GSA to cut 400 employees in face of declining revenue

Employees at the General Services Administration's acquisition shops are bracing for a round of personnel cuts.

Two consecutive years of declining revenue within the Federal Technology Service has left that organization in the untenable position of having costs exceed revenue, said Martin Wagner, acting commissioner of FTS and its sister organization, the Federal Supply Service. The two shops have been partially merged.

Business volume for FTS's IT Solutions program, where the losses are the greatest, decreased from a peak of $7.2 billion in fiscal 2004 to a projected low of $4.3 billion by the end of this fiscal year, according to GSA.

About 400 positions within FTS need to be cut, Wagner said. GSA is seeking authority to offer early retirement or buyouts to the affected employees. Cutting personnel through reduction-in-force notices would be a last resort, Wagner said.

"I cannot exclude it, but we are taking these steps so as not to have to do that," he said.

Personnel cuts also will affect the FSS, but losses will be concentrated in FTS. Notice of the cutbacks comes on top of a hiring freeze implemented earlier this year in both procurement shops, as well as for management and administrative staff at the central and regional offices.

GSA's procurement organization has experienced several years of turmoil that began with revelations of contracting abuse in 2003. Under resulting congressional pressure, it began consolidating FTS and FSS into a Federal Acquisition Service. Although that merger received official internal approval last September, many details were not worked out at the time.

A Feb. 24 agency memorandum said that Acting Administrator David Bibb has approved the new organization's design. GSA staffers were scheduled to give Congress briefings on Monday.

Jack Hanley, president of the National Federation of Federal Employees' Council of GSA Locals, said the personnel cuts will haunt the agency. "How do we get our business to work when we get rid of the people who do the work?" he said. "It's a plan for extinction."

GSA should use existing reserve funds to make up for revenue shortfalls, and retain the employees, Hanley said.

Wagner said the reserve funds Hanley mentioned are designated to cover agency transition costs to Networx, GSA's procurement vehicle for telecommunication services. "You can't go get those dollars," he said.

But even if that money were available, it would be a mistake to subsidize a money-losing operation for a prolonged period, he added. GSA doesn't envision recapturing lost revenue levels for at least another year, maybe two. Using dollars from agency fees to preserve an inefficient organization goes against GSA's mandate of low-cost service, Wagner said.

At the same time, Wagner acknowledged that cost-cutting alone will not save GSA. "What you do with cutting costs is you buy time," he said.

Employees targeted for early retirement offers will be those in the least disruptive areas of the procurement shops, and, in the meantime "we are going to do everything in our power to make sure that customers' needs are met," he said.