Interagency and agencywide contracting was responsible for at least $54 billion of the approximately $540 billion that was obligated governmentwide for goods and services in fiscal year 2009. Interagency contracting is a process by which one agency either uses another agency's contract directly or obtains contracting support services from another agency. In agencywide contracting, sometimes called enterprisewide contracting, a component within an agency awards a contract for use by all components of that agency. Both contracting methods are intended to leverage the government's buying power and provide cost savings. By providing a simplified, expedited, and lower cost method of procurement, they can help agencies save both time and administration costs. However, unjustified duplication among available contracts can result in increased costs to the government.
Agencies have created numerous interagency and agencywide contracts using existing statutes, the Federal Acquisition Regulation, and agency-specific policies. The creation of these contracts is based on a number of rationales, including avoiding user fees that would be paid for using another agency's contract, allowing for cost-reimbursement contracts, and gaining more control over procurement actions within the agencies. With the proliferation of these contracts, however, there is a risk of unintended duplication and inefficiency. Billions of taxpayer dollars flow through interagency and agencywide contracts, but the federal government does not have a clear, comprehensive view of which agencies use these contracts and if they are being utilized in an efficient and effective manner. Without this information, agencies may be unaware of existing contract options that could meet their needs and may be awarding new contracts when use of an exiting contract would suffice. The government, therefore, might be missing opportunities to better leverage its vast buying power.
Government contracting officials and representatives of vendors have expressed concerns about potential duplication among the interagency and agencywide contracts across government, which they said can result in increased procurement costs, redundant buying capacity, and an increased workload for the acquisition workforce. Some vendors stated they offer similar products and services on multiple contracts and that the effort required to be on multiple contracts results in extra costs to the vendor, which they pass to the government through increased prices. Some vendors stated that the additional cost of being on multiple contracts ranged from $10,000 to $1,000,000 per contract due to increased bid and proposal and administrative costs. One vendor stated that General Services Administration contracts compete with agencywide contracts, and from industry's perspective, this has introduced redundant buying capacity.
For several years the General Service Administration's Federal Acquisition Service and its Inspector General have reported that unnecessary duplication exists within the Multiple Award Schedule (MAS) program. Similarly, the January 2007 Report of the Acquisition Advisory Panel identified several problems regarding interagency contracting. In particular, the report noted that too many choices without information related to the performance and management of these contracts make the cost-benefit analysis and market research needed to select an appropriate acquisition contract impossible. Such problems persist, as GAO reported in April 2010.
GAO has identified two overriding factors that hamper the government's ability to realize the strategic value of using interagency and agencywide contracts: (1) the lack of consistent governmentwide policy on the creation, use, and costs of awarding and administering some contracts; and (2) long-standing problems with the quality of information on interagency and agencywide contracts in the federal procurement data system. Both factors may have contributed to unnecessary duplication.
In April 2010, GAO recommended that the Office of Management and Budget (OMB), which has governmentwide procurement policy responsibilities, establish a policy framework for establishing some types of interagency contracts and agencywide contracts, including a requirement to conduct a sound business case. GAO also recommended that OMB take steps to improve the data on interagency contracts including updating existing data on interagency and agencywide contracts, ensuring that departments and agencies accurately record this data, and assessing the feasibility of creating and maintaining a centralized database of interagency and agencywide contracts. This database would allow contracting officers to identify and make informed decisions on available contracts. GAO's recommendations were consistent with provisions in the 2009 National Defense Authorization Act, which directed that the Federal Acquisition Regulation be amended to require that certain interagency contracts entered into by an executive agency be supported by a business case analysis and all interagency contracting be supported by a written determination that the approach is the best procurement alternative. An interim regulation addressing the legislation was issued in December 2010.
OMB has taken some steps to improve interagency contracting and related data. It reported in August 2010 that agencies are working to improve their internal management controls, such as making determinations that using another agency's contract is in the best interest of the government. In addition to the recent interim regulation, OMB reported that it planned to issue overarching guidance that would address the need for agencies to prepare business cases describing the need for a new multiagency or agencywide contract, the value added by its creation, and the agency's suitability to serve as an executive agent. According to OMB, the upcoming guidance will require agencies to address the anticipated impact that a proposed multiagency contract will have on the government's ability to leverage its buying powersuch as how it differs from an existing contract and the basis for concluding that it will offer greater value than an existing contract. This business case analysis also will require the agency to evaluate the cost of awarding and managing the contract and compare this cost to the likely fees that would be incurred if the agency used an existing contract or sought out acquisition assistance.
While the interim regulation and OMB's plans concerning a requirement for agencies to submit business cases for new multiagency or agencywide contracts constitute steps forward, in the absence of better data regarding the universe of such contracts, agencies may face challenges in evaluating the value of existing contracts. GAO has reported numerous times over the years on issues related to the quality of the government's data on contracts. In that regard, OMB reports that it has a new effort under way to improve contract information in the Federal Procurement Data System-Next Generation (FPDS-NG), the current federal government database for information and data on all federal contracts. OMB also is discussing options for creating a clearinghouse of existing interagency and agencywide contracts.
In OMB's announcement of its planned guidance, it noted that progress has been insufficient on the issue of contract duplication and concerns remain that agencies are duplicating each other's contracting efforts and creating redundant contracting capacity. Until controls to address the issue of duplication are fully implemented, the government will continue to miss opportunities to take advantage of the government's buying power through more efficient and more strategic contracting. At the same time, the added workload for the acquisition workforce and procurement costs for vendors, which result in higher prices for the government, will continue until this problem is addressed.
To realize the benefits of using interagency and agencywide contracts, OMB and the General Services Administration will need to fully implement the steps they are taking to address identified shortcomings in the management of interagency contracting. The procuring agencies will have to play their parts as well. In particular, despite numerous GAO recommendations over the years, improvements are still needed regarding the accuracy of the federal contracts database in order to determine whether the contracts are being used in an efficient and effective manner. Continued congressional oversight of this issue is warranted.
Requiring business case analyses for new multiagency and agencywide contracts and ensuring agencies have access to up-to-date and accurate data on the available contracts will promote the efficient use of interagency and agencywide contracting and, by reducing the costs associated with duplicate contracts, help the government better leverage its purchasing power when buying commercial goods and services.
The information contained in this analysis has been based on products listed under the "Related GAO Products" tab, with updates provided through the OMB Report to Congress from August 2010 and an interview with OMB officials. GAO determined that the data it used were sufficiently reliable for its purposes.
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