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Highlights

For over 125 years, the Bureau of Engraving and Printing (BEP), within the Department of the Treasury, has relied on a single contractor to supply the paper for U.S. currency. Such a long-term contracting relationship could contribute to higher costs and other risks. Another federal agency that relied on a single contractor, the U.S. Mint, decided to obtain a second supplier for coin metal. In solicitations for currency paper contracts in 1999 and 2003, BEP took steps to address barriers to competition that GAO had identified in 1998 through a survey of paper manufacturers. This report updates GAO's 1998 report using data from a second survey. It addresses (1) the changes BEP made to encourage competition and the results of its efforts, (2) the steps BEP took to ensure that it paid fair and reasonable prices, and (3) the analysis BEP has done of the advantages and disadvantages of obtaining a second supplier.

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Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of the Treasury 1. To obtain the views of paper manufacturers on barriers to competition and to determine if there is a need for a second supplier of currency paper, the Secretary of the Treasury should direct the Director of BEP, before issuing solicitations for currency paper contracts in the future, to increase outreach activities with paper manufacturers to allow them to provide their views on the barriers to competition, identify the steps BEP should take to address these barriers, and comment on the solicitations.
Closed - Implemented
BEP held a currency paper conference on June 28, 2005. Representatives from several paper manufacturers attended and asked questions regarding the technical requirements for currency paper, as well as the solicitation and award process.
Department of the Treasury 2. To obtain the views of paper manufacturers on barriers to competition and to determine if there is a need for a second supplier of currency paper, the Secretary of the Treasury should direct the Director of BEP to determine if there is a need to obtain a second supplier for currency paper by preparing an analysis of the advantages and disadvantages of obtaining a second supplier of currency paper, including the impact on the cost, security, quality, and adequacy of the currency paper supply. If the analysis determines that there is a need to obtain a second supplier, the Secretary should then determine what steps are necessary to obtain a second supplier for currency paper.
Closed - Implemented
In January 2006, BEP contracted with ARINC, an independent consultant, to conduct an economic analysis of the advantages and disadvantages of obtaining a second supplier. ARINC issued a report "Economic Analysis of the Advantages and Disadvantages of Obtaining a Second Supplier for Currency Paper" on June 30, 2006, which includes an analysis of the effect a second supplier would have on the cost, security, and quality of currency paper as well as the adequacy of the paper supply.

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