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Report to the Chairman and Ranking Minority Member, Committee on 

Governmental Affairs, U.S. Senate:



United States General Accounting Office:



GAO:



July 2002:



CONTRACT MANAGEMENT:



Interagency Contract Program Fees Need More Oversight:



Contract Management:



GAO-02-734:



Contents:



Letter:



Results in Brief:



Background:



Programs Have Reported Revenue in Excess of Costs but Actual Costs Have 

Not Always Been Captured:



Conflict Exists between GWAC Agencies’ Operation of Their Revolving 

Funds and OMB’s Guidance on Earnings:



GSA Schedules Program Fee Has Not Been Adjusted Despite Hefty Earnings:



Conclusions:



Recommendations for Executive Action:



Agency Comments:



Appendix I: Scope and Methodology:



Appendix II: Comments from the Office of Management and 

Budget:



Appendix III: Comments from the General Services 

Administration:



Appendix IV: Comments from the Department of the Interior:



Appendix V: Comments from NASA:



Appendix VI: Comments from the Department of Health & Human Services:



Appendix VII: Governmentwide Acquisition Contract Data Sheet - 
Department 

of Commerce:



Appendix VIII: Governmentwide Acquisition Contract Data Sheet - Federal 

Technology Service:



Appendix IX: Governmentwide Acquisition Contract Data Sheet - NASA:



Appendix X: Governmentwide Acquisition Contract Data Sheet - 

NIH:



Appendix XI: Governmentwide Acquisition Contract Data Sheet - 
Department 

of Transportation:



Appendix XII: Franchise Fund Pilot Data Sheet - Department of 

the Interior:



Appendix XIII: Program Data Sheet - Federal Supply Products:



Appendix XIV: GAO Contact and Staff Acknowledgments:



Tables:



Table 1: First Year of OMB Executive Agent Designation:



Table 2: Reported Annual Earnings (Losses) by Fiscal Year:



Table 3: Reported COMMITS Program Results for Fiscal Years 1999 to 

2001:



Table 4: COMMITS Full Service Program Fees by Fiscal Year:



Table 5: COMMITS Limited Service Fee Structure by Fiscal Year:



Table 6: FTS GWAC Information:



Table 7: Reported FTS Results by Fiscal Year:



Table 8: SEWP Operating Results by Fiscal Year:



Table 9: SEWP Fees by Fiscal Year:



Table 10: NIH GWAC Information:



Table 11: Reported NIH GWAC Results by Fiscal Year:



Table 12: NIH GWAC Fees by Fiscal Year:



Table 13: Reported ITOP Results by Fiscal Year:



Table 14: ITOP Fee Structure by Year:



Table 15: ITOP Fee Structure Effective 10/1/01:



Table 16: Reported Results for GovWorks by Fiscal Year:



Table 17: Reported Schedules Program Results by Fiscal Year:



Table 18: Schedules Program Fees by Fiscal Year:



Figures:



Figure 1: Key Elements of the Fee-Setting Cycle:



Figure 2: GSA Schedules Program Reported Earnings and Costs:



Abbreviations:



COMMITS: Commerce Information Technology Solutions:



FEDCAC: Federal Computer Acquisition Center:



FEDSIM: Federal Systems and Integration Management Center:



FTE: Full-time equivalent:



FSS: Federal Supply Service:



FTS: Federal Technology Service:



GAO: General Accounting Office:



GSA: General Services Administration:



GWAC: Governmentwide acquisition contract:



ITOP: Information Technology Omnibus Procurement:



NASA: National Aeronautics and Space Administration:



NIH: National Institutes of Health:



NITAAC: National Information Technology Acquisition and 

Assessment Center:



OMB: Office of Management and Budget:



SDC: Solutions Development Center:



SEWP: Scientific and Engineering Workstation Procurement:



TASC: Transportation Administrative Service Center:



Letter:



July 25, 2002:



The Honorable Joseph I. Lieberman

Chairman

The Honorable Fred Thompson

Ranking Minority Member

Committee on Governmental Affairs

United States Senate:



Federal agencies are increasingly using contracts and acquisition 

services offered by other agencies and paying a fee for these services. 

These interagency contract service programs are being used in a wide 

variety of situations, from those in which a single agency provides 

limited contracting assistance to a “soup to nuts” approach in which 

the provider agency’s contracting officer handles all aspects of the 

procurement. This increased use of interagency contracts has come about 

as a result of reforms and legislation passed in the 1990s, which 

allowed agencies to streamline the acquisition process, operate more 

like businesses, and offer increasing types of services to other 

agencies.



Reliable information on the fees charged and revenues generated by 

interagency contract services can be helpful to the Congress and to 

federal executives when they make decisions about allocating federal 

resources, authorizing and modifying programs, and evaluating program 

performance. However, information on costs and program results has been 

incomplete.



To provide you with information on the fees charged by interagency 

contract programs, we determined whether (1) the programs reported 

total annual revenues in excess of costs (earnings or (losses)) in 

accordance with the Office of Management and Budget’s (OMB) 

guidance[Footnote 1] on accounting for actual costs and (2) agencies 

with governmentwide acquisition contracts (GWAC) operate their programs 

consistent with OMB guidance to transfer earnings to the Treasury. In 

addition, we determined whether and to what extent fees charged by the 

General Services Administration’s (GSA) Federal Supply Schedules 

program have generated revenues in excess of costs. Our review 

included:



* the five agencies designated by OMB to operate information technology 

GWACs[Footnote 2]



* the Department of the Interior’s franchise fund pilot 

program[Footnote 3] and:



* the GSA Schedules program.[Footnote 4]



In fiscal year 2001, purchases under these seven interagency contract 

programs totaled $18.8 billion.



Specific information on our scope and methodology is in appendix I.



Results in Brief:



Most of the contract service programs we reviewed reported an excess of 

revenues over costs in at least one year between fiscal years 1999 and 

2001. The exceptions were the GWACs at Commerce and Transportation, 

which reported losses each year during this period. The Schedules 

program has produced exceptionally high earnings, with revenues 

exceeding costs by more than 53 percent--for a total of $151 million--

during the 3-year period.



OMB guidance directs agencies with GWACs or franchise fund programs to 

account for and recover fully allocated actual costs and to report on 

their financial results. Agencies are supposed to identify all direct 

and indirect costs and to charge fees to ordering agencies based on 

these costs. However, some GWAC programs have not identified or 

accurately reported the full cost of providing interagency contract 

services. Thus, there is no assurance that their fees accurately 

reflect their costs. Because OMB has not required agencies to submit 

annual financial reports summarizing program results that include a 

description of the agencies’ indirect cost allocation methodologies, it 

was unaware that not all agencies are following its guidance.



OMB’s guidance further directs that agencies transfer GWAC earnings to 

the miscellaneous receipts account of the U.S. Treasury’s General Fund. 

However, the way agencies operate their revolving funds conflicts with 

OMB’s guidance. Agencies that operate their GWACs under revolving funds 

have used GWAC earnings to support other programs within the revolving 

fund or to maintain fund operations. They have not transferred any GWAC 

earnings to the Treasury. These revolving funds were established by 

statutes that allow retention of earnings.[Footnote 5] Agency officials 

believe their revolving funds’ statutory provisions prevail over OMB’s 

guidance to GWAC agencies. OMB officials view this as an important 

issue that needs review.



The Schedules program has generated hefty earnings, largely because of 

the rapid growth of information technology sales. Rather than adjust 

the fee, however, GSA has used the earnings primarily to support GSA’s 

stock program and fleet program.[Footnote 6] Both of these uses are 

permitted by the revolving fund in which the Schedules program resides. 

However, the significant amount of earnings means that Schedules 

program customers are, in effect, being consistently overcharged for 

the contract services they are buying. GSA officials stated that 

adjusting the fee would be burdensome for the Schedules contractors, in 

part because the fee is embedded in the unit costs, rather than charged 

as an add-on where it could be adjusted more easily. However, GSA is 

now considering options for adjusting the fee and plans to discuss the 

issue with OMB in the development of the President’s fiscal year 2004 

budget request.



We are making recommendations to OMB concerning (1) the need for more 

oversight of GWAC executive agents’ indirect cost accounting and their 

reporting of annual operating results, fees, and the use of earnings 

and (2) the need to work with GWAC executive agents to address the 

handling of GWAC earnings. We are also making a recommendation to GSA 

to adjust the Schedules program fee to reflect costs more closely.



Background:



The government acquisition landscape was reformed by several 

legislative changes in the 1990s, such as the Clinger-Cohen Act of 

1996[Footnote 7] and the Government Management Reform Act of 

1994.[Footnote 8] The Clinger-Cohen Act authorized creation of GWACs, 

which are typically multiple-award contracts for information technology 

that allow an indefinite quantity of goods or services (within 

specified limits) to be furnished during a fixed period, with 

deliveries scheduled through orders with the contractor. The providing 

agency awards the contract, and other agencies order from it.



OMB was authorized by the Clinger-Cohen Act to designate agency heads 

as executive agents for GWACs. Some agencies had already established 

information technology contracts prior to the OMB designation. However, 

according to agency officials, the OMB designation is beneficial to 

them because it enables them to provide a streamlined contracting 

process, it creates opportunities to leverage the buying power of 

customer agencies, and it helps them market their contracting services. 

Table 1 shows the year in which agencies received OMB’s designation.



Table 1: First Year of OMB Executive Agent Designation:



Agencies: GSA’s Federal Technology Service[A]; 1996: X; 1997: [Empty]; 

1998: [Empty]; 1999: [Empty]; 2000: [B].



Agencies: Commerce; 1996: [Empty]; 1997: [Empty]; 1998: [Empty]; 1999: 

X[B]; 2000: [Empty].



Agencies: Transportation[A]; 1996: [Empty]; 1997: [Empty]; 1998: 

[Empty]; 1999: X[B]; 2000: [Empty].



Agencies: NASA[A]; 1996: [Empty]; 1997: [Empty]; 1998: [Empty]; 1999: 

[Empty]; 2000: X[B].



Agencies: NIH; 1996: [Empty]; 1997: [Empty]; 1998: [Empty]; 1999: 

[Empty]; 2000: X[B].



[A] These agencies had received procurement authority from GSA for 

information technology contracts prior to OMB’s executive agent 

designation.



[B] Indicates when agencies were required to follow OMB guidance on 

fully allocated actual costs.



[End of table]



The Government Management Reform Act of 1994 authorized the Director of 

OMB, in consultation with congressional committees, to designate six 

franchise fund pilots that would operate as fully self-supporting 

business-like entities within the federal government to compete for the 

delivery of common administrative support services to federal 

customers. Franchise fund programs provide administrative services such 

as contracting, systems operation, and payroll processing, in addition 

to information technology. Interior’s program, GovWorks, provides 

contracting services for a wide range of goods and services.



The Schedules program,[Footnote 9] part of GSA’s Federal Supply 

Service, provides federal agencies with a streamlined process to obtain 

commonly used products and services at prices associated with volume 

buying. Information technology is the biggest business line in the 

Schedules program. Interagency purchases of information technology from 

the Schedules program exceed those made from all GWAC programs 

combined.



GWACs, franchise fund pilot programs, and the Schedules program charge 

fees for services with the intent to recover costs. Fees are based on 

known costs, estimates of future costs and revenues, and consideration 

of the prices charged by the competition for similar services. Figure 1 

is an illustrative depiction of the factors that agencies consider when 

setting fees. A detailed description of each agency’s program, 

financial results, fee structure, and services appears in appendixes 

VII through XIII.



Figure 1: Key Elements of the Fee-Setting Cycle:



[See PDF for image]



[End of figure]



Programs Have Reported Revenue in Excess of Costs but Actual Costs Have 

Not Always Been Captured:



All of the programs we reviewed except the Commerce and Transportation 

GWACs reported revenue in excess of costs for one or more fiscal years 

between 1999 and 2001. Table 2 shows reported earnings based on 

financial statements for the contract programs.



Table 2: Reported Annual Earnings[Footnote 10] (Losses) by Fiscal Year:



Interagency contract program: Commerce; 1999: ($137,264); 2000: 

($371,499); 2001: ($178,691).



Interagency contract program: GSA’s Federal Technology Service; 1999: 

$182,000; 2000: $2,412,000; 2001: $3,613,000.



Interagency contract program: NASA[A]; 1999: ($957,373); 2000: 

$420,696; 2001: $646,645.



Interagency contract program: NIH; 1999: $2,365,780; 2000: $1,390,388; 

2001: $268,219.



Interagency contract program: Transportation; 1999: ($852,064); 2000: 

($298,662); 2001: ($960,156).



Interagency contract program: Interior franchise fund - GovWorks; 1999: 

$238,262; 2000: ($190,373)[B]; 2001: ($48,710).



Interagency contract program: Schedules program; 1999: $39,455,650; 

2000: $55,496,936; 2001: $56,370,055.



[A] NASA’s earnings were prepared at our request because data available 

from the GWAC program were not sufficiently complete for financial 

statement purposes. :



[BT] his earnings amount is subject to change because a GovWorks fiscal 

year 2000 expense of $488,000 was processed erroneously. Interior is 

taking action to correct this error.



Source: Contract programs’ reported annual financial results. :



[End of table]



Starting in 1999, OMB required that agencies with GWACs should 

identify, account for, and recover fully allocated actual costs in 

accordance with federal financial accounting standards.[Footnote 11] 

Actual costs include direct costs, such as labor and materials, and 

indirect costs, such as rent and support services. However, agencies do 

not consistently report revenues and costs in accordance with OMB’s 

guidance. They have developed their own approaches to accounting and to 

reporting program costs, and these approaches are evolving as the 

agencies make periodic changes.



OMB requires each GWAC agency to submit a semi-annual report of its 

activities. However, OMB has not required annual financial summaries of 

program results that would include a description of the agencies’ 

indirect cost allocation methodologies and provide an entire year’s 

worth of information on program results. Accordingly, OMB was unaware 

that not all agencies are reporting revenues and costs in accordance 

with its guidance. Further, while GSA identifies, allocates, and 

reports actual costs for both its GWAC program and the Schedules 

program, other agencies’ records are not as complete. We found 

instances of incomplete identification and allocation of indirect 

costs, partial reporting of program results, and overstated indirect 

costs, as shown in the examples below. Without more complete 

information on the costs of interagency contract services, there is no 

assurance that fees accurately reflect costs.



* NASA does not include any costs for rent, utilities, contract 

support, or program management in the account that summarizes GWAC 

costs. Further, NASA components do not pay a fee for using the GWAC 

because of an agencywide practice of not charging fees to internal 

users of NASA’s own contracts. Consequently, both the costs recorded in 

the GWAC account and GWAC revenues are understated. NASA officials 

noted that NASA is making an in-kind contribution to the program by not 

charging administrative costs, and that this contribution is sufficient 

to ensure that external customer fees are not subsidizing NASA’s own 

use of the GWAC program. However, NASA provided us only a rough 

analysis, prepared in 1999, of the costs and potential revenues 

involved. NASA stated that it intends to periodically reassess its 

financial contribution to the GWAC program.



* NIH’s GWAC financial results do not include some indirect costs for 

support services provided by the NIH Office of the Director, such as 

acquisition policy, budget services, and equal opportunity programs. In 

addition, the fiscal year 2001 financial results, prepared by NIH’s 

financial office, reported GWAC earnings of $57,837, an understatement 

due to two factors. First, reported revenues from NIH’s internal 

customers were not combined with revenues from external customers. If 

internal and external revenues had been combined as one line item, 

reported earnings would have increased to $268,219. Second, the program 

was overcharged by $729,870 for indirect costs, including rent and 

utilities, because of an accounting error. NIH officials informed us 

that corrective actions have been taken on both problems for fiscal 

year 2002. However, NIH officials do not plan to identify or allocate 

additional Office of the Director’s costs, because they do not believe 

it would be cost-effective to do so.



* Transportation’s GWAC operates within the Transportation 

Administrative Service Center and is allocated a portion of the 

center’s indirect costs. Indirect costs allocated to the program have 

fluctuated substantially from year to year. Such fluctuations 

significantly impact reported program operating results. For example, 

the GWAC’s indirect costs jumped by more than 90 percent in fiscal year 

2001, because the indirect cost allocation was based on an estimated 

GWAC sales volume that was not realized. This allocation was not 

adjusted at the end of the year to reflect actual sales. If actual 

sales had been used, the indirect costs allocated to the GWAC would 

have been about $600,000 lower and would have substantially reduced the 

program’s reported loss of about $1 million that year.[Footnote 12] 

Program officials restructured their fees for fiscal year 2002, in part 

due to prior year losses.



Full costing is also a key principle of the franchise fund pilot 

programs. OMB’s guidance states that the operation should be self-

sustaining and that fees should fully recover costs. Interior’s 

progress in identifying and recovering full costs has evolved over 

time. However, program officials have not fully allocated indirect 

costs at the department level.



Conflict Exists between GWAC Agencies’ Operation of Their Revolving 

Funds and OMB’s Guidance on Earnings:



The legislation authorizing GWACs was silent with respect to how 

agencies should account for financial transactions under the contracts; 

for example, how to obligate funds for the contract and how to account 

for revenue. Thus, agencies administering GWACs were left to their own 

devices when determining whether these financial transactions would be 

accounted for through existing revolving funds or in stand-alone 

accounts. The GWACs at NIH, Transportation, and the Federal Technology 

Service operate under revolving funds, while NASA and Commerce operate 

their GWACs in stand-alone reimbursable accounts.



OMB guidance on earnings stipulates that (1) GWAC fees should be 

adjusted so that total revenues do not exceed actual costs and (2) 

revenues generated in excess of the agency’s actual costs are to be 

transferred to the miscellaneous receipts account of the U.S. 

Treasury’s General Fund. However, the way agencies operate their GWACs 

under revolving funds conflicts with OMB’s guidance. Agency officials 

told us that they have accounted for GWAC revenue in the same manner 

that the law authorizes them to account for revenue from other programs 

in their revolving funds. Thus, they have used earnings generated by 

some products and services--including GWACs--to offset losses incurred 

by other products and services. Further, they are permitted to retain 

earnings in their revolving funds and use those earnings for authorized 

purposes of the fund, unless the law governing operation of the fund 

requires them to transfer amounts to the Treasury. Agency officials 

maintain that their fund legislation prevails over the OMB guidance 

where there is a conflict between the two. OMB officials told us that 

they plan to review this issue.



The different approaches GWAC programs have taken when revenues 

exceeded costs are discussed below:



* From fiscal years 1999 to 2001, NIH reported revenues in excess of 

costs from its GWAC operations. For the 3 years combined, the GWACs’ $4 

million of earnings offset $3.6 million in losses in other revolving 

fund acquisition programs. For fiscal year 2001, the most recent year 

for which actual costs are available, reported GWAC earnings of 

$268,219 offset other programs’ losses of $116,590. NIH lowered its fee 

for orders placed with its small business contractors for the two GWACs 

awarded in fiscal year 2001. The fee for orders with larger businesses 

did not change.



* Within its revolving fund, the Federal Technology Service’s IT 

Solutions program manages GWACs and provides other information 

technology services to federal agencies. The program’s earnings are 

used to provide resources for future investment based on revolving fund 

plans approved by OMB. Losses within segments of the program are offset 

against earnings in other programs or covered by using retained 

earnings from this fund. For example, $3.6 million in earnings 

generated by GWACs in fiscal year 2001 offset losses in some other 

business lines, in particular the information security program.



* NASA does not have a revolving fund and, therefore, its GWAC operates 

in a stand-alone account. NASA records show that for revenues received 

in fiscal years 1999, 2000, and 2001, NASA’s GWAC accounts had year-end 

balances of $688,247, $1,106,155, and $573,114, respectively.[Footnote 

13] NASA’s practice has been to carry over balances remaining from one 

fiscal year to the next. However, NASA now intends to revise its 

current practice and to obligate funds in support of its GWAC in the 

fiscal year received, to the extent possible. NASA lowered its fees in 

fiscal years 1999 and 2000, and raised them for fiscal year 2001, when 

it awarded a new version of its GWAC.



Other interagency contracting services we reviewed allow the providing 

agency to retain funds. For example, franchise fund 

legislation[Footnote 14] allows Interior’s franchise fund to retain an 

amount not to exceed 4 percent of the total annual income for the 

acquisition of capital equipment and other specified uses. The fund 

under which the GSA Schedules program operates is allowed to retain 

earnings for specific purposes, as discussed below.



GSA Schedules Program Fee Has Not Been Adjusted Despite Hefty Earnings:



The fee charged by the Schedules program has consistently generated 

revenue well in excess of costs. From fiscal year 1999 to 2001, the 

revenue generated by fees exceeded program costs by 53.8 percent, or 

$151.3 million. Program customers are, in effect, being overcharged for 

the contract services they are buying. Nevertheless, program officials 

have not adjusted the fee.



Because the program has been highly profitable since 1997, we analyzed 

the use of revenues in excess of costs over the past 5 years. From 1997 

to 2001, the program reported $210.8 million in earnings. Figure 2 

shows earnings and costs during this period.



Figure 2: GSA Schedules Program Reported Earnings and Costs:



[See PDF for image]



[End of figure]



GSA records show that it used the $210.8 million in earnings as 

follows:



* $192 million was used to support other programs, primarily GSA’s 

fleet and stock programs. Support of the fleet program primarily 

involved financing the procurement of vehicles. Support of the stock 

program primarily involved offsetting substantial losses in fiscal 

years 2000 and 2001. The revolving fund legislation allows earnings to 

be used for these purposes.



* $4.4 million of fiscal year 1998 earnings was transferred to the 

miscellaneous receipts account of the General Fund of the Treasury.



* GSA has not yet made a decision on how to use $14.4 million of 

Schedules program earnings from fiscal year 2001.



The Schedules program fee was established at 1 percent in 1995. 

According to GSA officials, the program was intended to break even, 

with the fee recovering program costs including contract administration 

and program support. GSA officials explained that the profitability of 

the Schedules program is much greater than expected due to the 

inclusion of the information technology schedule and its dramatic 

growth. For fiscal years 1997 through 2001, information technology 

revenues grew 287 percent, and this program now comprises about two-

thirds of all Schedules program sales.



In 1999, the GSA Inspector General recommended that the fee be adjusted 

to bring it in line with costs, noting that for two years the program 

had been generating nearly twice the revenue needed to cover program 

costs.[Footnote 15] While GSA generally concurred with the 

recommendation, it did not implement a change in the fee at that time 

due to concerns about the administrative cost and the time such an 

action would entail. GSA told the Inspector General that it was not 

practical to take action until it was confident that the fee would be 

stable for an extended period of time. Despite an additional 3 years of 

similar earnings, GSA has taken no action to bring its fee in line with 

costs.



GSA maintains that it still has not experienced marketplace stability 

sufficient to accurately forecast the Schedules business volume. 

Further, GSA officials stated that adjusting the fee would be 

burdensome for the thousands of Schedules contractors. They said that 

one key obstacle is that the 1 percent fee is embedded in the unit cost 

of the goods and services on the Schedules. Our review showed that some 

other interagency contract programs, such as NIH’s and NASA’s GWACs, 

have established their fees as add-ons to the price of goods and 

services. This approach gives them the flexibility to change their fees 

without affecting the unit price of their goods and services and 

provides transparency to customers on the fee being paid.



OMB has expressed concern about the large earnings the Schedules 

program has generated. With a 3-year restructuring of its business 

lines nearing completion, and recognizing the need for flexibility in 

setting Schedules program fees, GSA is now considering options to 

design a flexible fee adjustment. GSA plans to work with OMB to 

identify alternatives to the current pricing structure in the 

development of the President’s fiscal year 2004 budget request.



Conclusions:



The increasing use of interagency contract programs makes it imperative 

that Congress and federal agencies receive reliable information on the 

fees charged and earnings generated by these programs. However, some 

agencies are not identifying, determining accurately, or recovering the 

full costs of their programs as directed by OMB. Thus, there is no 

assurance that the fees they are charging accurately reflect their 

costs. Further, because some agencies have not submitted to OMB 

complete annual financial results, OMB is not receiving clear 

information on how earnings have been used and whether fees were 

adjusted accordingly. OMB needs better information so that it can more 

easily identify management weaknesses when they arise and work with 

GWAC agencies to overcome them.



The conflict between the way agencies are operating their revolving 

funds--using GWAC earnings to support other programs--and OMB’s 

guidance on the handling of earnings is a matter of concern. The 

agencies have not brought the problem to OMB’s attention. In its 

monitoring and oversight role over the GWAC program, OMB needs to 

determine how this conflict can be addressed.



Despite consistently high earnings in the Schedules program, GSA has 

not adjusted the 1 percent contract service fee it charges customers. 

Program customers are, in effect, being consistently overcharged for 

the contract services they are buying, while GSA is using excess 

earnings to support other programs. We believe that the fee should be 

adjusted to reflect costs more closely.



Recommendations for Executive Action:



We recommend that the director of OMB:



* ensure that GWAC executive agents comply with OMB guidance on full 

cost accounting in establishing their fees.



* direct GWAC executive agents to provide OMB with (1) annual financial 

reports containing costs and revenues that summarize annual program 

results and the need for any fee adjustments and (2) a discussion of 

how earnings have been used.



* work with GWAC executive agents to address the handling of GWAC 

earnings, including appropriate disposition of funds and adjustment of 

fees.



* Also, we recommend that the administrator of GSA:



* adjust the Federal Supply Schedules program fee to reflect costs more 

closely.



Agency Comments:



We received written comments on a draft of this report from OMB, GSA, 

NASA, NIH, and the Department of the Interior. The Department of 

Transportation offered technical comments, which we incorporated as 

appropriate.



OMB noted that its general framework on fee policies and accounting 

practices is well-founded, but that additional attention is needed to 

ensure that its guidance is being followed effectively. OMB stated that 

it intends to work with OMB’s Office of Federal Financial Management 

and the agencies to evaluate appropriate revisions to its reporting 

requirements on fees so that disparities between fees charged and costs 

incurred can more easily be identified and addressed. OMB also intends 

to work with GWAC executive agents and the GSA’s Federal Supply Service 

to address the handling of excess revenues generated by their programs, 

including appropriate disposition of funds and adjustment of fees. OMB 

also provided oral comments, and we made revisions to the text as 

appropriate. OMB’s letter appears in appendix II.



GSA took exception to our statement that the Schedules program produced 

“exceptionally high earnings” from fiscal years 1999 through 2001. We 

believe that this characterization is warranted, based on the fact that 

revenues exceeded costs by more than 53 percent or $151 million during 

this period. GSA also commented that “the statement that profits from 

the Schedules program are being held at too high a level in order to 

offset losses in another program is incorrect.” We revised the text to 

indicate that earnings from the Schedules program were used to offset 

losses in the stock program and to finance vehicle purchases for the 

fleet program. GSA also stated that it does not seem very practical to 

compare the much smaller numbers of contracts at NASA and NIH with the 

number of Schedules contracts that would have to be renegotiated if the 

fee were adjusted. Our intent was to point out that because the fee 

add-on mechanism is used by other agencies, it may be one option GSA 

could consider in adjusting its fee.



Finally, while agreeing that the current fee mechanism lacks the 

flexibility to match costs and revenues over time, GSA pointed out the 

complexity of such an undertaking and the desire to minimize the impact 

on customers, contracting partners, GSA, and the Schedules program 

itself. We acknowledge the complexity of implementing a flexible fee 

structure. However, given that the program has consistently reported 

earnings well in excess of costs for several years, we believe steps 

need to be taken now to begin the process of adjusting the fee. GSA 

also offered technical comments, which we have incorporated as 

appropriate. GSA’s letter appears in appendix III.



The Department of the Interior stated that the information and 

recommendations in our report provide OMB helpful guidance for 

oversight of a growing interagency program. The Department noted that 

the reported operating results provided for fiscal year 2000 reflect a 

$488,000 processing error, which the franchise fund program is 

correcting. We have reflected this information in Table 2 and in 

appendix XII. An additional technical comment has also been 

incorporated. The Department of the Interior’s letter appears in 

appendix IV.



NASA characterized as misleading the statement in our draft report 

that NASA had not prepared earnings statements for its GWAC program. In 

fact, while NASA provided semi-annual reports to OMB for fiscal year 

2001, it had not prepared financial statements for the GWAC program, 

and the data available from the program were incomplete for financial 

statement purposes. In responding to our draft report, NASA prepared 

the financial results that accompany its comments. These annual results 

are substantially different than the semi-annual earnings results that 

NASA had reported to OMB for fiscal year 2001. On a combined basis, the 

semi-annual reports showed a loss of $235,817, whereas the annual 

financial results showed that the program had earnings of $646,645. We 

have incorporated the latest results into table 2 and appendix IX.



NASA also provided additional details on its rationale for not 

assessing costs to NASA customers for use of the GWAC and asserted that 

NASA has not used assessments against other agencies to cover its share 

of the administrative costs. We have reflected these points in the 

report. NASA also stated that program personnel conducted a 

“deliberative analysis” of the costs involved. However, program 

personnel provided us with only a rough analysis, prepared in 1999, to 

support the cost assessment. NASA plans to periodically reassess the 

apportionment of NASA and non-NASA costs and NASA’s in-kind 

contribution versus the fees paid by external customers.



NASA also elaborated on its rationale for carrying over balances 

remaining from one fiscal year to the next. It now plans to revise this 

practice and to obligate, to the extent possible, funds in the fiscal 

year they are received. Recognizing that NASA’s lack of authority for a 

working capital fund has caused concerns about the authority under 

which it manages its GWAC, NASA has proposed legislation to establish a 

fund for the agency in fiscal year 2003. Finally, NASA asserts that the 

Economy Act[Footnote 16] provides authority for NASA to receive funds 

and apply those funds over periods of time, including across fiscal 

years, in order to support its GWAC program.[Footnote 17].

NASA’s letter, with attachments, appears in appendix V.



NIH commented that our report will enable the agency to continue to 

improve its information technology services and strengthen oversight of 

these services to both NIH and other federal agencies. NIH noted that 

the GWAC program office will continue to strive to comply with and 

promote OMB’s reporting requirements for GWACs. NIH also offered 

technical comments that we incorporated as appropriate. NIH stated that 

revenues (and thus earnings) were not understated to OMB because 

revenues from internal customers were included in semi-annual reports 

to OMB. However, those revenues were not attributed to the GWAC program 

in NIH financial statements, which were prepared by NIH’s financial 

office. Further, on a combined basis, NIH’s semi-annual reports to OMB 

showed a loss of $814,629, whereas the annual financial results showed 

that the program had earnings of $268,219. NIH’s letter appears in 

appendix VI.



As requested by your office, unless you publicly announce the contents 

of this report earlier, we plan no further distribution of it until 30 

days from the date of this letter. We will then send copies of this 

report to other interested congressional committees and to the 

Secretaries of Commerce, Health and Human Services, Interior, and 

Transportation; the Administrator, GSA; the Administrator, NASA; and 

the Administrator of OMB’s Office of Federal Procurement Policy. We 

will make copies available to others upon request. In addition, the 

report will be available at no charge on the GAO Web site at http://

www.gao.gov.



If you have any questions regarding this report, please contact me at 

(202) 512-4841. An additional contact and other key contributors are 

listed in appendix XIV.



Sincerely yours,



David E. Cooper 

Director

Acquisition and Sourcing Management:



[End of section]



Appendix I: Scope and Methodology:



We focused our review on all five agencies granted executive agent 

status by the Office of Management and Budget (OMB) to provide 

governmentwide acquisition contracts (GWACs) for information 

technology. The five agencies with such authority are the General 

Services Administration (GSA), the National Institutes of Health (NIH), 

the Department of Transportation, the National Aeronautics and Space 

Administration (NASA), and the Department of Commerce. In addition, we 

collected similar information about the GSA Schedules program and the 

primary contract service program within the Department of the 

Interior’s franchise fund pilot program. Interagency purchases of 

information technology made from the GSA Schedules program exceed those 

made from all GWAC programs combined. Interior’s GovWorks acquisition 

program is the largest component of the Department of the Interior’s 

franchise fund.



To examine the fees being charged, we identified reported revenues and 

costs. We also reviewed the fee structure and how it changed during 

fiscal years 1999 through 2001. We reviewed agency financial statements 

and annual reports for fiscal years 1999 through 2001, as well as the 

supporting revenue and cost data for each program, the OMB executive 

agent designation and financial management guidance, the contract 

activity reports submitted to OMB, the Statement of Federal Financial 

Accounting Standards Number 4: Managerial Cost Accounting Concepts and 

Standards for the Federal Government developed by the Federal 

Accounting Standards Advisory Board, and relevant legislation. We did 

not independently verify the accuracy of the operating results reported 

for each program. We interviewed and obtained information from 

officials in the contract program and financial offices at the 

Departments of Commerce, Transportation, and Interior; NIH; NASA; and 

GSA. We also held discussions with officials in OMB’s Office of Federal 

Procurement Policy and Office of Federal Financial Management.



To determine provider agencies’ ability to retain earnings, we reviewed 

relevant legislation for each program. We interviewed contract program 

managers and financial officials at the Departments of Commerce, 

Transportation, and Interior; NIH; NASA; and GSA. We also held 

discussions with officials in OMB’s Office of Federal Procurement 

Policy and the offices of the inspector general at the Departments of 

Transportation and Interior and at GSA. To assess the agencies’ 

compliance with OMB’s guidance regarding the use of earnings, we 

reviewed financial reports and held discussions with program officials 

regarding funds transferred to the miscellaneous receipts account of 

the General Fund of the U.S. Treasury.



We conducted our review from May 2001 to June 2002 in accordance with 

generally accepted government auditing standards.



[End of section]



Appendix II: Comments from the Office of Management and Budget:



EXECUTIVE OFFICE OF THE PRESIDENT OFFICE OF MANAGEMENT AND BUDGET 

WASHINGTON, D.C. 20503:



OFFICE OF FEDERAL PROCUREMENT POLICY:



July 17, 2002:



Mr. David E. Cooper Director:



Acquisition and Sourcing Management General Accounting Office 

Washington, DC 20548:



Dear Mr. Cooper:



I have been asked to respond on the Director’s behalf to your May 24, 

2002 request for comment from the Office of Management and Budget (OMB) 

on your draft report, GAO-02-734. This report discusses fee practices 

and policies associated with inter-agency contract programs.



OMB has taken several key steps to provide an appropriate framework for 

the establishment and handling of fees by the agencies that operate the 

inter-agency contracts examined by the General Accounting Office (GAO). 

For example, each agency that serves as an executive agent for a 

government-wide acquisition contract for information technology (GWAC) 

under a designation granted by OMB pursuant to section 5112(e) of the 

Clinger-Cohen Act (40 U.S.C. 1412(e)), is required, by the terms of the 

designation issued by OMB, to account for and recover fully allocated 
actual 

costs in accordance with the Statement of Federal Financial Accounting 

Standards 4; Managerial Cost Accounting Concepts for the Federal 
Government, 

issued by the Federal Accounting Standards Advisory Board (FASAB). 
While the 

FASAB standard appropriately permits some degree of flexibility in the 

execution of the accounting, its ultimate aim is to ensure that 

agencies obtain reliable and timely information on the full cost of 

agency programs.



In addition to accounting for costs, OMB has made provisions to address 

the handling of excess revenues. GWAC executive agents are required to 

adjust their lees so that total revenues do not exceed actual costs. 

and revenues generated in excess of the agency’s actual costs are 

transferred to the miscellaneous receipts of the General Fund of the 

Treasury. In the implementation of this principle, we recognize that 

certain funds, such as the Information Technology Fund, 40 U. S.C. 757 

(which is used to support activities for GWACs operated by GSA’s 

Federal Technology Service), provide for GSA to retain revenues in an 

amount determined by OMB to cover operating needs of the fund.



OMB believes the general framework described above for addressing fees 

remains well-founded. At the same time, we recognize the need for 

additional attention to ensure these fee policies and accounting 

practices are being followed effectively. In our most recent GWAC 

redesignations (issued at the end of March), we specifically instructed 

executive agents to augment their reporting to OMB on revenues and 

costs to discuss their strategy for re-calculating fees to correct any 

differences between revenues and costs. In response to GAO’s draft 

recommendations, we intend to work with OMB’s Office of Federal 

Financial Management and the agencies to evaluate appropriate further 

revisions to this reporting so that OMB can more easily recognize 

possible disparities between fees charged and costs incurred and work 

with the agencies to address these disparities when they arise. We also 

intend to work with GWAC executive agents and the General Services 

Administration’s Federal Supply Service (FSS), which operates the 

Multiple Award Schedules Program, to address the handling of excess 

revenues generated by these respective programs, including appropriate 

disposition of funds and adjustment of fees. We have already initiated 

discussions with FSS to explore alternative approaches to its current 

pricing structure and retention policy.



I appreciate the opportunity to comment on the draft report.



Sincerely,



Angela B. Styles Administrator:



Signed by Angela B. Styles:





[End of section]



Appendix III: Comments from the General Services Administration:



GSA:



GSA Administrator:



July 12, 2002:



The Honorable David M. Walker Comptroller General:



of the United States General Accounting Office Washington, DC 20548:



Dear Mr. Walker:



We appreciate the opportunity to comment on the United States General 

Accounting Office (GAO) draft report, “Contract Management: Interagency 

Contract Programs Need More Oversight” (GAO-02-734).



Please find the enclosed General Services Administration (GSA) comments 

to the report findings and recommendation concerning adjusting the 

Federal Supply Schedules program fee to reflect costs more closely.



If you have any additional questions or need further assistance, please 

have a member of your staff contact Mr. Ralph Boldt, Branch Chief, 

Audit Followup and Evaluation Branch, on 202/501-3094.



Sincerely, Stephen A. Perry, Administrator:



Signed by Stephen A. Perry:



Enclosure:



General Services Administration Comments On the GAO Draft Report, 

“Contract Management: Interagency Contract Programs Need More 

Oversight” (GAO-02-734):



GENERAL:



Findings (page 2, paragraphs 1 and 2):



The Schedules program is much larger in the number of contracts and the 

volume of transactions than those in the Department of the Interior. 

Since the scope and depth of the programs are vastly different, we 

suggest that the relative size be identified to give some context to 

the size of each.



Findings (page 3 paragraph 3):



The following comments are offered:



First Sentence: We suggest that it might be more appropriate to use the 

words “large” or “significant” versus the word “hefty” in describing 

the earnings generated. Also, please consider the same revision for the 

heading on page 11.



Second Sentence: The decision on how to use earnings is not made by 

“Schedules program officials” but rather by various GSA management 

officials. We suggest the sentence be amended to reflect “GSA 

officials”. Also, the reference to GSA’s stock program should be 

revised to GSA’s Supply Business Line. It should also be noted that the 

Stock program historically has been part of the Supply and Procurement 

Business Line and the Schedules program has been just one of the 

methods of supply. This will change effective October 1, 2002, when 

Supply and Procurement are separated into distinct business lines.



The statement that profits from the Schedules program are being held at 

too high a level in order to offset losses in another program is 

incorrect. Profits and losses on individual programs are fully 

disclosed in our General Supply Fund (GSF) internal and external 

financial statements. The earnings retained in the GSF are used as a 

source of capital to provide equity financing for the replacement of 

assets, primarily vehicles, as authorized by law. Additionally, these 

funds can only be retained when there is a documented need in the Fleet 

program to enter into agency vehicle consolidation actions where it can 

be proven that the Government saves substantial additional funds 

through consolidation of other agencies’ fleets. With regard to losses 

in the Supply program, the Supply and Schedules programs were simply 

two components of the same business line, each using a different 

methodology to provide customer support. Historically, there were times 

when the Supply segment of the business line produced more excess 
revenue 

than Schedules. In fact, during the first year of the Schedules cost 

recovery operation, revenues did not fully offset costs, producing a 
loss of 

$2.4 million. As time has progressed, business methods and customer 
needs and 

preferences have changed resulting in significant growth for the 

Schedules program. In response, GSA has spent the last three years 

consolidating operations and redefining our business model so that the 

Supply program can position itself to meet changing customer 

requirements. Therefore, it is incorrect to view the Schedules program 

as subsidizing the stock program. The GSF provides the flexibility for 

GSA to respond to changing requirements through the authorities granted 

to the GSA Administrator under the Federal Property and Administrative 

Services Act of 1949, as amended. Supply and Schedules are 

complementary programs.



Footnote 6: Revise “GSA’s stock program” to “GSA’s Supply Business 

Line.” Also, the reference to the “motor vehicle” program should be 

revised here and throughout the report to the “Fleet program.”:



Finding (page 7, Chart): As referenced earlier, since the scope and 

depth of the programs are vastly different, we suggest that the 

relative size be identified to give some context to the size of each.



Finding (page 7, paragraph 1): Concerning full cost recovery, GSA 

supports best practices for full cost recovery operations in accordance 

with Federal accounting standards, which should be applied to cost 

recovery programs across the Government.



Finding (page 7, paragraph 3): We suggest the word “relatively” be 

deleted.



Finding (page 11): The General Accounting Office (GAO) states that the 

Schedules program produced exceptionally high earnings with revenues 

exceeding costs by more than 53 percent or $151 million during a three-

year period. This statement is somewhat misleading due to the unique 

business model developed for the Schedules program. To break even, GSA 

would have to be able to calibrate the fee in tenths of a percentage 

point. Additionally, the phrase “exceptionally high earnings” depends 

on one’s perspective. It might be more appropriate if the report just 

stated that the Schedules program produced earnings of $151 million 

during the three-year period.



Finding (page 13, paragraph 1):



Concerning the statement that the GSA Inspector General (IG) 

recommended the fee be lowered and that GSA concurred but has taken no 

action to implement it, it should be noted that the IG’s actual 

recommendation was that we “[a]djust the fee to bring revenue in line 

with costs.” While we generally concurred with the recommendation, the 

IG was advised that we did not plan to adjust the fee at that time 

because the administrative cost of changing the fee and the time it

would entail would be significant. The IG was advised that we would 

adjust the fee when we were confident that the fee would be stable for 

an extended period of time.



Since the issuance of the IG report, we have not experienced stability 

in the marketplace that would allow us to accurately forecast our 

business volume. Additionally, the acquisition regulatory climate, 

which has potentially significant impacts on the usage of the Schedules 

program, has not been stable. Consistency in the Industrial Funding Fee 

(IFF) has great value to both our customers and our contractors. Given 

the uncertainty of the market and the fact that neither group raised 

concerns regarding the rate, we have maintained the fee at its present 

level.It is also important to note that for the last three years we 

were in the midst of restructuring the Supply program. The 

restructuring effort caused additional uncertainty regarding our 

business line projections. Now that the Supply program restructuring is 

almost complete, we are reviewing options, processes and impacts to 

design a flexible IFF adjustment.



Finding (page 13, paragraph 2): The GAO report states that “some other 

interagency contract programs, such as NIH and NASA GWACS, have 

established their fees as add-ons to the price of goods and services.” 

We suggest that there be some explanation of the number of contracts 

involved as well as how many are small and disadvantaged businesses. 

Comparing approximately 40 contracts from NASA and NIH with over 10,000 

contracts from GSA that would have to be renegotiated does not seem 

very practical. Using add-ons might not be the most efficient way to 

adjust the fee.



Appendix VIII (page 38. Chart): The chart reflects rates charged for 

Special Orders, Simplified Acquisition, and Definite Quantity 

contracts. These are not interagency or GWAC contracts in the same 

sense as used in this report. These contracts are used to meet specific 

or unique requirements and are not shared contracts as with GWACS or 

Schedules, although orders from different agencies can be consolidated 

into one contract as with automotive procurements. In these three 

areas, when something needs to be bought, a unique contract generally 

has to be prepared to meet the requirement, and this is generally done 

for a single customer or small groups of customers.This is what 

accounts for the higher rate. These contracting mechanisms are not 

otherwise mentioned in the study, and all the other numbers quoted for 

GSA in this study reflect Schedules only. We suggest that GAO remove 

these line items and the footnotes, discussed below, from the chart.



Appendix VIII, page 38, Footnote a to Table VIII): This footnote 

misstates GSA’s pricing policy for these acquisition programs. A range 

of fees is established based on annual analyses of program costs and 

trend-based projections of business volumes. The fee/pricing objective 
is 

to generally break even. However, for some small orders, fees are 
established 

to encourage better leveraging of the Government’s buying power through 

aggregate purchases.



Appendix VIII, page 38, Footnote b to Table VIII): This footnote 

misstates the definition of the Special Orders program. Special order 

contracting employs competition in accordance with Federal Acquisition 

Regulations. It is used when customers request GSA to provide full-

service acquisition support.



Recommendation (page 14, fourth bullet):



The Administrator of GSA adjusts the Federal Supply Schedules program 

fee to reflect costs more closely.



Comment;



GSA agrees that the current schedule cost recovery mechanism IFF lacks 

the flexibility to match costs and revenues as they change over time. 

Enhancing the IFF process will be a complex undertaking as considerable 

efforts will be required to minimize the impacts on customers, 

contracting partners, GSA, and the long-term effectiveness of the 

program, but GSA agrees that it needs to be done. We welcome the 

opportunity to discuss this matter further.



[End of section]



Appendix IV: Comments from the Department of the Interior:



United States Department of the Interior:



OFFICE OF THE ASSISTANT SECRETARY POLICY, MANAGEMENT AND BUDGET 

Washington, D.C. 20240:



JUL 0 1 2002:



Ms. Michele Mackin, Assistant Director Acquisition and Sourcing 

Management United States General Accounting Office Washington, DC 

20548:



Dear Ms. Mackin:



We have reviewed the U.S. General Accounting Office’s proposed report 

entitled Contract Management Interagency Contract Programs Need More 

Oversight (GAO-02-734; job code 120075), and find it to be both 

informative and useful. The information and recommendations provide the 

Office of Management and Budget helpful guidance for oversight of a 

growing interagency program. We believe that all agencies will welcome 

better accounting and reporting guidelines to ensure consistency across 

the Government.



The Minerals Management Service has provided the following suggested 

changes to the report for your consideration:



Appendix VII, Franchise Fund Pilot Data Sheet-Department of the 

Interior, Page 36 of the report:



Table VII. I shows reported annual operating results for GovWorks’ 

portion of Interior’s franchise fund (IFF). Due to a processing error 

in Fiscal Year 2000, $488,000 was erroneously reported as bad debt 

expense by GovWorks. The IFF is correcting the error.



The last sentence of the history section should be changed to show that 

GovWorks began operations in 1997 as part of Interior’s franchise fund.



We appreciate the opportunity to review and comment on the proposed 

report. If you have any questions regarding our comments, please 

contact Debra Sonderman, Director, Office of Acquisition and Property 

Management, on 202-208-6352.



Sincerely,



P. Lynn Scarlett:



Assistant Secretary - Policy, Management and Budget:



Signed by P. Lynn Scarlett:



[End of section]



Appendix V: Comments from NASA:



United States Department of the Interior:



OFFICE OF THE ASSISTANT SECRETARY POLICY, MANAGEMENT AND BUDGET 

Washington, D.C. 20240:



JUL 0 1 2002:



Ms. Michele Mackin, Assistant Director Acquisition and Sourcing 

Management United States General Accounting Office Washington, DC 

20548:



Dear Ms. Mackin:



We have reviewed the U.S. General Accounting Office’s proposed report 

entitled Contract Management Interagency Contract Programs Need More 

Oversight (GAO-02-734; job code 120075), and find it to be both 

informative and useful. The information and recommendations provide the 

Office of Management and Budget helpful guidance for oversight of a 

growing interagency program. We believe that all agencies will welcome 

better accounting and reporting guidelines to ensure consistency across 

the Government.



The Minerals Management Service has provided the following suggested 

changes to the report for your consideration:



Appendix VII, Franchise Fund Pilot Data Sheet-Department of the 

Interior, Page 36 of the report:



Table VII. I shows reported annual operating results for GovWorks’ 

portion of Interior’s franchise fund (IFF). Due to a processing error 

in Fiscal Year 2000, $488,000 was erroneously reported as bad debt 

expense by GovWorks. The IFF is correcting the error.



The last sentence of the history section should be changed to show that 

GovWorks began operations in 1997 as part of Interior’s franchise fund.



We appreciate the opportunity to review and comment on the proposed 

report. If you have any questions regarding our comments, please 

contact Debra Sonderman, Director, Office of Acquisition and Property 

Management, on 202-208-6352.



Sincerely,



P. Lynn Scarlett:



Assistant Secretary - Policy, Management and Budget:



Signed by P. Lynn Scarlett:



[End of section]



Appendix VI: Comments from the Department of Health & Human Services:



DEPARTMENT OF HEALTH & HUMAN SERVICESPublic Health Service:



JUN 21 2002:



National Institutes of Health Bethesda, Maryland 20892:



www.nih.gov:



David E. Cooper:



Director, Acquisition and Sourcing Management U.S. General Accounting 

Office:



441 G Street, N.W. Washington, D.C. 20548:



Dear Mr. Cooper:



Enclosed are the comments of the National Institutes of Health on the 

GAO draft report entitled, “ Contract Management: Interagency Contract 

Programs Need More Oversight,” GAO-02-734. The report provides a 

thorough evaluation of NIH and other agency Government-wide Acquisition 

Contracts that have improved the acquisition and delivery of 

information technology services. We appreciate the opportunity to 

review and comment on this report.



Our response contains both general and technical comments. We believe 

that inclusion of these suggested changes and additions will improve 

the report’s clarity and precision.



Should you have any questions, please contact Patricia Quast at 301-

402-8264.



Elias A. Zerhouni, M.D. Director:



Signed by Elias A. Zerhouni, M.D.:



Enclosure:



Comments of the National Institutes of Health (NIH) On the U. S. 

General Accounting Office (GAO) Draft Report “Contract Management: 

Interagency Contract Programs Need More Oversight,” GAO-02-734:



We appreciate the opportunity to review and provide comments on this 

draft report. The GAO should be commended for the thorough review of 

the Government-wide Acquisition Contracts (GWACs). The review will 

enable us to continue to improve our IT services and strengthen our 

oversight of these services to both NIH and other Federal agencies. The 

NIH information Technology Acquisition and Assessment Center (NITAAC) 

continues to make a difference in delivering IT services and be a 

Federal government model of what Innovative contracting can become 

through streamlined processes and effective management.



In response to this draft report, NIH managers performed additional 

reviews of our accounting systems that showed that the NIH and NITAAC 

accounting practices are In accordance with the generally accepted 

accounting principles for accommodating appropriations and Service and 

Supply Funds (SSFs). In compliance with 42 U.S.C. 231 regulations 

pertaining to SSFs and all other appropriated fund regulations, 

appropriations and SSF dollars are not commingled. Retained earnings 

are held in the SSF for continued funding of the revolving fund 

account. NITAAC will continue to strive to comply with and promote the 

Office of Management and Budget “Principles for Government-wide 

Acquisitions of Information Technology” as presented in the Executive 

Agent Designation Activity Reporting requirements. This includes a 

financial management structure as required by the Statement of Federal 

Financial Accounting Standards (SFFAS) IV: Managerial Cost Accounting 

Standards and Concepts for the Federal Govemment with additional 

support from the Managerial Cost Accounting Standards Guide. . Using 

these standards and guides, the NIH will continue to assure the 

identification, accounting and recovery of the fully allocated actual 

costs as further directed by NIH financial managers.



[End of section]



Appendix VII: Governmentwide Acquisition Contract Data Sheet - 

Department of Commerce:



Commerce Information Technology Solutions

Office of Acquisition Management, Office of the Secretary:



Program Description:



The Commerce Information Technology Solutions (COMMITS) program 

provides the Commerce Department and other federal agencies with a 

means of awarding performance-based information technology services 

from 56 small business contractors. The principal goal of COMMITS is to 

provide an alternative governmentwide acquisition contract (GWAC) that 

allows agencies to contract with small and minority-owned businesses 

for information technology requirements.



The COMMITS program is designed to accomplish three objectives: (1) 

deliver information technology services and solutions to meet 

government organizations’ missions, (2) deliver information technology 

services and solutions using a streamlined, performance-based 

acquisition methodology, and (3) provide a pool of small business 

contractors capable of delivering the government’s information 

technology requirements.



To date, the Department of Commerce’s National Oceanic and Atmospheric 

Administration, the Environmental Protection Agency, and the Department 

of Defense’s Army Research Laboratory have spent the most money under 

COMMITS.



Contract Information:



COMMITS is a 5-year multiple-award indefinite delivery, indefinite 

quantity contract, which permits issuance of task orders with options 

that may extend performance for an additional 5 years beyond the 

original performance period. The ceiling amount is $1.5 billion for 

services in Information Systems Engineering, Information Systems 

Security, and Systems Operations and Maintenance. The COMMITS contract 

allows for the following types of contracts: firm-fixed price, fixed-

price with incentive, cost plus fixed fee, cost plus award fee, cost 

plus incentive fee, labor hours, and time and materials.



Results Table:



Table 3 shows reported annual operating results for COMMITS.



Table 3: Reported COMMITS Program Results for Fiscal Years 1999 to 

2001:



GWAC orders; 1999: $138,119; 2000: $14,430,538; 2001: $52,774,581.



Fee revenues; 1999: $1,742; 2000: $172,675; 2001: $829,151.



Earnings (losses); 1999: ($137,264); 2000: ($371,499); 2001: 

($178,691).



Percent of orders from external customers; 1999: 28.86%; 2000: 21.97%; 

2001: 38.62%.



Number of employees (FTE)[A]; 1999: None; 2000: 6; 2001: 8.



Contracted support (FTE); 1999: None; 2000: .3; 2001: 1.7.



[A] FTE is full-time equivalent.



Source: COMMITS program data.



[End of table]



Fees:



COMMITS program officials told us that fees are reviewed annually to 

ensure that total revenues do not exceed actual costs. The COMMITS 

program office collects fees directly from the customers through an 

interagency agreement. The fees shown in tables 4 and 5 are applied to 

the value of task orders placed by program customers.



Table 4: COMMITS Full Service Program Fees by Fiscal Year:



Full service COMMITS fees[A]: Task order awards if contract is less 

than $5 million.; 1999: 1.25%; 2000: 1.25%; 2001: 2.50%.



Full service COMMITS fees[A]: Task order awards if contract is greater 

than $5 million.; 1999: .65%; 2000: .65%; 2001: 2.50%.



Full service COMMITS fees[A]: Modifications if contract is less than $5 

million.; 1999: .75%; 2000: .75%; 2001: 2.00% (if less than $2 

million); 1.75%.



Full service COMMITS fees[A]: Modification if contract is greater than 

$5 million.; 1999: .35%; 2000: .35%; 2001: 1.00%.



[A] Full service fees are charged when customers use the Department of 

Commerce’s acquisition and financial management service organizations.



Source: COMMITS program.



[End of table]



Table 5: COMMITS Limited Service Fee Structure by Fiscal Year:



Limited service COMMITS fees[A]: Task order awards if contract is less 

than $5 million.; 1999: 1.00%; 2000: 1.00%; 2001: 1.75% (if less than 

$500,000).



Limited service COMMITS fees[A]: Task order awards if contract is 

greater than $5 million.; 1999: .50%; 2000: .50%; 2001: 1.50% (if 
greater 

than $500,000).



Limited service COMMITS fees[A]: Modifications if contract is less than 

$5 million.; 1999: .50%; 2000: .50%; 2001: 1.75% (if less than 
$500,000).



Limited service COMMITS fees[A]: Modification if contract is greater 

than $5 million.; 1999: .30%; 2000: .30%; 2001: 1.50% (if greater than 

$500,000).



Limited service COMMITS fees[A]: National Oceanic and Atmospheric 

Agency agreement, any amount.; 1999: [Empty]; 2000: [Empty]; 2001: 

1.00%.



Limited service COMMITS fees[A]: Environmental Protection Agency 

agreement, any amount.; 1999: [Empty]; 2000: [Empty]; 2001: 1.50%.



[A] Limited service fees are charged when customers use their own 

acquisition and financial management service organizations.



Source: COMMITS program.



[End of table]



History:



The Commerce Department’s Annual Performance Plan (1999) addresses 

mission objectives including increasing opportunities for small, small 

minority, and women-owned small businesses. A major initiative in 

Commerce’s contracting program was to establish a multiple award 

governmentwide indefinite delivery, indefinite quantity contract among 

highly qualified small disadvantaged, small disadvantaged 8(a), and 

women-owned small businesses. On June 21, 1999, OMB designated the 

Department of Commerce an executive agent for the acquisition of 

information technology for the COMMITS program.



[End of section]



Appendix VIII: Governmentwide Acquisition Contract Data Sheet - Federal 

Technology Service:



IT Solutions 

General Services Administration:



Program Description:



The Federal Technology Service’s (FTS) IT Solutions business line 

offers a full range of information technology products and services in 

support of customers’ missions worldwide.



Pre-award services include technical assistance such as requirements 

analysis and proposal development and acquisition services that include 

developing an acquisition strategy, conducting the acquisition, signing 

contracts, and providing legal support, if needed. Post-award services 

include project management such as managing milestones, schedules, and 

costs; performing problem resolution and overseeing progress reviews; 

and financial management services that include managing project funding 

and accepting and paying vendor invoices.



FTS has nine GWACs, and it uses four solution development centers (SDC) 

to operate them. In addition, FTS’s Federal Systems and Integration 

Management Center (FEDSIM) provides technical and acquisition expertise 

to agencies including access to GWACs and other types of contracts.



* The Federal Computer Acquisition Center (FEDCAC) operates the first 

six GWACs listed in table 6 below. Its core business line is the 

repackaging of proven industry solutions that are delivered via 

contracts to meet the emerging technology needs of a specific client 

agency or for governmentwide use. FEDCAC generated over $200 million in 

orders in fiscal 2001.



* The ANSWER SDC, which operates the ANSWER GWAC, contracted for $195.7 

million in business in the last fiscal year.



* The Small Business SDC specializes in contracts with small 

businesses. The center, which has contracts with over 150 small 

business contractors, generated $200.4 million in fiscal year 2001.



* The Information Technology Acquisition Center (ITAC) manages the 

Millennia Lite GWAC, which covers four functional areas:



1) information technology planning, studies, and assessment, 



2) high-end information technology services, 



3) mission support services, and 



4) legacy systems migration and new enterprise systems development. 

Millennia Lite generated $126.3 million in fiscal year 2001.





* FEDSIM’s program officials provide technical and acquisition 

expertise. Center personnel can use a variety of contracts, including 

those offered by other agencies, GSA’s Schedules contracts, and the 

GWACs operated by FTS.



Contract Information:



Table 6 contains a brief description of each GWAC. 



Table 6: FTS GWAC Information:



GWAC description: Disaster Recovery Services; Provides worldwide 

alternate secure facilities with computer and communications systems 

for most technology platforms to implement an agency’s disaster 

recovery plan.; Contract maximum value: $150 million; Period of 

performance: 5 years, expires Sept. 2003; FY 2001 orders: $3.9 million; 

Number of vendors: 3; Top customers FY 2001: Social Security, Drug 

Enforcement, Internal Revenue Service; FTEs FY 2001: 1.5.



GWAC description: Millennia; Intended to meet the federal government’s 

demand for large system integration and software development projects.; 

Contract maximum value: $25 billion; Period of performance: 5-year 

base, one 5-year option; awarded April 1999; FY 2001 orders: $102.8 
million; 

Number of vendors: 11; Top customers FY 2001: FBI, Navy, DOD other; 
FTEs 

FY 2001: 1.



GWAC description: Seat Management; Provides management, operation, and 

maintenance of items such as desktop, server, and communications assets 

and services.; Contract maximum value: $9 billion; Period of 

performance: 5 years with one 5-year option; awarded July 1998; FY 2001 

orders: $1.4 million; Number of vendors: 8; Top customers FY 2001: 
Federal 

Highway, Nuclear Regulatory Commission; FTEs FY 2001: 1.75.



GWAC description: Smart Card; Provides a common multi-technology, 

multi-application smart card solution that supports initiatives such as 

electronic commerce and providing access to secured areas.; Contract 

maximum value: $1.5 billion; Period of performance: 2-year base, has 

two 4-year options; awarded May 2000; FY 2001 orders: $12.9 million; 

Number of vendors: 5; Top customers FY 2001: DOD other, Army, Veterans; 

FTEs FY 2001: 1.



GWAC description: TELIS; The Telecommunications Integrator Services 

contract is a turnkey solution tailored to fit an agency’s 

telecommunication needs. It is a flexible contract that provides 

telecommunications service solutions and network equipment.; Contract 

maximum value: $600 million; Period of performance: 5 years; awarded in 

1997; FY 2001 orders: $66.1 million; Number 

of vendors: 1; Top customers FY 2001: Air Force, Energy, Social 

Security; FTEs FY 2001: 3.5.



GWAC description: Virtual Data Center Support Services; Provides an 

alternative for obtaining mainframe and mid-range systems and related 

IT and network products and services. It provides for the outsourcing 

of government data services from existing federal data centers located 

throughout the world.; Contract maximum value: $6 billion; Period of 

performance: 5-year base, one 5-year option; awarded February 1997; FY 

2001 orders: $15.4 million; Number 

of vendors: 3; Top customers FY 2001: Education; FTEs FY 2001: 1.



GWAC description: ANSWER; Provides for long-term, worldwide, all-

encompassing information technology support such as requirements and 

design research, system development, and software maintenance.; 

Contract maximum value: $25 billion; Period of performance: 2-year 

base, has eight 1-year options; awarded December 1998; FY 2001 orders: 

$195.7 million; Number of vendors: 10; Top customers FY 2001: Navy, 
Army, 

Air Force; FTEs FY 2001: 8.5.



GWAC description: IT Solutions Small Business - Section 8(a); Provides 

a broad range of small business integration services that can include 

personal computers, agency-wide computer networks, training, and other 

information technology services.; Contract maximum value: $90 million 

per contract; Period of performance: 7 years; expires October 2004; FY 

2001 orders: $200.4 million; Number 

of vendors: Over 150; Top customers FY 2001: Army, Navy, 

Air force; FTEs FY 2001: 5.



GWAC description: Millennia Lite; Provides a full spectrum of 

information technology systems integration and development services 

worldwide.; Contract maximum value: $20 billion; Period of performance: 

3-year base, with seven award term options; awards made April to June 

2000; FY 2001 orders: $126.3 million; Number 

of vendors: 43; Top customers FY 2001: Army, Navy, Air Force; FTEs 

FY 2001: 4.



Source: FTS IT Solutions program:



[End of table]



Results Table:



Table 7 shows reported annual operating results for the FTS GWACs.



Table 7: Reported FTS Results by Fiscal Year:



GWAC orders; 1999: $247,460,000; 2000: $774,180,000; 2001: 

$724,917,788.



Revenues; SDCs; FEDSIM; IT Solutions[A]; 1999: ; $21,298,000; 

$855,409,000; $3.1 billion; 2000: ; $39,470,000; $975,398,000; $4.0 

billion; 2001: ; $75,067,000; $1.1 billion; $5.1 billion.



Earnings (losses); SDCs; FEDSIM; IT Solutions; 1999: ; ($1,890,000) 

$2,072,000; $4,664,000; 2000: ; $715,000; $1,697,000; ($2,727,000); 

2001: ; $1,115,000; $2,498,000; ($750,000).



SDC employees (FTE)[B]; 1999: 47.2; 2000: 55.2; 2001: 27.3.



FEDSIM (FTE); 1999: 140.7; 2000: 156.8; 2001: 177.



[A] IT Solutions is one of two major business lines within FTS. IT 

Solutions includes SDCs and FEDSIM. FEDSIM was also included in OMB’s 

executive agent designation.



[B] FTE is full-time equivalent.



Source: FTS IT Solutions program.



[End of table]



Fees:



FTS’s SDCs charge customers two forms of fees: contract access fees and 

consulting fees. With some exceptions, an access fee of 1 percent 

covers the cost of administering the contracts. The disaster recovery 

contract is one of the exceptions, with a fee of ½ percent. The access 

fee is included in the contractors’ prices, and they remit the fee 

revenue to FTS. The access fee has remained steady at 1 percent.



Consulting fees are paid directly to FTS. The centers and FEDSIM charge 

an hourly rate for technical expertise. For example, FEDCAC and FEDSIM 

rates ranged from $74 to $125 per hour in fiscal year 1999, from $75 to 

$125 per hour in fiscal year 2000, and from $85 to $141 per hour for 

fiscal year 2001. Customers and FTS enter into a memorandum of 

understanding or an interagency agreement with FTS that outlines the 

level of support required, the estimated cost to provide the support, 

and other reporting and contractual elements.



Fees are developed to recover full costs and are effective for the 

entire fiscal year. Rate changes during the year are rare. According to 

program officials, the fees are reviewed annually.



History:



On August 2, 1996, GSA became the first agency to receive an executive 

agent designation by OMB under the Clinger-Cohen Act. Both FEDSIM and 

FEDCAC were specifically identified in this designation. FEDCAC evolved 

from the Air Force Computer Acquisition Center, which had been in 

existence for over 20 years. FEDCAC was incorporated into the GSA in 

August of 1991. FEDCAC was chartered to provide acquisition assistance 

on a fee-for-service basis to agencies whose technical requirements 

exceeded $100 million. ITAC is the newest SDC. It became fully 

operational in fiscal year 2001, along with the Millennia Lite GWAC.



[End of section]



Appendix IX: Governmentwide Acquisition Contract Data Sheet - NASA:



Scientific and Engineering Workstation Procurement

Goddard Space Flight Center:



Program Description:



NASA’s governmentwide acquisition contract (GWAC) is the Scientific and 

Engineering Workstation Procurement (SEWP) contract. The current GWAC, 

SEWP III, supports NASA’s objective of meeting its own requirements for 

high-performance information technology, as well as similar needs in 

other agencies. NASA provides technical expertise in developing SEWP 

contracts in areas such as electronic data interchange, web and imaging 

technology, order processing, and technology refreshment.



NASA’s role as the agent between the federal agencies and the prime 

contractors is accomplished by three major ordering processes: 1) pre-

order decision-making, which allows users to check prices on-line for 

all of SEWP’s contracts and to track quotes requested from vendors; 2) 

delivery order processing, which includes receiving delivery orders, 

checking for accurate information, and entering order information into 

SEWP’s database; and 3) post-order quality assurance, which includes a 

quality assurance check with agency customers on product delivery, 

product functionality, and overall customer satisfaction.



The program currently includes 12 prime contracts serviced by 8 prime 

contractors. The largest SEWP customers are the Air Force, the Army, 

and the Navy.



Contract Information:



SEWP III is a fixed-price, indefinite delivery, indefinite quantity 

contract with a maximum value of $4 billion. The initial set of SEWP 

III contracts were awarded on July 30, 2001. The term of the contracts 

is 5 years. The contract specializes in providing advanced technology 

UNIX, Linux, and Windows-based workstations and servers, along with 

peripherals, network equipment, storage devices, and other information 

technology products.



Results Table:



Table 8 shows reported annual operating results for SEWP.



Table 8: SEWP Operating Results by Fiscal Year:



GWAC orders; 1999: $573,383,181; 2000: $673,414,864; 2001: 

$506,627,011[A].



Revenues; 1999: $1,547,853; 2000: $2,571,705; 2001: $3,200,858.



Earnings (losses); 1999: ($957,373); 2000: $420,696; 2001: $646,645.



Percent of orders to external customers; 1999: 

78.5; 2000: 80.9; 2001: 87.8.



NASA FTE[B]; 1999: 4; 2000: 4; 2001: 4.5.



Contracted support; 1999: 14; 2000: 14; 2001: 14.



[A] The decrease in fiscal year 2001 was mainly due to the transition 

between SEWP II and SEWP III contracts.



[B] FTE is full-time equivalent.



Source: SEWP program and NASA Office of the Chief Financial Officer, 

Goddard Space Flight Center.



[End of table]



Fees:



The SEWP III fees shown table 9 below are applied to the value of 

purchases made by program customers. The fee is included as a separate 

contract line item on contract orders. This fee is collected by the 

contractors and forwarded to the government quarterly. Fees are 

reviewed each year and adjusted based on a comparison of revenues and 

costs. Fees are not charged to NASA customers because of an agency 

policy against charging fees for internal use of NASA-based contracts. 

However, NASA noted that it is making an in-kind contribution by not 

charging some costs to the program, such as providing the contracting 

personnel to set up and administer the SEWP contracts, the SEWP program 

manager, and office space. NASA does not charge the Environmental 

Protection Agency a fee because a representative from that agency 

serves on the SEWP executive committee.



Table 9: SEWP Fees by Fiscal Year:



1999[A]: .75% for orders $0-100,000; 2000: 0.0% for orders of 

$2,500 or less; 2001: 0.0% for orders of $2,500 or less.



1999[A]: .65% for orders $100,000-250,000; 2000: .5% for orders from 

$2,501 to $400,000; 2001: .75% for orders from $2,501 to $666,666.



1999[A]: .5% for orders $250,000-500,000; 2000: $2,000 for orders 

over $400,000; 2001: $5,000 for orders over $666,666.



1999[A]: .4% for orders $500,000-750,000; 2000: [Empty]; 2001: [Empty].



1999[A]: .3% for orders $750,000-1 million; 2000: [Empty]; 2001: 
[Empty].



1999[A]: .2% for orders over $1 million; 2000: [Empty]; 2001: [Empty].



Note: The fees shown here represent the most current fee adjustment 

during the year.



[A] The fee at the beginning of the year was a flat .75% on all orders.



Source: SEWP program.



[End of table]



History:



NASA’s efforts to consolidate its procurement of high-end information 

technology products date back to the early 1990s. NASA’s first SEWP 

contract was awarded in 1991 as a NASA-only procurement. Within a year, 

it became a governmentwide contract at the request of the General 

Services Administration (GSA). The most recent GSA delegation of 

authority for the SEWP contract, effective through November 14, 2000, 

was issued in 1995, prior to the passage of the Clinger-Cohen Act of 

1996. On September 29, 2000, OMB designated NASA as an executive agent 

for governmentwide acquisition of information technology.



[End of section]



Appendix X: Governmentwide Acquisition Contract Data Sheet - NIH:



National Information Technology Acquisition and Assessment Center 

Department of Health & Human Services:



Program Description:



The National Institutes of Health National Information Technology 

Acquisition and Assessment Center (NITAAC) is the organizational focal 

point for the three governmentwide information technology contracts NIH 

offers. NITAAC is part of the Office of Administration, which is 

located in the Office of the Director, NIH. NITAAC’s goals include 

providing NIH and other agencies with quality information technology 

products and services that focus on emerging technologies and 

solutions. In addition, NITAAC seeks to simplify the information 

technology procurement process for internal and external clients, as 

well as for contractors, by encouraging the use of its on-line ordering 

system to improve communication between clients and contractors and to 

reduce the paperwork burden.



NITAAC provides a variety of client services. For example, NITAAC 

reviews each task order request to determine if it is within the scope 

of the contract and to ensure that the statement of work and potential 

contractors are well suited to one another. Quality assurance at the 

contract level is performed by reviewing contractors’ monthly status 

reports and by analyzing customer orders and feedback on program and 

policy changes. NITAAC offers mediation services to customer and 

contractors for GWAC orders when problems occur during contract 

administration.



NITAAC’s GWACs are serviced by over 100 prime contractors. The largest 

customers for fiscal year 2001 were the Army, Treasury, and NIH.



Contract Information:



NITAAC’s three GWACs are described in table 10.



Table 10: NIH GWAC Information:



Chief Information Officer Solutions and Partners 2 Innovations (CIO-

SP2i) Allows agencies to customize IT services and solutions. The 

contract covers hardware, software development, systems integration, 

and technical support services in nine task areas, such as IT 

operations and maintenance and critical infrastructure protection and 

information assurance.; Contract maximum: $19.5B; Period of 

performance: 10 years; 12/21/00 to 12/20/10; FY 2001 orders: $198.1M; 

Number of prime contractors: 48; Top customers FY 2001: NIH; Health and 

Human Services/Admini-stration for Children and Families; Army.



Image World 2 New Dimensions (IW2 nd); Provides a mechanism to meet IT 

acquisition needs in areas of imaging and document management systems. 

Offerings include tasks such as data base management, solutions-based 

imaging systems, and document conversion and electronic storage.; 

Contract maximum: $15B; Period of performance: 10 years; 12/21/00 to 

12/20/10; FY 2001 orders: $16.3M; Number of prime contractors: 24; Top 

customers FY 2001: NIH; Transportation; National Archives.



Electronic Computer Store-II (ECS-II); Provides a full range of 

products to meet hardware and software development needs in the areas 

of desktop computing, networks, and UNIX-based workstations. Items 

include commercial off-the-shelf hardware and software, software 

documentation, hardware maintenance, peripherals, and warranty 

services.; Contract maximum: $2B; Period of performance: 5 years; 9/17/

97 to 9/16/02; FY 2001 orders: $291.3M; Number of prime contractors: 

45; Top customers FY 2001: Army; NIH; Treasury.



Note: Data for orders and top customers also include CIO-SP and IW 

contracts that expired during the year.



Source: NITAAC program.



[End of table]



Results Table:



Table 11 shows NIH’s reported annual operating results for its GWACs.



Table 11: Reported NIH GWAC Results by Fiscal Year:



GWAC orders; 1999: $614,101,007; 2000: $508,635,215; 2001: 

$505,746,565.



Revenues; 1999: $5,883,643; 2000: $5,026,185; 2001: $4,376,083.



Earnings; 1999: $2,365,780; 2000: $1,390,388; 2001: $268,219[A].



Percent of orders to external customers; 1999: 87.7; 2000: 

86.4; 2001: 83.8.



NIH staff (FTE)[B]; 1999: 18.4; 2000: 20.3; 2001: 22.6.



Contracted support personnel; 1999: 3; 2000: 9; 2001: 9.



[A] NIH officials noted that these reported earnings are understated 

due to an overcharge of $729,870 for indirect costs including rent and 

utilities.



[B] FTE is full-time equivalent.



Source: NITAAC program.



[End of table]



Fees:



Table 12 below lists the fees paid by NITAAC’s customers external to 

NIH. The fees are applied to the value of orders placed by program 

customers and are included as a line item on those orders. The 

contractors receive the fees and forward them to NIH. While the 1 

percent fee was retained for the two 10-year GWACs awarded in fiscal 

year 2001, NITAAC introduced a sliding scale of lower fees for small 

business orders. NITAAC reduced its fee in this manner to further 

promote the use of its small business contractors. Internal customers 

are charged a flat fee per order submitted. NITAAC reviews its fees 

annually.



NITAAC recently received authority to accept funds from other agencies 

through inter-departmental agreements. For these customers, NITAAC not 

only awards customer orders but administers them as well. NITAAC 

charges an additional fee of 1.5 percent to handle these agreements.



Table 12: NIH GWAC Fees by Fiscal Year:



Fees if:: Order is less than $1M; 1999: All GWACs: 1%; 1999: All GWACs: 

1%; 2000: ECS-II: 1%; 2000: CIO-SP2i: 1%; 2001: CIO-SP2i: 1%; 2001: 

IW2nd: 1%.



Fees if:: Order is from $1M to $5M; 1999: All GWACs: 1%; 1999: All 

GWACs: 1%; 2000: ECS-II: 1%; 2000: CIO-SP2i: 1%; 2001: CIO-SP2i: 1%; 

2001: IW2nd: .75%.



Fees if:: Order is from $5M to $10M; 1999: All GWACs: 1%; 1999: All 

GWACs: 1%; 2000: ECS-II: 1%; 2000: CIO-SP2i: 1%; 2001: CIO-SP2i: .75%; 

2001: IW2nd: .5%.



Fees if:: Order is greater than $10M; 1999: All GWACs: 1%; 1999: All 

GWACs: 1%; 2000: ECS-II: 1%; 2000: CIO-SP2i: 1%; 2001: CIO-SP2i: .5%; 

2001: IW2nd: .25%.



[A] If an order is $25,000 or less, a minimum fee of $250 is charged.



Source: NITAAC program.



[End of table]



History:



NIH has been managing all three information technology contracts since 

1996, when the original IW and CIO-SP contracts were awarded under the 

authority of its Service and Supply Fund (42 U.S.C 231). The original 

ECS contract was awarded on September 29, 1995.



[End of section]



Appendix XI: Governmentwide Acquisition Contract Data Sheet - 
Department 

of Transportation:



Information Technology Omnibus Procurement (ITOP)

Transportation Administrative Service Center:



Program Description:



The Department of Transportation’s governmentwide acquisition contract 

(GWAC), ITOP, operates under the Transportation Administrative Service 

Center (TASC). ITOP has awarded contracts to 35 prime vendors--

comprising a mixture of small disadvantaged, small, and large 

businesses--who offer a broad range of support resources related to 

information technology. Initiated to streamline government 

procurements of information technology, ITOP is supported by a group of 

multiple pre-awarded contracts.



The three top customers are the Department of Defense’s Department of 

the Army and Joint Strike Fighter Program Office, and the Federal 

Bureau of Investigation.



On May 20, 2002, the Deputy Secretary of Transportation informed the 

Director of the Office of Management and Budget that Transportation 

would not be seeking redesignation as a GWAC executive agent beyond 

June 3, 2002. The Secretary stated that two issues must be resolved 

before the Department can determine if a long-term extension of GWAC 

authority is warranted. First, while early numbers for the first half 

of fiscal year 2002 show that ITOP has been recovering its costs, more 

data are needed to ensure continued self-sufficiency. Second, the 

Department is in the process of determining the extent to which ITOP 

can address the information technology needs of the new Transportation 

Security Administration. The Secretary stated that meeting the 

Transportation Department’s in-house information technology 

requirements must now be its priority.



Contract Information:



ITOP offers a 7-year indefinite delivery, indefinite quantity task 

order contract providing information systems engineering, systems 

operations and management, and information systems security to satisfy 

customer requirements. The contract provides for the following types of 

orders: firm fixed price, cost plus fixed fee, cost plus award fee, and 

time and materials.



The current contract, referred to as ITOP II, provides for a maximum of 

$10 billion for information technology solutions. ITOP II has an 

individual task order delivery ceiling of $300 million. The first 

contract, ITOP, provided for a total of $1.13 billion, with an 

individual task order ceiling of $50 million.



Results Table:



Table 13 shows reported annual operating results for ITOP.



Table 13: Reported ITOP Results by Fiscal Year:



GWAC orders; 1999: $247,364,339; 2000: $258,589,555; 2001: 

$246,803,547.



Revenues; 1999: $2,095,253; 2000: $3,398,901; 2001: $3,927,010.



Earnings (losses); 1999: ($852,064); 2000: ($298,662); 2001: 

($960,156).



Percent of orders from external customers; GWAC orders: Revenues: 

Earnings (losses): transactions; 1999: 68%; 2000: 76%; 2001: 87%.



GWAC orders: Revenues: Earnings (losses): dollars; 1999: 76%; 2000: 

96%; 2001: 93%.



Transportation employees (FTE)[A]; 1999: 12; 2000: 14; 2001: 17.



Contracted support; 1999: 7; 2000: 7; 2001: 7.



[A] FTE is full-time equivalent.



Source: TASC and ITOP program data.



[End of table]



Fees:



ITOP’s program office reassesses its fees periodically to ensure 

continued competition with other agencies and to ensure that the 

program recovers costs. The customer pays the fee directly to the ITOP 

program office using an interagency agreement or other funding 

instrument. The fees shown in tables 14 and 15 below are applied to the 

value of task orders placed by program customers.



ITOP adjusted its fee structure in 2001 to better reflect the level of 

effort and costs of providing services and to address prior-year 

losses. In fiscal year 2002, TASC reduced the indirect cost rate it 

charges ITOP by 40 percent. The TASC indirect cost rate reduction 

(fixed-fee overhead) has already saved ITOP about $600,000 through June 

2002. A Transportation official noted that the ITOP’s total revenues 

have exceeded costs for the first 9 months of fiscal year 2002.



Table 14: ITOP Fee Structure by Year:



Service category: Basic contractual services; Service category: Program 

office award[A]; Effective 9/1/1998: Fee: 2.75%; min = $2,063; max = 

$275,000; Effective 4/1/2000: Fee: 2.75%; min = $825; max = $275,000.



Service category: Joint effort[B]; Effective 9/1/1998: Fee: 2.0%; min = 

$1,500; max = $200,000; Effective 4/1/2000: Fee: 2.0%; min = $600; max 

= $200,000.



Service category: Contract modifications; Effective 9/1/1998: Fee: 

1.5%; min = N/A; max = $150,000; Effective 4/1/2000: Fee: 1.5%; min = 

N/A; max = $150,000.



Service category: Financial services -; payment processing; service; 

Effective 9/1/1998: Fee: .75% - 1.00%; min = $375; max = $75,000; 

Effective 4/1/2000: Fee: .75% - 1.00%; min = $150; max = $75,000.



Service category: Delegation of contract authority; Service category: 

Customer award; Effective 9/1/1998: Fee: 1.0%; min = N/A,; max = 

$100,000; Effective 4/1/2000: Fee: 1.0%; min = N/A; max = $100,000.



Service category: Customer award-ITOP associate program; Effective 9/1/

1998: Fee: .75%; min = N/A; max = $75,000; Effective 4/1/2000: Fee: 

.75%; min = N/A; max = $75,000.



[A] Program office provides limited pre-award technical support and a 

full range of contracting support. The program office has lead 

responsibility for writing the requirement (statement of work).



[B] Program office provides a full range of contracting support. The 

customer is responsible for writing the requirement (statement of 

work).



Source: ITOP program.



[End of table]



Table 15: ITOP Fee Structure Effective 10/1/01:



Service category: Basic contractual services; Service category: Initial 

award (including 3 no-cost modifications) and a modification with 
funding; 

Fee: 2.5%; min = $3,000; max = $350,000 per task order or modification 
per 

year.



Service category: Each additional no-cost modification; Fee: $15,000.



Service category: No-cost modification package (3 per year); Fee: 
$30,000.



Service category: Delegation of contracting authority, annual; Fee: 1%; 

min = $3,000; max = $350,000 per task order per year.



Service category: Financial services -; payment processing; service; 

Fee: 1%; min = $10,000; max = $127,000/year.



Service category: Additional value-added services; Service category: 

Deluxe contractual expert service; Fee: $50,000 annually.



Service category: Deluxe technical expert service; Fee: $50,000 
annually.



Service category: Dedicated support; Fee: Custom-priced.



Source: ITOP program.



[End of table]



History:



The ITOP program office received both the Department of 

Transportation’s approval and the General Services Administration’s 

delegation of procurement authority for its multiple pre-awarded 

indefinite delivery, indefinite quantity contract in August 1995. ITOP 

received its first OMB executive agent delegation in January 1999. As 

discussed previously, ITOP’s executive agent delegation expired on June 

3, 2002, and the Department of Transportation decided not to seek 

redesignation at that time.



[End of section]



Appendix XII: Franchise Fund Pilot Data Sheet - Department of the 

Interior:



Interior Franchise Fund: 



GovWorks Federal Acquisition Center:



Program Description:



Interior’s Minerals Management Service manages the GovWorks program, 

which is the largest component of the Interior franchise fund. This 

fund is located in Interior’s Office of the Secretary. The GovWorks 

program offers a wide range of acquisition services, such as buying 

high-dollar products and services and awarding grants and cooperative 

agreements. Program services include project planning, soliciting and 

evaluating offers, administering contracts and agreements through 

closeout, and paying all bills. Clients also receive assistance with 

project management activities, such as preparing statements of work and 

tracking expenditures.



GovWorks procurements are not limited to any specialized area. The 

program offers acquisition services in a wide range of areas, such as 

information technology, environmental studies, training systems 

development, secure communications, engineering and technical studies, 

joint military program support, and healthcare support services. In 

fiscal year 2001, GovWorks had contracts with about 300 contractors. 

GovWorks’ largest customers are the Department of Defense, the 

Department of Health and Human Services, and the Department of State.



The acquisition services that GovWorks provides to external customers 

are processed through Interior’s franchise fund. Similar service 

projects for internal customers are accounted for by the Minerals 

Management Service separately from the franchise fund.



Contract Information:



Because GovWorks is a general-purpose acquisition service, it can 

access other agencies’ governmentwide acquisition contracts and GSA’s 

schedules contracts, in addition to preparing its own contracts. 

GovWorks has awarded indefinite delivery, indefinite quantity 

contracts, and multiple-award contracts covering areas such as training 

and education systems, construction management, and telecommunications 

infrastructure support.



Results Table:



Table 16 shows reported annual operating results for Interior’s 

franchise fund program.



Table 16: Reported Results for GovWorks by Fiscal Year:



Contract awards; 1999: $112,280,368; 2000: $174,308,032; 2001: 

$289,821,890.



Revenues; 1999: $24,183,040; 2000: $88,255,873; 2001: $195,065,239.



Earnings (losses); 1999: $238,262; 2000: ($190,373)[A]; 2001: 

($48,710).



Percent of awards to external customers; 1999: 76.4; 2000: 

72.7; 2001: 87.



[A] This earnings amount is subject to change because a GovWorks fiscal 

year 2000 expense of $488,000 was processed erroneously. Interior is 

taking action to correct this error. :



Note: Revenue and earnings amounts are for GovWorks operations within 

the franchise fund.



Source: Interior franchise fund and GovWorks program.



[End of table]



Fees:



GovWorks establishes its fee for the franchise fund at the beginning of 

the project based on an assessment of the amount of assistance needed 

for the planned procurement. The fee is set as a percentage of the 

dollar value of the project. The base fee is 3 percent, but it can 

range from 2 to 4 percent. The fee is paid by the customer agency 

directly to the Interior franchise fund.



The GovWorks program employs 34 full-time-equivalent personnel, all of 

whom are Interior employees.



History:



In May 1996, OMB designated the Department of the Interior as one of 

six executive branch agencies authorized to establish a franchise fund 

pilot program. Franchise funds were authorized by the Government 

Management Reform Act of 1994. The GovWorks program began operation in 

1997 as part of Interior’s franchise fund.



[End of section]



Appendix XIII: Program Data Sheet - Federal Supply Schedules:



General Services Administration:



Federal Supply Service:



Program Description:



The General Services Administration’s (GSA) Federal Supply Service 

(FSS) organization offers a supply and procurement business under the 

Federal Supply Schedules Program (Schedules program), which provides 

federal customers with services from more than 7,400 program vendors, 

as well as a wide range of commercial products.



The services provided by the Schedules program include accounting, 

graphic design, financial, information technology, environmental, and 

landscaping, along with a vast array of brand-name products from office 

supplies to systems furniture and computers. The services and products 

are provided at volume discount pricing on a direct-delivery basis. 

Negotiated prices for varying requirements and all vendor-awarded 

contracts are included in a catalogue of 48 schedules. The value of 

information technology orders are larger than the orders in all other 

schedules combined.



The intent of the Schedules program is to offer customers shorter lead-

times, lower administrative costs, and reduced inventories; provide 

significant opportunities for agencies to meet their small business 

goals; and promote compliance with socioeconomic laws and regulations.



GSA reports that the external agencies with the largest Schedules 

program orders are the Department of Defense, the Department of 

Veterans Affairs, and the Department of Justice.



Contract Information:



Under the Schedules program, GSA awards contracts to multiple companies 

that supply comparable products and services. These contracts can be 

used by any federal agency to purchase commercial products and 

services. The current standard Schedules contract is for a 5-year 

period with three 5-year options.



Results Table:



Table 17 shows reported annual operating results for the Schedules 

program.



Table 17: Reported Schedules Program Results by Fiscal Year:



Orders; IT Schedules; 1999: $6.95 billion; 2000: $9.29 billion; 2001: 

$10.85 billion.



Total; 1999: $10.47 billion; 2000: $13.64 billion; 2001: $16.48 

billion.



Revenues; 1999: $113,808,123; 2000: $151,123,890; 2001: $167,500,482.



Earnings; 1999: $39,455,650; 2000: $55,496,936; 2001: $56,370,055.



Percent of orders from external Customers; 1999: 82; 2000: 79; 2001: 

71.



Schedules program employees (FTE)[A]; 1999: 623; 2000: 662; 2001: 

778.



[A] FTE is full-time equivalent.



Source: FSS data and GSA’s General Supply Fund Supply Operations 

financial statements.



[End of table]



Fees:



GSA’s fee, known as the Industrial Funding Fee, is intended to fully 

recover the cost of operations. In fiscal year 1995, the Schedules 

program started to become self-supporting. The Schedules program 

established a 

1 percent fee, which is remitted by the vendor to GSA. The fees shown 

in table 18 are applied to Schedules purchases by program customers.



Table 18: Schedules Program Fees by Fiscal Year:



Service category: Industrial Funding Fee for use of the Schedules 

program; 1999: 1%; 2000: 1%; 2001: 1%.



Service category: Indirect schedules; 1999: 5%; 2000: 5%; 2001: 5%.



Service category: Special orders contracting[A]; 1999: 3.5 - 40%[B]; 

2000: 3.5 - 40%[B]; 2001: 3.5 - 40%[B].



Service category: Simplified acquisition; 1999: 15 - 50%[B]; 2000: 15 - 

50%[B]; 2001: 15 - 50%[B].



Service category: Definite quantity; 1999: .5 - 10%[B]; 2000: .5 - 

10%[A]; 2001: .5 - 10%[B].



[A] Special orders contracting employs competition in accordance with 

the Federal Acquisition Regulation. It is used when customers request 

GSA to provide full-service acquisition support.



[B] The higher fees for these services result from providing tailored 

procurement assistance for various goods or services such as furniture, 

office supplies, hardware, and general products. GSA explained that 

purchases in these areas generally require that a unique contract be 

prepared, and generally for a single customer or for small groups of 

customers. The range of fees is based on annual analyses of program 

costs and trend-based projections of business volume. However, for some 

small orders, fees are established to encourage better leveraging of 

the government’s buying power through aggregated purchases.



Source: Schedules program.



[End of table]



History:



In 1993, the House Committee on Appropriations recommended that GSA 

review the benefits of providing supplies and equipment on a full cost-

reimbursable basis. Also in 1993, a Conference Committee for the 1994 

Treasury, Postal Service and General Government Appropriations Act 

stated that federal agencies should be allowed a choice of purchasing 

from the Schedules program or from the commercial sector. Further, in a 

1994 report, the Senate Appropriations Committee stated that the 

Schedules program was suitable for reimbursable funding under the 

general supply fund. In 1995, GSA’s Federal Supply Service began the 

process to convert the Schedules program to operation on a cost-

reimbursable basis.



[End of section]



Appendix XIV: GAO Contact and Staff Acknowledgments:



GAO Contact:



Michele Mackin (202) 512-4309:



Acknowledgments:



In addition to the individual named above, Penny A. Berrier, Paul M. 

Greeley, and John Van Schaik made key contributions to this report. 

Richard T. Cambosos, Mark P. Connelly, and Denise M. Fantone served as 

advisors.



[End of section]



FOOTNOTES:



[1] OMB’s executive agent designation letters for governmentwide 

acquisition contracts direct that agencies use an accountability 

structure and financial systems that ensure the identification, 

accounting, and recovery of the fully allocated actual costs in 

accordance with the Statement of Federal Financial Accounting Standards 

Number 4: Managerial Cost Accounting Concepts and Standards for the 

Federal Government. 



[2] GWACs are governmentwide contracts established to improve the 

acquisition of information technology. GWACs are operated at the 

Departments of Commerce and Transportation, the National Aeronautics 

and Space Administration (NASA), GSA’s Federal Technology Service 

(FTS), and the National Institutes of Health (NIH). On May 20, 2002, 

the Secretary of Transportation informed OMB that Transportation would 

not be seeking redesignation of its GWAC at that time. Additional 

information is in appendix XI.



[3] Six franchise fund pilot programs were authorized in the Government 

Management Reform Act (P.L. 103-356) to provide common administrative 

support services. In addition to the Department of the Interior, pilot 

programs were authorized at the Departments of Commerce, Health & Human 

Services, Treasury, and Veterans Affairs and the Environmental 

Protection Agency. 



[4] The Schedules program offers a large group of commercial products 

and services ranging from office supplies to information technology 

services.



[5] Three of the five GWAC programs (at Transportation, NIH, and FTS) 

operate under revolving funds, while the NASA and Commerce GWACs do 

not. The GAO General Counsel’s office sent letters to NASA and Commerce 

in April 2002 requesting information on how they operate their GWACs 

consistent with applicable fiscal laws, including the miscellaneous 

receipts statute (31 U.S.C. 3302(b)). NASA responded by letter dated 

May 8 and Commerce by letter dated May 17. We continue to explore these 

issues and we recently requested OMB’s views.



[6] GSA’s stock program serves as a storehouse and distribution center 

for items such as office supplies, tools, and safety products. GSA’s 

fleet program provides vehicles for lease by federal agencies.



[7] P.L. 104-106, Feb. 10, 1996.



[8] P.L. 103-356, Sec. 403, Oct. 13, 1994.



[9] Created under the authority of the Federal Property and 

Administrative Services Act of 1949 (40 U.S.C. 481 (a)(3)). 



[10] Appendixes VII through XIII include detailed data, including 

revenues, on each program.



[11] OMB’s executive agent designation letters state that the 

designation is granted with the understanding that the GWAC agency will 

adhere to and promote a series of policies and practices provided by 

OMB, such as recovery of fully allocated actual costs.



[12] For fiscal year 2001, the Transportation Administrative Service 

Center charged its business lines $8.8 million for the center’s 

indirect costs, more than double its actual costs of $4.1 million. 

Transportation’s Office of Inspector General reported in April 2002 

that it plans to review how the center calculates and allocates its 

operating costs.



[13] Earnings results are reflected in table 2 and appendix IX.



[14] P.L. 104-208, Sept. 30, 1996.



[15] GSA’s Office of the Inspector General, Audit of the Federal Supply 

Service’s Industrial Funding Fee For the Schedules Program, Report 

Number A83309/F/H/V99513 (Washington, D.C.: May 28, 1999).



[16] 31 U.S.C. 1535 and 1536.



[17] As noted in footnote 5, we sent a letter to NASA requesting 

information on how NASA operates its GWAC consistent with applicable 

fiscal laws. 



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