Contract Management:

Interagency Contract Program Fees Need More Oversight

GAO-02-734: Published: Jul 25, 2002. Publicly Released: Aug 26, 2002.

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Federal 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 an approach in which the provider agency's contracting officer handles all aspects of the procurement. This increased use of interagency contracts is a result of reforms and legislation passed in the 1990s, allowing agencies to streamline the acquisition process, operate more like businesses, and offer increasing numbers of services to other agencies. Most of the contract service programs GAO reviewed reported an excess of revenues over costs in at least one year between fiscal years 1999 and 2001. Office of Management and Budget (OMB) guidance directs agencies with governmentwide acquisition contracts (GWAC) or franchise fund programs to account for and recover fully allocated actual costs and to report on their financial results. Agencies are to identify all direct and indirect costs and 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. OMB's guidance further directs that agencies return GWAC earnings to the miscellaneous receipts account of the U.S. Treasury's General Fund. However, this guidance conflicts with the operations of agencies' revolving funds, which were established by statutes that allow retention of excess revenues. The Federal Supply Schedules program has generated hefty earnings, largely because of the rapid growth of information technology sales. Rather than adjust the fee, however, the General Services Administration has used the earnings primarily to support its stock and fleet programs. However, the significant amount of earnings means that Federal Supply Schedules program customers are being consistently overcharged for the contract services they are buying.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: OMB has issued new guidance for re-designation of agencies with GWACs. This guidance contains new requirements which contain corrective actions in response to GAO's recommendations.

    Recommendation: The Director of OMB should work with GWAC executive agents to address the handling of GWAC earnings, including appropriate disposition of funds and adjustment of fees.

    Agency Affected: Executive Office of the President: Office of Management and Budget

  2. Status: Closed - Implemented

    Comments: OMB has issued new guidance for re-designation of agencies with GWACs. This guidance contains new requirements which contain corrective actions in response to GAO's recommendations.

    Recommendation: The Director of OMB should 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.

    Agency Affected: Executive Office of the President: Office of Management and Budget

  3. Status: Closed - Implemented

    Comments: OMB has issued new guidance for re-designation of agencies with GWACs. This guidance contains new requirements which contain corrective actions in response to GAO's recommendations.

    Recommendation: The Director of OMB should ensure that GWAC executive agents comply with OMB guidance on full cost accounting in establishing their fees.

    Agency Affected: Executive Office of the President: Office of Management and Budget

  4. Status: Closed - Implemented

    Comments: GSA has initiated a rulemaking action that is a major step toward lowering the fee it charges on its schedules program contracts. Once that rulemaking process is completed this year (now estimated for late June or early July), GSA plans to implement the fee reduction in fiscal year 2004. The final rule has been published and, effective January 1, 2004, GSA's fee was lowered to .75 percent from 1 percent.

    Recommendation: The administrator of General Services Administration should adjust the Federal Supply Schedules program fee to reflect costs more closely.

    Agency Affected: General Services Administration

 

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