GSA may let states, localities spend federal grants on schedule contracts

The General Services Administration is considering a plan that would allow state and local governments to spend federal grant money on prenegotiated contracts available through its widely used Multiple Awards Schedules.

The initiative, known as cooperative purchasing, could go into effect as early as this summer and would partially reverse a decades-old policy that has limited, with few exceptions, the contracts on GSA schedules to federal agencies.

Josh Sawislak, senior adviser to GSA Administrator Lurita Doan, told Government Executive that the plan has the support of both vendors and state and local governments, many of whom have expressed interest in using the schedules to spend Homeland Security grants.

"Vendors will have a greater pool of customers, and state and local governments can leverage the federal buying power," Sawislak said. "It's a win-win-win."

The plan could also be a boon for GSA, which earns a 0.75 percent service fee for contracts signed off the schedules. GSA has not quantified how much revenue it expects to earn by opening its contracts to a national audience, but Sawislak said he does not expect it to make a significant impact on the agency's bottom line.

For example, since the passage of the 2002 E-Government Act, GSA's Schedule 70, which offers information technology equipment and services, has been open to state and local governments. Of the roughly $17.3 billion in sales conducted through that option last fiscal year, $239 million came from cooperative purchasing.

Sawislak said the biggest savings for state and local governments will be reducing the hours needed to negotiate and sign often complex contracts. "It's not going to be a huge number for us," he said. "But it makes a huge difference for state and local governments."

Cooperative purchasing is far from a new idea. In fact, for decades, federal grant holders were able to purchase supplies and services directly from GSA and other federal agencies. But in the early 1970s, the small business lobby pushed back, arguing that cooperative purchasing unfairly benefited larger firms. The argument later gained traction within the Office of Management and Budget.

In a May 16, 1972, letter to then-Acting GSA Administrator Rod Kreger, OMB Associate Director Frank Carlucci, who would later serve as secretary of Defense in the Reagan administration, said the program was "not consistent with the purpose of the administration's policy of reliance on the private enterprise system and is particularly objectionable in this sense because the burden of GSA competition falls more heavily on small businesses throughout the country." Four months later, OMB terminated the authorization allowing federal grantees to purchase off the schedules.

Much has changed in 35 years. The majority of companies on the GSA schedules are now small or disadvantaged businesses, many of which have seen their sales flourish in recent years, in part through advances in Web-based procurement.

Don Erickson, director of government relations for the trade group Security Industry Association, said the growth of the industry has made the old argument against cooperative purchasing irrelevant. "Cooperative purchasing is a great idea," Erickson said. "Our perspective is that the policy is outdated and doesn't make the best use of grant dollars."

In recent years, GSA has made some exceptions to its grantee prohibition. The municipal government of Washington, D.C., and the World Bank have full access to the schedules while, in addition to Schedule 70, state and local governments can buy law enforcement equipment for counter-narcotics activities or products to prepare and recover from a natural disaster or terrorist attack.

The Security Industry Association is also pushing for state and local governments to have full access to Schedule 84, a catalog of thousands of homeland security-related products and services.

The cooperative purchasing program being considered by GSA would operate within strict parameters. Only federal grant money could be spent on the schedules, and customers would have to verify that they are using the funds for their intended purpose.

And while allowing state and local governments to spend nonfederal resources on the schedules would require an act of Congress, the new cooperative purchasing plan will most likely be considered a regulatory change that falls within GSA's mission, negating the need for congressional approval.

Nonetheless, at least one key legislator is pushing for OMB to review the existing rule. Earlier this year, Rep. Edolphus Towns, D-N.Y., chairman of the House Oversight and Government Reform Subcommittee on Government Management, Organization and Procurement, wrote to OMB Director Rob Portman seeking an explanation of the policy.

Portman responded four months later, telling Towns that OMB, GSA and the Small Business Administration were consulting to "consider if broadened grantee access to the schedules is appropriate and, if so, the appropriate extent of such access."

GSA is hoping to issue a policy change this summer, Sawislak said, at which point the agency would implement an interim rule that could allow the change to go into effect immediately.