Charge It

GSA designs office supply contracts to reach more buyers for less money.

Consolidating the procurement of office supplies might sound more like a theme for a Dilbert comic strip than a major government initiative, but the Obama administration is banking on its new purchasing strategy. The goal is to transform how federal agencies leverage their collective buying power to reap taxpayer savings.

In June, the General Services Administration established 12 new blanket purchase agreements-essentially charge cards set up with certain vendors-for discounted supplies such as pens and pencils, office furniture and printer toner. And, while bulk buying is far from revolutionary, this is not exactly your grandfather's strategic sourcing initiative.

Unlike most BPAs, which are available only to one agency, the new agreements will be open to all employees with a SmartPay card. The price structure of the BPAs also is unique-established through repeated rounds of reverse auctions, a bidding process that encourages vendors to lower their rates to keep pace with competitors. The agreements include price reductions of up to 19 percent on multiagency bulk purchases.

All together, the administration expects agencies to trim their office supply costs, estimated at $1 billion a year, by nearly $200 million over the next four years. "That's not just a lot of pens and pencils," says former Office of Management and Budget Director Peter R. Orszag. "These are dollars that can be better used on services for the American people."

GSA launched a similar blanket purchase agreement for office supplies in 2006, but the initiative fell flat, with orders underperforming expectations by nearly 90 percent. Larry Allen, president of the Coalition for Government Procurement, says many agencies thought they could get better prices elsewhere, including through similar GSA agreements.

While prices are lower this time and the path has been cleared of duplicative contracts, Allen says vendors could be in for another letdown: "I cannot recall one multiagency big buy that achieved what it set out to," he says. "You can only drive so much behavior." Allen, whose member companies are part of the BPA, figures if sales inch up to only 75 percent below expectations, he would consider the program a success.

GSA officials have higher expectations and anticipate considerably better sales from the new agreements.

From early July to mid-August, 45 agencies, commissions or boards placed 11,500 orders, totaling $2.4 million, says Steve Kempf, commissioner of GSA's Federal Acquisition Service. Eight major agencies have signed letters of commitment to use the agreements. Those commitments represent roughly $250 million in sales during the next four years, he says.

"Industry kept telling us, 'If you have commitments, we'll get you good prices,' " Kempf says. "And, we always said, 'If you give us good prices, we'll give you the business.' This was a change getting the upfront agreements from the agencies." Kempf says GSA has made several adjustments since the original 2006 agreements were set up, such as boosting collaboration among industry and agency partners and setting minimum order sizes. In addition, the BPA price will be available to all feds who use their purchase cards at vendor locations, even if they are unaware of the agreements.

GSA-run blanket purchase agreements are big business. Civilian agencies obligated $3.2 billion to them in fiscal 2008-up 383 percent from the previous four years. But the agreements have not always been negotiated or managed well. In 2009, the Government Accountability Office reviewed 336 GSA agreements and found that nearly half the time agencies did not seek pre-negotiated discounts. And while contracting officers are required to conduct annual reviews of the prices they paid to vendors on the BPAs, virtually none did, investigators found.

Jaime Gracia, an independent federal acquisition consultant, said BPAs could have a bright future if agencies conduct thoughtful analysis and improve information sharing. "Agencies need to start talking to one another," he says. "Right now, there is a lot of mistrust among agencies and that collaboration is not happening."

GSA has begun to collect additional spending and pricing data before entering into blanket purchase agreements to get a better understanding of the market- place, according to Kempf.

For years, strategic sourcing has been a popular tactic among agencies that generally combine a handful of small contracts to create one consolidated procurement. The approach has received renewed interest since the Obama administration required agencies to cut their procurement spending by 7 percent. The practice, however, is unpopular with many small businesses, which complain that bundled contract opportunities often are out of their reach.

But the office supply agreements emphasize small business participation. The BPAs are divided into three pools of companies based on their collective products and services. Only two of the businesses are large: Office Depot and Staples. The rest are small vendors, including three owned by service-disabled veterans. "We have established that you can use strategic sourcing and include small businesses in it," Kempf says. "The proof is in the pudding that it can be done."

More governmentwide BPAs could be on the horizon. Dan Gordon, administrator of the Office of Federal Procurement Policy at OMB told a Senate panel in June the administration is looking to establish similar agreements for copiers and printers or technology hardware.