The Federal Supply Schedules (FSS) program consists of 40 schedules providing access to almost 20,000 vendors offering a wide range of goods and services. The General Services Administration (GSA) administers 31 of schedules for goods and services including from office furniture and supplies, personal computers, scientific equipment, library services, network support, laboratory testing services, as well as management and advisory services. (The remaining 9 schedules are administered by the Department of Veterans Affairs for an assortment of health care services.) Recently, the Government Accountability Office (GAO) reported results from a review of reported obligations through the GSA’s supply schedules.
By GSA’s account, the total sales through the FSS program for fiscal year 2014 totaled $33.1 billion, which reportedly includes data not reported in the Federal Procurement Data System (FPDS-NG such) such as awards under the $3,000 micro-purchase threshold and those made by federal intelligence agencies and state and local governments. The GAO’s analysis of the publicly reported federal procurement data for this period found that federal use of the FSS program declined from $31.8 billion in 2010 to $25.7 billion in 2014, consistent with the overall drop in contracting obligations during that time.
Although both products and services spending levels through the FSS program have decreased in recent years, products have dropped more than services —30 percent compared to 14 percent— leading to services comprising an increasing proportion of obligations. Spending on services made up 73 percent of obligations in 2014, up from 69 percent in 2010. In fiscal year (FY) 2014, the most recent data GAO evaluated, three product or service categories accounted for 70 percent of all FSS obligations. Spending on professional, management, and administrative support services topped $9.8 billion, making up 38 percent of total spending for FY 2014. Twenty percent of obligations ($5.1 billion) went towards information technology and telecommunications services. Information technology products, like equipment, software, and supplies, made up 12 percent ($3.1 billion) of contracted funds. The GAO counted spending on various categories like office supplies amounted to $129 million for FY2014 (0.5 percent of FSS obligations), and which it combined into an “other’ grouping with all the categories of the remaining 30 percent.
One key observation from the GAO’s analysis is that a relatively small number of vendors receive most of the FSS obligations. The report noted that, “although some schedules have a large pool of vendors, most of the obligations on orders through those schedules go to a smaller subset of vendors.” Schedule 70, for instance, has a total of 4,789 vendors that provide general purpose commercial information technology equipment, software, and services. Roughly 80 percent of all the Schedule 70 obligations from FY 2010 through 2014 went to 308 of those companies, or 6 percent of the total pool. Similarly, Schedule 874 is for mission oriented business integrated services (also known as MOBIS) has a total pool of 2,098 vendors, of which 219 (10 percent) account for 80 percent of the obligations. Schedule 520 is for financial and business solutions (also known as FABS) and boast a comparatively smaller pool of 641 vendors. Just 44 of those vendors (7 percent) receive 80 percent of the Schedule 520 spending. This concentration of awards raises some eyebrows about the level of competition.
Several other observations relate to pricing assessments and contracting procedures. Even with GSA’s determination that prices established on the FSS contracts are fair and reasonable, prices for the same item or service can vary widely from one schedule to the next. The analysis GAO completed suggested that agencies need to pay closer attention to pricing when orders are awarded. GAO’s evaluation of the contracting procedures emphasize a focus on vendor pricing as well as issues with contracting practices. Continued budget pressure and turnover of the contracting workforce issues are likely to sustain the focus on cost savings, which raises concerns about ignoring potential tradeoffs that result from prioritizing price above all else. Other findings across contracting practices suggested fundamental issues with workforce skill levels. Lack of awareness of requirements contributed to errors in justifications for noncompetitive orders, to skipping required steps like seeking discounts, to purchasing open market items without completing price assessments. The sum of the analysis highlighted the need for more guidance and training to ensure the programs are used properly.
To ease the issue around pricing assessments, GSA is proposing revisions to its regulations. In place of quarterly reports and a price reduction clause, the proposal would require vendors to provide data on prices paid at the order level, which would enable agencies to more rapidly compare prices for similar goods and services. This change would not eliminate the risk of agencies paying higher prices, but it would stand to reduce the likelihood while reducing price variation for similar goods and services. It would, of course, also help agencies with pricing analysis.
The requirement to reporting pricing data has a number of implications for vendors. One stands out, as it will also impact government customers. The continued use of price as a sole discriminator poses significant issues for business strategies and government capabilities. Too narrowly focusing on perceived costs savings neglecting the value provided through higher overall quality levels or more robust features. Shaping contracting guidance with the single goal of savings in mind will lead to lower prices, but it may also carry ramifications for the competitive environment that these contracting initiatives are often aiming to support.