GSA schedule spending dips, poor equipment sales to blame

Federal IT spending through the General Services Administration's multiple award schedule contracts for products and services declined in 2005 for the first time in 10 years, according to a new report issued by Input Inc.

Sales slipped from $16.8 billion in fiscal 2004 to $16.5 billion in fiscal 2005, a 2 percent decline after annual increases averaging more than 15 percent the last five years, the report from the Reston, Va., market research firm states.

The spending decrease is not dramatic relative to overall GSA Schedule 70 sales, which still make up more than one-third of addressable federal IT spending, said Jim Krouse, Input's acting director of public sector market analysis.

"However, it comes during a year in which total federal IT spending is still increasing, so this represents a shift specifically away from the schedules as a procurement channel and not a general decline in the market," Krouse said.

The decrease in spending is entirely in equipment sales, according the report. While the report does not draw any final conclusions about the cause for the decrease in equipment spending, it does offer two possible solutions.

First, the decrease in spending through Schedule 70 may have been caused by a shift in purchasing to other federal contract vehicles. A second is that the demand for IT equipment in federal agencies may be decreasing, either due to capacity or infrastructure consolidation issues.

Input feels that significant growth in equipment spending may still come from the inclusion of state and local government agencies as buyers through cooperative purchasing agreements. State and local governments are already increasing GSA Schedule 70 purchasing, with a reported $192 million spent in fiscal 2005, roughly twice what was spent in fiscal 2004, according to Input.

"If state and local spending follows a trend similar to that of federal agencies over the past 10 years, GSA Schedule 70 could become a significant centralizing force for the public sector IT market," Krouse said.