Neal Fox | Contracting in perspective: Door opens for non-GSA deals

Contracting via government- or agencywide buying vehicles is running a bit wild. As more agencies proceed with plans for their own vehicles, GSA's historic near-monopoly on such contracts is threatened.

Over the past two years, the Defense Department has launched big deals as Seaport-e, ITES and NETCENTS. The Homeland Security Department canceled Spirit but relaunched Eagle and then FirstSource, a giant small-business set-aside. NASA announced SEWP IV, and NIH is looking into ECS IV.

How come?

In this and future articles, I will attempt to clarify the future of large scale federal procurements and the strategies behind them. I'll examine some of the largest procurement vehicles that are planned or being rolled out over the next 18 months, such as Eagle, Alliant, Networx and others. I'll try to bring insight and understanding regarding the choices these vehicles and their contractors engender.

The fundamental question is why agencies are pursuing so many of these GWACs. In a nutshell, GSA has brought this on itself. Two developments have created a crisis of confidence in the agency as the master of procurement.

First, GSA's Federal Technology Service engaged in some questionable acquisitions'the use of the wrong vehicles to expedite fulfilling legitimate requirements. The GSA inspector general jumped in. It didn't matter if these improprieties were isolated and done by well-intentioned people who overstepped their authority in order to help customers; nor that GSA responded to end the abuses. This is, after all, Washington, and the damage had been done.

Second, GSA egged itself by 'parking' DOD acquisition funds that otherwise should have expired. And not pocket change, but several billion dollars. GSA was forced to admit it lacked the authority to extend the life of those expiring funds. The one-two punch of these issues resulted in a crisis of confidence that opened the door to more decentralized governmentwide procurement contracting.

Meanwhile, GSA's Federal Supply Service had built its value around providing governmentwide contracts that were mainly used by customers in a self-service manner. These vehicles include the Multiple-Award Schedule contracts, GWACs and the SmartPay credit card program. These contracts will continue to be popular as self-service vehicles.

More affected by the crisis in confidence are GSA's assisted services. Demand for them, in dollar value, has fallen 40 percent in the past year, according to some estimates. Under assisted services, GSA will perform the task order procurement on behalf of another government agency for a larger fee than it extracts on self-service buys, where the fee is 0.75%.

Before the abuses were uncovered, GSA assisted services had three value components for customer agencies, only one of which remains. The three value components were extension of expiring funds, performing task order procurements quickly and providing a contracting officer where an agency either had none or needed to supplement its existing procurement staff.

Well, special authority for extension of expiring funds went out the window; indeed, it never really existed. Some estimates consider the parking of funds the reason for more than half of all GSA assisted-services sales. The other vanishing value component is the ability to perform task order procurements quickly. Thanks to the so-called Get it Right campaign, GSA assisted-service times have doubled over the past two years.

Besides, when an agency program manager is faced with the decision to send out contracting to GSA and pay an extra 3 percent or more, or have it done internally, the choice will usually be to do it internally. That's because the agency program manager has more control over the outcome when accomplished by internal contracting personnel.

That leaves the one remaining value component for GSA assisted services. If an agency has no contracting personnel or it needs to supplement contracting personnel during peak periods, GSA assisted services is still a good option. As you might surmise, when two of three value components evaporate, a business will suffer. For GSA, the result is that agencies are creating their own internal contracting vehicles managed by their own contracting personnel. GSA is suffering financially as a result, and, in my opinion, this will continue to accelerate.

GSA does not seem to have recognized the changed environment that has diminished the value of assisted services to its customers. The reorganization combining FSS and FTS into one new Federal Acquisition Service builds the future of GSA around the assisted services that are on the decline. Instead, the door is widening for non-GSA approaches to meet governmentwide procurement needs. Even the opportunity to expand into strategic sourcing, which should be a GSA domain, will be impacted by the diffusion of authority in the new FAS organization. This will leave open the door to other providers such as GovWorks, FedBid Inc. and others to provide for the strategic sourcing needs of agencies. At least many sales through these providers would still be through the GSA schedules.

Stay tuned for my next article, where I will discuss the DHS EAGLE contract vehicle.

Neal Fox is the former assistant commissioner for commercial acquisition at GSA and now leads Neal Fox Consulting. He can be reached via e-mail at nfox@usa.com.