In recent years, federal agencies spent nearly $40 billion each fiscal year procuring goods and services through the General Services Administrations (GSA) Multiple Award Schedules (MAS) contracts. MAS contracts are operated to help leverage the buying power of the federal government by providing cost savings at prices associated with volume buying on millions of commercial goods and services. GSA awards and administers over 19,000 contracts with vendors under the MAS program.
As permitted by statute, GSA charges customer agencies a fee when they place orders under MAS contracts. The MAS programs fee rate, which is expressed as a percentage of the dollar value of the order, has remained stable for the last 5 fiscal years at 0.75 percent. In fiscal year 2010, GSA collected approximately $282 million in fee revenue from agencies that use the MAS contracts. GSA retains this revenue to support the MAS program.
As GAO reported in September 2011, the revolving fund statute under which GSA operates its MAS program requires that GSA set its interagency contract fee rate to recover the costs of the programs operations. It also provides that GSA may establish reserves for operating needs. The program is not required to break even on an annual basis. As such, the program is permitted to have excess revenue in a given year or annual costs that exceed revenue. The figure below shows the fee revenue GSA collected and GSAs costs to operate the MAS program during fiscal years 2007 through 2010, and illustrates the difference between those amounts, which GAO refers to as excess revenue. The figure also illustrates that although the annual excess revenue generated by GSAs MAS program has declined over those years, GSAs MAS program averaged an excess of $62.2 million in revenue over program costs, before contributions to reserves, each fiscal year.
Fee Revenue versus Costs for the GSA MAS Program--Fiscal Years 2007 through 2010
GSA maintains three reserves for all the programs operated through the revolving fund that includes the MAS program:
Excess revenue accumulates in the reserves until it is used for operations or improvement projects.
From fiscal years 2007 to 2010 GSAs reserve balances grew significantly, largely due to this excess revenue generated annually by the MAS program. At the end of fiscal year 2010, the combined balance of GSAs three reserves was over $800 millionabout $350 million of which resided in the Working Capital Reserve to cover shortfalls in operating funds. Although GSA reviews its program fee rate annually as part of its budget process, there is nothing in GSAs internal guidance that would trigger an evaluation of the fee rate of an individual program, such as the MAS program, that consistently generates excess revenue resulting in the continuous growth of the reserve balances.
A reduction in the fee rate for the MAS program could generate significant cost savings for every agency of the federal government that uses the MAS program. For example, a reduction of 0.10 percentage pointsfrom the current rate of 0.75 percent to 0.65 percentwould generate a savings of almost $40 million per year.
40 U.S.C. § 321(d)(2), which requires cost recovery so far as practicable.
To improve the management of the MAS program, GAO recommended in September 2011 that the Administrator of General Services direct the Federal Acquisition Service Commissioner to
Such an evaluation would allow GSA to determine whether a reduction in the fee rate of any of its programs might be warranted. A reduction of the fee rate for the MAS program alone would provide federal agencies potentially significant cost savings.
The information contained in this analysis is based on the findings in the report listed in the related GAO product section as well as additional work GAO conducted. GAO analyzed cost and revenue data on the program for fiscal years 2007 through 2010. GAO also interviewed officials from GSAs MAS program, policy, and financial offices.
GAO provided GSA with a copy of its September 2011 report for review and comment. GSA agreed with GAOs recommendation to develop and implement guidance. GSA is planning to issue a new policy in February 2012 that establishes an annual process to determine the need to conduct fee rate reviews for programs that produce an excess (or shortfall) of over $5 million in revenue on average over any 3-year period. The draft policy also requires an automatic review of the fee rate of the MAS program each year. GSA plans to perform these assessments annually beginning in March 2012. GSA expressed concern about reducing the current fee rate in light of recent reductions in excess revenue. In this regard, GSA pointed out that it needs to ensure sufficient levels of reserves to fund needed improvements in the information technology systems that support its programs. GAO believes the annual process will provide for a more rigorous monitoring of the fee rates charged by GSA and provide a trigger for fee rate reviews when appropriate. The annual process could also give GSA further insight into the level of reserve funds that will be available for its information technology improvement projects.
As part of its routine audit work, GAO will track agency action to address the recommendation and report to Congress
For additional information about this area, contact William T. Woods at (202) 512-4841 or firstname.lastname@example.org.
Federal agencies spend over $50 billion annually on goods and services using interagency contracts, which leverage the government's buying power, simplify procuring commonly used goods and services, and allow agencies to use the contracts and expertise of other agencies. Agencies that operate interagency contracts and provide assisted acquisition services for other agencies recover their costs by...