GSA acquisition units report losses

Parts of the General Services Administration's two procurement organizations have been losing money for more than a year, according to agency documents and officials.

Losses are greatest within the Federal Technology Service; this fiscal year alone, operating expenses and overhead costs for FTS' Regional IT Solutions organization could exceed revenue by $45.7 million, Government Executive has learned. The organization's revenue for the first quarter of fiscal 2006 was down by 50 percent when compared to the same quarter the previous year.

Business lines within the Federal Supply Service are also losing money, Kathleen Turco, GSA's acting deputy administrator and chief financial officer, confirmed.

Within FTS, both IT Solutions and Professional Services are in the red. Losses accelerated following the agency's late fiscal 2005 decision to return money that federal customers had stored within the GSA information technology fund.

"That upset a lot of people because now the money could no longer be used, it was old money," said Sandra Bates, a former FTS commissioner. Agencies saw the IT fund as a convenient way of holding unspent money from fiscal year to fiscal year -- money that otherwise would have been sent to the Treasury Department.

The Defense Department, in particular, had a large amount of money stored in the IT fund, most of which it could no longer use, according to government and industry sources. Much of that money ended up back at the Treasury Department, they said.

Customer agencies also balked at time-intensive processes created by the agency's "Get It Right" campaign, Bates said. "I'm not saying that quick is best, but customers are not accustomed to the longer lengths of time so they're perhaps turning in-house," she said. The Get It Right campaign was the agency's response to procurement abuses uncovered in 2003.

But losses at FTS' Professional Services have more to do with GSA's January decision to end GSA Preferred, a failed information technology investment, Turco said.

Within FSS, losses are greatest in the Global Supply service, said Neal Fox, a former GSA assistant commissioner for commercial acquisition. The unit stockpiles supplies and resells them to federal agencies. "They put copier paper into warehouses--cleaning fluid, all sorts of everyday items that can be shipped from vendors," Fox said. "That business model is losing money for GSA."

Turco said GSA is reviewing Global Supply's structure but has made no decision on whether to close the warehouses.

Other, smaller FSS business lines such as sales of excess government property are also money-losing propositions, Fox said.

Previously, the agency used money gained through its schedules program to cover FSS losses, Fox said. GSA is trying to get legislation through Congress to combine the IT fund with the FSS fund. "GSA wants to merge those two funds, because they know the IT fund cannot make money as it's now structured," Fox said.

By voice vote, the House passed a bill sponsored by Rep. Tom Davis, R-Va., in May 2005 that would merge the two funds, but the legislation has stalled in the Senate.

"It's no secret that costs are exceeding revenues in some areas," said Neil Franz, a GSA spokesman. The agency's ongoing reorganization of its procurement shops also will result in an 8 percent loss of full-time equivalent positions when compared to the beginning of fiscal 2006, Franz said. The new Federal Acquisition Services organization will contain 4,130 full-time equivalent positions, he said.

Turco said the agency has taken steps to lower total losses this fiscal year. A hiring freeze on FTS and FSS personnel, plus a hold on new management and administrative employees, will save the agency money, she said. "A great deal of our expenses are related to labor," she said.

GSA also is cutting its training budget, trimming travel expenses and preventing employees from attending "unnecessary conferences," Turco added. The agency also will work to increase its business revenue, she said.

Savings created by GSA's recent decision to cut about 400 positions within FTS and additional positions in FSS will not accrue until fiscal 2007, Turco said. GSA has said it will try to let employees go by offering early retirement or buyouts. Martin Wagner, acting commissioner of the partially merged procurement shops, has not ruled out issuing reduction in force notices, however.