Buy Lines: Don't rush to limit use of GSA schedules

Stan Soloway

The Navy is seriously considering a new policy that would limit sharply its ability to use General Services Administration schedules for support services. The policy would explicitly prohibit using non-Navy contracting vehicles unless the head of the contracting agency approves it. A similar policy is reportedly being discussed among Air Force officials.

Concern about growth and operations of both the GSA Federal Supply Service, which oversees the schedules, and the GSA Federal Technology Service are nothing new. Internal Air Force analyses, General Accounting Office studies and other reports have chronicled the significant amount of money the Defense Department -- by far, the largest user of the schedules -- pays GSA for administrative fees on every transaction. Other government activities also charge administrative fees for their services.

However, this is only part of the story. Before any substantive policy changes are made, a number of critical questions need to be answered.

First, agencies need to do a full cost analysis, not just a spend analysis. For example, effective January 2004, the FSS administrative fee will be 0.75 percent. The fee is designed to support FSS' management of the schedules themselves, no small feat given the thousands of schedule holders.

On the other hand, FTS' administrative fee is substantially higher, in the 5 percent to 7 percent range. But FTS provides full acquisition and contract administration support to its customers.

Therefore, the question is whether an agency can replace the services FSS and FTS provide at a cost equal to or less than the administrative fees, and still have access to a similarly diverse array of suppliers. If that question has been asked and answered, we haven't seen the analyses. Moreover, experience suggests that the agencies can't do this.

Second, there is real concern among many components that the requirement to stay within the Navy (or Air Force, as the case may be) actually will drive up costs. In many cases, the pass-throughs associated with internal multiple-award contracts are higher than the GSA administrative fees.

Thus, even though those funds will stay within the military department, the costs to the components could be higher, requiring either additional appropriations -- highly unlikely in the current environment -- or increased pressure on resources.

Finally, it is always dangerous to limit acquisition options. For every vehicle that looks good today, there is almost always another, even better vehicle tomorrow. Likewise, requiring components to get approval from the head of the contracting activity for every deviation from the policy directive will create an untenable bottleneck that greatly slows the process and risks mission execution.

If that happens, the components, under pressure to deliver for their customers in a timely manner, likely will avoid the burdensome waiver process in favor of simply following the directive and going to the readily available source, even if it is not the optimal solution for the customer or the taxpayer.

The schedules often offer a superior solution for agencies. The Navy's concerns are legitimate and certainly warrant more detailed discussion with all stakeholders.

But the danger is that a precipitous policy decision will be made before extensive dialogue takes place. The Navy, Air Force and other federal agencies would be wise to approach this issue carefully. If they don't, the law of unintended consequences could well take over.

Stan Soloway is president of the Professional Services Council; he previously served as deputy undersecretary of defense. His e-mail is

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