Report urges GSA to step up auditing of contracts

The General Services Administration is not keeping track of savings generated from one of its most popular contracting tools, according to a new report from the Government Accountability Office.

The (GAO-05-229) found that 60 percent of selected fiscal 2004 contracts lacked paperwork to show prices were fair. The report suggested that if GSA increased its documentation of contract pricing, it could negotiate better prices.

"Until GSA takes steps to ensure the appropriate use of available pricing and negotiation tools, it will continue to miss opportunities to save the government hundreds of millions of dollars in the procurement of goods and services," stated the report.

GSA schedules, which offer agencies contracts for items from furniture to software, have skyrocketed in popularity over the last decade, jumping in annual sales of $4 billion to $32 billion. Their increased use caught the attention of the Government Accountability Office, which became concerned after GSA's inspector general issued a report in 2001 on pricing problems with the schedules.

GAO's criticisms centered on the decline in the number of audits before and after contracts are awarded, which it says in the past have helped GSA to recover millions of dollars on mispriced contracts. GAO found that the number of audits before awards has fallen sharply over time, from 130 in fiscal 1992 to 14 in fiscal 2003.

The report attributes the decline to an increased emphasis on speed and a lack of institutional stress on audits.

Mary Alice Johnson, GSA spokeswoman, said the agency already has taken significant steps toward increasing documentation of contracts. She pointed out that while the number of pre-award audits has declined over the past decade, it increased 150 percent between fiscal 2003 and fiscal 2004, and is expected to almost double to 70 audits this year.

She added that the decline can at least partly be explained by the lengthening of GSA schedule contracts from one year to five years. GSA proposed a new rule last week to reconsider the use of post-award contracts, which were discontinued in 1997 in an effort to streamline the contracting process and reflect commercial best practices.

Johnson also said that GSA already has implemented many of the report's recommendations, including beefing up contract oversight. In 2002, GSA created a nationwide program to periodically evaluate contractor performance. The agency also is taking steps to work more closely with the inspector general's office on pre-award audits and to increase documentation on contract pricing, she said.

More documentation and greater use of audits would please GAO. "We think if they use those tools, they could better negotiation better prices," said Jim Fuquay, assistant director of GAO's acquisition and sourcing management team.

While some agencies have decided to avoid GSA and negotiate directly with companies, Fuquay said he doesn't think agencies are not using GSA schedules because of contract documentation concerns.

"Agencies using schedules aren't aware of negotiations taking place behind the scenes. They look at prices and go from there," he said.

The report already has raised eyebrows in Congress. A spokeswoman for Sen. Susan Collins, R-Maine, said she is concerned with continued problems with the GSA schedules and plans to discuss her concerns with agency officials. Collins is chairwoman of the Senate Homeland Security and Governmental Affairs Committee.