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GSA to cut contract fees for agencies

Sep. 16, 2012 - 03:33PM   |  
By ANDY MEDICI and SARAH CHACKO   |   Comments
Dan Tangherlini, acting administrator at GSA, said he wants to lower fees GSA charges on its Federal Strategic Sourcing Initiative.
Dan Tangherlini, acting administrator at GSA, said he wants to lower fees GSA charges on its Federal Strategic Sourcing Initiative. (Thomas Brown / Staff)

The General Services Administration plans to lower the fees it charges agencies to use its supply schedules. But some agencies and outside groups say that may not be enough to win their business.

Acting GSA Administrator Dan Tangherlini said at a hearing Sept. 12 he wants to lower the fees GSA charges on its Federal Strategic Sourcing Initiative — where agencies can order office supplies and other common products from a select group of companies — from 2 percent of the purchase to 0.75 percent.

The extra charge discourages agencies from using the service, Tangherlini said. But GSA is also looking at reducing all the fees it charges agencies for using contracts on the federal supply schedules. Those fees stand at 0.75 percent of a purchase, he said.

“We want to take away that fee, we want to reduce some other fees and we really want to kick off a broader discussion with our agency partners and say ‘what’s the right structure of these fees going forward?’” Tangherlini said.

Agencies spent $535 billion on contracts in 2011, according to figures from the Office of Management and Budget. Nearly $40 billion, or 7 percent, went through the GSA schedules.

But some agencies and outside groups say that lowering charges won’t help GSA drum up more business.

“I have never been in a meeting for strategy where we discussed, ‘Should we use a schedule or should we use this contract vehicle, and what’s the cost?’ “ said Bill McNally, NASA assistant administrator for procurement. “The [decision is based on] what’s your requirement and then deciding the best way to buy it based on the requirement.”

Contracting officers usually choose a contract vehicle based on the requirement and whether GSA’s contracts are easier to use than creating a new contract, McNally said. GSA’s contracts are not always easier. For example, the GSA schedule for services shows labor categories and rates but does not specify what work the contractor will perform, he said. So the contracting officer must write a statement of work and hold a competition, he said.

“Do you really need to use a schedule, or just put out a [request for proposal] and get the contractors to do the work?” McNally said.

However, for bulk purchases of simple commodities, like office supplies, GSA contracts may be faster, he said.

NASA also often needs complex technical services that are hard to award on a firm fixed-price contract, such as a schedule contract, he said.

GSA’s 0.75 percent fee for use of its schedules is within the range of fees that other agencies charge to use their contracts, said consultant Larry Allen, former president of the Coalition for Government Procurement. For example, NASA charges a 0.45 percent fee to use its IT governmentwide contract. The National Institutes of Health charges agencies between 0.25 percent and 1 percent of purchases to use three of its IT contracts.

However, removing the 1.25 percent surcharge from the federal strategic sourcing contracts to bring it in line with the 0.75 percent used for supply schedule contracts may make those contracts more attractive, companies said.

GSA may not need to reduce its rates below 0.75 percent to remain competitive, but a reduction would not be a surprise considering that GSA collects more than it needs to operate, Allen said.

GSA’s inspector general issued a report in February that showed the Federal Acquisition Service (FAS), which manages GSA’s contracting programs, had a $688 million surplus as of September 2009.

After the last audit of FAS’s revenues in 1999, GSA returned $92 million in excess funds to the Treasury and lowered its fee for use of its schedule contracts from 1 percent to 0.75 percent.

Sen. Joseph Lieberman, I-Conn., chairman of the Senate Homeland Security and Governmental Affairs Committee, urged GSA at the Sept. 12 hearing to reduce fees on its supply schedules and apply its surplus for the best benefit of the taxpayer.

Tangherlini agreed, saying fees and surplus levels have not been studied in “quite some time” and that “it’s worthy of a good, deep dive and inspection and a better understanding of what should be a right level of reserve.”

The new effort to lower fees stems from a top-to-bottom review GSA conducted after the release of an April 2 inspector general report about lavish spending at an $823,000 2010 conference in Las Vegas.

The report forced the removal of top leadership and led to the appointment of Tangherlini as acting administrator.

Other reforms

GSA is also looking at reducing or consolidating the 11 regions that make up GSA in order to reduce redundancies and provide better management and oversight of agency functions.

Tangherlini said the agency will more than likely maintain some regional divisions to suit the unique interests of customers in different parts of the country.

But he said the agency will not rush into a reorganization.

“I think it’s really important that if we are going to start playing around the fundamental structure of something that has been around for 50 years or 60 years that we make sure we don’t cause any unintended negative consequences,” Tangherlini said.

Tangherlini also said he is working on instituting a new evaluation process for managers, where they will be evaluated not just by their supervisor but by peers and employees.

This will help provide more accountability and give managers a comprehensive tool to help evaluate their performance, he said.

Tangherlini has installed other reforms at the agency, including:

• Consolidating all budget, finance and accounting personnel under the chief financial officer.

• Consolidating all information technology personnel and budgets under the chief information officer.

• Freezing hiring and clamping down on conference spending and travel — canceling 47 conferences.

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