Federal Supply Schedules:

More Attention Needed to Competition and Prices

GAO-15-590: Published: Jul 9, 2015. Publicly Released: Aug 10, 2015.

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What GAO Found

According to the General Services Administration (GSA), total sales through the Federal Supply Schedules (FSS) program in fiscal year 2014 were $33.1 billion. This includes purchases by federal, state, and local agencies, including federal intelligence agencies which do not report their FSS spending publicly. GAO's analysis of publicly reported federal procurement data shows that federal use of the FSS program has declined from $31.8 billion in 2010 to $25.7 billion in 2014—a 19 percent inflation-adjusted decrease. This is consistent with the decline in overall federal contracting obligations. The FSS portion of total federal contracting obligations remained steady—between 5 and 6 percent.

Most FSS obligations were competed in fiscal year 2014, but only 40 percent of obligations were on orders for which the government received three or more quotes—a number frequently mentioned in the Federal Acquisition Regulation (FAR). These results are influenced by various factors. One factor identified in the orders from the agencies GAO reviewed—the Departments of Defense (DOD) and Health and Human Services (HHS) and GSA—involves situations where few vendors can fulfill agencies' specific needs.

Extent of Competition for Fiscal Year 2014 Federal Supply Schedule Orders

Extent of Competition for Fiscal Year 2014 Federal Supply Schedule Orders

HHS had a significantly higher percentage of FSS obligations in fiscal year 2014 on orders that were competed but the agency received only one or two quotes—51 percent—compared to DOD and GSA, which received one or two quotes for 35 and 32 percent of their FSS obligations, respectively. HHS's practice of targeting solicitations to fewer vendors may be contributing to this higher rate.

Agencies are paying insufficient attention to prices when using FSS. Ordering agencies did not consistently seek discounts from schedule prices, even when required by the FAR. In addition, GAO found cases in which officials did not assess prices for certain items, as required, or had insufficient information to assess prices. Contracting officials were not always aware of the requirement to seek discounts and told GAO that the need to assess prices was not emphasized in training and guidance. When contracting officials are not aware of these regulations, agencies may be missing opportunities for cost savings.

Why GAO Did This Study

The FSS program provides agencies a simplified method of purchasing commercial products and services at prices associated with volume buying. In 2011, the FAR was amended to enhance competition on FSS orders. Competition helps agencies get lower prices on products and services and get the best value for taxpayers.

GAO was asked to examine competition and pricing for FSS orders. This report addresses (1) how and to what extent the government is using the FSS program, (2) factors influencing the degree of competition for FSS orders, and (3) the extent to which agencies examine prices to be paid for FSS orders.

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 non-generalizable 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.

What GAO Recommends

GAO recommends that DOD, HHS and GSA issue guidance and assess training to focus attention on rules related to pricing. DOD, HHS and GSA concurred. GAO also recommends HHS assess reasons contributing to its higher rate of orders with only one or two quotes. HHS concurred.

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

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: DOD agreed with the recommendation, and on July 31, 2015 the Director of Defense Procurement and Acquisition Policy issued a memorandum emphasizing the requirement to seek discounts and reminding contracting officials of the procedures to follow with respect to purchasing open market items through the Federal Supply Schedule Program. As a result, we have closed this recommendation as implemented.

    Recommendation: To help ensure contracting officers follow ordering procedures when using FSS, and to enhance internal controls, the Secretaries of DOD and HHS and the Administrator of GSA should issue guidance emphasizing the requirement to seek discounts and outlining effective strategies for negotiating discounts when using the FSS program.

    Agency Affected: Department of Defense

  2. Status: Open

    Comments: In December 2016, HHS stated that it had assessed and reviewed existing guidance and determined that existing guidance was adequate, but that HHS contracting officials needed to be refreshed on the content. While HHS stated that it had tasked the contracting heads of each HHS component with ensuring that its officials attend refresher training, the agency has not yet ensured that this has been accomplished. In June 2017, HHS officials said they were again considering issuing additional guidance, per our recommendation.

    Recommendation: To help ensure contracting officers follow ordering procedures when using FSS, and to enhance internal controls, the Secretaries of DOD and HHS and the Administrator of GSA should issue guidance emphasizing the requirement to seek discounts and outlining effective strategies for negotiating discounts when using the FSS program.

    Agency Affected: Department of Health and Human Services

  3. Status: Closed - Implemented

    Comments: In November 2015, GSA issued a procurement information notice reminding contracting officers of existing requirements and effective strategies for seeking discounts for all FSS orders.

    Recommendation: To help ensure contracting officers follow ordering procedures when using FSS, and to enhance internal controls, the Secretaries of DOD and HHS and the Administrator of GSA should issue guidance emphasizing the requirement to seek discounts and outlining effective strategies for negotiating discounts when using the FSS program.

    Agency Affected: General Services Administration

  4. Status: Closed - Implemented

    Comments: DOD agreed with the recommendation, and on July 31, 2015 the Director of Defense Procurement and Acquisition Policy issued a memorandum emphasizing the requirement to seek discounts and reminding contracting officials of the procedures to follow with respect to purchasing open market items through the Federal Supply Schedule Program. As a result, we have closed this recommendation as implemented.

    Recommendation: To help ensure contracting officers follow ordering procedures when using FSS, and to enhance internal controls, the Secretaries of DOD and HHS and the Administrator of GSA should 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.

    Agency Affected: Department of Defense

  5. Status: Open

    Comments: In December 2016, HHS stated that it had assessed and reviewed existing guidance and determined that existing guidance was adequate, but that HHS contracting officials needed to be refreshed on the content. While HHS stated that it had tasked the contracting heads of each HHS component with ensuring that its officials attend refresher training, the agency has not yet ensured that this has been accomplished. In June 2017, HHS officials said they were again considering issuing additional guidance, per our recommendation.

    Recommendation: To help ensure contracting officers follow ordering procedures when using FSS, and to enhance internal controls, the Secretaries of DOD and HHS and the Administrator of GSA should 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.

    Agency Affected: Department of Health and Human Services

  6. Status: Closed - Implemented

    Comments: In November 2015, GSA issued a procurement information notice reminding contracting officials of the procedures for including open market items on FSS orders, and the requirement to determine that the prices of open market items are fair and reasonable. In addition, the notice reminded contracting officials that open market items should be clearly labeled as items not on the FSS contract.

    Recommendation: To help ensure contracting officers follow ordering procedures when using FSS, and to enhance internal controls, the Secretaries of DOD and HHS and the Administrator of GSA should 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.

    Agency Affected: General Services Administration

  7. Status: Closed - Implemented

    Comments: DOD agreed with the recommendation, and, in January 2017, the Director of Defense Procurement and Acquisition Policy (DPAP) issued a memorandum noting that DPAP had collaborated with the Defense Acquisition University to assess existing training programs. The memo stated that DPAP and DAU identified a number of learning assets that covered FSS ordering procedures and that, where appropriate, changes were made to the curriculum and new material was added to cover the latest DOD policies and ordering procedures for FSS.

    Recommendation: To help ensure contracting officers follow ordering procedures when using FSS, and to enhance internal controls, the Secretaries of DOD and HHS and the Administrator of GSA should 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, including requirements to 1) properly prepare justifications for noncompetitive awards, 2) seek discounts, and 3) assess prices for open market items included in FSS orders.

    Agency Affected: Department of Defense

  8. Status: Closed - Implemented

    Comments: HHS agreed with the recommendation. In December 2016, HHS stated that the agency had performed a high-level assessment of current training related to FSS from various sources. Based on the results of this assessment, HHS determined that the current training is adequate.

    Recommendation: To help ensure contracting officers follow ordering procedures when using FSS, and to enhance internal controls, the Secretaries of DOD and HHS and the Administrator of GSA should 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, including requirements to 1) properly prepare justifications for noncompetitive awards, 2) seek discounts, and 3) assess prices for open market items included in FSS orders.

    Agency Affected: Department of Health and Human Services

  9. Status: Closed - Implemented

    Comments: In March 2016, GSA evaluated its FSS training to be certain that the areas outlined in our recommendation were current per regulation and statute. The most current versions of the FSS curriculum include requirements for preparing justifications for noncompetitive awards, seeking discounts, and assessing prices for open market items included in FSS orders.

    Recommendation: To help ensure contracting officers follow ordering procedures when using FSS, and to enhance internal controls, the Secretaries of DOD and HHS and the Administrator of GSA should 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, including requirements to 1) properly prepare justifications for noncompetitive awards, 2) seek discounts, and 3) assess prices for open market items included in FSS orders.

    Agency Affected: General Services Administration

  10. Status: Open

    Comments: HHS agreed with the recommendation. In January 2017, an HHS official stated that the agency had tried to conduct an assessment but had not yet been able to obtain enough information. In June 2017, HHS officials said that they would reexamine how to conduct an assessment per our recommendation.

    Recommendation: To help foster competition for FSS orders consistent with the FAR, the Secretary of HHS should assess reasons that may be contributing to the high percentage of orders with one or two quotes--including the practice of narrowing the pool of potential vendors--and if necessary, depending on the results of the assessment, provide guidance to help ensure contracting officials are taking reasonable steps to obtain three or more quotes above the simplified acquisition threshold.

    Agency Affected: Department of Health and Human Services

 

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