GAO-10-367 Contracting Strategies: Data and Oversight Problems Hamper Opportunities to Leverage Value of Interagency and Enterprisewide Contracts

GAO

United States Government Accountabilit

Office

Report to Congressional Requesters

CONTRACTING

STRATEGIES

Data and Oversight

Problems Hamper

Opportunities to

Leverage Value of

Interagency and

Enterprisewide

Contracts

April 2010

GAO-10-367

What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

April 2010

CONTRACTING STRATEGIES

Data and Oversight Problems Hamper Opportunities

to Leverage Value of Interagency and Enterprisewide

Contracts

Highlights of GAO-10-367, a report to

congressional requesters

gencies can use several different

types of contracts to leverage the

government’s buying power for

goods and services. These include

interagency contracts—where one

agency uses another’s contract for

its own needs—such as the General

Services Administration (GSA) and

the Department of Veterans Affairs

multiple award schedule (MAS)

contracts, multiagency contracts

(MAC) for a wide range of goods

and services, and governmentwide

acquisition contracts (GWAC) for

information technology. Agencies

spent at least $60 billion in fiscal

year 2008 through these contracts

and similar single-agency

enterprisewide contracts. However,

concerns exist about duplication,

oversight, and a lack of information

on these contracts, and pricing and

management of the MAS program.

GAO was asked to assess the

reasons for establishing and the

policies to manage these contracts;

the effectiveness of GSA tools for

obtaining best MAS contract prices;

and GSA’s management of the MAS

program. To do this, GAO reviewed

statutes, regulations, policies,

contract documentation and data,

and interviewed officials from OMB

and six agencies.

What GAO Recommends

GAO makes recommendations: to

the Office of Management and

Budget (OMB) to strengthen policy,

improve data and better coordinate

agencies’ awards of MACs and

enterprisewide contracts; and to

GSA to improve MAS program

pricing and management. Both

agencies concurred with GAO’s

recommendations.

GWACs, MACs—two types of interagency contracts—and enterprisewide

contracts should provide an advantage to the government in buying billions

of dollars worth of goods and services. However, data are lacking and there is

limited governmentwide policy to effectively leverage, manage, and oversee

these contracts. The total number of MACs and enterprisewide contracts is

unknown, and existing data are not sufficiently reliable to identify them. In

addition, GWACs are the only interagency contracts requiring OMB approval.

Agencies GAO reviewed followed statutes, acquisition regulations, and

internal policies to establish and use MACs and enterprisewide contracts.

Avoiding fees associated with using other agencies’ contracts and more

control over procurements are some of the reasons agencies cited for

establishing MACs and enterprisewide contracts. However, many of the same

contractors provided similar products and services on multiple contracts—a

condition that increases costs to both the vendor and the government and

misses opportunities to leverage the government’s buying power. Recent

legislation and OMB’s Office of Federal Procurement Policy initiatives are

expected to strengthen management of MACs, but no such initiatives exist for

enterprisewide contracts.

GSA’s MAS program—the largest interagency contracting program—uses

several tools and controls to obtain best prices, but the limited application of

certain tools hinders its ability to determine whether it achieves this goal. GSA

has established two regulatory pricing controls for MAS contracts: seek the

best prices vendors provide to their most favored customers; and a price

reduction clause that provides the government a lower price if a vendor

lowers the price for similarly situated commercial customers. GSA uses other

pricing tools—e.g., pre-award contract audits by its Inspector General and

Procurement Management Reviews—on a limited basis. For example, the

Inspector General performs pre-award audits on a small sample of MAS

contracts annually, but has identified contract cost avoidance of almost $4

billion in recent years. In 2008, GSA established a MAS advisory panel that

recommended changes to the pricing controls noted above; concerns remain

that such changes could adversely affect GSA’s ability to negotiate best prices.

A lack of data, decentralized management, and limitations in assessment tools

create challenges for GSA in managing the MAS program. The agency lacks

data about customer agencies’ use of the program, limiting its ability to

determine how well the program meets customers’ needs. The MAS program

office lacks direct program oversight, as GSA has dispersed authority for

managing MAS among nine acquisition centers under three business

portfolios. Program stakeholders have identified concerns that this structure

has impaired consistent policy implementation. Shortcomings in assessment

tools also result in management challenges. For example, performance

measures are inconsistent, including inconsistent emphasis on pricing. GSA’s

customer satisfaction survey has such a low response rate that its utility for

evaluating program performance is limited.

View GAO-10-367 or key components.

For more information, contact John Needham

at (202) 512-4841 or needhamjk1@gao.gov.

Page i GAO-10-367

Contents

Letter 1

Results in Brief 5

Background 8

With Insufficient and Unreliable Data and Limited

Governmentwide Policy, Agencies’ Use of Interagency and

Enterprisewide Contracts May Result in Inefficient Contracting 18

GSA’s Efforts to Determine Whether It Obtains the Best Prices on

MAS Contracts Is Hindered by the Limited Application of

Selected Pricing Tools 30

Effective MAS Program Management Is Hindered by a Lack of

Data, a Decentralized Management Structure, and Shortcomings

in Assessment Tools 39

Conclusions 46

Recommendations for Executive Action 47

Agency Comments and Our Evaluation 49

Appendix I Scope and Methodology 52

Appendix II General Services Administration Multiple Award

Schedule Pricing Process and Tools 59

Appendix III Comments from the Department of Defense 60

Appendix IV Comments from the Department of Health and Human

Services 61

Appendix V Comments from the General Services Administration 63

Appendix VI GAO Contact and Staff Acknowledgments 69

Contracting Strategies

Tables

Table 1: Comparison of Various Contract Vehicles Examined 10

Table 2: Governmentwide Acquisition Contracts as of September

30, 2008 12

Table 3: Selected Agencies’ and Military Departments’ Reasons for

Establishing MACs and Enterprisewide Contracts in Lieu

of Using the GSA MAS Program 23

Table 4: Selected Agencies’ and Military Departments’ Reasons for

Establishing MACs and Enterprisewide Contracts in Lieu

of Using GWACs and MACs Identified by Agencies 24

Table 5: Top 10 GWAC Vendors on GWACs, MACs, and

Enterprisewide Contracts 27

Table 6: Federal Agencies and Military Departments Included in

Our Review 52

Table 7: Vendors Included in Our Review 53

Table 8: List of Agencies, Military Departments, and Contracting

Programs Reviewed 55

Figures

Figure 1: MAS Program Sales, Fiscal Years 1996 through 2008 15

Figure 2: GSA MAS Pre-Award Audits, Fiscal Years 1998 through

2008 34

Figure 3: MAS Program Organizational Chart 43

Page ii GAO-10-367 Contracting Strategies

Abbreviations

DOD Department of Defense

DHS Department of Homeland Security

EAGLE Enterprise Acquisition Gateway for Leading-Edge Solutions

FAR Federal Acquisition Regulation

FAS Federal Acquisition Service

FPDS-NG Federal Procurement Data System-Next Generation

GAO Government Accountability Office

GSA General Services Administration

GWAC Governmentwide acquisition contract

MAC Multiagency contract

MAS Multiple Award Schedule

NASA National Aeronautics and Space Administration

OFPP Office of Federal Procurement Policy

OMB Office of Management and Budget

PMR Procurement Management Review

VA Department of Veterans Affairs

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Page iii GAO-10-367 Contracting Strategies

Page 1 GAO-10-367

United States Government Accountability Office

Washington, DC 20548

April 29, 2010

The Honorable Joseph I. Lieberman

Chairman

The Honorable Susan M. Collins

Ranking Member

Committee on Homeland Security and Governmental Affairs

United States Senate

The Honorable Edolphus Towns

Chairman

The Honorable Darrell E. Issa

Ranking Member

Committee on Oversight and Government Reform

House of Representatives

The Honorable Claire McCaskill

Chairman

Subcommittee on Contracting Oversight

Committee on Homeland Security and Governmental Affairs

United States Senate

Since 2002, spending on federal contracts has more than doubled, with

approximately $530 billion obligated

in fiscal year 2008. As this spending

has increased, there has been renewed focus on maximizing efficiencies in

the procurement process to achieve cost savings. One way to accomplish

this is by increasing the use of contracts designed to leverage the

government’s buying power when acquiring commercial goods and

services. These include the multiple award schedule (MAS) program

contracts (also known as the Federal Supply Schedule),

multiagency

In this report, we use procurement dollars reported by federal agencies which are

considered obligations and data from vendors which are reported in sales. Therefore, we

have used dollars obligated and sales data interchangeably.

MAS means 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. Federal Acquisition Regulation (FAR) § 8.401.

Contracting Strategies

contracts (MAC), and governmentwide acquisition contracts (GWAC).

The General Services Administration (GSA) directs and manages the MAS

program. It has delegated authority to the Department of Veterans Affairs

(VA) to operate schedules for medical supplies.

Other agencies have

established and operate MACs and GWACs. MAS contracts, MACs, and

GWACs are all interagency contracts.

When managed properly, interagency contracting—a process by which

one agency either uses another agency’s contract directly or obtains

contracting support services from another agency—can leverage the

government’s aggregate buying power and provide a simplified and

expedited method for procuring commonly used goods and services.

Enterprisewide contracts, which, according to procurement officials,

appear to have become more popular in recent years, are internal

purchasing programs established within a federal department or agency to

acquire goods and services. They are similar to interagency contracts in

that they can leverage the purchasing power of the federal agency but

generally do not allow purchases from the contract by federal activities

other than the original acquiring activity. In fact, the Office of

Management of Budget (OMB) recently reported that 20 of the 24 largest

procuring activities are planning to achieve contracting savings by

implementing strategic sourcing initiatives

by using enterprisewide

contracting to leverage their buying power.

These initiatives are part of

OMB’s goal, announced in December 2009, of reducing contract cost by 7

percent by September 30, 2011.

MACs are task-order or delivery-order contracts established by an agency that can be used

for governmentwide use to obtain goods and services, consistent with the Economy Act.

FAR § 2.101. GWACs are considered multiagency contracts but, unlike other multiagency

contracts, are not subject to the same requirements and limitations, such as documenting

that the contract is in the best interest of the government, set forth under the Economy Act.

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). These contracts are operated by

an executive agent designated by the Office of Management and Budget. FAR § 2.101.

VA operates its portion of the schedules program under a delegation of authority from

GSA. Although GSA has delegated to VA the authority to contract for medical supplies

services under various MAS, GSA has not delegated to VA the authority to prescribe the

policies and procedures that govern the MAS program.

An approach to leverage buying power, reduce costs, better manage suppliers, and

improve the quality of goods and services acquired.

Office of Management and Budget, Acquisition and Contracting Improvement Plans and

Pilots: Saving Money and Improving Government (Washington D.C.: Dec. 2009).

Page 2 GAO-10-367 Contracting Strategies

Though precise numbers are unavailable, in fiscal year 2008, government

buyers used the MAS program, MACs, and GWACs to acquire at least $60

billion of commercial goods and services, including billions spent through

enterprisewide contracts. Some in the procurement community have

raised concerns about a proliferation of some of these contracts, noting

that without coordinated governmentwide oversight of MACs and

enterprisewide contracts it is unclear whether the use of these contracts

helps government buyers leverage their buying power. The perceived

growth in the number of these contracts and duplication that has occurred

with their growth may also adversely affect the overall administrative

efficiencies and cost savings expected with their use. Furthermore, in

recent years, we and others have highlighted challenges with MAS

program pricing and compliance with the Federal Acquisition Regulation

(FAR) to obtain the best possible value. In this context, you requested

that we address management issues associated with the growth in use of

interagency contracting vehicles and enterprisewide contracts, and

especially the management of the GSA’s MAS program contracts.

Specifically, this report addresses:

1. the data that exist to describe MACs, GWACs, and enterprisewide

contracts use governmentwide; the extent to which policies and

guidance exist to establish and manage these contracts; and the

reasons agencies use these contracts;

2. the effectiveness of tools and controls GSA uses to obtain the best

possible prices for customers of its MAS program; and

3. the extent to which GSA has performance information and an

oversight structure in place to manage the MAS program.

We conducted this work at the Office of Federal Procurement Policy

(OFPP) within OMB, which has governmentwide procurement policy

responsibility. We also conducted work at six federal agencies including

GSA, the Department of Defense (DOD), including the three military

departments, Department of Health and Human Services, Department of

Homeland Security (DHS), VA, and the National Aeronautics and Space

Administration (NASA) because these agencies established and or used

the MAS, GWAC, MAC, or enterprisewide contract programs and were

responsible for almost 87 percent of total federal procurement obligations

in fiscal year 2008.

To assess the oversight of and benefits provided these

Franchise funds and interagency assisting entities that undertake some or all of the

contracting function for an agency, typically on a “fee-for-service” basis, are not part of this

review. See GAO, Interagency Contracting: Franchise Funds Provide Convenience, but

Value to DOD Is Not Demonstrated, GAO-05-456 (Washington, D.C.: July 29, 2005).

Page 3 GAO-10-367 Contracting Strategies

programs, we reviewed policies, agency directives, relevant studies, audit

reports, the FAR, and other regulations relevant to our review objectives.

We interviewed OFPP representatives responsible for overseeing

interagency contracting, the Senior Procurement Executives or their

representatives for the agencies where we conducted work, and other

agency officials responsible for multiagency and enterprisewide contracts.

To determine the magnitude of multiagency and enterprisewide contracts,

we attempted to use the Federal Procurement Data System-Next

Generation (FPDS-NG) but found that the data were not sufficiently

reliable to determine the universe and use of MACs

or enterprisewide

contracts. Despite its critical role, we have consistently reported on

FPDS-NG data quality issues over a number of years.

This lack of

reliability made it impossible to determine the universe and use of these

types of contracts. Hence, we conducted literature searches and reviewed

agencies’ and government contractors’ Web pages to identify examples of

MACs and enterprisewide contracts. After identifying examples of these

contracts, we judgmentally selected for review 14 contracting programs

from 5 of the 6 agencies and 2 of the 3 military departments that had at

To determine if the data on interagency contracts were reliable we tried to verify some of

the data generated from FPDS-NG. For instance, FPDS-NG includes a data field that is

intended to identify GWACs but we found a number of instances where known GWACs

were coded incorrectly. We also searched the system by contract number for MACs that

we were aware of and found similar issues, with some contracts coded properly as MACs

and some not. In addition, to identify a contract as a MAC, we searched for indefinite

delivery contracts that were coded as being governed by the Economy Act—which most

MACs are—and determined if the contract was also used by any agency other than the one

that entered into the contract.

We have previously reported on data reliability issues with FPDS-NG. See, e.g., GAO,

Federal Contracting: Observations on the Government’s Contracting Data Systems,

GAO-09-1032T (Washington, D.C.: Sept. 29, 2009); Contract Management: Minimal

Compliance with New Safeguards for Time-and-Materials Contracts for Commercial

Services and Safeguards Have Not Been Applied to GSA Schedules Program, GAO-09-579

(Washington, D.C.: June 24, 2009); Interagency Contracting: Need for Improved

Information and Policy Implementation at the Department of State, GAO-08-578

(Washington, D.C.: May 8, 2008); Department of Homeland Security: Better Planning and

Assessment Needed to Improve Outcomes for Complex Service Acquisitions, GAO-08-263

(Washington, D.C.: April 22, 2008); Federal Acquisition: Oversight Plan Needed to Help

Implement Acquisition Advisory Panel Recommendations, GAO-08-160 (Washington,

D.C.: Dec. 20, 2007), Improvements Needed to the Federal Procurement Data System-Next

Generation, GAO-05-960R (Washington, D.C.: Sept. 27, 2005); Reliability of Federal

Procurement Data, GAO-04-295R (Washington, D.C.: Dec. 30, 2003); OMB and GSA: FPDS

Improvements, GAO/AIMD-94-178R (Washington, D.C.: Aug. 19, 1994); The Federal

Procurement Data System—Making It Work Better, GAO/PSAD-80-33 (Washington, D.C.:

Apr. 18, 1980); and The Federal Procurement Data System Could Be an Effective Tool for

Congressional Surveillance, GAO/PSAD-79-109 (Washington, D.C.: Oct. 1, 1979).

Page 4 GAO-10-367 Contracting Strategies

least one of the three contract types (MAC, GWAC, and enterprisewide

contracts), and met with agency officials and vendors to confirm our

identification of examples and to obtain their perspectives on the

proliferation of these vehicles. Because the MAS program represents the

single largest federal program providing multiagency contracts, we

concentrated our work on the MAS program. Furthermore, because GSA

rather than VA sets the policy for the MAS program, we focused on GSA’s

management of the program. We reviewed GSA’s management structure

for overseeing the program and the tools and controls GSA established for

obtaining fair and reasonable pricing for MAS contracts. We reviewed

GSA memorandums, regulations, manuals, and other relevant

documentation; interviewed agency officials; and analyzed GSA processes

and practices related to program oversight and contract negotiations. We

also conducted structured interviews with 16 vendors with high sales on

the GSA MAS program and had also been awarded GWACs, MACs, or

enterprisewide contracts. The 16 vendors represented both large and small

businesses. We also judgmentally selected 17 contracting officers from 4

of the 6 agencies selected for review and the 3 military departments who

had placed orders through one of the reviewed contract vehicles to obtain

their perspectives on the management and pricing of the MAS contracts,

MACs, GWACs and enterprisewide contracts. We also met with

representatives of several private sector organizations—the Coalition for

Government Procurement, Jefferson Solutions, LLC, the Professional

Services Council, and the Washington Management Group—that represent

vendors and contractors to obtain their views on issues related to our

review objectives.

We conducted this performance audit from October 2008 through April

2010 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

the evidence obtained provides a reasonable basis for our findings and

conclusions based on our audit objectives. A more detailed discussion of

our scope and methodology is in appendix I.

Interagency and enterprisewide contracts should provide an advantage to

the government in buying billions of dollars worth of goods and

services, yet OMB and agencies lack reliable, comprehensive data

to effectively leverage, manage, and oversee these contracts. The total

number of MACs and enterprisewide contracts currently in use by

agencies is unknown because the federal government’s official

Results in Brief

Page 5 GAO-10-367 Contracting Strategies

procurement database, FPDS-NG, is not sufficiently reliable for identifying

these contracts. This has been a longstanding problem. Furthermore, we

found there is limited governmentwide policy for establishing and

overseeing MACs and enterprisewide contracts. The agencies we

reviewed followed statutes, FAR, and their own internal policies and

guidance to justify, establish, and operate MACs and enterprisewide

contracts. Currently, GWACs are the only contracts requiring approval

from and annual reporting to OMB. We also found that some agencies’

policies or guidance have encouraged the use of enterprisewide contracts

over the use of other contracts, including the GSA MAS program contracts.

We found that departments and agencies establish, justify, and use their

own MACs and enterprisewide contracts rather than other established

interagency contracts for a variety of reasons, which include avoiding fees

paid for the use of other agencies’ contracts, gaining more control over

procurements made by organizational components, and allowing for the

use of cost reimbursement contracts. Under these conditions, many of the

same vendors provided similar products and services on multiple

contracts, which increases costs to both the vendor and the government

and can result in missed opportunities to leverage the government’s

buying power. Recent legislation and OFPP initiatives are expected to

strengthen oversight and management of MACs, but no initiatives are

underway to strengthen oversight of enterprisewide contracts.

GSA’s MAS program—the largest interagency contracting program with

approximately 17,000 contracts—uses several tools and controls in the

contract award and administration process to obtain and maintain best

prices for its contracts, but applies some of the tools on a limited basis.

This hinders GSA’s ability to determine whether it achieves the MAS

program goal of obtaining best prices. GSA has established two key

regulatory controls to obtain and maintain best prices throughout the life

of all MAS contracts. The first is the provision that, prior to award, GSA

seeks to obtain the best price that a vendor provides to their most favored

customer,

and the second is the use of a price reduction clause in each

MAS contract that allows the government to receive a lower contract price

after award if the vendor lowers its price to similarly situated commercial

customers. However, GSA does not collect information to determine if the

price reduction clause is working as intended. GSA also uses other tools

Most favored customers are customers or categories of customers that receive the best

price from vendors (48 C.F.R. 538.270(a), 538.271, and 538.272). The pursuit of most

favored customer pricing is consistent with the objective of negotiating a fair and

reasonable price (Final rule, 62 Fed. Reg 44,518, 44,519 (Aug. 21, 1997)).

Page 6 GAO-10-367 Contracting Strategies

to leverage the government’s buying power, evaluate compliance with

program pricing policies, and ensure the quality of contract negotiations

primarily for larger contracts. These include pre-award audits of MAS

contracts by the GSA Inspector General, clearance panel reviews of

contract negotiation objectives, and Procurement Management Reviews.

However, GSA applies these tools to a small number of MAS contracts.

For example, the GSA Inspector General performed pre-award audits of 69

contracts in fiscal year 2008, but does not target hundreds of other

contracts that are eligible for audit. Nevertheless, with an investment of a

few million dollars annually, the Inspector General recommended almost

$4 billion in cost avoidance through these audits from fiscal years 2004

through 2008—cost avoidance would result from lower prices paid by

government buyers. We also found several instances where required

clearance panel reviews were not held, and GSA officials said that they do

not check whether contracts that met the appropriate threshold received a

panel review as required, thus limiting the effectiveness of this tool. GSA

also conducts Procurement Management Reviews to assess contracts’

compliance with statutory requirements and internal policy and guidance.

However, GSA only selects a small number of contracts for review and at

the time of our fieldwork did not use a risk-based selection methodology,

which does not permit GSA to derive any trends based on the review

findings. In 2008, GSA established an advisory panel to review MAS

program pricing provisions, which has recommended changes to the

pricing provisions, among other things. These changes include elimination

of the price reduction clause and clarifying the price objective for MAS

contracts, which could potentially remove “most favored customer” as the

pricing goal for MAS contracts. However, concerns remain that

eliminating these provisions could adversely affect GSA’s ability to

negotiate best prices.

A lack of comprehensive data, a decentralized management structure, and

limitations in assessment tools create challenges for GSA to manage the

MAS program effectively and have a program wide perspective on its

operations. Our prior work has highlighted the importance of having

comprehensive data as part of a strategic approach to procurement, noting

that the use of procurement data to identify buyers and how much is being

spent for goods and services can identify opportunities to save money and

improve performance. However, GSA lacks data about the use of the MAS

program by customer agencies. Without this data, GSA is limited in its

ability to determine how well the MAS program meets its customers’ needs

and to help its customers obtain the best value through MAS contracts,

among other things. In addition, the decentralized management structure

for the MAS program hinders consistent implementation of the MAS

Page 7 GAO-10-367 Contracting Strategies

program within GSA, as well as program oversight. GSA established a

MAS program office in 2008 to manage strategic and policy issues for the

program. However, it lacks direct oversight authority for the MAS

program—program oversight is not addressed in its charter. Rather, GSA

has dispersed responsibility for the management of individual contract

schedules among nine acquisition centers under three business lines.

Some MAS program officials and vendors we met with pointed out that as

a result of this structure, a lack of communication and consistency exists

among the acquisition centers, which has impaired the consistent

implementation of policies across the MAS program and the sharing of

best practices, and the GSA Inspector General has identified issues with

oversight of the MAS program. Finally, shortcomings in assessment tools

also result in management challenges. For example, performance

measures are inconsistent across the GSA organizations that manage MAS

contracts, including inconsistent emphasis on pricing. GSA’s MAS

customer satisfaction survey also has an extremely low response rate that

limits its utility as a means for evaluating program performance.

We make five recommendations to OMB to strengthen policy, improve

data and better coordinate agencies’ awards of MACs and enterprisewide

contracts. We also make eight recommendations to GSA to improve MAS

program pricing and management. Both OMB and GSA agreed with our

recommendations. DOD pointed out in its comments on the draft of this

report that it is the largest purchasing organization in the federal

government and the largest customer of GSA and looks forward to

working with the OMB’s Administrator for OFPP and with GSA on their

efforts to implement the recommendations. The Department of Health

and Human Services concurred with our findings and recommendations.

Likewise, NASA stated that our draft report was complete, concise, and

accurate and provided a balanced view of issues. DHS and VA elected not

to provide comments on a draft of the report.

Government buyers generally use three types of available interagency

contracts—MACs, GWACs, and MAS program contracts—all of which

leverage the government’s buying power when acquiring goods and

services. These interagency contracts can be established under several

statutory authorities, including: (1) the Economy Act,

which authorizes

agencies to place orders for goods and services with another government

Background

31 U.S.C. § 1535.

Page 8 GAO-10-367 Contracting Strategies

agency; (2) the Clinger-Cohen Act of 1996,

which authorizes GWACs; and

(3) the Federal Property and Administrative Services Act of 1949, as

amended,

which provides authority for GSA’s MAS program.

The Federal Acquisition Streamlining Act of 1994,

also has a bearing on

interagency contracting, since its enactment, along with that of the

Clinger-Cohen Act of 1996, authorized fundamental changes in the

management of government acquisition programs. These statutes (1)

made it easier for federal agencies to purchase commercial items; (2)

streamlined the processes for making small purchases; (3) eliminated GSA

as the sole authority for all federal information technology acquisitions;

and (4) allowed for establishment of GWACs and other contracting

vehicles including enterprisewide contracts. Since then, some agencies

have established and operated MACs, GWACs, and enterprisewide

contracts, while GSA operates the MAS program. Agencies, including GSA

and VA for the MAS program, usually charge their customer agencies fees

for using their GWACs, MACs, and schedule contracts. These fees are

usually a percentage of the value of the procurement to cover the costs of

administering the contract. Table 1 describes the various contract types

we examined, including the number in existence and fees charged when

known, and their fiscal year 2008 sales.

40 U.S.C § 11314(a)(2).

41 U.S.C. § 251 et seq. and 40 U.S.C. § 501.

Pub. L. No. 103-355.

Page 9 GAO-10-367 Contracting Strategies

Table 1: Comparison of Various Contract Vehicles Examined

Interagency contracts

Multiple award schedules

GSA VA

MACs GWACs

Enterprisewide

contracts

Authority Federal Property and

Administrative Services Act of 1949

as amended. GSA delegated

authority to VA

Economy Act Clinger-Cohen Act Various authorities to

include the Economy

Act and the Federal

Acquisition

Streamlining Act

Purpose To provide comparable commercial

goods and services at varying

prices and a streamlined process to

obtain these goods and services at

prices associated with volume

buying.

To obtain goods or

services by

interagency

acquisition which

cannot be obtained

as conveniently

or economically by

contracting directly

with a private

source

To provide a broad

range of information

technology goods and

services.

Provide authority for

placement of orders

between major

organizational units

within an agency and

establishing a general

preference for use of

multiple awards.

Number of

schedules/programs

49 schedules 9 schedules Unknown 16 programs Unknown

Sales in 2008

(in billions)

$37.6 $9.2 Unknown

$5.3 Unknown

Number of contracts Approximately

19,000

Unknown 1,031 Unknown

Fee Structure 0.75 % 0.50% Unknown 0.25 -1.75 % Not applicable

Source: GAO analysis of statutes, regulations and agency data. Dollars and numbers are from fiscal year 2008 data.

The four MAC programs reviewed had obligations totaling $2.5 billion in fiscal year 2008.

The three enterprisewide contract programs reviewed had obligations totaling $4.8 billion in fiscal

year 2008.

In fiscal year 2008, as shown in table 1, federal agencies used GWACs,

MACs, and the MAS program to buy at least $60 billion of goods and

services to support their operations including some agencies spending

billions using enterprisewide contracts. GWACs, MACs, the

enterprisewide contracts we examined, and contracts under the MAS

program are all indefinite delivery/indefinite quantity (ID/IQ) contracts--

contracts that are established to buy goods and services when the exact

times and exact quantities of future deliveries are not known at the time of

Page 10 GAO-10-367 Contracting Strategies

award.

Once known, an agency places individual delivery orders for

goods and task orders for services against these contracts.

MACs and GWACs

MACs and GWACs provide advantages to both agencies and vendors. For

agencies, they provide a means of procuring goods and services without

the time and expense of a full and open solicitation for each order. For

vendors, the FAR requires agencies to provide a fair opportunity to be

considered for orders exceeding $3,000.

The Economy Act, along with

other authorities, allows an agency to enter into a MAC and then make it

available for other government agencies to place task or delivery orders to

obtain a variety of goods and services.

The Economy Act is applicable to

orders placed under MACs, with the exception of MACs for information

technology that are established pursuant to the Clinger-Cohen Act. Per

the FAR guidance for the Economy Act, an agency planning to place an

order against another agency’s MAC must document that the servicing

agency has an appropriate pre-existing contract available for use or that it

has the capabilities or expertise to enter into a contract for the required

goods or services, which is not available within the requesting agency.

MACs are established within their respective agencies and no external

reporting on their use is required. As a result, governmentwide

comprehensive data on the number of MACs and dollars involved with

their use are not readily available.

Based on FPDS-NG data, in fiscal year 2008, $161 billion (over 30 percent of total federal

procurement) was obligated using ID/IQ contracts.

Fair opportunity requires a contracting officer to provide each awardee a fair opportunity

to be considered for each order exceeding $3,000 issued under multiple ID/IQ contracts

unless (1) the agency need for the goods or services is so urgent that providing a fair

opportunity would result in unacceptable delays, (2) only one awardee is capable of

providing the goods or services required at the level of quality required because they are

unique or highly specialized, (3) the order must be issued on a sole-source basis in the

interest of economy and efficiency because it is a logical follow-on to an order already

issued under the contract provided that all awardees were given fair consideration for the

original order, or (4) it is necessary to place an order to satisfy a minimum guarantee. FAR

§16.505(b).

The Economy Act, authorizes an agency to place orders for goods and services with

another government agency when the head of the requesting (i.e., ordering) agency

determines that it is in the best interest of the government and decides it cannot order

goods or services by contract with a commercial enterprise as conveniently or cheaply. 31

U.S.C. § 1535.

FAR §§ 17.503, 17.504.

Page 11 GAO-10-367 Contracting Strategies

GWACs provide a broad range of information technology goods and

services and resources for agency activities.

Each GWAC is operated by

an executive agent designated by OMB.

The Economy Act does not

apply when placing orders under GWACs. As of March 30, 2010, four

agencies—GSA, NASA, the Department of Health and Human Service

and the Environmental Protection Agency—had OMB authorization to

operate GWACs. As shown in table 2 below, these agencies were

responsible from 1 to 11 GWAC programs having obligations in fiscal y

2008 totaling almost

ear

$5.3 billion.

Table 2: Governmentwide Acquisition Contracts as of September 30, 2008

Executive agency

Number of GWAC

Programs

Total fiscal year 2008 sales

(billions)

General Services Administration 11 $2.93

National Aeronautics and Space

Administration 1 $1.32

Department of Health and Human

Services, National Institutes of

Health

3 $1.04

Environmental Protection Agency 1 $0.00

Source: GAO analysis of agency information.

Sales against the Environmental Protection Agency GWAC in fiscal year 2008 totaled less than

$63,000.

Obligations placed against GWACs have ranged from about $5 to $6 billion

annually, but have declined slightly in recent years from $5.8 billion in

fiscal year 2004 to $5.3 billion in fiscal year 2008.

Enterprisewide Contracts

Along with using interagency contracts to leverage their buying power, a

number of large departments—DOD and DHS in particular—are turning to

enterprisewide contracts as well to acquire goods and services.

Enterprisewide contracting programs are IDIQ contracts established

solely for the use of the establishing agency and can be used to reduce

contracting administrative overhead, provide information on agency

spending, meet various requirements across the agency, and avoid the fees

GWACs are considered MACs, but unlike other MACs, they are not subject to the

Economy Act. FAR § 2.101.

OFPP, within OMB, is responsible for the overall management of the GWAC program.

Page 12 GAO-10-367 Contracting Strategies

charged for using interagency contracts, such as a GWAC. Creating

enterprisewide contracts can also be a method to support strategic

sourcing within the agency and a means of tailoring requirements for

agency-unique purposes. They can also be used to specify and enforce

specific contract terms and conditions and bring more consistency into

the agency contracting processes. Three significant enterprisewide

contracting programs are DHS’s Enterprise Acquisition Gateway for

Leading-Edge Solutions (EAGLE) and FirstSource programs and the

Department of the Navy’s SeaPort Enhanced program. EAGLE and

FirstSource provide contracts with 64 vendors for information technology

services and commodities, respectively, for the 16 components that make

up DHS and obligated over $1.2 billion in fiscal year 2008. The Department

of the Navy’s SeaPort Enhanced program provides contracts for procuring

engineering, technical, programmatic, and professional support services.

Currently the program has contracts with over 1,800 vendors and obligated

almost $3.6 billion in fiscal year 2008.

MAS Program

GSA has had a prominent role in providing goods and services to federal

agencies for decades as part of its responsibility for administering supplies

for federal agencies. Through its MAS program (also referred to in this

report as the schedules program), GSA provides federal agencies with a

simplified method for procuring various quantities of a wide range of

commercially available goods and services. As the largest interagency

contracting program, the MAS program provides advantages to both

federal agencies and vendors.

Agencies, using the simplified methods of

procurement of the schedules, avoid the time expenditures and

administrative costs of other methods. Vendors receive wider exposure

for their commercial products and expend less effort to selling these

products. Moreover, the MAS program is the primary governmentwide

buying program aimed at helping the federal government leverage its

significant buying power when buying commercial goods and services.

Together, GSA and VA operate 58 schedules. GSA operates 49 schedules,

which offer a wide range of goods and services such as office furniture

and supplies, personal computers, scientific equipment, library services,

network support, laboratory testing services, and management and

advisory services. GSA delegated to the VA the authority to solicit,

While GSA, in its regulations uses the term “offeror,” for purposes of this report we use

the term “vendor.”

Page 13 GAO-10-367 Contracting Strategies

negotiate, award, and administer contracts for selected schedules. VA has

seven schedules for various categories of medical/surgical supplies and

equipment and pharmaceuticals, and two schedules for various health care

services including professional health care and staffing services and

laboratory testing and analysis services.

In August 1997, after passage of FASA and the Clinger-Cohen Act, GSA

revised its acquisition regulations to promote greater use of commercial

buying practices, and streamline the purchasing process for its

customers.

GSA expected these changes to lead to more participation by

both large and small businesses, and to increased competition, thereby

providing federal agencies a wider range of goods and services at

competitive prices. As of December 2009, there were almost 19,000

available contracts providing goods and services on the GSA and VA

schedules. While MAS sales by both GSA and VA have grown significantly

since 1998, sales have leveled off in recent years, as shown in figure 1.

62 Fed. Reg. 44,518 (Aug. 21, 1997).

Page 14 GAO-10-367 Contracting Strategies

Figure 1: MAS Program Sales, Fiscal Years 1996 through 2008

2008200620042002200019981996

Dollars (in billions)

Fiscal year

VA multiple award schedule program

GSA multiple award schedule program

Source: GAO analysis of GSA and VA data.

Note: Sales are presented in fiscal year 2009 dollars.

Over the last several years, GSA initiated several changes within the MAS

program. In late 2006, the agency reorganized and created the Federal

Acquisition Service (FAS), which combined the duties of the Federal

Technology Service and the Federal Supply Service. As part of this

reorganization, GSA established three primary FAS business portfolios—

General Supplies and Services; Integrated Technology Services; and

Travel, Motor Vehicle, and Card Services—and gave them management

and operational control over the MAS schedules. Within these portfolios,

nine acquisition centers located throughout the United States award and

manage MAS contracts. GSA also established within FAS the Office of

Acquisition Management, which is responsible for ensuring that GSA

activities comply with federal laws, regulations, and policies, and that

operating practices are consistent across business lines and acquisition

centers. In July 2008, within the Office of Acquisition Management, GSA

created the MAS Program Office to develop and implement acquisition

policy and guidance, define systems requirements, and coordinate

program-wide improvements. VA manages its portion of the MAS program

from its National Acquisition Center, located in Hines, Illinois. The MAS

Page 15 GAO-10-367 Contracting Strategies

Governance Council, established in 2008 as part of the creation of the MAS

Program Office, includes representatives from both GSA and VA, and is

responsible for addressing and coordinating MAS program issues that

affect both GSA and VA.

In 2008, GSA also established a MAS Advisory Panel to provide

independent advice and recommendations on MAS program pricing

policies and provisions in the context of commercial pricing practices.

The panel is made up of representatives from GSA and other federal

agencies as well as industry associations. The panel issued its report in

February 2010, and made numerous recommendations to GSA regarding

the MAS program pricing provisions, competition requirements, and data

collection, among other things.

Prior Reviews of

Interagency Contracts and

the MAS Program Raised

Concerns

Prior reviews and audits of interagency contracting and the MAS program

by GAO and inspectors general have highlighted several management

challenges and concerns. Between 1999 and 2009, we and agencies’

inspectors general issued 12 audit reports identifying a lack of competition

for task and delivery orders issued under ID/IQ contracts. These reports

addressed task and delivery orders awarded under the MAS program,

GWACs, MACs, and enterprisewide contracts and found that the orders

were either not competed, did not provide for fair opportunity, and/or

restricted competition. For example, in 2004, we found that contracting

officers waived competition requirements for nearly half—34 out of 74—of

MAS orders reviewed.

In early 2005, we reported that the use of interagency contracting vehicles

had grown rapidly and numerous issues had surfaced, including problems

with internal controls, inadequate competition, unclear definitions of roles

and responsibilities, and inadequate training of contracting personnel. As

a result, we designated the management of interagency contracting as high

risk in 2005.

We stated in our 2005 high risk report that the government

needed to bolster oversight and control over interagency contracting so

that it would be well-positioned to realize the benefits of these contracts.

Multiple Award Schedule Advisory Panel Final Report (Feb. 2010).

GAO, Contract Management: Guidance Needed to Promote Competition for Defense

Task Orders, GAO-04-874 (Washington D.C.: July 30, 2004).

GAO, High-Risk Series: An Update, GAO-05-207 (Washington, D.C.: Jan. 2005).

Page 16 GAO-10-367 Contracting Strategies

Even though interagency contracting remains on our list of high-risk areas,

there has been an improvement. In 2009, we reported that OMB and

federal agencies have made progress toward improving the use of

interagency contracting. For example, we reported that OMB issued

policy guidance designed to improve the use of interagency contracting

across the government.

In 2005, we also reported on GSA’s schedules program pointing out several

problems related to schedule contract pricing based on GSA’s review of

selected MAS contract files from fiscal year 2004.

Nearly 60 percent of

the contract files GSA reviewed lacked the documentation needed to

establish clearly that GSA had effectively negotiated schedule prices. GSA

was also not effectively using pricing tools such as pre-award audits, to

meet its pricing objectives. In response to a recommendation in our

report, GSA significantly increased the number of annual pre-award audits

resulting in a total of almost $4 billion in cost avoidances over a five year

period.

In 2007, the Acquisition Advisory Panel—often referred to as the SARA

panel—reported in fiscal year 2004, FPDS-NG data showed that total

obligations for interagency contracting reached $142 billion, or 40 percent

of the total obligated governmentwide on contracts that year.

The panel

concluded that pressures and incentives for agencies to establish and use

interagency contracting vehicles, coupled with little oversight or

transparency, had created an environment that allowed the uncoordinated

proliferation of interagency contracts, which in turn hampered the

government’s ability to maximize the effectiveness of these contracts

While the panel report provided an estimate of the total obligations for

interagency contracts in fiscal year 2004, it also stated that the FPDS-NG

GAO, High-Risk Series: An Update, GAO-09-271 (Washington, D.C.: Jan. 2009).

GAO, Contract Management: Opportunities to Improve Pricing of GSA Multiple Award

Schedules Contracts, GAO-5-229 (Washington, D.C.: Feb. 11, 2005).

The panel was established by Section 1423 of the Services Acquisition Reform Act of 2003,

which was enacted as part of the National Defense Authorization Act for Fiscal Year 2004

(Pub. L. No. 108-136, (2003). The statute tasked the panel, among other things, to review

governmentwide policies regarding the use of governmentwide contracts. We did not

assess the reliability of the data reported by the panel.

Page 17 GAO-10-367 Contracting Strategies

data used to make this estimate and analyze interagency contracts were

not reliable at the detailed level.

In 2009, the DOD’s Inspector General found problems with enterprisewide

contracting reporting that the Department of the Navy’s SeaPort Enhanced

internal controls were not adequate.

Furthermore, the Inspector General

found that the SeaPort Enhanced program office did not ensure that task

orders were open for bidding for the length of time specified and deviated

from FAR criteria by not performing adequate market research. In another

report issued in 2009, the DOD Inspector General reported that 72

percent—21 out of 29—of the task orders awarded under a GWAC valued

at $13.9 million had insufficient competition.

Interagency and enterprisewide contracts should provide an advantage to

the government in buying billions of dollars worth of goods and

services, yet OMB and agencies cannot be sure they are leveraging

this buying power because they lack the necessary comprehensive,

reliable data to effectively manage and oversee these contracts.

Additionally, the government's lack of an overarching governmentwide

policy to ensure that leveraging happens further exacerbates the problem

Absent governmentwide data and policy, agencies have created numerous

MACs and enterprisewide contracts using existing statutes, the FAR, and

agency-specific policies. The creation of these contracts is based on a

number of rationales and reasons including avoiding fees that would be

paid for using interagency contracts, allowing for cost-reimbursement

contracts, and getting more control over the procurement actions of their

sub-components. Under these conditions, however, duplication of similar

contracts and inefficiencies have occurred. Both government contracting

officials and representatives of vendors expressed concerns about this

condition. While some steps are being taken to improve this condition,

more can be done to improve the government's buying power.

With Insufficient and

Unreliable Data and

Limited

Governmentwide

Policy, Agencies’ Use

of Interagency and

Enterprisewide

Contracts May Result

in Inefficient

Contracting

Report of the Acquisition Advisory Panel to the Office of Federal Procurement Policy

and the United States Congress (Washington, D.C.: Jan. 2007). Chap. 3 and Chap. 7.

Inspector General, Department of Defense, SeaPort Enhanced Program, D-2009-082

(Arlington, Va.: May 6, 2009).

Inspector General, Department of Defense, FY 2007 DOD Purchases Made Through the

National Institutes of Health, D-2009-064 (Arlington, Va.: March 24, 2009).

Page 18 GAO-10-367 Contracting Strategies

Prior attempts by the acquisition community to identify interagency and

enterprisewide contracts have not resulted in a reliable database useful for

identifying or providing governmentwide oversight on those contracts. In

2003, a FAR rule established an interagency contracting directory to

collect information on interagency contracting vehicles.

In 2006, OFPP

started the Interagency Contracting Data Collection Initiative to identify

and list the available GWACs, MACs, and enterprisewide contracts. OFPP

requested that all federal agencies with interagency contracts report the

number of contracts available with a description of what was available on

each contract, which agencies could use it, the reason for creating it, and

whether or not there was a completed business case analysis on the

contract. Twenty-two of the 24 major federal agencies responded to OMB.

The initiative was a one-time effort and thus has not been updated since.

The Identification and Use

of MACs and

Enterprisewide Contracts

Is Unknown

In conducting this review, we could not identify the universe of MACs and

enterprisewide contracts because the data available in the official

government contracting data system, FPDS-NG, were insufficient and

unreliable. Despite its critical role, we have consistently reported on

FPDS-NG data quality issues over a number of years and found problems.

In 2009, we testified that OMB has taken steps to address some of these

problems; however, the quality of some FPDS-NG data remains an issue.

The fiscal year 2009 National Defense Authorization Act requires that the

Director of OMB direct improvements to the FPDS-NG to collect more

complete and reliable data on interagency contracting actions.

These

requirements, however, do not call for capturing data on enterprisewide

68 Fed. Reg. 43,859 (July 24, 2003). This rule added new FAR subpart 5.6, Publicizing

Multiagency Use Contracts, which (1) provides the Internet address to access the database

(i.e., www.contractdirectory.gov); (2) requires contracting activities to enter information

into the database within 10 days of award of a procurement instrument intended for use by

multiple agencies; and (3) required contracting activities to enter information into the

database by October 31, 2003, on all contracts and other procurement instruments intended

for multiple agency use existing at the time of the FAR amendment.

We made a number of narrowly focused recommendations on FPDS-NG data quality in

2005. While these recommendations have been addressed, our subsequent work shows

that FPDS-NG data reliability remains an issue.

GAO, Federal Contracting: Observations on the Government’s Contracting Data

Systems, GAO-09-1032T (Washington, D.C.: Sept. 29, 2009).

The data to be collected is to contain information on interagency contracting actions at

the task or delivery order level and other transactions, including the initial contract and any

subsequent modifications awarded or orders issued. Pub. L. No. 110-417 § 874 (2008).

Page 19 GAO-10-367 Contracting Strategies

contracts, which are now being used to achieve savings as part of the

governmentwide strategic sourcing initiative.

Most of the senior procurement executives, acquisition officials and

vendors we spoke with believed a publicly available source of information

on these contracts is necessary. Senior procurement executives from DHS

and DOD stressed the usefulness of a governmentwide clearinghouse of

information on existing contracts. Sixteen of the 17 contracting officers

we spoke with stated that having a publicly available listing of contracts,

for example, could reduce their market research time. For instance, one

official stated that it is a “hunt and search” effort to find contract vehicles

and that a central database would reduce market research time and allow

contract actions to be processed faster. An official from GSA told us there

is not enough information on currently available contracts, which requires

their contracting officers to rely on Internet searches and informal

discussions to locate contract vehicles. Furthermore, a number of vendors

we spoke with also stated they would favor a central source of

information on available contracts and believe this source would help

increase transparency.

Agency officials we spoke with said that if agencies could easily find an

existing contract they would avoid unnecessary administrative time to

enter into a new contract, which they said could be significant. One

official stated that if there were an awareness of what was available to use,

it would help to reduce their acquisition lead time. A Department of the

Navy procurement official told us that by awarding fewer larger contracts,

the Department of the Navy and DOD have created efficiencies resulting in

lower prices. The SARA panel report previously noted some of these

concerns, stating that too many choices without information related to the

performance and management of these contracts make the cost-benefit

analysis and market research needed to select an appropriate acquisition

vehicle impossible. This is particularly important given OMB’s June 2008

guidance on interagency contracting that requires agencies to make a

determination that using an interagency contracting vehicle is in their best

Page 20 GAO-10-367 Contracting Strategies

interest; taking into account factors such as whether the vehicle is suitable

to meet their needs and provides the best value.

Governmentwide Policy on

MACs and Enterprisewide

Contracts Is Limited;

Agencies Use Various

Procedures to Establish

and Manage These

Contracts

Federal agencies operate with limited governmentwide policy that

addresses the establishment and use of MACs and enterprisewide

contracts. Federal regulations generally provide that an agency should

consider existing contracts to determine if they might meet its needs.

contrast, GWAC creation and management has governmentwide oversight.

OFPP, as part of OMB, exercises statutory approval authority regarding

establishment of a GWAC. Once established, agencies provide annual

reports to OFPP, as part of OMB, on GWACs. The senior procurement

executives we spoke with had mixed views on the proper role of OFPP in

providing clarification and oversight to agencies establishing their own

contract vehicles. For example, Army senior acquisition officials

representing the senior procurement official told us that the policy on

interagency contracting is not cohesive. In their view, OFPP should

provide policy and guidance that agencies would be required to follow.

They also think surveillance of interagency contracts is a major issue since

proper oversight is sometimes lacking. Similarly, officials from the Office

of the Under Secretary of Defense for Acquisition, Technology, and

Logistics stated that OFPP is the right agency to take the leadership role

on strategic sourcing for services. They added, however, that OFPP might

not have sufficient staff to do so. In contrast, the Senior Procurement

Executive for the Department of the Navy pointed to agency-specific

circumstances or requirements that create uncertainty about the utility of

broad OFPP guidance.

The six federal agencies and the three military departments we reviewed,

responsible for almost 87 percent of total federal procurement obligations

in fiscal year 2008, have policies that require approval and review for

acquisition planning involving contracts for large dollar amounts which

would generally include the establishment of MACs and enterprisewide

contracts. The review process varies from agency to agency. For

OMB interagency contracting guidance issued in 2008 discusses how to use and manage

interagency contracts including how to place orders off of an existing contract. This

guidance provides that agencies shall ensure that decisions to use interagency acquisitions

are supported by best interest determinations before placing orders against other agencies

contracts. OMB Memorandum, Improving the Management and Use of Interagency

Acquisitions (June 6, 2008).

FAR § 7.105.

Page 21 GAO-10-367 Contracting Strategies

example, an official from the Office of the Under Secretary of Defense for

Acquisition, Technology, and Logistics told us that any new DOD contract

estimated at over $100 million would be required to go through a review

process to ensure that no other contract exists that could fulfill the new

requirement. As another example, DHS requires that the senior

procurement executive approve the establishment of each enterprisewide

contract. The policy requires that each enterprisewide contract

coordinate requirements between operating entities and determine

administrative costs prior to approval.

Furthermore, agencies have issued guidance encouraging the use of

enterprisewide contracts rather than using interagency contracts. DOD

guidance on acquisition of services—accounting for over 50 percent of

DOD’s obligated contract dollars—advises that contracting officers

consider the use of internal DOD contract vehicles to satisfy requirements

for services prior to placing an order against another agency’s contract

vehicle. Similarly, DHS senior procurement executives told us that DHS

policy requires buyers to consider EAGLE and FirstSource—both DHS

enterprisewide contracts—before they go to other sources to fulfill

information technology requirements. In fact, OMB recently reported that

20 of the 24 largest procuring activities are planning on reducing

procurement spending by implementing strategic sourcing initiatives by

using enterprise contracting to leverage their buying power.

These

initiatives are part of the administration’s goal of reducing contract

spending by 7 percent over the next 2 years.

Departments and Agencies

Cite a Variety of Reasons

for Establishing MACs and

Enterprisewide Contracts

Instead of Using Existing

Contracts

Agencies we met with cited several reasons for establishing their own

MACs and enterprisewide contracts including cost avoidance through

lower prices, and fewer fees compared to other vehicles, mission specific

requirements, and better control over the management of contracts. As

shown in tables 3 and 4 below, when deciding to award a MAC or an

enterprisewide contract, agencies listed a number of reasons in the

acquisition plans for not using existing contracts.

Office of Management and Budget, Acquisition and Contracting Improvement Plans

and Pilots: Saving Money and Improving Government (Washington D.C.: Dec. 2009).

Page 22 GAO-10-367 Contracting Strategies

Table 3: Selected Agencies’ and Military Departments’ Reasons for Establishing MACs and Enterprisewide Contracts in Lieu

of Using the GSA MAS Program

Multiagency contracts and

enterprisewide contracts

Purpose and Reason

GSA prices too high

Technology refresh delays due to

dependence on changes to MAS

contracts

Does not allow a range of

contract types, i.e., cost type

contracts or include required

contract terms and conditions.

Would require large number of

schedules

Cannot ensure products are in

compliance with DOD standards

Outside the continental United

States

Review and approval for the use

of non-DOD contract vehicles

MAC: Army Desktop and Mobile

Computing-2 (ADMC-2) (Approved

August 2005)

Provide commercial information

technology equipment to integrate,

modernize, and refresh the Army’s

existing architecture while providing

standardized interfaces.

X X X X X X

MAC: Army Information Technology

Enterprise Solutions-2 Hardware

(ITES-2H) (Approved June 2006)

Support the Army enterprise

infrastructure with a full range of state-

of-the-market information equipment

and incidental integration services.

Scope encompasses all requirements

for information technology.

X X X X X X

MAC: Army Information Technology

Enterprise Solutions-2 Services (ITES-

2S) (Approved September 2005)

Support the Army enterprise

infrastructure with a full range of

information technology services.

MAC: Defense Information Systems

Agency Encore II (Approved

December 2005)

Support the agency mission area

resulting in contracting solutions that

provide support of all functional

requirements including Command and

Control, Intelligence, and Mission

support areas, and to all elements of

the Global Information Grid.

X X

Enterprisewide contracts: Acquisition

of Services in support of the

Department of the Navy and Marine

Corps SeaPort Enhanced (SeaPort-e)

(Approved May 2005)

Facilitate the implementation of an

enterprisewide approach to the

acquisition of services to implement

cost-effective and integrated business

practices to better support the

Department of the Navy.

Enterprisewide contracts: Homeland

Security Enterprise Acquisition

Gateway for Leading-Edge Solutions

(EAGLE)(Approved August 2005)

Provide a comprehensive range of

information technology support services

for use throughout the agency through

a centrally managed program.

Enterprisewide contracts: Homeland

Security First Source (Approved

September 2005)

Provide access to a wide variety of

information technology products for use

throughout the agency through a

centrally managed program.

Source: GAO analysis of agencies’ acquisition plans.

Page 23 GAO-10-367 Contracting Strategies

Can more effectively leverage industry to partner with the Army as opposed to utilizing GSA

schedules to conduct a large number of smaller acquisitions.

Analysis of alternatives was not discussed in the acquisition strategy.

Table 4: Selected Agencies’ and Military Departments’ Reasons for Establishing MACs and Enterprisewide Contracts in Lieu

of Using GWACs and MACs Identified by Agencies

Multiagency contracts and

enterprisewide contracts

Purpose and Reason

GWAC prices too high

Criticism regarding Agency

reliance governmentwide

acquisition contracts

Confusing for ordering

activities

Cannot ensure products are

in compliance with DOD

standards

Outside the continental

United States

Review and approval for the

use of non-DOD contract

vehicles

Create dependence on

external agencies

Vehicles do not include

required contract terms and

conditions

MAC: Army Desktop and Mobile

Computing-2 (ADMC-2) (Approved

August 2005)

Provide commercial information

technology equipment to integrate,

modernize, and refresh the Army’s

existing architecture while providing

standardized interfaces.

X X X X X

MAC: Army Information Technology

Enterprise Solutions-2 Hardware

(ITES-2H) (Approved June 2006)

Support the Army enterprise

infrastructure with a full range of

state-of-the-market information

equipment and incidental integration

services. Scope encompasses all

requirements for information

technology.

X X X X X

MAC: Army Information Technology

Enterprise Solutions-2 Services

(ITES-2S) (Approved September

2005)

Support the Army enterprise

infrastructure with a full range of

information technology services.

MAC: Defense Information Systems

Agency Encore II (Approved

December 2005)

Support the agency mission area

resulting in contracting solutions that

provide support of all functional

requirements including Command

and Control, Intelligence, and

Mission support areas, and to all

elements of the Global Information

Grid.

Enterprisewide contracts:

Acquisition of Services in support of

the Department of the Navy and

Marine Corps SeaPort Enhanced

(SeaPort-e) (Approved May 2005)

Facilitate the implementation of an

enterprisewide approach to the

acquisition of services to implement

cost-effective and integrated

business practices to better support

the Department of the Navy.

Page 24 GAO-10-367 Contracting Strategies

Multiagency contracts and

enterprisewide contracts

Purpose and Reason

GWAC prices too high

Criticism regarding Agency

reliance governmentwide

acquisition contracts

Confusing for ordering

activities

Cannot ensure products are

in compliance with DOD

standards

Outside the continental

United States

Review and approval for the

use of non-DOD contract

vehicles

Create dependence on

external agencies

Vehicles do not include

required contract terms and

conditions

Enterprisewide contracts: Homeland

Security Enterprise Acquisition

Gateway for Leading-Edge

Solutions (EAGLE) (Approved

August 2005)

Provide a comprehensive range of

information technology support

services for use throughout the

agency through a centrally managed

program.

X X X

Enterprisewide contracts: Homeland

Security FirstSource (Approved

September 2005)

Provide access to a wide variety of

information technology products for

use throughout the agency through a

centrally managed program.

X X X

Source: GAO analysis of agencies’ acquisition plans.

The analysis of alternatives did not discuss GWACs or other MACs in the acquisition strategy.

Analysis of alternatives was not discussed in the acquisition strategy.

The following examples provide more detail about why agencies created

MACs and enterprisewide contracts shown in tables 3 and 4.

• The Army cited several reasons for establishing their ITES-2S and

ITES-2H contracts—MACs for information technology hardware and

services-in 2005 and 2006. The Army wanted to standardize its

information technology contracts so each contract would include the

required Army and DOD security parameters. According to the Army,

GSA contracts do not automatically include these security

requirements and using a GSA contract would require adding these

terms to every order. The Army also cited timeliness concerns with

GSA contracts and GSA fees as reasons for establishing their own

contracting vehicles.

• The Department of the Navy cited numerous reasons for setting up its

SeaPort Enhanced program, an enterprisewide contract, established in

April 2001. According to the Department of the Navy Senior

Procurement Executive, the Department of the Navy created this

program to reduce costs associated with buying services. Program

officials stated there were problems with interagency contracting and

wanted to make sure they had more control over their procurements.

They stated further that GSA’s fees made its schedules programs cost

prohibitive. The Department of the Navy officials also stated they

wanted more insight into their procurements, which they could not

Page 25 GAO-10-367 Contracting Strategies

gain when using the GSA schedules. Finally, the Department of the

Navy also wanted to be able to use cost-reimbursable contracts, which

are not allowed by the GSA’s MAS program. The Department of the

Navy felt this prohibition hindered their efforts to make their

acquisitions efficient.

• In 2005, DHS established EAGLE and FirstSource contracting programs

that both involve enterprisewide contracts used for information

technology products and services. Officials stated the main reason

these programs were established was to avoid the fees associated with

using other contract vehicles and save money through volume pricing.

In addition, the programs centralized procurements for a wide array of

mission needs among its many agencies. EAGLE was approved around

the time of Hurricane Katrina and DHS determined it would be easier

to coordinate assistance if the department had contractors together

under one program, which would allow DHS to better manage them.

Furthermore, DHS officials stated they wanted to be able to coordinate

the people managing the contracts, which did not happen when using

GSA contracts.

Other departments and agencies are moving toward awarding their own

contracts. For example, in late 2009, VA was in the process of establishing

a new MAC to provide an array of information technology services,

including program management, systems engineering, cybersecurity and

enterprise network systems. VA officials stated that this new contracting

program—called the Transformation Twenty-One Total Technology (T4)—

will help VA and others procure services at a lower fee than what VA

would pay by ordering through the GSA schedules program or the NASA

GWAC.

Vendors and Agency

Officials Expressed

Concerns about Contract

Duplication and

Associated Management

Efforts and Costs

We found the same vendors, on many different contract vehicles providing

information technology goods or services, which may be resulting in

duplication of goods and services being offered. See table 5 below

showing that the top 10 GWAC vendors, based on sales to the government,

offer their goods and services on a variety government contracts that all

provide information technology goods and services. For example, of the

13 different contract vehicles, 5 of the 10 vendors were on 10 or more of

these.

Page 26 GAO-10-367 Contracting Strategies

Table 5: Top 10 GWAC Vendors on GWACs, MACs, and Enterprisewide Contracts

Vendors

Type of contract by agency or military department 1 2 3 4 5 6 7 8 9 10

Selected GWACs

General Services Administration

Alliant. Designed to provide information technology solutions to federal agencies. X X X X X X X X

Applications’N Support for Widely-diverse End-user Requirements (ANSWER)

Expired. Can support an array of information technology services.

X X X X X X

Millennia. Provides information technology support for large system integration and

development. Expired.

X X X X X X

Millennia Lite. Provides information technology solutions. X X X X X X X

National Aeronautics and Space Administration

Scientific and Engineering Workstation Procurement (SEWP). Provides information

technology products.

X X

National Institutes of Health, Department of Health and Human Services

Chief Information Officer-Solutions and Partner 2 innovations (CIO-SP2i). Provides

wide range of information technology products, services, and solutions.

X X X X X X X X

Electronic Commodities Store III (ECS III). Offers computer hardware and software. X X X

General Services Administration Multiple Award Schedules

Information Technology X X X X X X X X X X

Selected MACs

Army

Information Technology Enterprise Solutions-2 (ITES-2). Provides information

technology service solutions and the purchase or lease of hardware.

X X X X X X X X X

Defense Information Systems Agency

ENCORE II. Provides information technology requirements. X X X X X X X

Department of Treasury

Total Information Processing Support Services (TIPSS-3). Provides a broad range

of information technology services.

X X X X X X

Selected enterprisewide contracts

Department of Homeland Security

Enterprise Acquisition Gateway for Leading-Edge Solutions (EAGLE). Provides

information technology service solutions.

X X X X X X X X

Department of Justice

Information Technology Support Services-3 (ITSS-3). Procurement of information

technology services.

X X X X X

Total 11 10 10 10 4 8 11 8 9 4

Source: GAO analysis of vendors’ and agencies’ data.

Note: Not all of the agencies or contract programs were included in our review.

Page 27 GAO-10-367 Contracting Strategies

Vendors and agency officials we met with expressed concerns about

duplication of effort among the MACs, GWACs, and enterprisewide

contracts across government, which they said can result in increased

procurement costs and an increased workload for the acquisition

workforce. A number of vendors we spoke with told us they offer similar

products and services on multiple contract vehicles and that the effort

required to be on multiple contracts results in extra costs to the vendor,

which they pass to the government through the prices they offer. The

vendors stated that the additional cost of being on multiple contract

vehicles ranged from $10,000 to $1,000,000 due to increased bid and

proposal and administrative costs. One vendor stated that they provide

similar goods and services on the Department of the Navy’s Seaport

Enhanced contract and their GSA schedule. In addition, we found one

vendor offering the exact same goods and services on both their GSA

schedule and the NASA’s GWAC and offering lower prices on the GWAC.

Another vendor stated that getting on multiple contract vehicles can be

cost-prohibitive for small businesses and forces them to not bid on a

proposal or to collaborate with a larger business in order to be on a

contract vehicle. Finally, a third vendor stated that GSA vehicles compete

with enterprisewide or agency-specific vehicles, and from industry's

perspective, it has introduced redundant buying capacity.

Government procurement officials expressed additional concerns. For

example, an official from OFPP has stated that such duplication of effort

only complicates the problem of an already strained acquisition

workforce. GSA officials have also remarked on the growth of

multiagency and enterprisewide contracts, which often compete directly

with GSA schedule contracts. The FAS Deputy Commissioner stated that

while the agencies cite GSA fees as a reason for creating their own

vehicles, agencies fail to consider the duplication of effort and cost of

doing these procurements. Rather, these agencies need to consider the

GSA fee as an opportunity cost for the agency if they do not have to create

their own contract. In addition, he noted that creating additional contracts

can place unnecessary demands on an already strained acquisition

workforce.

Page 28 GAO-10-367 Contracting Strategies

Recent legislation and OFPP initiatives are expected to strengthen

oversight and management of MACs, but these initiatives do not address

enterprisewide contracts. The 2009 National Defense Authorization Act

required, one year after its enactment, that the FAR be amended to require

that any MAC entered into by an executive agency after the amendment’s

effective date be supported by a business case analysis.

Under the act,

the FAR requirement for the business case is to include an analysis of all

direct and indirect costs to the federal government of awarding and

administering a contract and the impact it would have on the ability of the

federal government to leverage its buying power. However, the act is

silent on what steps an agency should take to examine the effect a new

contract will have on the ability of the government to leverage its buying

power. Additionally, the act does not address similar requirements for

enterprisewide contracts. Under the act, the pending FAR rule relating to

this legislation was required to be issued by October 15, 2009; however,

the rule was still in progress as of January 29, 2010.

The act also requires

an amendment of FAR to require that all interagency acquisitions include a

written agreement between the requesting agency and the servicing

agency that assigns responsibility for the administration and management

of the contract and a determination that the acquisition is the best

procurement alternative.

Legislation Requires the

FAR to be Amended to

Provide Requirements for

a Business Case Analysis

for MACs, but Does Not

Address Enterprisewide

Contracts

Senior procurement executives we met with were generally in favor of this

new requirement for MACs. For example, DOD representatives said that

the requirement would help them better manage MACs because it will

create metrics with which they can measure success. The NASA Senior

Procurement Executive noted that the new requirement could better

ensure that other agencies properly use the NASA contract vehicles.

However, VA officials representing the department’s Senior Procurement

Executive expressed concern about the time it might take to approve a

contract and ensure that agencies comply with the new requirement.

Duncan Hunter National Defense Authorization Act for Fiscal Year 2009, Pub. L. No. 110-

417 § 865 (2008).

Open FAR Case No. 2008-032, “Preventing Abuse of Interagency Contracts.” On the Open

FAR Cases, as of January 29, 2010, this case is described as to implement

Section 865 of the

National Defense Authorization Act for Fiscal Year 2009 (Pub. L. No. 110-417), which

addresses issues relating to interagency acquisitions. Also, on the Open FAR Cases, the

status of the case as of January 21, 2010, is stated as “OFPP identified draft interim FAR

rule issues” and “OFPP, FAR and DAR staff resolving issues.”

Page 29 GAO-10-367 Contracting Strategies

Nevertheless, a business case analysis approach for MACs has the

potential to provide a governmentwide approach to awarding MACs as

was pointed out by the SARA panel. The panel reported that proper

business planning requires management deliberation and accountability,

identification of the roles and responsibilities of the requiring and

servicing agency, and the means to communicate this to approving

officials. The panel noted that the OFPP review and approval process for

GWACs could serve as a good business model for approving MACs. Using

the GWAC process as a model, the full business case analysis as described

by the SARA panel, would need to include measures to track direct and

indirect costs associated with operating a MAC. It would also include a

discussion about the purpose and scope, and the amount and source of

demand. Further, the business case would need to identify the benefit to

the government along with metrics to measure this benefit. Moreover, the

agency seeking approval to establish a MAC would be required to identify

the planned contracting practices, the division of responsibilities between

the servicing agency and the customer agency, and the management

structure.

GSA’s MAS program is the largest government interagency contracting

program, with approximately 17,000 of the 19,000 contracts involved in the

federal supply schedules program, but GSA’s limited application of

selected pricing tools hinders its ability to determine whether it obtains

the best MAS contract prices. Because vendors do not compete against

each other to receive MAS contracts, GSA uses two regulatory controls to

obtain the best prices for its customers throughout the existence of the

MAS contracts they use. The first is the goal that GSA obtain the best

prices for MAS contracts that vendors offer their most favored customers.

The second is a price reduction clause in each MAS contract that generally

operates to reduce the MAS contract price after contract award whenever

the vendor lowers its prices for its similarly situated commercial

customers. GSA also uses tools such as pre-award audits and clearance

panel reviews to negotiate best prices and ensure the quality of contract

negotiations, respectively, but the use of these tools is limited to a

relatively small number of MAS contracts, thus hindering their

effectiveness. We also found several instances where GSA acquisition

centers did not hold clearance panel reviews as required. An advisory

panel established by GSA has made recommendations that could result in

changes to the program’s pricing controls and tools but concerns remain

that these changes could adversely affect GSA’s ability to negotiate best

prices.

GSA’s Efforts to

Determine Whether It

Obtains the Best

Prices on MAS

Contracts Is Hindered

by the Limited

Application of

Selected Pricing Tools

Page 30 GAO-10-367 Contracting Strategies

The goal of the MAS program, according to internal GSA guidance, is to

use commercial terms and conditions and the leverage of the government’s

volume buying to negotiate the best possible prices and terms for

customers and taxpayers.

Vendors do not compete against each other to

receive MAS contracts. Instead, GSA evaluates a vendor’s offer under a

multiple award schedule solicitation by comparing the terms and

conditions of the MAS contract solicitation to the terms and conditions of

the vendor’s agreements with its commercial customers, taking into

account factors such as prices and discounts offered to the vendor’s

commercial customers, sales volume, and contract length, in order to

establish price negotiation objectives.

Additional information on the

MAS contract award process is available in appendix II.

GSA Has Established Two

Key Regulatory Controls to

Obtain Vendors’ Best

Prices

The negotiation objective described above, which calls for comparing

prices and discounts that a vendor offers the government with the prices

and discounts that a vendor offers its similarly situated commercial

customers, is done as part of GSA’s goal to receive “most favored

customer” pricing for MAS contracts. When trying to achieve this

negotiation objective, GSA seeks to obtain the best price a vendor

provides its most favored customer while recognizing that there may be

legitimate reasons why the best price is not achieved given that terms and

conditions of commercial sales vary.

For example, a vendor may incur

more expenses selling to the government than to a customer who receives

the vendor’s best prices, which could justify a smaller price discount for

the government. Most favored customer pricing is one of the two key

regulatory provisions that GSA has established in its acquisition

regulations that work together to obtain the best prices throughout the life

of MAS contracts. The second pricing provision is the inclusion of a price

reduction clause in MAS contracts.

This provision provides price

protection for the government following contract award if a vendor lowers

GSA, Federal Supply Schedule Procurement Information Bulletin 04-2 (Jan. 30, 2004).

48 C.F.R. § 538.270(c).

Most favored customers are customers or categories of customers that receive the best

prices or discounts from vendors for similar purchases. 48 C.F.R. §§ 538.270; 538.271; and

538.272. GSA recognizes that the pursuit of most favored customer pricing is consistent

with the objective of negotiating a fair and reasonable price. (62 Fed. Reg 44,518, 44,519

(Aug. 21, 1997).) GSA regulations permit awards at prices greater than the most favored

customer price so long as the award is in the best interest of the government and the price

is fair and reasonable. 48 C.F.R.§ 538.270(a) and (d).

48 C.F.R. §§ 538.272 and 552.238-75.

Page 31 GAO-10-367 Contracting Strategies

its prices to commercial customers during the contract period.

However,

GSA officials we spoke with said that they do not collect data to show how

often the price reduction clause is invoked to reduce schedule prices, as

the data they track on price adjustments for MAS contracts does not

specify whether the price is increased or reduced. Consequently, it is

difficult to assess whether the clause accomplishes its objective over the

life of the various schedule contracts. Despite this lack of data, several

vendors and MAS acquisition center officials we met with expressed

concerns about the resources and administrative burden required for

vendors to comply with the current pricing provisions. For example,

representatives of one vendor we met with noted the difficulty in defining

and tracking labor categories across a large company in order to comply

with the most favored customer pricing provision. On the other hand,

GSA Inspector General Officials we spoke with said that the pricing

provisions are essential tools to ensuring that GSA can negotiate best

prices for its customers.

Limited Use of Certain

MAS Pricing Tools Hinders

Their Effectiveness

In addition to its regulatory pricing controls, GSA also uses pre-award

audits, prenegotiation clearance panels and procurement management

reviews (PMR) as tools to negotiate favorable pricing outcomes and

ensure the quality of MAS contract negotiations. These tools also provide

information on MAS contracts’ compliance with the regulatory pricing

controls discussed above. However, GSA uses these tools primarily for a

small number of larger dollar value contracts, thus limiting its ability to

evaluate the effectiveness of the regulatory pricing controls and obtain the

best prices under MAS contracts.

One of these tools is the pre-award audit, conducted by the GSA Inspector

General. These audits enable contract negotiators to verify that vendor-

supplied pricing information is accurate, complete, and current before

The price reduction clause requires the contractor to maintain the negotiated

price/discount relationship between the government and the vendor’s customer or category

of customers on which the contract was predicated, as identified in the MAS contract. The

clause is triggered if the vendor lowers its price following contract award for the customer

that served as the basis of negotiation for the contract. 48 C.F.R. §§ 538.272, 538.271(c).

The clause does not apply to several categories of sales: (1) sales to commercial customers

under firm fixed-price definite quantity contracts with specified delivery in excess of the

MAS contract’s maximum order threshold; (2) sales to federal agencies; (3) sales to state

and local government entities under a MAS contract where the state or local government is

the customer that is the basis of award; or (4) sales caused by an error in quotation or

billing. 48 C.F.R. § 552.238-75(d).

Page 32 GAO-10-367 Contracting Strategies

contract award. Ultimately, the pre-award audits can result in lower

prices for the users of MAS contracts by identifying opportunities for GSA

to negotiate more favorable price discounts when awarding contracts

based on an analysis of the prices, terms, and conditions offered to the

vendor’s most favored customer. For example, a pre-award audit of an

office furniture vendor’s MAS contract with an estimated value of

approximately $700 million identified the potential for greater discounts

that could result in savings of approximately $20 million over the contract

period given that the government was the vendor’s largest customer. For

contract extensions, these audits can also review compliance with the

price reduction clause in the prior contract period.

Following a decline in the number of pre-award audits--and associated

cost avoidance--in the early 2000s compared to earlier years, GSA

increased the number of pre-award audits in recent years by providing

additional funding to the GSA Inspector General to perform the reviews,

allocating $5 million annually for pre-award audits.

As a result, the GSA

Inspector General has identified almost $4 billion in potential cost

avoidance through pre-award audits from fiscal years 2004 through 2008.

Figure 2 below shows the increase in identified MAS contract cost

avoidance as the number of pre-award audits has increased in recent

years:

Beginning in fiscal year 2009, GSA moved to fund pre-award audits through direct

appropriations to the GSA Inspector General instead of reimbursable funding from GSA.

Page 33 GAO-10-367 Contracting Strategies

Figure 2: GSA MAS Pre-Award Audits, Fiscal Years 1998 through 2008

Cost avoidance (dollars in millions)

Number of MAS pre-award audits

200

400

600

800

1,000

1,200

20082007200620052004200320022001200019991998

Source: GSA Inspector General data.

Fiscal year

Cost avoidance

Number of MAS pre-award audits

Note: Cost avoidance data are presented in fiscal year 2009 dollars.

While the number of pre-award audits and identification of potential cost

avoidance has increased in recent years, GSA could be missing additional

opportunities for cost savings on MAS contracts by not targeting for

review more contracts that are eligible for audit. GSA guidance instructs

contract negotiators to request audit assistance for new contract offers

and extensions as appropriate when a contract’s estimated sales exceed

$25 million for the 5-year contract period.

However, not all contracts

that meet this threshold receive an audit, and the current number of aud

represents a very small number of contracts relative to the size of the MAS

program. For example, 69 pre-award audits were completed in fiscal year

2008. In addition, for the GSA Inspector General’s audit planning effort for

the two year period of 2009 through 2011, more than 250 contracts that

exceeded the $25 million threshold were not selected for audit due to

resource constraints, compared to 145 contracts that were. These 145

its

Contracts that fall below the $25 million threshold may also be selected for audit based on

issues such as a specific concern with a vendor’s MAS contract.

Page 34 GAO-10-367 Contracting Strategies

contracts, with an award value of approximately $4.7 billion, represent

only 2 percent of the total award dollars for all MAS contracts.

GSA uses other tools designed to improve the quality of MAS contract

negotiations, but their effectiveness is limited by incomplete

implementation and a narrow scope. In 2003, GSA established an

Acquisition Quality Measurement and Improvement Program, which was

designed to create management controls to assess and improve the quality

of MAS contract negotiations. This program included a prenegotiation

clearance panel process to help MAS acquisition center management

ensure the quality of its most significant contract negotiations. Under this

initiative, MAS acquisition centers hold meetings on contracts that meet a

defined dollar threshold to review the contract’s negotiation objectives

with an emphasis on pricing.

MAS acquisition center officials we spoke with said the panel reviews

were a valuable tool to ensure that contract negotiators have done a

proper market analysis to support the contract’s pricing and that the

processes used within an acquisition center to negotiate and award

contracts are consistent. Nevertheless, we found that acquisition centers

had not fully implemented the panel reviews, thus limiting their

effectiveness. We identified several instances of contracts that met their

acquisition center’s dollar threshold where there was no indication that a

panel review was held. These ranged from one contract for consulting

services with an estimated value of $12.5 million to another for

information technology equipment and services with an estimated value of

approximately $276 million. GSA officials we spoke with regarding the

panel reviews said that they do not check whether contracts that met the

appropriate threshold received a panel review, even though this is

supposed to be done as part of the panel reporting process. In addition,

the GSA Inspector General recently reported that GSA had not clearly

defined management reporting responsibilities for the panel reviews

following the reorganization of the FAS, further limiting the intended

benefits of the initiative. In response to these issues, GSA has begun the

process of updating its prenegotiation clearance panel guidance to reflect

the current FAS management structure and review whether panel reviews

were completed for contracts that met or exceeded the panel thresholds,

which it plans to finalize in 2010.

Among the MAS Acquisition Centers we reviewed, the prenegotiation clearance panel

thresholds ranged from $1.8 million to $25 million in estimated annual sales.

Page 35 GAO-10-367 Contracting Strategies

GSA also conducts PMRs through its Office of the Chief Acquisition

Officer to assess the quality of contract negotiations through a review of

selected contract files’ compliance with statutes, regulations, and internal

policy and guidance. The reviews replaced a similar effort that was part of

the Acquisition Quality Measurement and Improvement Program, and

cover a number of acquisition organizations within GSA, including MAS

acquisition centers. In terms of MAS contract pricing, the PMRs review

whether a contract’s discounts, terms and conditions are equal to or better

than those for the vendor’s most favored customer, and whether the

contract negotiator properly documented how the contract’s price was

determined to be fair and reasonable, among other things. Following the

review, the acquisition center receives a report that includes the review’s

findings, as well as recommendations for improvement that require

corrective action plans. In PMR reports we reviewed from fiscal years

2008 and 2009, we found several examples of PMR findings relating to

deficiencies in MAS contract pricing including: insufficient file

documentation to support price reasonableness; files that did not clearly

establish the price/discount relationship with vendors’ categories of

customers; and contract files that did not address which of the vendor’s

customers would serve as the basis for the price reduction clause.

While the PMRs can be a valuable tool for identifying areas for

improvement in MAS contract negotiations and pricing, the scope of the

reviews has been limited to a small number of MAS contracts, thus

minimizing their usefulness for assessing trends in MAS contracts’

compliance with GSA policy and guidance. In the PMR reports we

reviewed, GSA’s PMR team selected samples of between 12 and 16

contracts for review at each MAS acquisition center, a small amount

relative to the universe of approximately 17,000 MAS program contracts,

and at the time of our fieldwork, the selection methodology did not focus

on risk or yield a statistical sample of contracts for review. GSA officials

that manage the PMR process said that the number of contracts in each

sample they review makes it difficult to derive trends from the PMR

review findings, although a subsequent update to GSA’s PMR methodology

to focus on attempting to select a statistical sample of contracts for review

could address this issue.

Advisory Panel

Recommendations on

Pricing Provisions Raise

Concerns

Recently, GSA has attempted to examine the relevance of GSA’s pricing

controls established to obtain the best available pricing for MAS contracts

in the current marketplace. In 2008, GSA established an advisory panel to

examine the MAS program’s most favored customer and price reduction

regulatory provisions in the context of current commercial pricing

Page 36 GAO-10-367 Contracting Strategies

practices. The panel, comprised of both government and industry

representatives, met 16 times, receiving testimony from 30 program

stakeholders. The panel issued its report in February 2010, which

contained 20 recommendations regarding the MAS program, several of

which address GSA’s MAS pricing provisions. Specifically, the panel

recommended that GSA eliminate the price reduction clause for MAS

services and product contracts on the basis that new statutory competition

requirements (known as “fair opportunity” requirements)

and additional

data collection on MAS orders should ensure that the government receives

competitive prices.

Regarding the price objective for MAS contracts, the

panel recommended that GSA issue clear guidance to implement the price

objective for MAS contracts to obtain fair and reasonable prices at the

time of contract award. MAS Advisory Panel members and program

stakeholders we spoke with stated that this could mean that the “most

favored customer” price would no longer be the objective for the MAS

program. Senior Procurement Executives from GSA and VA, with whom

we spoke, both members of the panel, had differing opinions on the

panel’s draft recommendations. The GSA Senior Procurement Executive

noted that the pricing provisions had not served their intended purpose,

and that competition for orders would make the provisions irrelevant. The

VA Senior Procurement Executive, however, was in favor of retaining the

price reduction clause for products, and said that the most favored

customer price objective provides some assurance of market pricing for

goods and services. He also said that the elimination of the price

The panel recommended that GSA eliminate the price reduction clause for services

immediately and eliminate the clause in phases for goods on the assumption that GSA will

develop a solution to collect additional data and information on pricing at the order level

for use by GSA and other federal agencies, another panel draft recommendation. The

information would then be used to conduct market research, determine fair and reasonable

pricing at the contract level and competition at the order level. The panel envisioned that

the phasing in of this recommendation would occur as contract options are exercised or

recompeted.

Section 863 of the Fiscal Year 2009 National Defense Authorization Act (Pub. L. No. 110-

417) extended “fair opportunity” competition requirements from the Department of

Defense to all executive agencies. Under these requirements, which previously applied to

the Department of Defense (DFARS 208.405-70), agencies are required to make purchases

of goods and services on a competitive basis by providing all contractors under a multiple

award contract notice of the intent to make the purchase and to afford all contractors an

opportunity to make an offer. Notice can be provided to fewer than all contractors offering

the goods or services if notice is provided to as many contractors as practicable. However,

a purchase cannot be made under a notice provided to fewer than all contractors unless

offers were received from at least three qualified contractors or a determination is made

that no additional qualified contractors were able to be identified despite reasonable

efforts to do so.

Page 37 GAO-10-367 Contracting Strategies

reduction clause would have a negative impact on cost recoveries from

VA’s pre- and post-award audits for its schedule contracts.

GSA will need to consider several issues as it evaluates the panel’s

recommendations. First, while the panel made efforts to collect data to

assist it in its deliberations, there is minimal quantitative data in the

panel’s report to support its conclusions. For example, although the panel

reported that those who testified before it said that the price reduction

clause is rarely triggered, GSA (as noted earlier) does not track data on the

number of contract modifications due to price reductions.

Second, while the panel reported that competition for MAS orders is the

best way to ensure that the government receives competitive prices, there

may be risks in relying solely on competition as a substitute for these

pricing provisions. For example, DOD, the largest MAS customer, has

been subject to fair opportunity competition requirements since 2002, but

DOD’s analysis of competition data for fiscal year 2008 shows that fair

opportunity was not given on more than one-third of DOD’s MAS orders,

which totaled approximately $3.6 billion.

Our prior work and numerous

DOD Inspector General reviews have also identified problems with the

implementation of this requirement, such as issues with excessive waivers

of the requirement and repeated instances of orders that did not provide

for sufficient competition.

Third, changes to the MAS program pricing objective could also have an

adverse impact on the program’s pricing tools. For example, elimination

of most favored customer as the pricing objective could impair the ability

of the GSA Inspector General to identify potential cost avoidance in its

pre-award audits of MAS contracts. GSA Inspector General

representatives told us that the most favored customer pricing objective is

critical to their evaluation of vendors’ price proposals. Moreover, they

said that if GSA adopts the panel’s proposals, their ability to continue

identifying potential cost avoidance for MAS contracts would depend on

whether GSA establishes another negotiation objective as a replacement

DOD, Department of Defense’s Competition Report for FY 2008 (Washington, D.C.: Mar.

4, 2009).

GAO, Contract Management: Guidance Needed to Promote Competition for Defense

Task Orders, GAO-04-874 (Washington, D.C.: July 30, 2004). Department of Defense Office

of Inspector General, Summary of DOD Office of Inspector General Audits of Acquisition

and Contract Administration (Arlington, Va.: Apr. 22, 2009).

Page 38 GAO-10-367 Contracting Strategies

for “most favored customer.” Our prior work has also highlighted the

importance of having a price objective that leverages the government’s

buying power, as agencies may not pursue additional discounts when

placing MAS contract orders. In our recent review of 336 blanket

purchase agreements based on MAS contracts,

agencies did not seek

price discounts when they established blanket purchase agreements in

almost half of the instances reviewed,

despite the fact that they are

required to do so.

GSA lacks data about the use of the MAS program by customer agencies

that it could use to determine how well the MAS program meets its

customers’ needs and to help its customers obtain the best value in using

MAS contracts. In addition, the decentralized management structure for

the MAS program hinders consistent implementation of the MAS program

within GSA, as well as program wide oversight. The MAS Program Office,

established in 2008 to manage strategic and policy issues, lacks direct

oversight authority for the MAS program, as GSA has dispersed

responsibility for the management of individual contract schedules among

nine different acquisition centers under three business portfolios.

According to some MAS program officials, this has impaired the consistent

implementation of policies across the MAS program and the sharing of

best practices, and the GSA Inspector General has identified issues with

oversight of the MAS program. Finally, there are shortcomings in

assessment tools that also result in management challenges. For example,

MAS performance measures are inconsistent across the GSA organizations

that manage MAS contracts, including inconsistent emphasis on pricing,

which limits GSA’s ability to have a program wide perspective on its

operations.

Effective MAS

Program Management

Is Hindered by a Lack

of Data, a

Decentralized

Management

Structure, and

Shortcomings in

Assessment Tools

Agencies may establish blanket purchase agreements under the MAS program. Blanket

purchase agreements are intended to be a simplified method of fulfilling repetitive needs

for supplies and services that also provide an opportunity to seek reduced pricing from

vendors’ MAS contracts

GAO, Contract Management: Agencies Are Not Maximizing Opportunities for

Competition or Savings Under Blanket Purchase Agreements Despite Significant

Increase in Usage, GAO-09-792 (Washington, D.C.: Sept. 9, 2009).

FAR Subpart 8.4 requires ordering activities to seek price discounts from MAS vendors

when establishing blanket purchase agreements.

Page 39 GAO-10-367 Contracting Strategies

GSA lacks important data that would facilitate more strategic management

of the MAS program. GSA officials told us that because agency customers

generally bypass GSA and place their orders directly with MAS vendors,

they lack data on the orders placed under MAS contracts; as a result, GSA

also lacks data on the actual prices paid relative to the MAS contract

prices. GSA does offer two electronic procurement tools, GSA Advantage

and e-Buy, which permit agencies to place MAS contract orders with

vendors and post requests for quotes with vendors. GSA Advantage also

has a spend analysis reporting tool that provides agencies with sales and

statistical data on their orders through the system. However, these tools

account for a very small percentage of overall MAS program sales and

have other limitations in their use, thus restricting the amount of data

available. In fiscal year 2008, customer sales through GSA Advantage

totaled approximately $559 million, representing only 1.5 percent of total

program sales, and GSA officials we spoke with said that its use is limited

to procuring goods as opposed to services. GSA officials also said that

while customers can use e-Buy to post requests for quotes of any size and

fulfill fair opportunity competition requirements, they do not generally use

e-Buy to place orders due to its inability to process orders greater than the

micro-purchase threshold of $3,000.

GSA Lacks Important Data

to Strategically Manage

MAS Contracts and Pricing

There are several drawbacks to the lack of available transactional data on

the goods and services ordered under the MAS program and the prices

paid. First, it hinders GSA’s ability to evaluate program performance and

manage the program strategically. Our prior work has highlighted the

importance of having comprehensive spend data as part of a successful

approach to procurement, noting that the use of procurement data to

determine how much is being spent for goods and services and to identify

buyers and suppliers can identify opportunities to leverage buying, save

money, and improve performance.

Several GSA officials acknowledged

that it is difficult for GSA to know whether the MAS program meets their

customers’ needs without data on who uses MAS contracts and what they

are buying. Furthermore, the GSA Inspector General has recommended

that GSA take steps to collect this data to use in evaluating customer

buying patterns and competition at the order level in order to adopt a

GAO, Best Practices: Using Spend Analysis to Help Agencies Take a More Strategic

Approach to Procurement, GAO-04-870 (Washington, D.C.: Sept. 16, 2004).

Page 40 GAO-10-367 Contracting Strategies

more strategic management approach.

We have made similar

observations in prior reports going back several decades.

Secondly, the lack of data could limit the ability of GSA and its customers

to achieve the best value in terms of MAS prices. Some GSA officials

informed us that they could possibly use transactional data to negotiate

better prices on MAS contracts. For example, one MAS acquisition center

official said that if they saw large percentage discounts off the contract

price on orders, they would question the price during the next contract

option period. Program stakeholders also expressed concerns regarding

the lack of MAS program data. Several of the agency contracting officers

we spoke with cited benefits of having additional transactional data on

MAS orders. For example, one contracting officer said additional data

could improve their negotiating position when buying goods and services,

while two others said it would increase visibility over their purchases.

Similarly, the MAS Advisory Panel has recommended that GSA make

order-level pricing information available to MAS contract negotiators and

agency contracting officers to conduct market research and assist in price

reasonableness determinations. In addition, a number of the senior

acquisition officials at agencies in our review said that they considered the

prices on MAS contracts to be too high, and without additional data from

GSA, it was difficult to see the value in the MAS program and the prices

that GSA negotiates. As noted earlier in this report, agencies we met with

cited similar concerns over GSA’s prices as a reason they created new

MAC and enterprisewide contracts. A number of these officials also said

that GSA should play a role in providing this data to its customers to assist

in their strategic procurement efforts.

MAS vendors, GSA officials and agency contracting officers we met with

had mixed opinions on the best way to collect this data, which might

include collecting data from MAS vendors, customer agencies, or through

greater use of electronic ordering portals like GSA Advantage. GSA

officials also told us that they have initiated a process improvement

initiative to collect more transactional data in the future, as they make

General Services Administration Office of Inspector General, Review of Multiple Award

Schedule Program Contract Workload Management (Kansas City, Mo.: July 31, 2007).

GAO, Management of Federal Supply Service Procurement Programs Can Be Improved,

GAO/PSAD-75-32 (Washington, D.C.: Dec. 31, 1974); and Ineffective Management of GSA’s

Multiple Award Schedule Program—A Costly, Serious, and Longstanding Problem,

GAO/PSAD-79-71 (Washington, D.C.: May 2, 1979).

Page 41 GAO-10-367 Contracting Strategies

improvements to information systems that support the MAS program.

However, this initiative is currently in its early stages.

Decentralized Management

Structure Limits

Consistent Program

Implementation and

Oversight

Responsibility for management of the MAS program is dispersed among

several different organizations in FAS, which has resulted in program

management challenges due to inconsistent implementation of policies

and guidance and program oversight weaknesses. Following the

reorganization of GSA that created FAS, the agency established the MAS

Program Office in July 2008 to provide a structure for consistent

implementation of the MAS program. The program office’s charter

provides it broad responsibility for MAS program policies and strategy,

and established a Governance Council comprised of representatives from

across FAS as well as VA to help foster collaboration in the MAS program.

To date, the office has undertaken several initiatives to fulfill its charter.

The Governance Council recently developed a set of strategic priorities for

the MAS program for the upcoming years, including the development of

additional training on the MAS program for both GSA and agency

contracting personnel, expanded customer outreach, and the improvement

of information systems that support the program. As part of its

responsibility to support process improvement efforts, the program office

has also undertaken initiatives to digitize MAS contract files and

implemented a pilot program to process MAS contract modifications

electronically.

While the MAS Program Office is responsible for ensuring consistency in

the MAS program, responsibility for managing the operation of individual

schedules resides with nine different acquisition centers under three

business portfolios. None of these business portfolios—which manage

other acquisition programs in addition to the MAS program—or the MAS

acquisition centers that award and manage MAS contracts are under the

direct management of the MAS Program Office. In addition, the program

office’s charter does not specifically provide it with direct oversight of the

business portfolios’ and acquisition centers’ implementation of the MAS

program. Figure 3 below depicts the organizational structure of the MAS

program.

Page 42 GAO-10-367 Contracting Strategies

Figure 3: MAS Program Organizational Chart

Integrated Technology

Services

General Supplies and

Services

Travel, Motor Vehicle, and

Card Services

Federal Acquisition

Service

Acquisition

Management

Center for Innovative

Acquisition

Development

Office of Vehicle

Acquisition and

Leasing Services

Center for Facilities

Maintenance and

Hardware

Greater Southwest

Acquisition Center

Management

Services Center

Integrated Workplace

Acquisition Center

National Administrative

Services and Office

Supplies Acquisition

Center

Center for Travel

and Transportation

MAS Program

Office

Center for IT Schedule

Programs

Source: GSA.

MAS Program Office officials stated that despite not having direct

authority over the organizations that manage the MAS program, they are

able to work through issues that arise with the business portfolios.

However, GSA officials in MAS acquisition centers as well as some MAS

vendors we spoke with had varying opinions about the program’s current

management structure. Some MAS program officials, vendors, and

Page 43 GAO-10-367 Contracting Strategies

program stakeholders gave positive feedback on the Program Office’s

efforts to date. For example, one vendor stated that the electronic

modification effort had made processing contract updates easier and more

transparent. Furthermore, some GSA officials and industry

representatives we spoke with said that the program office’s governance

council provided the acquisition centers with input on policy and strategy

issues, and that the program office was making progress with the strategic

management of the MAS program. However, other MAS program officials

stated that the program is still not managed in a coordinated way and that

there is a lack of communication and consistency among MAS acquisition

centers which impairs the consistent implementation of policies across the

program and the sharing of information between business portfolios. For

example, one MAS acquisition center official we spoke with said that the

lack of communication among portfolios has hindered their ability to

respond to vendor questions relating to schedules under other portfolios.

The GSA Inspector General has expressed similar concerns, noting in a

recent report that inconsistent pricing policy among MAS acquisition

centers had contributed to instances in which the government did not have

assurance of the reasonableness of MAS contract pricing, and that there

were opportunities for a more consistent approach in pursuing volume

discounts for MAS contracts.

The report also found that a lack of clearly

defined responsibilities within the new FAS organization has harmed

national oversight of the MAS program and may have affected the sharing

of best practices between acquisition centers. While at the time of our

work the MAS Program Office was a relatively new organization within

FAS, the issues identified with consistency of program implementation

and the use of pricing tools identified earlier in this report highlight the

challenges the office will face in providing coherent program oversight in

the future.

General Services Administration Office of Inspector General, Review of Consistency in

Implementing Policy Across Acquisition Centers (Arlington,Va.: Sept. 2009).

Page 44 GAO-10-367 Contracting Strategies

In addition to a lack of data and a decentralized management structure,

shortcomings in assessment tools also create MAS program management

challenges. Our prior work on performance measurement in the federal

government noted that when complex program goals are broken down

into a set of performance measures, it is important to ensure that the

measures sufficiently cover the key aspects of an agency’s performance,

and that the overall measurement of performance does not become biased

by measures that assess some priorities while neglecting others.

GSA has

developed performance measures for the organizations that manage the

MAS program to establish accountability for program performance and

drive continual improvement. They include measures for sales volume,

program costs, and time to complete contracting actions such as

processing contract offers and modifications. While these may be valid

measures of program performance, the measures are inconsistent among

the organizations and do not place as much emphasis on pricing, a key

aspect of the program, making it difficult to have a program wide

perspective of MAS program performance. For example, the fiscal year

2009 performance scorecard for the Information Technology Schedule has

a performance measure to track state and local government sales, while

the General Supplies and Services business portfolio, which also manages

a schedule that state and local governments can use, does not.

Furthermore, the Travel, Motor Vehicle, and Card Services business

portfolio has a draft performance measure for fiscal year 2010 related to

the quality of documentation in contract files, but the Information

Technology Schedule and the General Supplies and Services business

portfolio do not.

Limitations in Assessment

Tools That Focus on

Internal Operations and

MAS Customers Also

Hinder Effective Program

Management

There are also inconsistencies in the extent to which the organizations

measure performance as it relates to MAS contract pricing. The

Information Technology Schedule has tracked price competitiveness for

its products by comparing prices for MAS vendors on GSA Advantage to

prices for the same products in the private sector, with a goal for GSA’s

prices to be at least 10 percent less. Similarly, the Travel, Motor Vehicle,

and Card Services business portfolio has established a performance

measure that will track how its prices compare against a baseline of prices

paid for similar products in the private sector. However, the General

Supplies and Services business portfolio does not track any measures

related to pricing. A GSA official in the FAS Office of Strategic Business

GAO, The Results Act: An Evaluator’s Guide to Assessing Agency Annual Performance

Plans, GAO/GGD-10.1.20 (Washington, D.C.: April 1998).

Page 45 GAO-10-367 Contracting Strategies

Planning and Process Improvement, which oversees performance

management, noted that they are in the early stages of internal discussions

regarding the development of performance measures related to quality,

which would address pricing, as well as developing a separate scorecard

for the MAS program.

GSA also uses an annual MAS customer satisfaction survey to assess MAS

customers’ perspectives on MAS prices, information available on the MAS

program, and training efforts, among other things. The results of such

surveys can be used to monitor trends in customer satisfaction over time

and identify areas for improvement. OMB guidance for federal agencies

on statistical surveys advises that agencies should aim to achieve the

highest practical response rate, and conduct a nonresponse analysis when

response rates do not reach 80 percent, as lower response rates increase

the risk of bias in the survey results.

However, the MAS customer

satisfaction survey reports we reviewed for fiscal years 2007 through 2009

had a response rate of 1 percent or less, and did not include a nonresponse

analysis, raising concerns over the use of the surveys’ results to measure

MAS program performance. A GSA official who oversees the survey

acknowledged that the low response rate is an indicator that GSA should

improve its survey methodology.

Billions of taxpayer dollars flow through MACs, GWACs, the MAS

program, and enterprisewide contracts; however, the federal government

does not have a clear comprehensive view of who is using these contracts

and if they are being used in an efficient and effective manner—one that

minimizes duplication and advantages the government’s buying power by

taking a more strategic approach to buying goods and services.

Longstanding problems with the quality of FPDS-NG data on these

contracts and the lack of consistent governmentwide policy on the

creation, use, and costs of awarding and administering of some of these

contracts are hampering the government’s ability to realize the strategic

value of using these contracts. Furthermore, departments and agencies

may be contracting for the same goods and services across a myriad of

contracts—MACs, GWACs, the MAS program, and enterprisewide

contracts. A more comprehensive business case analysis for MACs and

Conclusions

Office of Management and Budget, Standards and Guidelines for Statistical Surveys

(Washington, D.C., 2006).

Page 46 GAO-10-367 Contracting Strategies

enterprisewide contracts could help ensure that these contracts are being

established and used in an efficient and effective manner.

Agencies are sometimes reluctant to turn to the GSA MAS program

because they are not confident that GSA prices are as low as they could be

and, as a result, create their own contracts. While GSA has established

pricing provisions and tools to use to ensure that it obtains the best prices

that vendors offer to their commercial customers and takes advantage of

price decreases after it awards its MAS contracts, some of these tools are

not applied effectively. Consequently, it is difficult for both GSA and

federal agencies to know whether MAS prices truly achieve the program’s

goal of providing best prices. Furthermore, the proposal to eliminate the

most favored customer price objective and price reduction clause could

further weaken GSA’s ability to negotiate best prices. In addition, GSA’s

decentralized program management structure and shortcomings in

program assessment tools and data create oversight challenges that

prevent GSA from obtaining reliable feedback from its customers and

managing the MAS program more strategically. Furthermore, given that

the MAS program is the government’s leading interagency contracting

program, it is important that OFPP stay informed of GSA’s plans to

address these issues, in order to identify potential lessons learned that

could be relevant for other interagency contracting programs.

Until these issues with interagency and enterprisewide contracts and the

MAS program are addressed, we believe the government will continue to

miss opportunities to minimize duplication and take advantage of the

government’s buying power through more efficient and more strategic

contracting.

To provide better transparency and a coordinated approach in awarding

MACs and enterprisewide contracts, we recommend that the Director of

the Office of Management and Budget direct the Administrator of the

Office of Federal Procurement Policy to take the following five actions in

conjunction with the agencies’ senior procurement executives:

Recommendations for

Executive Action

• Survey departments and agencies to update the 2006 Office of Federal

Procurement Policy Interagency Contracting Data Collection Initiative

to identify the universe of MACs and enterprisewide contracts in use

throughout federal departments and agencies and assess their utility

for maximizing procurement resources across agencies;

• Ensure that departments and agencies use the survey data to

accurately record these contracts in FPDS-NG;

Page 47 GAO-10-367 Contracting Strategies

• Establish a policy and procedural framework in conjunction with

agencies for establishing, approving, and reporting on new MACs and

enterprisewide contracts on an ongoing basis; the framework should

stress the need for a consistent approach to leveraging the

government’s buying power across departments and agencies while

continuing to use their statutory authorities for buying goods and

services;

• Assess the feasibility of establishing and maintaining a centralized

database, which could provide sufficient information on GWACs,

MACs, and enterprisewide contracts, for contracting officers to

conduct market research and make informed decisions on the

availability of existing contracts to meet the agencies’ requirements;

and

• As part of developing the pending FAR rule to implement the 2009

National Defense Authorization Act, ensure that departments and

agencies complete a comprehensive business case analysis as

described by the SARA panel, and include a requirement to address

potential duplication with existing contracts, before new MACs and

enterprisewide contracts are established.

To strengthen GSA MAS program pricing and management, we

recommend that the Administrator of the General Services Administration

take the following eight actions:

• In coordination with the GSA Inspector General, target the use of pre-

award audits to cover more contracts that meet the audit threshold;

• Fully implement the process that has been initiated to ensure that

vendors that meet the pre-negotiation clearance panel threshold

receive a panel review;

• When considering the MAS Advisory Panel recommendations to clarify

the price objective and eliminate the price reduction clause, ensure

that any alternative means to negotiate and determine best prices are

validated and in place before eliminating these pricing provisions,

• Collect transactional data on MAS orders and prices paid, possibly

through the expanded use of existing electronic tools or through a pilot

data collection initiative for selected MAS schedules and make the

information available to MAS contract negotiators and customer

agencies,

• Establish more consistent performance measures across the MAS

program, including measures for pricing;

• Take steps to increase the MAS customer survey response rate by using

a methodologically sound means to identify bona fide program users

and employing survey techniques that produce meaningful and

actionable information that can lead to program improvements;

Page 48 GAO-10-367 Contracting Strategies

• Clarify and strengthen the MAS program office’s charter and authority

so that it has clear roles and responsibilities to consistently implement

guidance, policies, and best practices across GSA’s acquisition centers

including policies and practices related to the above recommendations;

and

• Report GSA’s plans to address these recommendations to the

Administrator of the Office of Federal Procurement Policy.

We provided a draft of this report to OMB, DOD, Department of Health

and Human Services, DHS, VA, GSA, and NASA. We received email

comments from OMB. We also received email comments from DHS, VA

and NASA noting that they had no technical comments. We received

written comments from DOD, the Department of Health and Human

Services, and GSA, which are included as appendixes III-V.

Agency Comments

and Our Evaluation

OMB concurred with our recommendations in its response. NASA’s

response stated that it found our report to be complete, concise, and

accurate and provided a balanced view of issues. In their written

responses, GSA and the Department of Health and Human Services

concurred with our recommendations and DOD stated that it looks

forward to working with the OMB’s Administrator for OFPP and with GSA

on their efforts to implement the recommendations. In addition, the GSA

Inspector General provided technical comments on the topic of pre-award

audits that we incorporated into the report as appropriate.

In its comments on a draft of this report, OMB agreed with our assessment

that interagency and enterprisewide contracts should provide an

advantage to the government by leveraging the government’s buying

power and maximizing efficiencies in the procurement process. OMB also

stated that the growth in the use of interagency contracting vehicles raises

concerns about potential duplication and redundancy of effort and

capacity. OMB further stated that it is actively engaged in initiatives to

improve transparency into these vehicles as well as the governance,

reporting and regulations covering the establishment, management, and

use of interagency contracts. Finally, OMB stated that it agrees that

governmentwide guidance in this area will help the government to

effectively leverage, manage, and oversee these contracts.

In written comments on a draft of this report, GSA stated that it agreed

with our findings and recommendations pertaining to GSA and agreed to

make additional efforts to improve MAS program pricing and

management. GSA also stated that it plans to brief the Administrator of

Page 49 GAO-10-367 Contracting Strategies

the OFPP on its plans to implement the recommendations. In addition,

GSA noted the key role that competition plays in helping agencies achieve

the best value through the MAS program. Specifically, GSA stated that the

pre-award audit cost avoidance amounts identified by the GSA IG do not

account for additional price reductions that might be realized from other

regulatory procedures in the FAR that call for users of the MAS program to

seek competition and additional price reductions on MAS orders. As

noted in our report, the pre-award amounts reflect cost avoidance in the

negotiated contract-level prices for MAS contracts as opposed to order-

level prices, which GSA acknowledges are challenging to collect

information on. In addition, GSA stated in its written comments that the

requirement for ordering activities to seek price discounts at the order

level is an additional key regulatory pricing control for the MAS program.

While competition and requirements to seek additional price discounts are

key aspects of ensuring that agencies can achieve the best value through

the MAS program, we note that our objective was to evaluate the

effectiveness of the tools and controls GSA uses to obtain the best

possible prices for its customers in negotiating MAS contract prices, as

opposed to tools used at the ordering level by agencies. Finally, as noted

in our report, our recent review of 336 MAS blanket purchase agreements

found that agencies did not seek additional price discounts as required by

the FAR in almost half of the instances reviewed. These points highlight

the importance of GSA’s role in using pricing tools to negotiate the best

possible prices up front for its MAS contracts.

OFPP, DOD, Department of Health and Human Services, and GSA also

provided technical comments, which were incorporated as appropriate.

As agreed with your offices, unless you publicly announce the contents of

this report earlier, we plan no further distribution of it until 30 days from

the date of this report. We will then send copies of this report to

interested congressional committees; the Director of the Office of

Management and Budget; the Secretaries of Defense, Health and Human

Services, Homeland Security, and Veterans Affairs; and the Administrators

of the General Services Administration and the National Aeronautics and

Space Administration. The report also is available at no charge on the

GAO Web site at http://www.gao.gov. If you or your staff have any

Page 50 GAO-10-367 Contracting Strategies

questions about this report, please contact me at (202) 512-4841 or

[email protected]. 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 on

John K. Needh

appendix VI.

Director

urcing

ent

Acquisition and So

Managem

Page 51 GAO-10-367 Contracting Strategies

Appendix I: Scope and Methodology

Our overall objective was to address management issues associated with

the growth in the use of interagency contracting vehicles and

enterprisewide contracts, and especially the management of the General

Services Administration’s (GSA) multiple award schedule (MAS) program

contracts. To conduct this review we selected agencies that established or

used the MAS, governmentwide acquisition contract (GWAC), multiagency

contract (MAC) or enterprisewide contract programs. The six agencies

and three military departments selected in our review were responsible for

almost 87 percent of total federal procurement obligations in fiscal year

2008. We met with representatives from the Office of Management and

Budget’s Office of Federal Procurement Policy (OFPP), selected agencies’

Senior Procurement Executives or representatives, and selected Heads of

Contracting Activities and contracting officers at the departments and

agencies included in our review. We also met with vendors and several

private sector organizations that represent the vendor community. See

table 6 below for a list of agencies, reason for selection, and contracting

activities included in our review.

Table 6: Federal Agencies and Military Departments Included in Our Review

Agency/military department Reason for selection Contracting activities reviewed

Office of Management and Budget, Office of

Federal Procurement Policy

Responsible for governmentwide

procurement guidance and policies.

Department of Defense

Responsible for Department of Defense-

wide procurement guidance and policies.

Washington Headquarters Services,

Washington D.C.

Department of the Air Force Responsible for the Enterprise Information

Technology Acquisition (EITA) contract.

District of Washington Acquisition

Division, Contracting, Washington D.C.

Electronic Systems Center Hanscom Air

Force Base, Massachusetts

Department of the Army Responsible for multiagency contracts. Army Medical Research and Materiel

Command, Medical Research Acquisition

Activity, Ft. Detrick, Maryland

Department of the Navy Responsible for an enterprisewide contract-

SeaPort Enhanced.

Space and Naval Warfare Systems

Command, San Diego; California

Space and Naval Warfare Systems

Center Atlantic, North Charleston, South

Carolina

Department of Health and Human Services,

National Institutes of Health

Responsible for three governmentwide

acquisition contract programs.

Centers for Medicare and Medicaid

Services, Baltimore, Maryland

Department of Homeland Security Responsible for two enterprisewide contract

programs-Enterprise Acquisition Gateway

for Leading-Edge Solutions and

FirstSource.

Federal Law Enforcement Training

Center, Glynco, Georgia;

Federal Emergency Management

Agency, Washington D.C.

Appendix I: Scope and Methodology

Page 52 GAO-10-367 Contracting Strategies

Appendix I: Scope and Methodology

Agency/military department Reason for selection Contracting activities reviewed

Department of Veterans Affairs Delegated responsibility for a portion of the

multiple award schedule program.

General Services Administration Directs and manages the multiple-award

schedule program and a number of

governmentwide acquisition contract

programs.

Mid-Atlantic Region, Acquisition

Operations Division, Philadelphia,

Pennsylvania

National Aeronautics and Space

Administration

Responsible for the governmentwide

acquisition contract, Solutions for

Enterprise-Wide Procurement IV.

Source: GAO analysis.

Within the Department of Defense, we also reviewed the Defense Information Systems Agency

responsible for a number of MAC programs.

It was determined that the Air Force contract program was neither a MAC nor an enterprisewide

contract program.

In addition, we used a structured interview process to discuss our review

objectives with a mix of 16 large and small vendors with high sales on the

GSA MAS program and also awarded GWACs, MACs, or enterprisewide

contracts. Table 7 identifies the vendors included in our review.

Table 7: Vendors Included in Our Review

Booz Allen Hamilton, Incorporated,

McLean, Virginia

Business Technologies and Solutions,

Incorporated, Beavercreek, Ohio

Computer Sciences Corporation, Falls

Church, Virginia

Dell Federal Systems Corporation, Round

Rock, Texas

General Dynamics Information Technology,

Fairfax, Virginia

Government Acquisitions, Incorporated,

Cincinnati, Ohio

International Business Machines

Corporation, Bethesda, Maryland

MELE Associates, Incorporated, Rockville,

Maryland

MicroTech, Incorporated, Vienna, Virginia Orbis, Incorporated, Mount Pleasant, South

Carolina

Presidio Networked Solutions, Greenbelt,

Maryland

Raytheon Company, Arlington, Virginia

Science and Technology Corporation,

Hampton, Virginia

Science Applications International

Corporation, McLean, Virginia

SPARTA, Incorporated, Lake Forest,

California

SRA International, Incorporated, Fairfax,

Virginia

Source: GAO presentation of vendor‘s data.

To determine the magnitude of interagency contracting and the extent to

which policies and guidance exist to establish, oversee, and manage

MACs, GWACs, and enterprisewide contracts, we tried to identify the

universe of these contract vehicles. We found that an official central list of

these vehicles did not exist. We also tried to use the Federal Procurement

Page 53 GAO-10-367 Contracting Strategies

Appendix I: Scope and Methodology

Data System-New Generation (FPDS-NG) to identify these vehicles but

found this system did not adequately identify these vehicles. To determine

if the data on interagency contracts were reliable we tried to verify some

of the data generated from FPDS-NG. For instance, FPDS-NG includes a

data field that is intended to identify GWACs but we found a number of

instances where known GWACs were coded incorrectly. For example, the

Environmental Protection Agency has a number of GWACs but when we

searched on the contract numbers in FPDS-NG, none of the GWAC

contracts were correctly coded as a GWAC. Similarly, some of the

National Institutes of Health GWAC contracts were not correctly coded.

We also searched the system by contract number for MACs that we were

aware of and found similar issues, with some contracts coded properly as

MACs and some not.

This lack of reliability with FPDS-NG data made it

impossible to determine the universe of these types of contracts. Despite

its critical role, we have consistently reported on FPDS-NG data quality

issues over a number of years.

Accordingly, we conducted literature

searches, reviewed 13 agencies’ and departments’ Web pages and also

selected the ten largest government contractors’ which received the most

GWACs procurement obligations in fiscal year 2008 and reviewed their

Web pages to identify examples of MACs, GWACs, and enterprisewide

contracts. This produced a list of 14 MAC programs, 9 GWAC programs,

and 7 enterprisewide contracting programs, but we acknowledge that it

likely understates the total number of these programs. Based on this list,

To identify a contract as a multiagency contract we searched for indefinite delivery

contracts (IDC) that were also coded as being governed by the Economy Act—which most

MACs are—and also if that contract was used by an agency other than the agency that

entered into the contract.