Natural Gas:

Opportunities for Federal Cost Savings Through Competitive Purchases

RCED-91-35: Published: Oct 23, 1990. Publicly Released: Oct 23, 1990.

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GAO reviewed natural gas purchases by an Air Force base and two veterans medical centers to determine: (1) the extent to which the agencies used competitive procurement practices; (2) actual and potential cost savings from competitive procurement; and (3) why more agencies did not use competitive procurement practices.

GAO found that: (1) the military spent over $345 million annually for natural gas, but only 63 of 600 military installations purchased it competitively; (2) federal civilian agencies spent over $160 million annually for natural gas, but there was little knowledge on how they purchased it; (3) facilities that purchased gas competitively saved 10 to 30 percent on their gas costs; (4) four reviewed agencies could have reduced their natural gas costs by 11 to 22 percent over a 12-month period if they had purchased it competitively; and (5) the Department of Defense (DOD) could save an estimated $25 million to $38 million, or 7 to 11 percent, on gas costs annually if it purchased gas competitively. In addition, GAO found that more agencies did not buy natural gas competitively because they lacked: (1) awareness of this purchase option; and (2) time, staff resources, and technical expertise for evaluating the various options available and for managing the competitive bid process. GAO also found that: (1) the General Services Administration (GSA) planned to initiate a program to assess federal civilian agency potential to procure natural gas competitively; and (2) in January 1990, DOD established a program to increase natural gas competitive purchasing by centralizing and expanding wellhead purchases.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: GSA identified candidates for competitive procurements of natural gas. Analyses were completed on May 15, 1991.

    Recommendation: The Administrator of General Services, as a principal negotiator for federal utility and supply contracts, should institute a program to work with federal civilian agencies in conducting procurement cost comparisons for all large federal civilian agency users of natural gas.

    Agency Affected: General Services Administration

  2. Status: Closed - Implemented

    Comments: GSA has analyzed data on federal civilian agencies facilities' natural gas usage. GSA has recommended a gas-purchasing strategy to agency users and assisted them in procuring natural gas competitively.

    Recommendation: On the basis of comparative analysis, GSA should recommend a gas-purchasing strategy to agency users, actively assist in its achievement, and maintain data showing results of the analysis.

    Agency Affected: General Services Administration

  3. Status: Closed - Implemented

    Comments: GSA has obtained an oral agreement to include civilian agency facilities in Defense Fuel Supply Center's centralized and contract award procedures, which has thus far resulted in estimated annual financial savings for several facilities included. GSA is updating this information. GSA also has amended its regulations concerning natural gas procurement.

    Recommendation: GSA should consult and work with DOD officials to take advantage of their regional analysis, as well as their centralized solicitation and contract award procedures.

    Agency Affected: General Services Administration

  4. Status: Closed - Implemented

    Comments: On June 28, 1991 and February 21, 1992, GSA summarized the action taken in response to GAO recommendations. These letters discussed the status of GSA initiatives to assess the potential of federal civilian agencies to procure natural gas competitively. The Administrator plans to continue monitoring these initiatives on a periodic basis.

    Recommendation: The Administrator of General Services should monitor GSA initiatives to assess the potential for competitive natural gas procurement in the federal civilian agency sector to ensure that opportunities to reduce federal natural gas expenditures are fully realized.

    Agency Affected: General Services Administration

 

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