Use of Federal Supply Schedules Has Declined at Roughly the Same Rate as Overall Procurement Spending

		Use of Federal Supply Schedules Is Declining

In fiscal year 2014, GSA reported its total FSS program sales as  $33.1 billion, which, according to GSA officials, includes data not reported  in FPDS-NG such as awards under the $3,000 micro-purchase threshold  and those made by federal intelligence agencies and state and local  governments. According to data we reviewed from FPDS-NG, the federal  government obligated $25.7 billion through the FSS program in 2014—a  decrease of 19 percent or $6 billion since 2010. Since 2010, the proportion of total federal contracting obligations awarded  under the FSS program has remained approximately the same—between  5 and 6 percent. HHS Practice of Targeting Solicitations to Fewer Vendors May Result in Fewer Quotes

According to FPDS-NG data, in fiscal year 2014, HHS received only one  or two quotes for orders accounting for 51 percent of its total FSS  obligations. DOD and  GSA received one or two quotes for 35 and 32 percent of total FSS  obligations, respectively. Although this practice is consistent  with FAR procedures, the relatively higher percentage of HHS obligations  on orders for which the government received only one or two quotes in  fiscal year 2014 suggests that HHS contracting officers may not be  putting enough emphasis on ensuring that three or more quotes are  received when competing orders. In two cases at HHS,  contracting officials did not prepare these determinations and told us they  were not aware of this requirement. Agencies Are Paying Insufficient Attention to the Prices Paid under FSS Orders

Our analysis of how agencies assessed prices for the 60 orders in our  sample showed that agencies are not paying sufficient attention to prices  for goods and services under FSS orders. Ordering Agencies Did Not Consistently Seek Discounts from Schedule Prices When Required

In our sample of FSS orders that were over the SAT, we found a  significant number of cases—16 out of 45 orders—in which contracting  officers did not seek discounts from FSS prices, as required per the  FAR. When contracting officers do not seek discounts for FSS orders, the  government may be missing opportunities for cost savings. Recommendations for Executive Action

To help ensure contracting officers follow ordering procedures when  using FSS, and to enhance internal controls, we recommend that the  Secretaries of DOD and HHS and the Administrator of GSA take the  following three actions:  Issue guidance emphasizing the requirement to seek discounts and  outlining effective strategies for negotiating discounts when using the  FSS program;  Issue guidance reminding contracting officials of the procedures they  must follow with respect to purchasing open market items through the  FSS program, including the requirement to perform a separate  determination that the prices of these items are fair and reasonable;  and
Assess existing training programs to determine whether they are  adequate to ensure that contracting officials are aware of the ordering  procedures of the FSS program, including requirements to 1) properly  prepare justifications for noncompetitive awards, 2) seek discounts,  and 3) assess prices for open market items included in FSS orders. In addition, HHS concurred with our  recommendation to assess the reasons contributing to the agency’s high  percentage of orders with one or two quotes. Appendix I: Objectives, Scope and Methodology

The objectives of this review were to address (1) how and to what extent  the government is using Federal Supply Schedule (FSS) contracts to  order goods and services; (2) factors influencing the degree of  competition for FSS orders; and (3) the extent to which agencies examine  prices to be paid for FSS orders. We also analyzed the product and service  obligations to determine which product and service categories accounted  for the most obligations in fiscal year 2014. Using FPDS-NG  data, we identified the three agencies with the highest obligations on FSS  orders under GSA schedule contracts in fiscal year 2013: the Department  of Defense (DOD), GSA, and the Department of Health and Human  Services (HHS).
Why GAO Did This Study

The FSS program provides agencies a simplified method of purchasing commercial products and services at prices associated with volume buying. In 2011, the FAR was amended to enhance competition on FSS orders. Competition helps agencies get lower prices on products and services and get the best value for taxpayers.
GAO was asked to examine competition and pricing for FSS orders. This report addresses (1) how and to what extent the government is using the FSS program, (2) factors influencing the degree of competition for FSS orders, and (3) the extent to which agencies examine prices to be paid for FSS orders.
GAO analyzed data from the Federal Procurement Data System-Next Generation on obligations through the FSS program for fiscal years 2010-2014 and reviewed a non-generalizable sample of 60 FSS orders awarded in fiscal year 2013 by DOD, HHS and GSA, the agencies with the highest use of the FSS program. GAO also interviewed officials from these agencies and FSS vendors.

What GAO Found

According to the General Services Administration (GSA), total sales through the Federal Supply Schedules (FSS) program in fiscal year 2014 were $33.1 billion. This includes purchases by federal, state, and local agencies, including federal intelligence agencies which do not report their FSS spending publicly. GAO's analysis of publicly reported federal procurement data shows that federal use of the FSS program has declined from $31.8 billion in 2010 to $25.7 billion in 2014—a 19 percent inflation-adjusted decrease. This is consistent with the decline in overall federal contracting obligations. The FSS portion of total federal contracting obligations remained steady—between 5 and 6 percent.
Most FSS obligations were competed in fiscal year 2014, but only 40 percent of obligations were on orders for which the government received three or more quotes—a number frequently mentioned in the Federal Acquisition Regulation (FAR). These results are influenced by various factors. One factor identified in the orders from the agencies GAO reviewed—the Departments of Defense (DOD) and Health and Human Services (HHS) and GSA—involves situations where few vendors can fulfill agencies' specific needs.
HHS had a significantly higher percentage of FSS obligations in fiscal year 2014 on orders that were competed but the agency received only one or two quotes—51 percent—compared to DOD and GSA, which received one or two quotes for 35 and 32 percent of their FSS obligations, respectively. HHS's practice of targeting solicitations to fewer vendors may be contributing to this higher rate.
Agencies are paying insufficient attention to prices when using FSS. Ordering agencies did not consistently seek discounts from schedule prices, even when required by the FAR. In addition, GAO found cases in which officials did not assess prices for certain items, as required, or had insufficient information to assess prices. Contracting officials were not always aware of the requirement to seek discounts and told GAO that the need to assess prices was not emphasized in training and guidance. When contracting officials are not aware of these regulations, agencies may be missing opportunities for cost savings.

What GAO Recommends

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