Report finds interagency contracts rife with inefficiencies

Billions of taxpayer dollars flow through interagency and enterprisewide contracts annually, but because of poor management and oversight, the federal government does not know for sure if those contracts are being implemented efficiently and effectively, according to a new report from the Government Accountability Office.

The findings, released on Monday by House and Senate lawmakers, criticized the entire interagency contracting landscape, from the well-established General Services Administration Multiple Awards Schedule to newer vehicles the Army and the Homeland Security Department administer.

Overall, GAO found interagency vehicles -- in which contracts are awarded by one agency but used by another -- were largely repetitive and costly. Though precise numbers are unavailable, in fiscal 2008, government buyers spent at least $60 billion on interagency contracts. "The perceived growth in the number of these contracts and duplication that has occurred with their growth may also adversely affect the overall administrative efficiencies and cost savings expected with their use," the report said.

In recent years, interagency contracts have proliferated across the government, often with different goals.

Homeland Security officials told GAO it established its EAGLE and FirstSource information technology contracts to avoid the fees associated with using other contract vehicles, including the GSA Schedules. The Army, meanwhile, created a pair of multiple award contracts for information technology hardware and services to ensure that each award would include the required Defense Department security parameters, the report said.

The Office of Management and Budget has largely failed to keep track of interagency contracts as they have multiplied during the past decade, GAO said. The agency does not keep comprehensive data on the vehicles and the total number of multiple award and enterprisewide contracts is unknown. In fact, the only interagency contracts that require OMB approval are governmentwide acquisition contacts for information technology. The lack of federal coordination "increases costs to both the vendor and the government and misses opportunities to leverage the government's buying power," the report said.

The GAO report was particularly critical of GSA's multiple awards schedule program, the largest interagency contracting program. Investigators found GSA does not use all the tools at its disposal to negotiate the best prices from contractors. The agency also does not collect data about customer agencies' use of the program, limiting its ability to determine how well its contracts meet the government's needs, the report said.

Investigators found contractors providing similar products and services on multiple interagency contracts, occasionally at different prices. One vendor listed its products on the Navy's Seaport Enhanced contract and the GSA Schedule. Another offered the exact same goods and services on both the GSA Schedule and NASA's Solutions for Enterprisewide Procurement GWAC, but offered lower prices to the space agency.

Contractors told GAO that participating in multiple contract vehicles can be cost-prohibitive for small businesses and forces them to not bid on a proposal or to collaborate with a larger business. Firms said the additional cost of being on multiple contract vehicles can range from $10,000 to $1 million.

"The failure to manage those contracts to avoid overlaps is a major lost opportunity to save taxpayer money," said Sen. Joe Lieberman, I-Conn., chairman of the Homeland Security and Governmental Affairs Committee. "Interagency contracts were intended to increase government efficiency. Instead, on a daily basis, agencies duplicate each other's contracting efforts, raising the cost of government."

The Senate Subcommittee on Contracting Oversight, which held a hearing on interagency contracting earlier this year, is planning a second hearing in June.

Lawmakers called on the Obama administration to take aggressive steps to better synchronize and manage interagency contracts. "GAO has identified a need for OMB's Office of Federal Procurement Policy and GSA to exercise better leadership in overseeing these complex arrangements," said Rep. Darrell Issa, R-Calif., ranking member of House Oversight and Government Reform Committee. "This report must serve as a catalyst for all agencies to reevaluate the way they do business with our largest government contractors."

GAO recommended the Office of Federal Procurement Policy create a central clearinghouse of information on interagency contracts and establish a framework for approving new multiple award and enterprisewide contracts. OFPP agreed with the suggestions.

OFPP Administrator Daniel Gordon is expected to signal a policy direction regarding interagency contracting in the coming months. He told Government Executive in a February interview that he was working "to reduce duplication that does not benefit anyone."

In addition, the Federal Acquisition Regulation Council is expected to introduce a rule implementing a provision in the 2009 Defense Authorization Act that would require a business case analysis for any multiple award contract into which an agency enters. The rule was supposed to be issued by October 2009, but the council missed that deadline.