Interagency Contracting:

Improvements Needed in Setting Fee Rates for Selected Programs

GAO-11-784: Published: Sep 9, 2011. Publicly Released: Sep 9, 2011.

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Federal agencies spend over $50 billion annually on goods and services using interagency contracts, which leverage the government's buying power, simplify procuring commonly used goods and services, and allow agencies to use the contracts and expertise of other agencies. Agencies that operate interagency contracts and provide assisted acquisition services for other agencies recover their costs by charging a fee to their customers. In response to questions about fee rates and their composition, GAO assessed for selected interagency contracting programs (1) the current fee rates and trends in the fee rates, sales, costs, and revenues; (2) the extent to which programs subsidize, or are subsidized by, other programs; (3) the extent to which agencies identify, track, and forecast costs and revenues, manage reserves, and obtain approval for fee-rate changes; and (4) the extent to which agencies use contractor personnel to supplement program staffing. GAO analyzed data on six interagency contract programs at four agencies--General Services Administration (GSA), Department of the Interior (DOI), National Aeronautics and Space Administration (NASA) and National Institutes of Health (NIH); reviewed agency policies; and interviewed officials from the agencies' program, policy, and financial offices.

Fee rates for the selected interagency contract programs range from 0.25 percent to 12.0 percent of the value of the order for fiscal year 2011 and vary depending on the level of service and type of acquisition services provided. Some programs with lower fee rates provide only minimal support services while the customer agency places direct orders through an online system. Other programs provide more support services or function as the acquisition office for the customer agency. The fee rates have remained stable since fiscal year 2007 at four of the six programs reviewed--three at GSA and one at DOI. Two programs--one at NASA and one at NIH--lowered their rates. During this same period, sales have generally increased across programs, and most of the programs have generated revenue in excess of program costs. Excess revenue in a given year is permitted; however, GSA's Multiple Award Schedules (MAS) program has consistently accumulated excess revenue. All but NASA's program allow for subsidization since they are managed along with other programs under revolving funds. Subsidization allows agencies to ensure that their revolving funds remain solvent, even if they must subsidize across programs if some programs cannot cover all their costs with revenue generated by their fee rates. NASA is managed as a stand-alone program. Agencies follow key elements of the fee-setting process, but weaknesses exist in some programs. The weaknesses include inadequate cost identification, inadequate attention to growing reserve balances, and not following internal approval processes. For example, GSA does not track Networx costs at the contract level, and does not monitor the growth of reserve balances at the program level. DOI does not assign its overhead costs proportionately between its offices. Therefore, these agencies cannot ensure that all their fee rates are set appropriately and may be missing opportunities to identify program inefficiencies. Use of contractor personnel for support services in interagency contract programs varied widely, ranging from 5 percent of total staffing for the GSA MAS to 92 percent of staffing at NASA. In general, agencies use contractor personnel to provide acquisition support or management support. Agency officials said using contractor personnel allows them flexibility to adjust to changing workloads. NASA officials said that they will continue to review the extent to which functions should be performed by federal employees or by contractor personnel. GAO recommends that GSA improve its tracking of costs and management of reserves and that DOI improve its assignment of overhead costs. GSA and DOI concurred with GAO's recommendations.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: GSA began tracking the costs of the Networx MAC separately from its other network services in Fiscal Year 2013.

    Recommendation: To improve aspects of specific interagency contracting programs and to better adhere to cost recovery principles, the Administrator of General Services should direct the Federal Acquisition Service Commissioner to begin tracking cost information on the Networx multi-agency contract (MAC) at the program level to enable agency managers to identify possible inefficiencies in the program.

    Agency Affected: General Services Administration

  2. Status: Closed - Implemented

    Comments: GSA issued a new policy in February 2012 that establishes an annual process to determine the need to conduct fee rate reviews for programs that produce an excess (or shortfall) of over $5 million in revenue on average over any 3-year period. The policy also requires an automatic review of the fee rate of the MAS program each year. GSA began implementing these reviews in March 2013.

    Recommendation: To improve aspects of specific interagency contracting programs and to better adhere to cost recovery principles, the Administrator of General Services should direct the Federal Acquisition Service Commissioner to develop and implement guidance for evaluation of current fee rates when an individual program consistently transfers excess revenue to the reserve funds.

    Agency Affected: General Services Administration

  3. Status: Closed - Implemented

    Comments: In June 2012, DOI changed its cost allocation procedures so that the costs of the Herndon, VA office's administrative and management support is allocated between the two Assisted Acquisition Services program offices based upon each offices' percentage of the total direct costs for the two offices.

    Recommendation: To improve aspects of specific interagency contracting programs and to better adhere to cost recovery principles, the Secretary of the Interior should direct the National Business Center Director to revisit the assignment of costs of its Assisted Acquisition Services program to ensure that the overhead costs of the program are properly assigned between its two offices to ensure that each carries its fair share of the overhead costs consistent with cost recovery principles.

    Agency Affected: Department of the Interior

 

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