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State, Local BuyingPlan Hits Snag

By Dennis McCafferty

Staff Writer

As recently as last month, the likelihood of state and local governments shopping off the U.S. General Services Administration schedule seemed like a sure thing.

But deliberations in Congress over a $5.5 billion disaster relief bill - along with a potential veto by President Clinton - have put the proposal on life support, industry leaders say.

In approving the bill this month, the U.S. Senate passed an amendment that effectively killed the proposal, which is commonly called cooperative purchasing. Members of the House are voicing support for a compromise that would allow state and local governments to buy technology-related items through GSA. But the Clinton administration has indicated it will veto the bill if it contains an unrelated provision to prevent government shutdowns.

The issue is expected to be the subject of closed-door negotiations this week involving both House and Senate lawmakers before a final proposal is sent to President Clinton.

At the heart of the controversy is the potential "Wal-Martization'' of technology and a host of other industries: A huge, across-the-board purchase vehicle would be marketed nationwide with prices cut to the bone, driving out little players selling anything and everything to state and local governments.

Small-business dealers selling fire trucks, tractors, pharmaceutical and medical devices have voiced most of the opposition. However, fire trucks, farm, and lawn and garden equipment account for only $66 million of the $7 billion in annual schedule purchases, according to a study by the Washington-based Coalition for Government Procurement. By contrast, information technology purchases total more than $1.5 billion, according to the coalition.

"It's important to realize that fire trucks and farm equipment only represent a tiny portion of GSA schedule sales,'' said Larry Allen, executive director of the coalition, which represents 300 companies and accounts for 75 percent of GSA schedule sales. "If this were to be shut down because of these items, it would be a clear case of the tail wagging the dog.''

In attempting to salvage cooperative purchasing, the coalition has urged lawmakers to allow exemptions so state and local governments can buy technology-based items and other products through the GSA.

Whether states are allowed to make carte blanche purchases or not, one question that constantly emerges is: How much difference would it make? Large, savvy states such as California, Texas, Florida and Ohio have worked out agreements with vendors to get GSA-level prices for contracts, industry insiders say. Still, both sides believe widespread GSA schedule purchases would have a major impact on the free market system.

James P. Griffin, president of the Annandale, Va.-based National Emergency Equipment Dealers Association, said cooperative purchasing will harm more than the "mom and pop" tractor dealers who have developed business relationships with local and state government customers. Small technology companies will suffer as well.

Because the nation's technology advancements thrive on the know-how of small entrepreneurial shops, Griffin said, industry leaders should line up against cooperative purchasing. Small-business owners are now expressing resentment toward the GSA for quietly pushing the proposal, which should boost the agency's 1 percent surcharge revenues.

"[Cooperative purchasing] will go through those smaller companies like Grant going through Richmond,'' said Griffin, whose association represents 200 companies.

"There won't be any of them left. They've held these hearings and nobody knows what it's all about. You never heard about this," Griffin said. "This will kill small business in America, and small business is the backbone of America. ... I love competition but I can't compete against the U.S. government.''

Larry Gately, vice president of Hampton, Va.-based Gately Communications Corp., said his 52-employee technology company would be forced to hire 250 more people to adequately serve the needs of state and local governments if the GSA schedule purchases were opened up. Obviously, the company can't handle that growth.

As harsh as some results may be, wider-open schedule purchases will raise the competitive bar, say those supporting cooperative purchasing.

"When you buy off the GSA schedule, you're buying off a price standard,'' said Bob Laclede, national sales manager for Reston, Va.-based Decision Support Systems Inc., which deals with 280 resellers who have computer products on GSA schedules. "If you can't meet that price, you will be in trouble. That's what the information age has brought us to.''

"It doesn't make sense to kill something that you haven't even tried out,'' said Ken Salaets, director of government relations for the Information Technology Industry Council, a trade association representing 30 member corporations. Spending shifts by the federal government make cooperative purchasing a logical move, said John Guy, general manager of computer business for the federal government group at Palo Alto, Calif.-based Hewlett-Packard Co.

"We're seeing more and more money going out to the states,'' Guy said. "Whether you're talking about the manufacturer or the vendor, the organizations are evolving from federal programs to public-sector programs.''

But, before making GSA schedule purchases, many states would have to repeal prohibitive local laws.

Twenty-seven of 50 states and U.S. territories operate under bid requirements that would significantly limit GSA schedule purchases, according to the U.S. General Accounting Office. The National Association of State Purchasing Officials found in a 1992 survey that 45 states require sales and services to be handled by local dealers, and 31 states had laws either mandating in-state vendor or product preferences.


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