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General government > 19. Federal Supply Schedules

Agencies are paying insufficient attention to prices when using the Federal Supply Schedules program and may be missing opportunities for cost savings.

Why This Area Is Important

The Federal Supply Schedules (FSS) program, managed by the General Services Administration (GSA), provides federal agencies a simplified method of purchasing commercial products and services at prices associated with volume buying. A schedule is a set of contracts awarded to multiple vendors that provide similar products and services. According to GSA, total sales through the program in fiscal year 2014 were $33.1 billion. The FSS program must be used properly to help ensure that the government is obtaining a good price and competition to the maximum extent possible. For example, while contractors are not required to offer discounts from their FSS prices, ordering activities are required by the Federal Acquisition Regulation (FAR) to seek discounts when placing orders with values over a certain amount, and may seek discounts for all orders.[1]



[1] FAR Subsection 8.405-4.

What GAO Found

In a July 2015 report, GAO reviewed the extent to which agencies examine prices to be paid for FSS orders. GAO focused its review on the three agencies with the highest use of the program: the Department of Defense (DOD), GSA, and the Department of Health and Human Services (HHS).[1] GAO's analysis of how these agencies assessed prices for a nongeneralizable sample of 60 orders showed that agencies are not paying sufficient attention to prices for goods and services under FSS orders. Ordering agencies did not consistently seek discounts from schedule prices, even when required to do so by the FAR. GAO found a significant number of cases—16 out of 45 orders reviewed—in which contracting officers did not seek discounts from FSS prices as required.  When contracting officers sought discounts, vendors generally offered them, including a 57 percent discount for a $19.9 million order. In other instances, agencies purchased items not on the schedule contract—called open market items—without performing a separate price or cost analysis, as required by the FAR, or they did not obtain sufficient information to determine whether an item was on the schedule.  Despite existing training programs, contracting officials GAO interviewed were not always aware of the requirement to seek discounts.  Agency officials noted that some of the problems stem from inexperienced staff who are unfamiliar with schedule ordering procedures. When contracting officers do not seek discounts for FSS orders, the government may miss opportunities for cost savings. Further, when contracting officers do not evaluate prices for non-FSS items purchased in conjunction with an FSS order—which is allowed for administrative convenience—the government cannot be sure that items are being purchased at a fair and reasonable price.



[1] GAO identified these agencies based on obligations reported in Federal Procurement Data System-Next Generation, the government’s procurement database, for fiscal years 2010-2014.

Actions Needed

To help ensure contracting officers follow ordering procedures when using FSS, and to enhance internal controls, GAO recommended that the Secretaries of Defense and Health and Human Services and the Administrator of GSA take the following three actions:

  • Issue guidance emphasizing the requirement to seek discounts and outlining effective strategies for negotiating discounts when using the FSS program.
     
  • Issue guidance reminding contracting officials of the procedures they must follow with respect to purchasing open market items through the FSS program, including the requirement to perform a separate determination that the prices of these items are fair and reasonable.
     
  • Assess existing training programs to determine whether they are adequate to ensure that contracting officials are aware of the ordering procedures of the FSS program.

The financial benefits of implementing these recommendations cannot be precisely quantified because the effect this would have on thousands of individual transactions is unknown, but given the size of the FSS program, the savings could be quite substantial. For example, if agencies routinely obtained discounts on the more than $30 billion dollars obligated under FSS orders, the savings could exceed  tens of millions government-wide.

How GAO Conducted Its Work

GAO analyzed data from the Federal Procurement Data System-Next Generation on obligations through the FSS program for fiscal years 2010-2014 and reviewed a nongeneralizable sample of 60 FSS orders awarded in fiscal year 2013 by DOD, HHS, and GSA, the agencies with the highest use of the FSS program. GAO also interviewed officials from these agencies and FSS vendors.

Agency Comments & GAO Contact

All three agencies concurred with GAO's recommendations to issue guidance emphasizing the requirement to seek discounts, issue guidance reminding contracting officials of procedures for open market items, and assess the adequacy of training programs related to FSS ordering procedures. In response to GAO’s recommendations, DOD and GSA issued guidance reminding the contracting workforce to seek discounts when placing orders against FSS contracts and to follow the required FSS procedures for purchasing open market items. In addition, GSA has started to take steps to examine training curricula.

GAO provided a draft of this report section to all three agencies for review and comment. None of the agencies provided comments on this report section.

For additional information about this area, contact William T. Woods at (202) 512-4841 or woodsw@gao.gov.

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