
program: GSA Modernization Act[A]:
* Established Acquisition Services Fund;
* Requires cost recovery;
* Fund may maintain reserves for operating needs.
Program: Assisted Acquisition Services;
Agency--program: DOI - Assisted Acquisition Services;
Statutory authority for revolving fund for interagency contract
program: Government Management and Reform Act of 1994 and Department
of the Interior and Related Agencies Appropriations Act of 1997[B]:
* Established Interior Franchise Fund (used by the Herndon, Va.,
office);
* Requires full cost recovery;
* Interior Franchise Fund may maintain reserves for certain operating
needs;
43 U.S.C. § 1467:
* Authorizes Interior Working Capital Fund (used by the Sierra Vista,
Ariz., office);
* Requires full cost recovery;
* Fund may not maintain reserves.
Program: Governmentwide acquisition contract (GWAC);
Agency--program: NIH - Chief Information Officer Solutions and
Partners 2 Innovations (CIO-SP2i);
NIH - Image World 2 New Dimensions (IW2nd);
NIH - Electronic Commodities Store III (ECS III);
Statutory authority for revolving fund for interagency contract
program: 42 U.S.C. § 231 (1945):
* Established the Service and Supply Fund;
* Requires cost recovery of estimated or actual expenses;
* Fund may not maintain reserves.
Program: Governmentwide acquisition contract (GWAC);
Agency--program: NASA-- Solutions for Enterprise-Wide Procurement
(SEWP);
Statutory authority for revolving fund for interagency contract
program: Consolidated Appropriations Resolution, 2003[C]:
* Established the Working Capital Fund;
* Requires cost recovery of approximate expenses;
* Fund may not maintain reserves.
Program: Multiple-award schedules (MAS);
Agency--program: GSA - Schedules;
Statutory authority for revolving fund for interagency contract
program: GSA Modernization Act[A]:
* Established the Acquisition Services Fund;
* Requires cost recovery;
* Fund may maintain reserves for operating needs.
Program: Multi-agency contract (MAC);
Agency--program: GSA - Networx;
Statutory authority for revolving fund for interagency contract
program: GSA Modernization Act[A]:
* Established the Acquisition Services Fund;
* Requires cost recovery;
* Fund may maintain reserves for operating needs.
Source: GAO analysis of relevant statutes.
[A] Pub. L. No. 109-313, § 3 (2006); (codified at 40 U.S.C. § 321).
[B] Pub. L. No. 103-356, § 403; Pub. L. No. 104-208, 110 Stat. 3009,
3009-200-01 (1996).
[C] Pub. L. No. 108-7, 117 Stat. 11, 520; (codified at 51 U.S.C. §
30102).
[End of table]
The specific funding statutes generally dictate that the agencies set
their interagency contract fee rates to recover the costs of their
operations and that, in some instances, the statutes may permit the
agencies to maintain reserves to cover near-term operational expenses
or to cover the costs of future improvements to the program, such as
improvements to information technology systems. The fee is typically
expressed as a fee rate, which is a percentage of the dollar value of
the order. Figure 1 illustrates the relationship of the fee rate to
the program costs and revenues.
Figure 1: Relationship among the Fee Rate and Program Costs and
Revenues:
[Refer to PDF for image: illustration]
Rate x Sales: generates: Fee revenues, which must cover: Costs +
Reserves.
Example:
1% fee x $1 billion in sales: generates: $10 million in fee revenue,
which must cover: $9 million in costs + $1 million in reserves.
Source: GAO analysis of agency processes.
[End of figure]
Financial Management Criteria and Guidance for Interagency Contracting:
The Chief Financial Officers (CFO) Act of 1990,[Footnote 14] OMB
Circular A-25, federal accounting standards, and GAO's Federal User
Fee Design Guide[Footnote 15] provide additional guidance for the
financial management of interagency contract programs. Table 2
provides a summary of the relevant guidance related to establishing
and monitoring interagency contract program fee rates.
Table 2: Financial Management Guidance for Interagency Contracting Fee
Rates:
Guidance document: Chief Financial Officers Act of 1990[A];
Applicable information: Requires an agency's Chief Financial Officer
to review, on a biennial basis, the fees charged for services and to
make recommendations on revising the fee rates to reflect costs
incurred.
Guidance document: OMB Circular A-25;
Applicable information: Defines the scope and types of activities that
may be subject to fees and the basis upon which the fee rates are set.
With respect to goods and services that the government provides under
businesslike conditions, charges for those goods and services need not
be limited to the recovery of full cost and may yield net revenue.
Guidance document: Federal Financial Accounting Standards[B];
Applicable information: Prescribes managerial cost-accounting concepts
and standards aimed at providing reliable and timely information on
the full cost of federal programs, their activities, and outputs.
These concepts and standards include a framework for how to determine
the costs of interagency contract programs that are the basis for
setting fee rates.
Guidance document: GAO Federal User Fee Design Guide[C];
Applicable information: Examines the characteristics of user fees and
factors that contribute to a well-designed fee rate. The Design Guide
describes the following principles:
* Efficiency--increasing incentives to reduce costs where possible;
* Equity--having all customers pay their fare share;
* Revenue adequacy--obtaining fee revenues sufficient to cover the
costs of the program;
* Administrative burden--including the costs of administering fees in
setting fee rates (includes collection, enforcement, and compliance
costs).
Source: GAO analysis of statutes and related guidance.
[A] 31 U.S.C. § 902(a)(8). While the CFO Act generally is applied to
fees charged by government agencies to nongovernmental entities, the
Act's provision requiring biennial review provides a useful leading
practice for interagency contract fee review.
[B] Financial Accounting Standards Advisory Board, Statement of
Federal Financial Accounting Standards 4: Managerial Cost Accounting
Standards and Concepts (Washington, D.C.: July 1995).
[C] GAO, Federal User Fees: A Design Guide, GAO-08-386SP (Washington,
D.C.: May 28, 2008). While the design guide principles are used in
evaluating fees that are charged to readily identifiable users or
beneficiaries of government services beyond what is normally provided
to the general public. A number of these principles can serve as good
practices to consider when managing interagency contract fees.
[End of table]
Elements of the Fee-Setting Process:
The fee-setting process generally includes four key elements that are
reflected in guidance provided by OMB, federal financial-accounting
standards, and internal agency policy. These key elements include: (1)
identifying and tracking costs, (2) forecasting of costs and revenues,
(3) managing reserve contributions and balances where applicable, and
(4) obtaining approval for any changes in the rates. These four key
elements work in combination to allow agencies to determine the
appropriate fee rates. The four elements and their relationships are
shown in figure 2.
Figure 2: Key Elements of the Fee-Setting Process:
[Refer to PDF for image: illustration]
Setting fee rate to recover costs:
Elements:
Forecasting costs and revenues;
Identifying and tracking costs;
Managing reserve contributions and balances;
Obtaining approval for fee rate changes.
Source: GAO analysis of agency processes.
[End of figure]
Identifying and tracking costs provides data on the direct and
indirect costs of operating an interagency program. Forecasting
entails analyzing historical cost and revenue data for an interagency
contract program to help predict future costs and revenues of the
program. For agencies that maintain reserves, the contribution from
individual programs to reserves is another consideration that may have
an impact on fee rates. Finally, programs may have internal agency-
approval processes they need to comply with when making changes to fee
rates.
Interagency Contract Fee Rates Vary, and Revenues Generally Exceed
Costs:
Fee rates for the selected interagency contract programs range from
0.25 percent to 12.0 percent of the value of the order for fiscal year
2011. The fee rates have remained stable since fiscal year 2007 at
four of the six programs we reviewed, but two programs--the NASA and
NIH GWACs--have lowered their rates. During this same period, total
sales orders have generally increased across programs and most of the
programs have generated revenue in excess of program costs.
Current Fee Rates Vary by Type of Interagency Contract Program:
The current fee rates for most of the interagency contract programs we
reviewed range from 0.25 percent to 1.0 percent of the order amount.
Table 3 shows the current fee rates for the interagency contracts
programs we reviewed at the selected agencies.
Table 3: Fee Rates for Selected Interagency Contract Programs--Fiscal
Year 2011:
Program: Assisted Acquisition Services;
Agency: DOI;
Contract: [Empty];
Fee rate: 2.0% to 5.0%;
Fee caps and discounts: -n/a.
Program: Assisted Acquisition Services;
Agency: GSA;
Contract: [Empty];
Fee rate: 1.0% to 12.0%;
Fee caps and discounts:
* fee percentage decreases as total value of order increases;
* hourly rates for information technology projects[A].
Program: Governmentwide Acquisition Contract (GWAC);
Agency: NASA;
Contract: Solutions for Enterprise-Wide Procurement (SEWP);
Fee rate: 0.45%;
Fee caps and discounts:
* fee capped at $10,000 per order.
Program: Governmentwide Acquisition Contract (GWAC);
Agency: NIH;
Contract: Chief Information Officer Solutions and Partners 2
Innovations (CIO-SP2i);
Fee rate: 0.5% to 1.0%;
Fee caps and discounts: fee percentage decreases as total value of
order increases;
Contract: Image World2 New Dimensions (IW2nd);
Fee rate: 0.25% to 1.0%;
Fee caps and discounts: fee percentage decreases as total value of
order increases;
Contract: Electronic Commodities Store III (ECS III);
Fee rate: 0.5%;
Fee caps and discounts: fee capped at $10,000 per order or
modification.
Program: Multi-agency Contract (MAC);
Agency: GSA;
Contract: Networx;
Fee rate: 7.0%;
Fee caps and discounts: n/a.
Program: Multiple Award Schedules (MAS);
Agency: GSA;
Contract: [Empty];
Fee rate: 0.75%;
Fee caps and discounts: n/a.
Source: GAO analysis of DOI, GSA, NASA, and NIH data.
[A] GSA allows hourly rates for services supporting long-term
information technology projects. The rates range from $173 per hour to
$212 per hour for services provided for a full-term project, and range
from $254 per hour to $311 per hour for services provided on a
consulting basis.
[End of table]
The GSA MAS and NASA and NIH GWAC programs charge lower fee rates
because, generally, the customer agency may place direct orders
through an online system or the provider agency offers only minimal
support services. The GSA MAC contract charges a fee of 7.0 percent of
the value of the order because the program provides more support
services for the customer agency due to the technical nature of the
contract. The current fee rates for programs providing assisted
acquisition services on a project-by-project basis range from 2.0
percent to 12.0 percent. These programs provide a greater level of
support, such as start-to-finish acquisition services for customer
agencies that may lack their own acquisition staff.
Fee Rates Generally Have Remained Stable:
Fee rates for all of interagency contracting programs we reviewed
remained relatively stable from fiscal years 2007 through 2011. Two of
the programs--NASA's and NIH's GWACs--lowered their fee rates during
this period and one program--DOI's Assisted Acquisition Services--
plans a slight increase in fees for fiscal year 2012.
* NASA's GWAC program decreased its fee rate by 0.05 percentage points
annually since fiscal year 2007 from 0.65 percent to its current fee
rate of 0.45 percent. NASA program officials said this decrease was
possible because of increased revenues from increased use of the
program. For example, in fiscal year 2009, program use increased by 37
percent. Additionally, the program officials explained that because
the fund through which the program operates is not permitted to
maintain reserves, it must return all excess fee revenue to the
Treasury at the end of each fiscal year. However, according to NASA
program officials, the GWAC program has not generated any excess funds
because of the decreases in the program's fee rates.[Footnote 16]
* NIH's GWACs program lowered its fee in April 2009 for one of its
three GWAC contracts (ECS III) from 1.0 percent to 0.50 percent, and
instituted a fee cap of $10,000 per order on orders valued at $2
million or more.[Footnote 17] NIH officials said this was done in an
effort to compete with the NASA GWAC's fee, which was 0.60 percent
with a $10,000 fee cap for that fiscal year. NIH officials
acknowledged that the decreased fee rate was set at a level that might
not provide sufficient revenue to cover costs. In fact, the officials
anticipated that the fee rate would produce a short-term loss, but
expected the decreased fee rate to attract additional customers and
provide for increased sales and fee revenue in the long term. Prior to
fiscal year 2009, NIH did not charge its NIH customers the percentage
fee rate; instead NIH charged them a small transaction-based fee for
the individual support services they required.[Footnote 18] NIH now
charges both internal and external customers the same fee rates.
* DOI's fee rates have been relatively stable at a range of 2.0
percent to 5.0 percent, but DOI plans to raise its fee rates for
customers of one of its two offices--the Sierra Vista, Arizona,
office--by approximately 0.50 percentage points per project in fiscal
year 2012. The planned fee increase is because of an increase in rent
costs. DOI has discussed the expected increase with its customer
agencies and will have to re-negotiate the agreements with them to
reflect the new fee rates.
Interagency Contract Program Sales Generally Increased:
The interagency contract programs we reviewed vary greatly in terms of
their size, as indicated by annual sales. Sales represent the value of
the orders for products and services placed through the interagency
contract programs. Figure 3 illustrates the average annual sales by
each of the selected programs from fiscal year 2007 through fiscal
year 2010.
Figure 3: Average Annual Sales Orders on Selected Interagency Contract
Programs--Fiscal Years 2007 through 2010:
[Refer to PDF for image: vertical bar graph]
Agency: GSA MAS;
Average Annual Sales Orders: $37.9 billion.
Agency: GSA MAC;
Average Annual Sales Orders: $1.1 billion.
Agency: GSA AAS;
Average Annual Sales Orders: $3.8 billion.
Agency: NASA GWAC;
Average Annual Sales Orders: $1.6 billion.
Agency: NIH GWAC;
Average Annual Sales Orders: $0.9 billion.
Agency: DOI AAS;
Average Annual Sales Orders: $1.3 billion.
Source: GAO analysis of agency financial statements.
Notes: All data calculations are in nominal dollars. The Networx data
are estimates provided by the program office.
[End of figure]
Overall, sales totaled nearly $49 billion for the selected programs in
fiscal year 2010. Table 4 illustrates each program's annual sales from
fiscal year 2007 through fiscal year 2010.
Table 4: Sales through Selected Interagency Contract Programs--Fiscal
Years 2007 through 2010 and Percentage Change:
Program: Assisted Acquisition Services;
Agency: DOI;
Sales for Fiscal Year 2007: $1,572,952,630;
Sales for Fiscal Year 2008: $1,175,791,123;
Sales for Fiscal Year 2009: $1,240,473,266;
Sales for Fiscal Year 2010: $1,381,194,919;
Percentage increase (decrease) from fiscal year 2007 to 2010: (12.19%).
Agency: GSA;
Sales for Fiscal Year 2007: $3,719,935,521;
Sales for Fiscal Year 2008: $3,655,610,171;
Sales for Fiscal Year 2009: $3,808,389,718;
Sales for Fiscal Year 2010: $3,948,631,160;
Percentage increase (decrease) from fiscal year 2007 to 2010: 6.15%.
Program: Governmentwide Acquisition Contract (GWAC);
Agency: NASA;
Sales for Fiscal Year 2007: $996,531,496;
Sales for Fiscal Year 2008: $1,322,190,259;
Sales for Fiscal Year 2009: $1,824,048,987;
Sales for Fiscal Year 2010: $2,365,963,255;
Percentage increase (decrease) from fiscal year 2007 to 2010: 137.42%.
Agency: NIH;
Sales for Fiscal Year 2007: $914,332,167;
Sales for Fiscal Year 2008: $1,103,899,117;
Sales for Fiscal Year 2009: $979,804,727;
Sales for Fiscal Year 2010: $755,521,109;
Percentage increase (decrease) from fiscal year 2007 to 2010: (17.37%).
Program: Multi-agency Contract (MAC);
Agency: GSA;
Sales for Fiscal Year 2007: $962,490,451;
Sales for Fiscal Year 2008: $1,051,132,353;
Sales for Fiscal Year 2009: $1,154,087,763;
Sales for Fiscal Year 2010: $1,262,674,208;
Percentage increase (decrease) from fiscal year 2007 to 2010: 31.19%.
Program: Multiple Award Schedules (MAS);
Agency: GSA;
Sales for Fiscal Year 2007: $35,186,752,513;
Sales for Fiscal Year 2008: $37,699,440,547;
Sales for Fiscal Year 2009: $39,141,569,225;
Sales for Fiscal Year 2010: $39,519,056,000;
Percentage increase (decrease) from fiscal year 2007 to 2010: 12.31%.
Program: Total;
Sales for Fiscal Year 2007: $43,352,994,778;
Sales for Fiscal Year 2008: $46,008,063,571;
Sales for Fiscal Year 2009: $48,148,373,686;
Sales for Fiscal Year 2010: $49,233,040,651.
Source: GAO analysis of DOI, GSA, NASA, and NIH financial data.
Notes: All data and calculations are in nominal dollars. The Networx
data are estimates provided by the program office.
[End of table]
Overall, the sales of selected programs have varied since fiscal year
2007; half of the programs have experienced increases and half
decreases. The largest percentage increase in sales was NASA's GWAC,
which grew from $997 million in fiscal year 2007 to $2.4 billion in
fiscal year 2010--a 137.4 percent increase (127.3 percent in real
dollars). In contrast, the largest decrease was in the NIH GWAC
program, whose combined sales decreased from $914 million in fiscal
year 2007 to $756 million in fiscal year 2010--a 17.4 percent decrease.
We also calculated the inflation-adjusted change in these programs
[Footnote 19]. When we did this calculation, we found that the GSA
Assisted Acquisition program sales increased by 6.1 percent in nominal
dollars, which represented a 1.6 percent increase in real dollars. The
NASA GWAC's sales grew 127.4 percent in real dollars, and the NIH GWAC
decreased by 20.9 percent in real dollars. The GSA MAC program
experienced an increase of 31.2 percent in nominal dollars--25.6
percent in real dollars--for total program sales. Finally, the GSA MAS
program, which is the largest program we examined, grew a little over
12 percent in nominal dollars or 7.6 percent in real dollars.
Most Programs Generated Excess Revenue:
According to agency officials, the fee revenue generated from the
sales orders of the interagency contract programs is intended to cover
costs and contributions to reserves, where permitted; however, the
programs are not required to break even on an annual basis. As such
they are permitted to have excess revenue or costs that exceed their
revenue in a given year. According to officials from the selected
programs we reviewed, each program is managed with a goal of having
its revenues and costs break even over a period of up to 5 years. We
observed, however, that four of the six programs generated excess
revenue over their costs for almost every fiscal year since fiscal
year 2007. Figure 4 illustrates the fee revenue generated as compared
to program costs, before contributions to reserves, for the selected
interagency contract programs over the past 4 fiscal years, and the
magnitude of the difference between the fee revenue and program costs.
Figure 4: Fee Revenues versus Costs for Selected Interagency Contract
Programs--Fiscal Years 2007 through 2010:
[Refer to PDF for image: 6 multiple line graphs]
GSA MAS:
Fiscal year: 2007;
Cost: $190.25 million;
Revenue: $250.33 million;
Total excess revenue: $60.88 million.
Fiscal year: 2008;
Cost: $184.54 million;
Revenue: $268.79 million;
Total excess revenue: $84.25 million.
Fiscal year: 2009;
Cost: $211.47 million;
Revenue: $279.2 million;
Total excess revenue: $67.73 million.
Fiscal year: 2010;
Cost: $245.32 million;
Revenue: $281.86 million;
Total excess revenue: $36.54 million.
Average excess revenue: $62.2 million.
GSA AAS:
Fiscal year: 2007;
Cost: $161.85 million;
Revenue: $109.31 million;
Total loss: $52.54 million.
Fiscal year: 2008;
Cost: $111.68 million;
Revenue: $116.83 million;
Total excess revenue: $5.15 million.
Fiscal year: 2009;
Cost: $113.63 million;
Revenue: $119.61 million;
Total excess revenue: $5.98 million.
Fiscal year: 2010;
Cost: $119.13 million;
Revenue: $132.17 million;
Total excess revenue: $13.04 million.
Average loss: $7 million.
GSA MAC:
Fiscal year: 2007;
Cost: $56.1 million;
Revenue: $50.64 million;
Total loss: $5.7 million.
Fiscal year: 2008;
Cost: $61 million;
Revenue: $68.45 million;
Total excess revenue: $7.45 million.
Fiscal year: 2009;
Cost: $76.8 million;
Revenue: $70.69 million;
Total loss: $6.11 million.
Fiscal year: 2010;
Cost: $91.6 million;
Revenue: $77.15 million;
Total loss: $14.45 million.
Average loss: $4.7 million.
DOI AAS:
Fiscal year: 2007;
Cost: $44.88 million;
Revenue: $45.17 million;
Total excess revenue: $0.29 million.
Fiscal year: 2008;
Cost: $33.07 million;
Revenue: $40.25 million;
Total excess revenue: $7.18 million.
Fiscal year: 2009;
Cost: $40.34 million;
Revenue: $44.06 million;
Total excess revenue: $3.72 million.
Fiscal year: 2010;
Cost: $40.47 million;
Revenue: $45.84 million;
Total excess revenue: $5.37 million.
Average excess revenue: $4.1 million.
NIH GWAC (3):
Fiscal year: 2007;
Cost: $9.006 million;
Revenue: $8.71 million;
Total loss: $0.296 million.
Fiscal year: 2008;
Cost: $11.027 million;
Revenue: $10.857 million;
Total loss: $0.17 million.
Fiscal year: 2009;
Cost: $9.369 million;
Revenue: $10.968 million;
Total excess revenue: $1.599 million.
Fiscal year: 2010;
Cost: $10.148 million;
Revenue: $9.2 million;
Total loss: $.948 million.
Average excess revenue: $66,000.
NASA GWAC:
Fiscal year: 2007;
Cost: $1.48 million;
Revenue: $4.71 million;
Total excess revenue: $3.23 million.
Fiscal year: 2008;
Cost: $4.97 million;
Revenue: $6.66 million;
Total excess revenue: $1.69 million.
Fiscal year: 2009;
Cost: $6.72 million;
Revenue: $6.53 million;
Total loss: $0.19 million.
Fiscal year: 2010;
Cost: $6.91 million;
Revenue: $9.11 million;
Total excess revenue: $2.2 million.
Average excess revenue: $1.7 million.
Source: GAO analysis of DOI, GSA, NASA, and NIH financial data.
Notes: All data and calculations are in nominal dollars. The Networx
cost and revenue data are estimates provided by the program office.
[End of figure]
The interagency contract program with the largest amount of excess fee
revenue over operating costs was the GSA MAS program, which earned
excess revenues averaging $62 million each year from fiscal years 2007
through 2010. In contrast, the program where costs were not covered
overall by revenue was GSA's Assisted Acquisition Services program,
which did not cover an average of $7 million in costs per fiscal year
over the same period. Although the NIH GWAC had revenue in excess of
costs that averaged $66,000 over the last 4 fiscal years, the costs
were not covered by revenue for 3 of the 4 fiscal years.
Most Interagency Contract Programs:
Are Managed Jointly with Other Programs and Allow Subsidization of
Program Costs:
All of the programs we reviewed are operated under revolving funds,
and all but one are managed along with other programs in their
respective revolving funds. Generally, under a revolving fund
structure, the agencies are not required to ensure that each program
covers its costs, but rather that the fund as a whole remains solvent.
This arrangement allows for subsidization across programs if an
individual program cannot cover its costs with revenue generated by
its fee rate. While subsidization across programs is allowed and can
help ensure that a fund remains solvent, it can also allow
inefficiencies of individual programs to remain undetected. Monitoring
whether an individual program is recovering its costs allows managers
to assess whether the program's fee rate is aligned with cost-recovery
principles.
We observed that each agency has a different approach to whether its
selected interagency contract program is managed independently or in
conjunction with one or several other programs using the same
revolving fund. A description of how agencies manage the various types
of programs we reviewed follows:
* The three GSA interagency contract programs--Assisted Acquisition
Services, MAS, and the MAC--are managed collectively with 24 other
programs as part of the Federal Acquisition Service office through the
Acquisition Services Fund. Operationally, the office manages some of
its programs individually, such as the Assisted Acquisition Services
program, and some in groups with other programs, such as the MAC;
however, the MAS program is managed in segments that group similar
schedules together, such as the general supplies and services
schedules. The office allows fee revenue generated from individual
programs to help cover the costs of operations for others. For
example, GSA used revenue from other programs to cover costs of the
Assisted Acquisition Services program when it was not generating
sufficient revenue in fiscal year 2007 and prior years. In addition,
the MAS program has used excess revenue from one schedule to support
other schedules operated through the same fund that were not earning
enough revenue to cover their total costs. GSA managers acknowledge
that the individual programs may not be breaking even, but said the
fund overall is solvent.
* The three GWACs NIH manages are treated as a single operational
program; however, the program is managed alongside over 200 other
programs in NIH's Service and Supply Fund. According to NIH program
officials, the GWAC program has used funds from other NIH programs to
cover its total costs. With respect to its three GWACs, NIH has used
fee revenue from one of its GWAC contracts to cover expenses for the
other two GWAC contracts that were not fully recovering their costs.
* DOI's Assisted Acquisition Services program, which is comprised of
two units that operate under the same overall management, uses two
different revolving funds. The two units--the Herndon, Virginia,
office and the Sierra Vista, Arizona, office--set their fee rates
independently. The Assisted Acquisition Services program in the
Herndon office is managed along with another program through the
Interior Franchise Fund, which is allowed to accumulate excess revenue
in reserve funds for acquisition of capital equipment and improvement
of support systems.[Footnote 20] The Assisted Acquisition Services
program in the Sierra Vista office is managed independently through a
working capital fund, which does not authorize reserves and, according
to agency officials, must pay for its capital improvements as
operating costs. The Herndon office currently pays for most of the
overhead costs for the entire Assisted Acquisition Services program.
* NASA manages its GWAC program separately from all other programs
that the agency operates. According to NASA GWAC program officials,
NASA manages its GWAC finances with other programs in a revolving fund
but uses a unique accounting code that allows NASA to identify and
manage the GWAC program's costs and revenues independently. The NASA
GWAC has not been subsidized by other programs and has not been used
to subsidize other programs, according to the program officials.
Agencies Follow Key Elements of the Fee-Setting Process, but
Weaknesses Exist in Some Programs:
[Side bar:
Setting fee rate to recover costs:
Identifying and tracking costs. End of side bar]
The agencies we reviewed generally follow the four key elements of the
fee-rate-setting process--identifying and tracking costs, forecasting
costs and revenues, managing reserve contributions and balances where
applicable, and obtaining approval for fee rate changes--but we found
weaknesses in some agency programs. The weaknesses include inadequate
cost identification, inattention to growing reserve balances, and not
following internal agency approval processes.
Four of the Six Interagency Contract Programs Fully Capture Program
Costs:
Two agencies--NASA and NIH--are tracking the total costs for the GWAC
programs we reviewed. In addition, GSA tracks total costs for its MAS
and Assisted Acquisition Services programs. However, we found
weaknesses in the processes of two interagency programs--GSA's MAC and
DOI's Assisted Acquisition Services programs.
Specifically, GSA does not track the costs for its Networx MAC
program.[Footnote 21] GSA officials stated that the total direct and
indirect costs of operations for the Networx MAC program are tracked
only as part of a larger group of programs. The officials told us that
the other programs within the group have similar, if not identical,
requirements. Because the Networx MAC is managed jointly with several
other programs, costs are not tracked at the individual program
level.[Footnote 22] As a result, GSA managers do not know the true
costs of operations for the Networx MAC. In the absence of this
information, GSA may be missing opportunities to improve the Networx
MAC program's efficiency and the rates may not be set at the level
needed to recover its costs.
According to DOI program officials, one of the agency's two Assisted
Acquisition Services program offices--the Sierra Vista, AZ office--has
not included all of its indirect costs when calculating whether the
fee rates it sets will generate sufficient revenue to cover the total
costs of fulfilling a customer's requirements. The two offices (Sierra
Vista, AZ, and Herndon, VA) function separately and negotiate the fee
rates for the services they provide independently; however, the
Herndon, VA office provides some support services, such as policy and
legal guidance, to the Sierra Vista, AZ office. Currently, the Sierra
Vista, AZ office does not include the costs of the administrative and
management support the office receives from the Herndon, VA office as
a cost of its operations when it calculates fee rates. The Sierra
Vista, AZ office's fee rates average 2 to 3 percent, while the
Herndon, VA office's fee rates average 4 to 5 percent. DOI program
officials acknowledge that the assignment of overhead costs does not
represent the total costs, and said they are considering how best to
address the situation.
Cost and Revenue Forecasts Generally Used in Establishing Fee Rates:
[Side bar:
Setting fee rate to recover costs:
Forecasting costs and revenues. End of side bar]
According to agency officials, all of the selected programs
incorporate some level of cost and revenue planning, or forecasting,
to inform their fee setting process. Generally, the selected
interagency contract programs use current and historical data to
forecast total costs and fee revenues when determining fee rates for
the following fiscal year. Program officials noted that the previous
year's financial data can be a good predictor of customer usage.
Forecasting helps to ensure that the fee revenue will be adequate to
cover the expected costs of operating the program. We previously
reported that utilizing this principle of revenue adequacy is
generally a good practice when determining user fee rates.[Footnote
23] As previously mentioned, officials for each program told us they
manage their respective program fee revenues, costs, and rates over a
period of up to 5 years.
In the course of discussing the use of cost and revenue forecasts with
NIH GWAC program officials, they noted another issue. They told us
that the cost and revenue forecast data presented in the GWAC report
the officials provide annually to OMB are different than those used
within the agency. NIH GWAC program officials explained that they are
in the process of changing how the information is presented in the
reports to OMB to better present the forecast data used in the
internal fee-rate management process.
Growing Reserve Balances at Two Agencies:
[Side bar:
Setting fee rate to recover costs:
Managing reserve contributions and balances. End of side bar]
GSA and DOI have the statutory authority to maintain reserves within
their respective revolving funds, which are used to operate their
interagency contract programs.[Footnote 24] These agencies are
permitted to maintain two types of reserves: (1) an operating reserve
for near-term operating costs and (2) a capital investment reserve for
improvements to equipment or processes that benefit the program.
Reserve funds provide programs with management flexibility, but if a
program consistently accumulates excess fee revenue in reserves, this
excess could indicate that the fee rate is set higher than needed to
recover costs and could possibly be reduced.
Currently, GSA maintains three reserves for all the programs operated
within the fund; one operating reserve--the Working Capital Reserve--
and two investment reserves--the Business Reserve, which is to be used
for planned improvement projects, and the Investment Reserve, which is
to be used for improvements that were not planned when the revenue was
placed in the reserve. GSA officials have developed internal guidance
for maintaining its reserve funds, which includes a limit on annual
contributions.[Footnote 25] GSA's fund management processes include
developing an annual Cost and Capital Plan that details the planned
uses of the reserve balances. According to officials, if reserve
balances beyond the amount needed for the planned investments were to
remain, the agency would then review whether changes are needed in
individual programs' fee rates. The main focus of this planning
process is on reserve balances and not on whether an individual
program is continuing to transfer excess revenue to the reserve fund
year after year. While the reserve contributions and balances for the
past 4 fiscal years fall within their limits, the reserves have
continued to grow. Figure 5 shows the fiscal year end balances for
GSA's reserves for the last 4 fiscal years.
Figure 5: GSA Federal Acquisition Service Reserve Fund Balances--
Fiscal Years 2007 through 2010:
[Refer to PDF for image: stacked vertical bar graph]
Fiscal year: 2007;
Business Reserve (planned capital investment): $260.1 million;
Investment Reserve (unassigned capital investment): $18 million;
Working Capital Reserve (future operational costs): $223 million.
Fiscal year: 2008;
Business Reserve (planned capital investment): $205 million;
Investment Reserve (unassigned capital investment): $101.8 million;
Working Capital Reserve (future operational costs): $223.7 million.
Fiscal year: 2009;
Business Reserve (planned capital investment): $176 million;
Investment Reserve (unassigned capital investment): $171.4 million;
Working Capital Reserve (future operational costs): $340 million.
Fiscal year: 2010;
Business Reserve (planned capital investment): $234.1 million;
Investment Reserve (unassigned capital investment): $235.2 million;
Working Capital Reserve (future operational costs): $354.2 million.
Source: GAO presentation of GSA financial data.
Note: All data are in nominal dollars.
[End of figure]
At the end of fiscal year 2010, the combined balance of GSA's three
reserves was over $800 million--about $350 million of which resides in
the Working Capital Reserve that is to cover shortfalls in operating
funds. As shown in figure 5, the Working Capital Reserve has grown
significantly in recent years, largely due to the excess revenue
generated annually by GSA's largest interagency contract program,
which is the MAS program. As indicated previously in figure 4, the MAS
program has generated over $62 million on average annually in recent
years. Yet there is nothing in GSA's internal guidance that would
trigger an evaluation of the fee rate of an individual program that
consistently generates excess revenue.
One of DOI's two Assisted Acquisition Services program offices--the
Herndon, Virginia, office--operates under a revolving fund that is
allowed to place excess fee revenue into reserves. Until October 2010,
DOI's Herndon, Virginia, office had been placing its excess revenue in
a capital improvement fund, but did not maintain an operating reserve.
The DOI's Office of the Inspector General reported in June 2009 that
this practice was not in accordance with DOI's funding authority and
that DOI could not set aside reserves for capital improvements until a
sufficient amount of funds were placed in an operating reserve. As a
result, DOI changed its funding policy and created an Operating
Reserve in October 2010. DOI's fund management policy includes a limit
on the annual contribution made to its Capital Investment Reserve, but
does not specify a limit for the reserve's balance that would trigger
a fee-rate review.[Footnote 26] While the reserve contributions for
fiscal year 2010 fall within the new limits, the establishment of the
Operating Reserve and the limit on the Capital Investment Reserve are
so recent that DOI has not yet had the opportunity to evaluate the
effectiveness of the new policy. In fiscal year 2010, the balance in
the capital reserve fund was over $12 million. Figure 6 shows the
fiscal year end balances for DOI's reserves generated by the Herndon,
Virginia, office's Assisted Acquisition Services program for the last
3 fiscal years.
Figure 6: DOI Franchise Fund Reserve Fund Balances for the Acquisition
Services Directorate--Fiscal Years 2008 through 2010:
[Refer to PDF for image: stacked vertical bar graph]
Fiscal year: 2008;
Capital Investment Reserve (planned/unplanned capital investments):
$2.3 million.
Fiscal year: 2009;
Capital Investment Reserve (planned/unplanned capital investments):
$2.3 million.
Fiscal year: 2010;
Capital Investment Reserve (planned/unplanned capital investments):
$12.137 million;
Operating Reserve (future operational costs): $5.288 million.
Source: GAO presentation of DOI financial data.
Note: All data are in nominal dollars.
[End of figure]
According to agency officials, NIH has the statutory authority to
maintain reserves within its Service and Supply Fund but elects not to
use reserves for its revolving fund. These officials said that NIH
maintained reserves in the past, but no longer does because it found
that reserve funds were being used for purposes other than the
intended improvements.
Programs Generally Set Fee Rates through Annual Review Process:
[Side bar:
Setting fee rate to recover costs:
Obtaining approval for fee rate changes. End of side bar]
Five of the six selected agency programs--GSA MAS, MAC, and assisted
acquisition services, as well as the NIH GWAC and DOI assisted
acquisition services--review their fee rates on an annual basis as
part of the budget review process. NASA's GWAC is not subject to fee-
rate review and approval during the annual budget process, but is
reviewed every 6 months. We found that one program--GSA's MAC--did not
follow its review policy.
GSA did not follow its internal fee approval process when it
negotiated a reduced fee rate for one customer agency on the GSA
Networx MAC. According to agency officials, the GSA MAC program has a
memorandum of understanding with the Treasury Department that allows
for a 3.5 percent fee rather than the usual 7 percent once Treasury
has completed its transition from the predecessor contract to the
Networx MAC. The decision to provide Treasury the lower fee rate did
not follow GSA procedures and was made by the prior GSA Administrator.
It was not based upon the program's costs, but rather to maintain
Treasury's business since Treasury was planning to seek
telecommunication services on its own. Current program officials
indicated that the 3.5 percent fee rate will not allow the program to
recover the total costs of providing services to Treasury, though the
overall fund that is used to operate the Networx MAC should remain
solvent due to the multitude of other programs operated through the
fund. This practice, however, is not aligned with the cost recovery
principles of ensuring that all customers pay a fee rate that is
equitable to their share of the costs. GSA officials stated that they
are currently reviewing whether to implement the memorandum of
understanding negotiated by the former administrator and are
evaluating the impact of providing Treasury the lower fee.[Footnote 27]
NASA GWAC officials indicated that because the program has not had to
increase its fee rate, it has not had to submit a formal fee-rate-
change request to NASA management. The current process is simply to e-
mail NASA budget and financial officials about plans to keep the fee
rate the same or if any change in the rate was planned. However, as a
result of our review, NASA is revising its policy to require better
documentation for its fee determination and approval process on an
annual basis and plans to implement its new policy by the end of
fiscal year 2011.
Use of Contractor Staff to Support the Programs Varies:
The use of contractor personnel for support services in the selected
interagency contract programs varies widely as do the acquisition
support services the contractor personnel provide. In general, the
agencies use contractor personnel mainly to provide acquisition
support functions similar to the duties of a contract specialist, such
as invoice processing, data entry, and contract closeout, or to
provide program management support. Some agencies also use contractor
personnel for administrative support, website services, data systems
support, and marketing services.[Footnote 28] As figure 7 illustrates,
the use of contractor personnel among the selected agencies ranges
from 5 percent of total staffing for GSA's MAS program to 92 percent
of staffing for NASA's GWAC program.
Figure 7: Use of Contractor Personnel at Selected Interagency Contract
Programs--Fiscal Year 2010:
[Refer to PDF for image: illustration]
One person represents 10 federal employees or contractor personnel[A].
Program: GSA - MAS;
Federal employees: 57 persons;
Contractor personnel: 3 persons;
Contractor personnel of total staffing: 5%.
Program: GSA - AAS;
Federal employees: 30 persons;
Contractor personnel: 5 persons;
Contractor personnel of total staffing: 15%.
Program: DOI - AAS;
Federal employees: 16 persons;
Contractor personnel: 5 persons;
Contractor personnel of total staffing: 23%.
Program: GSA - MAC;
Federal employees: 9 persons;
Contractor personnel: 9 persons;
Contractor personnel of total staffing: 49%.
Program: NIH - GWAC;
Federal employees: 1.5 persons;
Contractor personnel: 1.5 persons;
Contractor personnel of total staffing: 50%.
Program: NASA - GWAC;
Federal employees: 0.5 persons;
Contractor personnel: 3.5 persons.
Contractor personnel of total staffing: 92%.
Source: GAO analysis of agency personnel data.
[End of figure]
According to agency officials, the interagency contract programs that
use contractor personnel for support generally do so because of the
flexibility of being able to use contractor personnel on a short-or
long-term basis as needed to adjust to changing workloads caused by
the cyclical nature of the interagency contract programs' work. For
example, GSA officials indicated that when headquarters offices or
regional offices request additional staff, such as within the Assisted
Acquisition Services program, the program officials usually determine
if the position can be filled by contractor personnel in an effort to
provide more flexibility to the program. If the program cannot use
contractor personnel to fill the needed position(s), GSA will then
begin the process to hire a federal worker. Additionally, the NIH GWAC
program officials stated they utilize contractor personnel to obtain
subject matter expertise that is not typically available in the
federal government. In addition, they said that using contractor
personnel also provides more flexibility in managing resources, as
contractor personnel can be more easily added to or removed from the
program than federal employees as programmatic requirements change.
According to agency officials, this flexibility helps the program
adapt to the changing nature of the work. For example, if NIH decided
to stop providing its GWAC services, contractor personnel could more
easily be released while NIH would have to find other work for federal
personnel on the program.
On the other hand, NASA GWAC officials explained that the program was
originally established as a contractor-operated center since the
program was limited to having only three federal employees. In
addition, according to NASA officials, while the work currently
performed by the contractor staff is not inherently governmental, the
separation between inherently governmental and non-inherently
governmental activities has started to present challenges. The
officials said that the limited number of federal employees coupled
with the continuing increase in business and work could lead to
contractor personnel's performing activities that might best be
performed by federal employees, such as strategic planning, contract
compliance checks, and performing contract administration. SEWP
managers told us that they will need to continue to review carefully
the extent to which functions should be performed by federal employees
or by contractor staff.
We previously reported that while there are benefits to using
contractors to perform services for the government--such as increased
flexibility in fulfilling needs--concerns exist about the federal
government's increasing reliance on contractor services.[Footnote 29]
Of key concern is the risk associated with the loss of government
control and accountability for mission-related policy and program
decisions when contractors provide services that closely support
inherently governmental functions. According to agency program
officials at the selected agencies, the agencies have appropriate
checks in place, such as annual contractor-performance reviews, to
ensure contractor support staff are providing services within the
scope of their contracts and are not performing inherently
governmental functions. Further, officials at all of the agencies that
use contractor personnel for support services stated that all
contractor personnel must sign non-disclosure agreements. We did not
assess whether such checks are actually being used or whether they are
effective.
Conclusion:
Billions of taxpayer dollars flow through the MAS, GWAC, MAC, and
Assisted Acquisition Services programs, and customer agencies pay
millions of dollars in fees for using interagency contracts. Customer
agencies receive many benefits from using the interagency contracts
and should reasonably expect the fees they pay to be based on accurate
and complete financial data, reasonable reserve levels, and sound
forecasting practices. For the most part, the programs we reviewed
follow the key elements of the fee-setting process in accordance with
applicable guidance. In some cases, agencies are planning actions that
will bring their fee practices more in line with established cost
recovery principles, such as GSA's plan to review the reduced fee it
negotiated with Treasury for using Networx. But further improvements
are needed.
Specifically, because GSA does not track costs for Networx at the
program level, it does not have an important tool for identifying
possible inefficiencies in the program. In addition, GSA's MAS program
has consistently generated excess revenue in recent years,
contributing significantly to growing reserve balances, yet GSA does
not have guidance on when a consistent pattern of excess revenues by a
program should lead to a review of that program's fee rates. As a
result, GSA may be missing an opportunity to reduce the fee rate for
MAS, a reduction that would mean savings for customer agencies. Every
dollar spent on fees is a dollar not available for the goods and
services agencies require. Finally, DOI could bring its fee structure
more in line with cost recovery principles by ensuring that each of
its locations bears the appropriate share of program overhead costs.
Until improvements occur, the federal agencies using these programs
may pay fees that are not always commensurate with the services they
are receiving.
Recommendations for Executive Action:
To improve aspects of specific interagency contracting programs and to
better adhere to cost recovery principles, we are making three
recommendations--two to GSA and one to DOI. We recommend that the:
* Administrator of General Services direct the Federal Acquisition
Service Commissioner to:
- begin tracking cost information on the Networx MAC at the program
level to enable agency managers to identify possible inefficiencies in
the program, and:
- develop and implement guidance for evaluation of current fee rates
when an individual program consistently transfers excess revenue to
the reserve funds.
* Secretary of Interior direct the National Business Center Director
to revisit the assignment of costs of its Assisted Acquisition
Services program to ensure that the overhead costs of the program are
properly assigned between its two offices to ensure that each carries
its fair share of the overhead costs consistent with cost recovery
principles.
Agency Comments and Our Evaluation:
We provided a draft of this report to GSA, NASA, DOI, and the
Department of Health and Human Services. We received email comments
from NASA and the Department of Health and Human Services stating that
they had no comments. We received written comments from GSA and DOI,
which are included as appendixes VII and VIII. GSA and DOI concurred
with our recommendations. They also provided technical comments that
were incorporated, as appropriate.
We are sending copies of this report to the Administrator of General
Services, the Administrator of the National Aeronautics and Space
Administration, the Secretaries of the Departments of Interior and
Health and Human Services, and the Director of the National Institutes
of Health. In addition, the report is also available at no charge on
the GAO Web site at [hyperlink, http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me at (202) 512-4841 or woodsw@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff who made key contributions to
this report are listed in appendix VII.
Signed by:
William T. Woods:
Director, Acquisition and Sourcing Management:
[End of section]
Appendix I: Multiple Award Schedules (MAS) Data Sheet: General
Services Administration (GSA):
Program:
Multiple Award Schedules (MAS).
Products/Services:
Over 11 million commercial products and services through nearly 40
schedules; products include building materials, furniture, hardware,
office supplies, environmental activities, scientific equipment,
training aids, automotive supplies, and vehicles; services include
advertising and marketing, facilities management, financial and
business operations, logistics, engineering, and security.
Legal Authority:
Established under Federal Property and Administrative Services Act of
1949; Acquisition Services Fund established by the GSA Modernization
Act.
Contract Information:
19,204 multiple indefinite-delivery, indefinite-quantity contracts;
18,735 vendors.
Operating Results:
Table 5: GSA MAS Program Operating Results--Fiscal Years 2007-2010:
Fiscal Year: Sales;
2007: $35,913,475,000;
2008: $36,854,488,000;
2009: $38,024,820,000;
2010: $38,923,811,000.
Fiscal Year: Revenues;
2007: $250,326,724;
2008: $268,793,884;
2009: $279,748,944;
2010: $281,860,830.
Fiscal Year: Costs;
2007: $190,245,161;
2008: $184,544,662;
2009: $211,740,790;
2010: $245,323,600.
Fiscal Year: Net revenue(Loss);
2007: $60,081,563;
2008: $84,249,222;
2009: $68,008,154;
2010: $36,537,230.
Source: GSA Controller's Office.
[End of table]
Fund Balances:
The balances in the Acquisition Services Fund are cumulative for all
the programs operated in the fund; therefore, they represent more than
the reserves for the MAS program.
Table 6: GSA Acquisition Services Fund Balances--Fiscal Years 2007-
2010:
Fiscal Year: Working Capital Reserve[A]; (operating reserve);
2007: $223,000,000;
2008: $223,700,000;
2009: $340,000,000;
2010: $354,200,000.
Fiscal Year: Business Reserve; (planned improvements);
2007: $260,100,000;
2008: $205,000,000;
2009: $176,000,000;
2010: $235,200,000.
Fiscal Year: Investment Reserve (investments not yet planned);
2007: $18,000,000;
2008: $101,800,000;
2009: $171,400,000;
2010: $234,100,000.
Source: GSA data.
[A] GSA places all of its working cash available to operate the
programs in the fund into its Working Capital Reserve. GSA's Working
Capital Reserve is the equivalent to the carryover balance for funds
that do not maintain reserves.
[End of table]
Fee Rates:
Table 7: GSA MAS Program Fee Rates--Fiscal Years 2007-2011:
Fiscal year: Fee rate;
2007: 0.75%;
2008: 0.75%;
2009: 0.75%;
2010: 0.75%;
2011: 0.75%.
Source: GSA MAS Program.
[End of table]
Fiscal Year 2010 Staffing:
569 government employees and 33 contractor personnel.
Biggest Customers:
U. S. Army, Department of Homeland Security, GSA.
[End of section]
Appendix II: Government Acquisition Contract (GWAC) Data Sheet:
National Aeronautic and Space Administration (NASA):
Program:
Solutions for Enterprisewide Procurement IV (SEWP).
Products/Services:
High-performance information technology that includes peripheral
equipment, network equipment, data storage devices, software including
security tools, and other information technology products and system
solutions.
Legal Authority:
Established via Office of Management and Budget designation based on
the Information Technology Management Reform Act of 1996, renamed the
Clinger-Cohen Act of 1996; Working Capital Fund established by the
Consolidated Appropriations Resolution, 2003.
Contract Information:
Set of fixed-price, indefinite-delivery, indefinite-quantity
contracts; maximum value of $5.6 billion over 7 years; 38 vendors,
including 21 small businesses, through 48 competed contracts--45
contracts awarded May 1, 2007, and 3 contracts awarded June 8, 2007.
Operating Results:
Table 8: NASA GWAC Program Operating Results--Fiscal Years 2007-2010:
Fiscal Year: Sales;
2007: $996,531,496;
2008: $1,322,190,259;
2009: $1,824,048,986;
2010: $2,365,963,255.
Fiscal Year: Orders;
2007: 22,890;
2008: 24,707;
2009: 24,805;
2010: 26,732.
Fiscal Year: Revenues;
2007: $4,710,370;
2008: $6,664,538;
2009: $6,526,271;
2010: $9,108,235.
Fiscal Year: Costs;
2007: $1,482,266;
2008: $4,974,777;
2009: $6,721,049;
2010: $6,906,483.
Fiscal Year: Net revenue(Loss);
2007: $3,228,104;
2008: $1,689,761;
2009: ($194,778);
2010: $2,201,752.
Source: NASA SEWP program data.
[End of table]
Fund Balances:
Table 9: NASA Working Capital Fund Balances--Fiscal Years 2007-2010:
Fiscal Year: Carryover Balance[A];
2007: $1,535,248;
2008: $2,416,338;
2009: $1,393,254;
2010: $3,435,324.
Source: NASA SEWP program data.
[A] The carryover balance represents the working cash available in the
fund used to operate the program. NASA requires the fund to maintain a
balance sufficient to cover 30 days of operating expenses and six
months of disbursements.
[End of table]
Fee Rates:
Table 10: NASA GWAC Program Fee Rates--Fiscal Years 2007-2011:
Fiscal Year: Fee Rate;
2007: 0.60%;
2008: 0.60%;
2009: 0.55%;
2010: 0.50%;
2011: 0.45%.
Fiscal Year: Maximum fee per order[A];
2007: $10,000;
2008: $10,000;
2009: $10,000;
2010: $10,000;
2011: $10,000.
Source: NASA SEWP program data.
[A] The maximum fee cap is applied per order or contract modification.
[End of table]
Fiscal Year 2010 Staffing:
Three full-time government employees and 35 contractor personnel.
Biggest Customers:
Departments of Veterans Affairs, Defense, and Justice.
[End of section]
Appendix III: Government Acquisition Contract (GWAC) Data Sheet:
National Institutes of Health (NIH):
Program:
Governmentwide Acquisition Contract (GWAC) program--includes three
contracts:
(1) Chief Information Officer Solutions and Partners 2 Innovations
(CIO-SP2i),
(2) Image World 2 New Dimensions (IW2nd), and:
(3) Electronic Computer Store III (ECS III).
Products/Services:
Information technology products and services focused on emerging
technologies and solutions.
Legal Authority:
Established via Office of Management and Budget based on the
Information Technology Management Reform Act of 1996, renamed the
Clinger-Cohen Act of 1996. Service and Supply Fund established by 42
U.S.C. § 231.
Contract Information:
Table 11: NIH GWAC Program Contracts:
Contract: CIO-SP2i;
Number of vendors: 44 primary;
Period of performance when orders may be placed on contract: 12/2000 -
12/2011;
Maximum cumulative value of orders permitted on contract: $19.5
billion.
Contract: IW2nd;
Number of vendors: 24 primary;
Period of performance when orders may be placed on contract: 12/2000 -
12/2010;
Maximum cumulative value of orders permitted on contract: $15 billion.
Contract: ECS III;
Number of vendors: 56 primary;
Period of performance when orders may be placed on contract: 11/2002 -
11/2012;
Maximum cumulative value of orders permitted on contract: $6 billion.
Source: NIH GWAC program.
[End of table]
Operating Results:
Table 12: NIH GWAC Program Operating Results--Fiscal Years 2007-2010:
Fiscal year: Sales;
2007: $914,332,167;
2008: $1,103,899,117;
2009: $979,804,727;
2010: $755,521,109.
Fiscal year: Orders;
2007: 3,500;
2008: 2,572;
2009: 2,485;
2010: 2,663.
Fiscal year: Revenues;
2007: $8,789,735;
2008: $10,857,022;
2009: $10,967,668;
2010: $9,199,685.
Fiscal year: Costs;
2007: $9,006,552;
2008: $11,026,846;
2009: $9,369,369;
2010: $10,148,173.
Fiscal year: Net revenue(Loss);
2007: ($216,817);
2008: ($169,824);
2009: $1,598,229;
2010: ($948,488).
Source: NIH GWAC program data.
[End of table]
Fund Balances:
Table 13: NIH GWAC Service and Supply Fund Balances--Fiscal Years 2007-
2010:
Fiscal Year: Carryover Balance[B];
2007: $4,377,268;
2008: $4,207,444;
2009: $5,805,743;
2010[A]: $4,857,255.
Source: NIH GWAC program data.
[A] For fiscal year 2010, NIH changed its reporting methods, as a
result the fiscal year 2010 data is not directly comparable to prior
years' data.
[B] The carryover balance represents the working cash available in the
fund used to operate the program, and does not include funds set aside
in the reserves.
[End of table]
Fee Rates:
Table 14: NIH GWAC Program Fee Rates--Fiscal Years 2007-2011:
CIO-SP2i large business;
2007: 1%;
2008: 1%;
2009: 1%;
2010: 1%;
2011: 1%.
CIO-SP2i small business;
2007: 0.5% - 1%;
2008: 0.5% - 1%;
2009: 0.5% - 1%;
2010: 0.5% - 1%;
2011: 0.5% - 1%.
IW2nd large business;
2007: 1%;
2008: 1%;
2009: 1%;
2010: 1%;
2011: 1%.
IW2nd small business;
2007: 0.25% - 1%;
2008: 0.25% - 1%;
2009: 0.25% - 1%;
2010: 0.25% - 1%;
2011: 0.25% - 1%.
ECS III;
2007: 1%;
2008: 1%;
2009: 0.5%;
2010: 0.5%;
2011: 0.5%.
Source: NIH GWAC program data.
Note: Starting in fiscal year 2009, NIH began charging 0.5% for all
Recovery Act orders.
[End of table]
Fiscal Year 2010 Staffing:
16 government employees and 16 contractor personnel.
Biggest Customers:
Health and Human Services, Departments of Defense and Justice.
[End of section]
Appendix IV: Multi-agency Contract (MAC) Data Sheet: General Services
Administration (GSA):
Program:
Networx.
Products/Services:
Over 50 telecommunications services including: legacy flip switch
connections, managing networks, and secure interoperable services.
Legal Authority:
Established via Federal Property and Administrative Services Act of
1949 and Clinger-Cohen Act of 1996; Acquisition Services Fund
established by the GSA Modernization Act.
Contract Information:
Table 15: GSA MAC Program Contracts:
Contract: Networx Universal;
Number of vendors: 3;
Period of performance when orders may be placed on contract:
3/29/2007 --3/28/2017;
Maximum cumulative value of orders permitted on contract: $20.1
billion.
Contract: Networx Enterprise;
Number of vendors: 5;
Period of performance when orders may be placed on contract:
5/31/2007 --5/30/3017;
Maximum cumulative value of orders permitted on contract: $48.1
billion.
Source: GSA Networx program.
[End of table]
Operating Results:
Table 16: GSA MAC Program Estimated Operating Results--Fiscal Years
2007-2010:
Sales;
2007: $962,490,451;
2008: $1,051,132,353;
2009: $1,154,087,763;
2010: $1,262,674,208.
Revenues;
2007: $50,636,373;
2008: $68,448,441;
2009: $70,687,385;
2010: $77,148,690.
Costs;
2007: $56,137,071;
2008: $61,049,425;
2009: $76,780,872;
2010: $91,549,170.
Net revenue (Loss);
2007: ($5,500,698);
2008: $7,399,016;
2009: ($6,093,487);
2010: ($14,400,480).
Source: GSA Networx program.
Note: Data provided are estimates, according to Networx program
officials.
[End of table]
Fund Balances:
The balances in the Acquisition Services Fund are cumulative for all
the programs operated in the fund; therefore, they represent more than
the reserves for the Networx MAC program.
Table 17: GSA Acquisition Services Fund Balances--Fiscal Years 2007-
2010:
Fiscal year: Working Capital Reserve[A];
(operating reserve);
2007: $223,000,000;
2008: $223,700,000;
2009: $340,000,000;
2010: $354,200,000.
Fiscal year: Business Reserve;
(planned improvements);
2007: $260,100,000;
2008: $205,000,000;
2009: $176,000,000;
2010: $235,200,000.
Fiscal year: Investment Reserve (investments not yet planned);
2007: $18,000,000;
2008: $101,800,000;
2009: $171,400,000;
2010: $234,100,000.
Source: GSA data.
[A] GSA places all of its working cash available to operate the
programs in the fund into its Working Capital Reserve. GSA's Working
Capital Reserve is the equivalent to the carryover balance for funds
that do not maintain reserves.
[End of table]
Fee Rates:
Table 18: GSA MAC Program Fee Rates--Fiscal Years 2007-2011:
Fiscal year: Fee Rate;
2006: 7.0%;
2007: 7.0%;
2008: 7.0%;
2009: 7.0%;
2010: 7.0%;
2011: 7.0%.
Source: Networx Program.
[End of table]
Fiscal Year 2010 Staffing:
92 government employees and 90 contractor personnel.
Biggest Customers:
Departments of Homeland Security, Defense, and Veterans Affairs.
[End of section]
Appendix V: Assisted Acquisition Services Data Sheet: General Services
Administration (GSA):
Program:
Assisted Acquisition Services.
Products/Services:
Acquisition support services including contracting, project
management, and financial management, such as for large information
technology product and services.
Legal Authority:
Established via Federal Property and Administrative Services Act of
1949; Acquisition Services Fund established by the GSA Modernization
Act.
Contract Information:
As identified to meet requirements of each project--indefinite-
delivery, indefinite-quantity contracts; multiple-award contracts;
orders placed on pre-existing contracts.
Operating Results:
Table 19: GSA Assisted Acquisition Services Program Operating Results--
Fiscal Years 2007-2010:
Fiscal year: Sales;
2007: $3,719,935,521;
2008: $3,655,610,170;
2009: $3,808,389,718;
2010: $3,948,631,160.
Fiscal year: Task orders (new and modifications);
2007: 14,936;
2008: 10,803;
2009: 8,477;
2010: 9,082.
Fiscal year: Revenues;
2007: $109,309,189;
2008: $116,832,418;
2009: $113,625,042;
2010: $119,132,920.
Fiscal year: Costs;
2007: $161,845,248;
2008: $111,684,753;
2009: $119,605,072;
2010: $132,170,640.
Fiscal year: Net revenue(Loss);
2007: ($52,536,059);
2008: $5,147,665;
2009: ($5,980,030);
2010: ($13,037,720).
Source: GSA Controller's Office.
[End of table]
Fund Balances:
The balances in the Acquisition Services Fund are cumulative for all
the programs operated in the fund; therefore, they represent more than
the reserves for the Assisted Acquisitions Services program.
Table 20: GSA Acquisition Services Fund Balances--Fiscal Years 2007-
2010:
Fiscal year: Working Capital Reserve[A];
(operating reserve);
2007: $223,000,000;
2008: $223,700,000;
2009: $340,000,000;
2010: $354,200,000.
Fiscal year: Business Reserve (planned improvements);
2007: $260,100,000;
2008: $205,000,000;
2009: $176,000,000;
2010: $235,200,000.
Fiscal year: Investment Reserve (investments not yet planned);
2007: $18,000,000;
2008: $101,800,000;
2009: $171,400,000;
2010: $234,100,000.
Source: GSA data.
[A] GSA places all of its working cash available to operate the
programs in the fund into its Working Capital Reserve. GSA's Working
Capital Reserve is the equivalent to the carryover balance for funds
that do not maintain reserves.
[End of table]
Fee Rates:
Fee rates negotiated on a project-by-project basis:
* range from 1 percent to 12 percent and:
* average of 4 percent.
Fiscal Year 2010 Staffing:
296 full-time government employees and 51 contractor personnel.
Biggest Customers:
U. S. Army, U.S. Air Force, and the Department of Defense Office of
the Secretary of Defense.
[End of section]
Appendix VI: Assisted Acquisition Services Data Sheet: Department of
Interior (DOI):
Program:
Assisted Acquisition Services.
Products/Services:
Project planning, soliciting and evaluating offers, administering
contracts and agreements through closeout, paying bills, and project
management activities such as preparing statements of work and
tracking expenditures.
Legal Authority:
Established via the Department of the Interior Appropriations Act of
1997and the Financial Services and General Government Appropriations
Act of 2008; Herndon, VA, office's Interior Franchise Fund established
by the Government Management Reform Act of 1994 and the Department of
the Interior Appropriations Act of 1997; Sierra Vista, AZ, office's
Working Capital Fund established by 43 U.S.C. § 1467.
Contract Information:
As identified to meet requirements of each project--new single-award
contracts or orders placed on pre-existing contracts including
indefinite-delivery, indefinite-quantity contracts, multiple-award
contracts, or interagency contracts.l:
Operating Results:
Table 21: DOI Assisted Acquisition Services Program Operating Results--
Fiscal Years 2007-2010:
Herndon office:
Fiscal Year: Sales;
2007: $1,065,184,952;
2008: $758,065,297;
2009: $843,513,166;
2010: $946,637,266.
Fiscal Year: New Task Orders;
2007: 2,168;
2008: 828;
2009: 440;
2010: 458.
Fiscal Year: Modifications;
2007: 3,700;
2008: 2,236;
2009: 2,489;
2010: 2,256.
Fiscal Year: Revenues;
2007: $37,194,629;
2008: $31,890,175;
2009: $35,661,795;
2010: $36,138,507.
Fiscal Year: Costs;
2007: $34,737,003;
2008: $24,684,702;
2009: $31,251,726;
2010: $32,259,540.
Fiscal Year: Net Revenue(Loss);
2007: $2,457,626;
2008: $7,205,473;
2009: $4,410,069;
2010: $3,878,967.
Sierra Vista office:
Fiscal Year: Sales;
2007: $507,767,678;
2008: $417,725,827;
2009: $396,960,100;
2010: $434,557,652.
Fiscal Year: New Task Orders;
2007: 225;
2008: 221;
2009: 289;
2010: 319.
Fiscal Year: Modifications;
2007: 1,501;
2008: 1,173;
2009: 901;
2010: 816.
Fiscal Year: Revenues;
2007: $7,980,727;
2008: $8,359,863;
2009: $8,401,697;
2010: $9,695,073.
Fiscal Year: Costs;
2007: $10,143,155;
2008: $8,380,534;
2009: $9,088,955;
2010: $8,206,710.
Fiscal Year: Net Revenue(Loss);
2007: ($2,162,428);
2008: ($20,671);
2009: ($687,258);
2010: $1,488,363.
Source: DOI program data.
[End of table]
Fund Balances:
Table 22: DOI Interior Franchise Fund and Working Capital Fund
Balances--Fiscal Years 2007-2010:
Herndon Office--Interior Franchise Fund:
Fiscal Year: Carryover Balance[A];
2007: $4,464,618;
2008: $10,123,397;
2009: $15,088,430;
2010: $4,760,645.
Fiscal Year: Operating Reserve;
2007: n/a;
2008: $2,300,000;
2009: $2,300,000;
2010: $5,287,849.
Fiscal Year: Capital Reserve;
2007: n/a;
2008: n/a;
2009: n/a;
2010: $12,136,574.
Sierra Vista Office--Working Capital Fund:
Fiscal Year: Carryover Balance;
2007: $13,742,763;
2008: $17,928,062;
2009: $17,136,057;
2010: $3,798,678.
Source: DOI program data.
[A] The carryover balance represents the working cash available in the
fund used to operate the program, and does not include funds set aside
in the reserves.
[End of table]
Fee Rates:
Fee rates negotiated on a project-by-project basis:
* average between 4 and 5 percent for Herndon, Virginia, office and:
* average between 2 and 3 percent for Sierra Vista, Arizona, office.
Fiscal Year 2010 Staffing:
Herndon, Virginia, office: 115 government employees and 27 contractor
personnel.
Sierra Vista, Arizona, office: 45 government employees and 21
contractor personnel.
Biggest Customers:
Herndon, Virginia, office: Office of the Secretary of Defense, the
National Telecommunications and Information Administration (Department
of Commerce), and Food and Drug Administration.
Sierra Vista, Arizona, office: Defense Advanced Research Projects
Agency, National Guard Bureau, and U.S. Army Program Executive Office,
Enterprise Information Systems.
[End of section]
Appendix VII: Comments from the General Services Administration:
GSA Administrator:
U.S. General Services Administration:
1275 First Street, NE:
Washington, DC 20417:
[hyperlink, http://www.gse.gov]
September 7, 2011:
The Honorable Gene L. Dodaro:
Comptroller General of the United States:
Government Accountability Office:
Washington, DC 20548:
Dear Mr. Dodaro:
Thank you for the opportunity to comment on the U.S. Government
Accountability Office (GAO) draft report, "Interagency Contracting:
Improvements Needed in Setting Fee Rates for Selected Programs" (GAO
11-784).
The U.S. General Services Administration (GSA) agrees with the GAO
recommendations pertaining to GSA; however, we would like to clarify
some of the information contained in the report. Additional details
have been provided in the enclosure.
Should you have any questions, please do not hesitate to contact me.
Staff inquiries may be directed to Ms. Agnes Leung, Controller,
Federal Acquisition Service, Office of the Controller. Ms. Leung can
be reached at (703) 603-8145.
Sincerely,
Signed by:
Martha Johnson:
Administrator:
[End of section]
Appendix VIII: Comments from the Department of Interior:
United States Department of the Interior
Office Of The Secretary:
Washington, DC 20240:
September 1, 2011:
Mr. William T. Woods:
Director, Acquisition and Sourcing:
Management Enclosure:
U.S. Government Accountability Office:
441 0 Street, N.W.
Washington, D.C. 20548:
Dear Mr. Woods:
Thank you for giving the Department of the Interior the opportunity to
review and comment on the Government Accountability Office (GAO)
revised draft report entitled 'Interagency Contracting: Improvements
Needed for Setting Fee Rates in Selected Programs' (GAO-11-784).
The Department concurs with the GAO recommendation to the Secretary of
Interior directing the NBC to revisit assignment of costs.
If you have any questions, please contact Dean Martin, the NBC Audit
Liaison Officer at (303) 969-5195.
Sincerely,
Signed by:
Pamela Haze (Acting), for:
Rhea Suh:
Assistant Secretary:
Policy, Management and Budget:
[End of section]
Appendix IX: GAO Contact and Staff Acknowledgments:
GAO Contact:
William T. Woods, (202) 512-4841 or woodsw@gao.gov:
Staff Acknowledgments:
In addition to the contact names above, James Fuquay (Assistant
Director); Marie Ahearn; Ami Ballenger; Morgan Delaney-Ramaker; R. Eli
DeVan; Georgeann Higgins; Katheryn Hubbell; Jean McSween; John K.
Needham, Ken Patton; Carol Petersen; Roxanna Sun; and Jack Warner made
key contributions to this report.
[End of section]
Footnotes:
[1] MACs are task-order or delivery-order contracts established by an
agency that can be used governmentwide to obtain goods and services
consistent with the Economy Act FAR § 2.101.
[2] GWACs are considered multi-agency contracts but, unlike other
multi-agency contracts, are not subject to the same requirements and
limitations, such as documentation that the contract is in the best
interest of the government as set forth under the Economy Act. GWACs
are contracts for information technology established by one agency for
governmentwide use that are operated--(1) By an executive agent
designated by the Office of Management and Budget pursuant to 40
U.S.C. 11302(e); or (2) under a delegation of procurement authority
issued by the General Services Administration (GSA). Federal
Acquisition Regulation (FAR) § 2.101. 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).
[3] MAS, also known as the Federal Supply Schedules program consists
of 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.
FAR § 8.401 and § 8.402. The MAS offers a large group of commercial
products and services ranging from office supplies to information
technology services.
[4] FAR § 2.101.
[5] While NIH operates three GWACs, they are managed jointly, and we
treated them as one program.
[6] A fund established by Congress to finance businesslike operations
through amounts received by the fund. A revolving fund charges for the
sale of products or services and uses the proceeds to finance its
spending, usually on a self-sustaining basis. Instead of recording the
collections in receipt accounts, the collections and outlays of
revolving funds are recorded in the same account. GAO, A Glossary of
Terms Used in the Federal Budget Process. [hyperlink,
http://www.gao.gov/products/GAO-05-734SP]. Washington, D.C. September
2005).
[7] Indefinite-delivery, indefinite-quantity contracts allow the
government to buy goods and services within stated limits when the
exact times and exact quantities of future deliveries of goods and
services are not known at the time of award. The government places
orders for individual requirements during the term of the contracts.
FAR §§ 16.501-2 and 16.504.
[8] FAR § 2.101.
[9] Beginning in December 2010, a Federal Acquisition Regulation
interim rule requires servicing agencies to prepare a business case
analysis to establish a multi-agency contract under the Economy Act.
75 Fed. Reg. 77,733 and 77,736; (Dec. 13, 2010), which revised FAR§
17.502-2.
[10] 31 U.S.C. 1535.
[11] 40 U.S.C § 11314(a)(2).
[12] Federal Property and Administration Services Act of 1949, ch.
288, 63 Stat. 377 (codified as amended in scattered section of 40 and
41 U.S.C.).
[13] Pub. L. No. 103-356, §. 403.
[14] Pub. L. No. 101-576, (codified as amended in scattered sections
of 31 U.S.C).
[15] GAO, Federal User Fees: A Design Guide, [hyperlink,
http://www.gao.gov/products/GAO-08-386SP] (Washington, D.C.: May 28,
2008).
[16] Unless a statue provides otherwise, excess fee revenue must be
returned to the Treasury as miscellaneous receipts. 31 U.S.C. § 3302.
[17] According to NIH officials, the NIH GWAC fee cap of $10,000 for
all delivery orders valued at or over $2 million applied to all new
orders awarded after June 30, 2009.
[18] Prior to April 2009, NIH customers paid only Service and Supply
Fund fees, which from fiscal year 2005 through fiscal year 2007 were
$160 for each record of call, $3.75 for each credit card purchase,
$110 for each purchase order greater than $2,500, and $85 for each
purchase order less than $2,500.
[19] We used the Fiscal Year Chain-Weighted Gross Domestic Product
Price Index with fiscal year 2010 as the base year for all inflation-
adjusted calculations in this report.
[20] The amount of reserves is limited to 4 percent of the total
annual income to the fund. Amounts in excess of this reserve
limitation are required to be transferred to the Treasury Department.
[21] GSA officials told us that because operating costs are not
tracked at the individual program level, the data they provided for
this report are only estimates of the Networx MAC's portion of the
larger group.
[22] GSA manages Networx as a contract and manages it along with
several other interagency contracts as GSA's Long Distance program.
According to program officials, Networx represents about 90 percent of
the Long Distance program.
[23] GAO, Federal User Fees: A Design Guide, [hyperlink,
http://www.gao.gov/products/GAO-08-386SP] (Washington, D.C.: May 29,
2008). While interagency contracting fees are not strictly defined as
user fees, this aspect of user fee guidance can be applied in the
analysis of interagency contract fees.
[24] As stated earlier in the report, the Interior Franchise Fund that
is used by the Herndon, Virginia, office has the authority to maintain
reserves, but the Interior Working Capital Fund that is used by the
Sierra Vista, Arizona, office does not have the authority to maintain
reserves.
[25] GSA has established a target of maintaining an average cash
balance equal to 8 percent of its annual total revenues in the Working
Capital Reserve to support 30 days of operating funds. The annual
contribution to the Investment Reserve cannot equal more than 4
percent of revenues in any given fiscal year.
[26] The annual contribution to DOI's Capital Investment Reserve
cannot equal more than 4 percent of the total annual income for the
program in any given fiscal year. If the contribution exceeds the
limit, the fee rate is to be adjusted downward to slow or halt the
accumulation of excess funds in the reserve. Amounts in excess of the
reserve limitation are required to be transferred to the Treasury
Department.
[27] The GSA Networx officials noted that they had expected to reduce
the Networx fee by 1.0 percent, from 7.0 to 6.0 percent, in fiscal
year 2010 once the transition from the predecessor contract was
complete; however, the transition was not completed by fiscal year
2010. They officials plan to reconsider reducing the fee rate once the
Networx transition is complete.
[28] The use of contractor personnel to provide acquisition support is
a management decision, and GAO and other organizations have previously
reported that a critical shortage in the federal government
acquisition workforce exists, which can require agencies to utilize
contractor personnel to find qualified personnel to perform contract
support services. GAO, Department of Homeland Security: A Strategic
Approach Is Needed to Better Ensure the Acquisition Workforce Can Meet
Mission Needs, [hyperlink, http://www.gao.gov/products/GAO-09-30]7.
(Washington, D.C.; November 2008); Report of the Acquisition Advisory
Panel to the Office of Federal Procurement Policy and the United
States Congress, January 2007.; and GAO, Department of Defense:
Additional Actions and Data Needed to Effectively Manage and Oversee
DOD's Acquisition Workforce. [hyperlink,
http://www.gao.gov/products/GAO-09-342]. (Washington, D.C.; March
2009).
[29] GAO, Department of Homeland Security: Improved Assessment and
Oversight Needed to Manage Risk of Contracting for Selected Services.
[hyperlink, http://www.gao.gov/products/GAO-07-990] (Washington, D.C.;
September 2007).
[End of section]
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