OFPP tries new approach to reign in MACs

By Jason Miller
Executive Editor
Federal News Radio

The Office of Federal Procurement Policy is doing an end run to curb the growth of multiple award contracts (MACs).

Dan Gordon, OFPP administrator, told the Senate Homeland Security and Governmental Affairs Ad Hoc Subcommittee on Contracting Oversight yesterday, that strategic sourcing through blanket purchase agreements is one best ways the White House will ensure agencies are getting the best prices for certain commodities.

Gordon also told lawmakers that for future multi-agency multiple award contracts a new guidance will require justification by OFPP before the agency can move forward.

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Additionally, OFPP will continue to improve data around the use and number of multiple award contracts making it easier for agencies to know which agencies run these vehicles and what products and services they provide.

All of these steps are trying to reign in MACs, which have proliferated over the past decade costing agencies and vendors millions of dollars a year.

But what Gordon didn’t do is put a line in the sand requiring justification for all future MACs, nor did he make a clear statement about the future of the National Institutes of Health’s CIO-SP3 governmentwide acquisition contract. NIH and vendors are waiting for OFPP’s decision to approve the third generation of the IT services contract.

Gordon offered only a hint of his thinking when describing what the business cases must show for future GWACs and multi-agency contracts.

“To have a GWAC in our view, the agency needs to show justification, they need to show that they will be meeting a need,” he says. “In NIH’s case, the unique aspect of Health IT is one of the key reasons that it made sense, just as the case with NASA, there was the issue of very high end, high-tech IT where they were able to draw on their scientists and engineers in NASA.”

Gordon says the business case also must show that the agency will charge reasonable fees and how they will manage the contracts, including giving OFPP full reports on how customers are using the contracts.

He says the guidance-coming later this summer-will not be for agencywide MACs, but he is encouraging agencies to develop business cases anyway.

“There is logic in having a business case required even for enterprisewide, the question is who needs to approve it?” Gordon says in an interview after the hearing. “I’m open-minded on that. It may make more sense for it to be at a high level within the agency; it may make more sense for it to be outside the agency.”

In the meantime, Gordon says agencies can improve governmentwide contracting through strategic sourcing.

He points to the recent award of BPAs for office supplies by the General Services Administration of how consolidation can occur around products.

Gordon says GSA estimates that the government will save $200 million over the next four years because of the low prices in the contract. He says agencies spend about $1 billion a year on office supplies.

“The schedules probably represent the greatest opportunity for strategic sourcing and we have only begun to tap that potential,” he says. “These BPAs were negotiated governmentwide and they will be open to every employee at every agency governmentwide.”

Gordon says he plans to move quickly on the next set of BPAs for products, such as copiers and printers or technology hardware. He says IT is the richest target for strategic sourcing.

“It is not enough to have them in place, but we have to make sure our federal employees really use these vehicles,” he says.

The Government Accountability Office recently found that 47 percent of the time agencies didn’t get their discounts negotiated under existing BPAs.

John Needham, director of GAO’s acquisition and sourcing management division, says OFPP needs to make sure contracting officers know these BPAs exist and what the discounts are.

He says a recent report found that contracting officers are required by the Federal Acquisition Regulations to go back and review the prices they got from the vendor off the BPA, but only 19 of the 320 cases actually did that.

GSA’s Steve Kempf, acting commissioner of the Federal Acquisition Service, says many of these challenges goes back to acquisition workforce training.

GSA is trying to make its MACs under the schedules program easier to use.

Kempf says this fall GSA will pilot a new pricing tool on three schedules to help contracting officers determine which vendor is offering the best price. He says currently contracting officers are using spreadsheets or even pen and paper.

“One of the things this system will do is actually you will get the information in electronically and you can see the differentiation in the price of the products, you can compare it to other products in [GSA] Advantage and even import information from other contracts whether they be governmental or commercial and compare the prices,” he says. “So that you can see as a contracting officer are you getting the very best price on that kind of product. The power of that tool and the flexibility will give the contracting officers better intelligence to make decisions about how to award the contract and at what price, and they will be able to see where the contractors may be playing a game in the way they are doing the pricing.”

GSA also will add Web 2.0 tools, including improved search capabilities and direct links to vendor’s tracking websites.

Kempf says GSA receives about 500,000 hits a day on its Advantage system, and its E-Buy system is growing at a rate of 14 percent in 2010.

“We are reducing the time it takes contracting officers to make administrative modifications to contracts, such as address changes, increasing their capacity to focus on more complex modifications,” he says.

GSA’s longer term goal is to make the entire acquisition system paperless and electronic.

One interesting exchange came between Kempf and Sen. Scott Brown (R-Mass.), ranking member of the subcommittee, about whether GSA kept within its budget.

Kempf says GSA had a $200 million surplus-profit-in 2009 and expects to have about $100 million extra in 2010.

He says a major reason for the surplus is GSA overestimated the cost of gas for federal vehicles. Kempf says GSA used about $100 million last year for its reserve fund to ensure they had enough money to run the organization in case revenues drop.

Brown and Sen. Claire McCaskill (D-Mo.) both wondered if fees were the reason agencies developed their own contracts instead of using GSA’s or other existing one.

None of the witnesses would say that was the reasons. But Rick Gunderson, the Homeland Security Department’s deputy chief procurement officer, says his agency believes it spent less money by creating its own technology contracts than by using someone else’s.

McCaskill asked Gunderson for further proof that they did indeed save money.

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