<DOC>
[109 Senate Hearings]
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S. Hrg. 109-515
GSA: THE PROCUREMENT PROCESS FROM START TO FINISH
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HEARING
before the
FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT
INFORMATION, AND INTERNATIONAL
SECURITY SUBCOMMITTEE
of the
COMMITTEE ON
HOMELAND SECURITY AND
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 29, 2005
__________
Printed for the use of the Committee on Homeland Security
and Governmental Affairs
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COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio CARL LEVIN, Michigan
NORM COLEMAN, Minnesota DANIEL K. AKAKA, Hawaii
TOM COBURN, Oklahoma THOMAS R. CARPER, Delaware
LINCOLN D. CHAFEE, Rhode Island MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah FRANK LAUTENBERG, New Jersey
PETE V. DOMENICI, New Mexico MARK PRYOR, Arkansas
JOHN W. WARNER, Virginia
Michael D. Bopp, Staff Director and Chief Counsel
Joyce A. Rechtschaffen, Minority Staff Director and Chief Counsel
Trina Driessnack Tyrer, Chief Clerk
FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, AND INTERNATIONAL
SECURITY SUBCOMMITTEE
TOM COBURN, Oklahoma, Chairman
TED STEVENS, Alaska THOMAS CARPER, Delaware
GEORGE V. VOINOVICH, Ohio CARL LEVIN, Michigan
LINCOLN D. CHAFEE, Rhode Island DANIEL K. AKAKA, Hawaii
ROBERT F. BENNETT, Utah MARK DAYTON, Minnesota
PETE V. DOMENICI, New Mexico FRANK LAUTENBERG, New Jersey
JOHN W. WARNER, Virginia MARK PRYOR, Arkansas
Katy French, Staff Director
Sheila Murphy, Minority Staff Director
John Kilvington, Minority Deputy Staff Director
Liz Scranton, Chief Clerk
C O N T E N T S
------
Opening statements:
Page
Senator Coburn............................................... 1
Senator Carper............................................... 3
WITNESS
Thursday, September 29, 2005
Stephen A. Perry, Administrator, U.S. General Services
Administration:
Testimony.................................................... 5
Prepared statement........................................... 34
APPENDIX
GAO Report GAO-05-960R Improvements Needed to Federal Procurement
Data System--Next Generation................................... 27
GSA: THE PROCUREMENT PROCESS FROM START TO FINISH
----------
THURSDAY, SEPTEMBER 29, 2005
U.S. Senate,
Subcommittee on Federal Financial Management,
Government Information, and International Security,
Committee on Homeland Security
and Governmental Affairs,
Washington, DC.
The Subcommittee met, pursuant to notice, at 3:02 p.m., in
room 562, Dirksen Senate Office Building, Hon. Tom Coburn,
Chairman of the Subcommittee, presiding.
Present: Senators Coburn and Carper.
OPENING STATEMENT OF CHAIRMAN COBURN
Senator Coburn. The Federal Financial Management Oversight
hearing will come to order.
I asked for this hearing because as I looked at GSA, I was
having trouble figuring out how GSA works and where the
transparency was and what was the goal, what are the
parameters, how do you measure the goal, and how do you measure
whether you are doing that? The purpose of the hearing today,
Mr. Administrator, is to try to get a better understanding and
see if we are getting a good price.
Americans have given us their credit card. They are on a
hook for a bill with ever-accumulating interest. That bill is
so big right now, our generation certainly won't pay it off.
Our children's generation won't pay it off. And maybe our
grandchildren's generation might pay it off, but they will pay
it off through a markedly decreased standard of living.
We have a moral obligation to take the trust that has been
given to us with their money and do that in a wise way. When
they ask to see the receipt, they shouldn't get an answer that
is so complex that we can't explain why they can't see the
receipt. The demands that Americans are making aren't really
very complicated. They want to know what we bought on their
dime, how much it cost, did we do everything we could to get
the best price out of it and get the best deal, and I believe
they deserve to have those questions answered.
The budget of the United States now stands at $2.6
trillion. That means the Federal Government spends over $7
billion a day. Federal Government spending has skyrocketed, as
we all know, from the 1960s, especially in the last 4 to 5
years, it has grown at about a 5 to 7 percent rate, greater
than its historical rate. Because the government is not
spending within its means, it means that the Treasury is forced
to borrow hundreds of billions of dollars each year to pay for
that, which translates to our children and our grandchildren.
One important way we can reduce the burden on the American
taxpayer and help spare our grandchildren a lower standard of
living is to make sure the goods and services the Federal
Government buys are bought at the best price, at the best
terms. And we don't really have a good answer for them for
anything other than that.
We are the largest purchaser in the world of almost
anything. The purchasing power is massive. GSA was established
to harness that incredible purchasing power by providing
central oversight and coordination of procurement. As the
government grows, it becomes all the more important for
agencies' procurement efforts to be tracked and coordinated in
order to build efficiencies and purchase in bulk whenever
possible.
Some questions we are going to try to address at today's
hearing are, are we doing better than the ceiling price in the
GSA catalog? The GSA fee structure, is it appropriate?
Accountability requiring transparency--do we have transparency
in terms of being able to measure performance indicators for
GSA? And discuss about the competing procurement agencies out
there that you compete with, the purpose for them and what is
going on in that area.
I want to thank Administrator Perry for being here today. I
would note that the questions that we submitted in the middle
of August were delivered to my office an hour ago, which
handicaps our ability to be informed for this because my staff
hasn't had a chance to read the answers to those. So what it
probably will entail, based on what is in those answers, is
another hearing, which we could have facilitated not having had
we had the answers in a more timely way. I recognize you have a
lot of things to do besides answer questions to us. We are
going to ask some questions today and we would just appreciate
a little more timely response so that we can do our job in
terms of oversight.
PREPARED STATEMENT OF SENATOR COBURN
Americans have given us their credit card. They are on the hook for
the bill and the ever-accumulating interest. Already, that bill is so
big that they can't pay it off, but their children and grandchildren
will. Congress has a moral obligation to take this trust seriously, and
shop for the best price. We shouldn't throw everything into our
shopping cart without even comparing price. When they ask to see the
receipt, they shouldn't get an answer that is so complex that we can
hardly hold a coherent hearing on the subject in plain English. The
demands Americans are making aren't complicated. They want to know what
we bought on their dime, how much it cost, and if we did everything we
could be haggle for the best deal. It's their grandkids' future on the
line, and they deserve to have these questions answered.
The budget of the U.S. Government now stands at $2.6 trillion
dollars. That means the Federal Government spends an average of over $7
billion every day. Federal Government spending has skyrocketed at a
rate unseen since the 1960s. Because the government is not spending
within its means, the Treasury is forced to borrow hundreds of billions
of dollars each year to pay for it. Our grandchildren will have to pick
up the tab when the bill comes due.
One important way we can reduce the burden on the American
taxpayer, and help spare our grandchildren a lower standard of living,
is to make sure that the goods and services the Federal Government
purchases are bought at the best possible price. And quite frankly,
there's no excuse for anything else. The purchasing power of the
Federal Government in the market is massive--our spending on goods and
services exceeds the Gross Domestic Product of all but three countries.
The GSA was established to harness that incredible purchasing power
by providing some central oversight and coordination of procurement. As
government grows, it becomes all the more important for agencies'
procurement efforts to be tracked, coordinated in order to build
efficiencies and purchase in bulk whenever possible.
We know that product prices on the GSA catalogue are ``ceilings''
rather than the best price. GSA negotiates a ``ceiling price'' from
which agencies may further negotiate. One goal of this hearing is to
find out whether agencies are actually negotiating down from these
ceiling prices.
We'll be looking at the incentive structures created by GSA's
operations, especially its fee-based system. Does this system create
the right incentives for contracting officers to get the taxpayers the
best deal?
Perhaps most important of all for intelligent procurement planning
and implementation is good information. We simply must know what we're
buying, for what purpose, in what quantity, and at what price. If we
don't, then we can't possibly develop strategies to get better prices,
set spending priorities based on what we're actually spending, avoid
inefficiencies and duplication, and appropriately steward the
taxpayers' financial trust. We will be looking today at the systems we
have for tracking procurement and if they are adequate to the task.
I'll be particularly interested in transparency of the process--do we
have access to the right information, and accountability--is someone
responsible for what gets bought, and if it gets bought at the best
price?
Finally, Federal procurement has come a long way since GSA was
first established. There are tons of different ways that agencies can
make purchases. They don't have to use GSA at all. They can use
different types of vehicles at GSA. They can use government competitors
of GSA, sometimes referred to as mini-GSAs. They can use private sector
procurement products. GSA is now performing a minority of all
government procurement. Our hearing will examine GSA's evolving mission
and its relevance to the procurement process.
I would like, without objection from Senator Carper, to
submit for the record the GAO report that was issued yesterday
highlighting the flaws in the data system that tracks
procurement. It was just released yesterday.\1\
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\1\ The GAO Report GAO-05-960R appears in the Appendix on page 27.
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I would like to introduce Mr. Perry after Senator Carper
finishes his opening statement. He has advised us that he will
have to leave for another hearing that is ongoing at the
concurrent time and I appreciate him so much for being here. I
also want to tell him I appreciate the fact that we are working
together, bipartisan, to look at costs and spending and
wasteful government spending, and that we both have a desire
not to single people out, but to make sure that after a
hearing, there is something accomplished that makes us better
at what we do. So there is nothing personal intended at any of
these hearings, but rather how do we all do a better job for
the American people.
Senator Carper.
OPENING STATEMENT OF SENATOR CARPER
Senator Carper. Thanks, Mr. Chairman. Mr. Perry, I always
say, everything I do, I can do better, and I think that is
probably true of most of us, including Federal agencies. We
welcome you here today.
I was joking with Mr. Perry that I heard a song riding in
to catch the train this morning, on the radio, an old song by
Journey whose lead singer was Steve Perry. I hear him on the
radio in the morning----
Senator Coburn. And now he is testifying before you.
Senator Carper [continuing]. And now he is testifying. We
will see if he is as good in person as he was on the radio. We
are glad you are here, and Mr. Chairman, I thank you for
inviting him to come by and to give us a little bit of a primer
on how GSA does what it does.
As the Chairman said, I wish right now I could be two
places at once. I can't, and I have made a commitment with
Senator Voinovich to be with him and some others on trying to
figure out how to retrofit devices in diesel-powered buses and
trucks and trains and boats to reduce the emission of bad stuff
into our air. So I am going to go over there and spend some
time with them and then I will come back.
I think this hearing may have been inspired, Mr. Chairman,
by some testimony that we heard earlier this summer regarding
whether GSA is doing what it needs to do to be certain that the
agencies that use its service are getting the very best value,
and I think that may have been the impetus. While I am going to
slip out for a while, I just would say I am very interested in
hearing what you have to say and the man who is sitting right
behind me, John Kilvington, will make sure that I get a full
briefing for that which I miss.
When taxpayers expect that when agencies go to GSA to
purchase a good or a service, and I believe some agencies may
have no choice but to go to GSA for some of what they use, that
they are not going to pay more than they need to, and that just
makes common sense.
I believe we heard at our last meeting that the GSA has
been doing pure audits of the contracts that they have with
outside vendors and this trend coincides with a tremendous
interest in the level of business that takes place through GSA,
and what I am told is a decline in the savings negotiated by
GSA personnel.
We look forward to hearing from you, Mr. Perry, today about
what might be behind these trends, if they are correctly
characterized, and also what we are going to be doing going
forward. I know you have some reforms on the way already at
your agencies--at least that is what I am told--so we are
interested in learning what they may mean with respect to
savings for your customers and ultimately for the taxpayers we
work for.
Again, thanks for being here and we are glad you are able
to share this time with us.
Senator Coburn. Let me introduce Mr. Perry. Stephen Perry
was appointed the 17th Administrator of the U.S. General
Service Administration on May 31, 2001. He is from Canton,
Ohio. He was a senior business executive who retired March 31,
2001, as Senior Vice President, Human Resources, Purchasing,
and Communication. His retirement marked the conclusion of a
37-year career at the Timken Company of Canton, Ohio, a leading
international manufacturer--I bought a lot of Timken bearings
when I was in business, I want to tell you--of highly-
engineered bearings and alloy steels with annual sales of $2.6
billion and 20,500 workers.
In 1991, then-governor, now U.S. Senator George Voinovich
appointed him to his cabinet as Director of the Department of
Administrative Services, which provided services to the State
agencies that are similar to what GSA provides to Federal
agencies. After a success in State Government, Mr. Perry
returned to Timken in 1993.
A 1963 graduate of Timken High School in Canton, Mr. Perry
earned his Bachelor's degree in accounting at the University of
Akron in Ohio. I can relate to that. I have a degree in
accounting, as well. He attended the University of Michigan
Executive Development Program and earned a Master's degree in
management from Stanford University in California.
Mr. Perry and his wife, Sandra, have five adult children
and six grandchildren.
Mr. Perry, welcome. We are so thankful you are here and we
appreciate you. You will have as much time as you would like to
make your opening statement. Since I am going to be here
probably by myself, take your time, and what we want to do is
just go through and get a great understanding. So thank you
very much for being here.
Senator Carper. Mr. Perry, if I could, I am a Buckeye. I
was an Ohio State Buckeye and it is always nice to welcome a
Zipper from the University of Akron. I am going to go see
George Voinovich right now. I will tell him that I was just
with you. I am sure he will want to be remembered, as well.
Thank you.
Senator Coburn. You may proceed.
TESTIMONY OF STEPHEN A. PERRY,\1\ ADMINISTRATOR, U.S. GENERAL
SERVICES ADMINISTRATION
Mr. Perry. Good afternoon, Dr. Coburn and Senator Carper. I
am pleased to have this opportunity, actually, to talk about
the acquisition processes that we use at the U.S. General
Service Administration.
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\1\ The prepared statement of Mr. Perry appears in the Appendix on
page 34.
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As you know, I have submitted a written statement for the
record, so I will make my remarks brief and leave most of our
time for dialogue.
Let me take the opportunity to say that I do regret the
fact that in our last appearance before your Subcommittee, we
were late in submitting testimony to you, and I regret to learn
that we were also late in submitting the answers to the
questions that you presented to us. I know what a hardship that
is, and I also know that we are making an effort inside GSA to
improve upon that.
As you are certainly aware, GSA's primary mission is the
acquisition of facilities and products and services for other
Federal agencies. GSA acquires all the office space and
products and equipment and telecommunications services and so
forth that over 1.1 million Federal workers need and use in the
successful operations of their agencies. We also provide
support to the Department of Defense, our men and women in
uniform, and to first responders in the event of situations
such as we are suffering through in the Gulf States now.
We believe that by providing these acquisition services, we
enable Federal agencies to focus more of their resources and
their expertise on achieving their own core mission and leaving
the acquisition, if you will, to be accomplished by the folks
at GSA.
We know that we have a very important responsibility. I
would agree completely with the remarks that you made about how
important it is for us to be efficient, to be effective, to be
reliable, to be consistent, and, of course, to be compliant
with all the rules and regulations that we have to follow in
order to provide best value for the government for the American
taxpayers.
It has been my privilege to be involved in public service
during these past four-plus years at the U.S. GSA. I believe
that the people who work there do share a strong commitment to
meeting the mission of GSA. It is an aspiration. We know that
we don't always measure up to the extent that we would like,
but there is a strong aspiration to do so.
I think also there is a strong understanding among GSA
associates that we are part of the value chain of providing
government services to the people who live in this country,
which in one way or another actually serves to improve the
quality of their life to the extent that we do that well. We
also know that the extent to which we do not do that well, then
we are impeding the ability of other agencies to provide the
government services that are necessary for U.S. citizens.
So we do have that strong commitment and I just wanted to
iterate that to you. In the course of our discussion, I could
talk a little bit about the things that we are doing or have
done to emphasize that as a foundation, because it is that
commitment to excellence in acquisition which forms the
foundation on which all these other things rest.
In addition to our commitment to achieve the GSA mission
and to be efficient and effective, we also have spent a lot of
time focusing on and rededicating and enhancing our commitment
to what we call our GSA values. These are not necessarily
values that we brought to the agency. These are values that we
discovered exist at the agency and we have attempted to
highlight them, to make them a part of our everyday jargon.
There are just five.
The first and foremost is ethics and integrity in
everything we do. That speaks to a lot of what you have on that
chart there.
A second value is treating our fellow associates with
respect, which ties directly into our third value which is very
important, and that is the value of teamwork.
As we discovered at GSA, as is the case with many Federal
agencies or, for that matter, many private sector
organizations, as well, we were a bit stovepiped. We had our
Public Building Service, our Federal Technology Service, our
Federal Supply Service. We had our Chief Financial Officers'
Office, our Chief People Officers' Office, a number of units
which were not working well together. There was autonomy. There
was a great deal of autonomy, too much autonomy, in my view,
between our regional offices and our national offices. So
teamwork, we have discovered in our organization, is critical
to being able to meet the needs of our customers.
We are unlike some large corporations that may have
unrelated divisions, one division produces light bulbs, another
division produces jet engines. It might not be necessary for
them to have a strong collaboration. But in our case, our
customer agencies look to us to provide a broad spectrum of
products and services that they need to operate and they expect
us to work together. So this issue of treating our fellow
associates with respect and teamwork are values that are very
important to our ability to be successful.
A fourth value is the value of results orientation, which
perhaps should go without stating, but it is the view of some
that in some organizations, we can be a little bit academic and
not enough focused on results and we are changing that.
And then the last value is that of professionalism, and I
can tell you from my experiences in the last four-plus years at
GSA that I have seen many examples of personal actions or
individual decisions or, in some cases, major GSA-wide
initiatives that truly do reflect these values. I have seen a
lot of opportunities for people to make decisions or to take
actions which clearly reflect the values that I have talked
about.
Unfortunately, I also have to report to you that I have
seen a few examples where we have fallen short of living up to
those values. However, I can also tell you that the
overwhelming part of the work that we do is done within the
confines, the guidelines of these values, and I know that we
are committed to continuing to strive for full achievement of
these values.
Mr. Chairman, as you may know, the model that is used by
the Federal Government to consolidate a lot, not all of, but a
lot of its acquisition of commercial products and services into
GSA, I believe is a very efficient, effective approach. It is
an approach that would be used by--as a best practice in the
private sector, to take all of the purchasing activity that has
to occur in Plant A and Plant B and various locations around
the country or around the world and to some extent consolidate
that and to leverage the synergies that might be captured by
doing so.
So I think the approach that we use is a wise approach. It
enables us to bring together the expertise that is necessary to
really understand the supply markets for the various products
and services we are buying, the expertise as it relates to the
Federal Acquisition Regulations, as you pointed out, which are
very complicated, and to leverage the volume of the Federal
Government's purchases so that we can have a better opportunity
of deriving the best value for the government and for the
American taxpayers.
It also, in my judgment, provides a sort of a streamlined
approach that makes it actually easier or more effective, or at
least a little less confusing for the industry to be able to
interact with the government when they pursue Federal
Government contracts.
Another point that I wanted to make is that GSA operates
using a revolving fund approach, and what that means is that,
in general, we don't receive direct appropriated funds to cover
the cost of providing office space or the acquisition services
that we provide. Rather, we receive reimbursement from the
agencies in the way of rent or cost of goods sold to reimburse
us for the expense that we may have incurred to pay for the
acquisition of a telecommunications system or what have you.
And then, in addition to that, there are some amount of fees
that we charge in order to cover the costs of our overall
operation.
As a general proposition, the fee approach and the revenue
receipt approach that we have is intended to be a break-even
approach. There is no incentive, or should not be an incentive
for us to try to derive revenues in excess of our expenses. In
the case of our Federal Supply Fund, for example, any revenues
in excess of expenses go back into the general Treasury. So, so
much about fees, and we will talk about that more, I am sure.
The other point I wanted to make has to do with the
approach that we have used to manage the operations. In a short
expression of this, the primary approach that we have used is
what I call our Performance Management Process, which begins
with an understanding of our customer requirements so that we
could work with them proactively and so that we could set goals
for ourselves which are commensurate with achieving the
customer's expectations, and with those goals in place, then we
have developed and documented and written out action plans, who
is responsible to do what by when to achieve those goals, and
we have, in addition to organizational goals for each of the
organizational units, we now have in place Individual Associate
Performance Plans which also document what is expected of each
individual, and that is used as the basis of our performance
evaluations for accountability and recognition at the end of
the year.
We also have put in place what we call a Performance
Measurement Tool, which we review on a regular basis--I have
personal reviews of each of them on a quarterly basis--to
determine where we are in terms of achieving the various goals
that have been set, getting an understanding of why we are
where we are, and then spending some time to talk about
corrective action that may be necessary to get us back on track
or to keep us on track with respect to achieving those goals.
And in the course of our discussion, I will be happy to talk
about what some of those goals are and the progress we are
making toward them.
In addition to what I called the Performance Management
Process, another process we have put in place which comes out
of the President's Management Agenda is what is referred to
there as the Strategic Management of Human Capital, and you
know the reasons why that is in place. It is certainly very
relevant for GSA. But we think the places where we have used
this now are places where it is bearing very good results.
In the Strategic Management of Human Capital as we employ
it, it starts again with an understanding of what our
customers' future performance expectations are of us. And then
when we have that understanding of what is expected, we make a
statement or a documentation of what kinds of skills and
competencies will be necessary for us to successfully achieve
those goals. A third step, which is the toughest of all, then,
is to discover what is the gap between our current skills and
competencies and that which we need for success and what will
be our strategy to bridge the gap from where we are today to
where we need to be.
We have employed that, for example, in our Public Building
Service, first at the national office, made, I would say,
pretty dramatic change in the way that unit of our organization
operates. And that in turn, then, was spread to the Public
Building Service entities within each of our 11 regional units.
That process is ongoing. I think the result of it has been and
will be that we are being much more effective in using the
dollars that are available to us to provide work space for
Federal workers.
It still is a challenge, obviously, to do that in an
efficient and effective way, but again, we have been talking
about some of our goals, for example, the fact that our leased
space, we acquire that leased space at rates at least double-
digit below what would be the case if our agencies were using
private sector leasing companies or brokers to provide that
space directly. In the case of providing maintenance, including
utility costs and cleaning for the public buildings that we
operate, again, that is double-digit below, in some years as
much as 14 below the estimates of what that benchmark should
be, and that is just true in a number of instances.
So we think that we are taking advantage of the leverage
that comes from providing this service and, as a result,
providing it at rates that could not be achieved if agencies
were acting alone.
At this point in time, we have gone beyond the PBS area in
terms of organizational design, and as you may know, we are
looking at our Federal Technology Service and our Federal
Supply Service and looking to combine those into one unit that
we will call our Federal Acquisition Service, and the purposes
are the same. There was a point in time, we believe, when the
separation of those two acquisition services might have made
some sense. It makes less sense in today's world, and so we are
moving to accomplish that change. All of those organizational
design changes are intended to enhance our organizational
capability to meet the future needs of our customer agencies.
And then just one other point that we focused on heavily
and that is to do what we call Achieve Excellence in Federal
Acquisitions, sometimes referred to as our ``get it right''
plan. You may know that there was a point in time, I believe in
2002, late in 2002, it began to emerge, and my view is that as
a result of our values, one of which says ethics and integrity
in everything we do, some of our associates were coming to our
managers and saying, if you guys are really serious about
ethics and integrity in everything we do, I need to tell you
about a few of our longstanding practices that I am not sure
really fit in that value.
So as we began to look at that, we found that there were
enough things that we were doing that were not in full
compliance with the Federal Acquisition Regulations, that we
would go beyond just a management review and we actually asked
our Inspector General to come in and to conduct a review at
each of our 11 client support centers around the country to
determine the extent to which we had, over the years, gotten to
a point where we were cutting a few corners. I will say that I
think that corner cutting was done in the effort to serve our
customers, but nevertheless, there is no justification for it,
and some of it was bad judgment, some of it was more egregious
than that.
I believe that we took appropriate steps not only to
eliminate it, but, where necessary, to have consequences for
those individuals that were involved and to provide a way going
forward where we emphasized the fact that as a result of our
discovery of those adversities, we will actually be better than
we otherwise would have been because of the increased focus
that we have made on getting it right and going beyond simply
getting it right to actually achieve excellence in Federal
acquisitions.
So with that, Mr. Chairman, I will stop with my brief
opening remark and be happy to respond to questions that you
might have.
I should also mention, I have asked to join me today some
of our leaders of the Public Building Service, our Federal
Acquisition Service, our Chief Acquisition Officer, and they
will be happy to participate in this dialogue, as well.
Senator Coburn. Great. Thank you. They are going to be more
than welcome to if they want.
First of all, the five parameters you work under are great
and I am glad to see them installed. I take care of a lot of
Federal employees in my medical practice. They are stellar. I
think across this country, we are very fortunate for the
Federal employees we have. My questions are going to deal more
not with the employees, but are we structured right and do we
have performance indicators that you can actually measure based
on what the mission of the GSA is.
The first question I have for you is how is it that GSA
ends up with all these competitors in the government doing
exactly the same thing you are doing? How did that happen, and
why did it need to happen, and if it needed to happen, why?
Mr. Perry. Well, I will give you my take on that. As you
know, the franchise funds were established by Congress. The
several that exist, as you point out, in many instances
purchase items that agencies could elect to purchase through
GSA. In other cases, they are very specific.
For example, in the Veterans' Administration, they purchase
pharmaceuticals and they have a special expertise there. That
probably makes sense. There are some purchases that may be made
by NASA that are of a very highly technical nature and it might
make sense that would happen there, as well. But for those
agencies who are involved in the purchase of standard
commercial items off the shelf, it is a question.
Now, what I have gotten as a response when I have asked the
same question is that there was a point in time, in our distant
history, hopefully, where GSA was not perceived to be fast on
its feet. We had gotten to be bureaucratic, partly as a result
of the fact that in our early days, we were a mandatory source.
Today, we are not. Agencies can elect to use GSA for services
are not. There are some exceptions. For example, in the leasing
of real estate, you still have to use GSA unless GSA gives you
a delegation of authority. But for the acquisition of
commercial products----
Senator Coburn. You mean like the SEC did?
Mr. Perry. Yes, or the Pentagon is another example. But at
any rate, I can't attest as to whether or not that was factual,
but that seems to be the folklore, that some people felt that
by having some healthy competition within government, that
would cause GSA and the other agencies, in fact, who are
running these franchise funds, to be on their toes and to be
the best they could be.
Senator Coburn. So is there any measurement of that? Is
there any way to measure whether we are getting a better value
as a country now that we have all these competing agencies?
Mr. Perry. I think there is----
Senator Coburn. And how do we measure that?
Mr. Perry. Well, what it would take, for example, is if we
took the Department of Interior, who has a franchise fund, and
if we made an apples-to-apples comparison as to what is being
invested by that unit to acquire technology versus GSA, I think
that would be part of the answer in terms of how efficient the
two units are. That is not the complete answer.
The GAO did a study of that and one of the things that they
determined was whereas the fees or rates that GSA publishes and
charges is an all-inclusive rate, that it includes its share of
the agency overhead, as it should, but what we believe that
report showed as it relates to the other funds, they were
incremental rates. In other words, they were not fully-loaded
rates. So on the surface of it, our view is that if we did that
competition and we looked at it on an apples-to-apples basis,
you would see that the GSA rates are lower.
Senator Coburn. OK. That brings me to my next question. Can
GSA today take 2004 purchases and know, here is what we bought,
here is how much we bought, here is what price we compared for
it, and compare that to the private sector or any one of these
other agencies?
Mr. Perry. Yes, in some of our business lines there----
Senator Coburn. Well, but is the model there to do that
everywhere?
Mr. Perry. I would say everywhere, and I would have to
think about whether we could do that in the case of our
Multiple Award Schedules. That would be the exception that
comes to mind. And the reason I say that, Senator, is that in
the case of the Multiple Award Schedules, those are acquisition
vehicles that are used directly by our customer agencies
without GSA's direct involvement. So if the Department of
Interior or Social Security Administration or somebody else
uses the Multiple Award Schedule, we would be able to capture
how many dollars were purchased. I don't know whether we would
have all the information that we might want to have as to----
Senator Coburn. I promise you, you don't. We have already
asked this question in the hearing before.
Mr. Perry. But there would be some exceptions to that. For
example----
Senator Coburn. OK, but I want to get to the point. I
believe that there are some exceptions, but if we are going to
measure performance, why would we not structure GSA to have an
information system that is designed to measure that?
For example, you can tell us how many books you buy, and
you can tell us within a framework what price you paid, but you
can't tell us by publisher on value that a competitive price,
whether you got a good deal or a bad deal unless you do a post-
award audit.
Mr. Perry. I don't think even the post-award audit would
still not address the----
Senator Coburn. Because you are not looking at price in the
post-award audit----
Mr. Perry. Right.
Senator Coburn [continuing]. Which is another question that
I have. Why in the world would we not look at price in the
post-award audit?
Mr. Perry. Well, we look at whether or not the contract was
carried out in accordance with the terms and conditions of the
contract. So we don't look at whether or not the terms and
conditions of the contract were the best that they could
possibly----
Senator Coburn. For management purposes, once you have done
the contract, I know you have cut the deal.
Mr. Perry. Right.
Senator Coburn. But for management purposes, why wouldn't
you want to know that information?
Mr. Perry. The time to know it is prior to----
Senator Coburn. Right. What if you are going to contract
with them again next year? But if you don't know that
information--in other words, what I am trying to get is to why
isn't there in GSA a way to know what the Federal--just from
you, let alone everybody else--what we bought, how much of it
we bought, and what price we paid for it?
Mr. Perry. I agree with that.
Senator Coburn. But we don't have that----
Mr. Perry. You don't have that.
Senator Coburn. We don't have that. So my question to you
then is, how do we do that? What do you need from me to help
you do that? How do I create that where you have the
information systems that are necessary to evaluate performance,
including price and value?
Mr. Perry. Well, may I start that answer to that question
with one thing that we do today, and then I will end it with my
answer to the thing that we have on the horizon which I think
gets to your basic question.
When we make our technology acquisitions today, we do make
a calculation that we call the Independent Government Cost
Estimate of what that technology acquisition should cost. So at
the outset, we have a target----
Senator Coburn. And that is a large portion of what you
buy, right?
Mr. Perry. Yes.
Senator Coburn. IT?
Mr. Perry. IT, other than buildings. So we do have that
Independent Government Cost Estimate, and then as we make the
acquisition, we measure ourselves as to whether or not we
achieved the acquisition somewhere close to or right on or even
below the estimate. We do the same thing in construction. We
obviously have on-time, on-budget goals and we measure that. So
I just want to say, it is not that nothing is measured. Some
things are measured.
Senator Coburn. Oh, I know that, and I have studied, I have
read the testimony from what we had last time. This is not an
attack on what you are doing today. It is in the question of I
see, coming from the private sector, what I see is the real
fact is we can't measure--we don't know what is exactly bought
and at what price in this country.
Mr. Perry. That is right.
Senator Coburn. OK.
Mr. Perry. We can't get it at the granular level that is
actionable.
Senator Coburn. But we ought to be able to if we really
want to leverage purchasing power, would you agree with that?
Mr. Perry. I agree with that.
Senator Coburn. OK. So we can't do that now, and since we
can't do that, one of the performance measures of success can't
be measured because we can't go out and compare, did we really
get the best price, because we don't know how much it was
bought off your catalog----
Mr. Perry. Right.
Senator Coburn [continuing]. And we don't know what they
paid for it. We know what the ceiling is, but we don't know--
for example, when you all negotiate a price----
Mr. Perry. That is right.
Senator Coburn [continuing]. Your testimony in the last
hearing, or your staff's testimony in the last hearing before
this Subcommittee is you negotiate what you think is the best
price and that becomes the ceiling.
Mr. Perry. Right.
Senator Coburn. And you have some pre-audit certifications
and some post-audit to see that they didn't do it--post-audits,
you are not looking at price. On pre-audits, sometimes you are.
But the point is, as that happens, in terms of negotiating, we
can't measure----
Mr. Perry. Right.
Senator Coburn. The real matter of the fact is maybe
somebody else wants to come and sell all of this to you in one
lump sum and will be available and can do it in a better way
and get us a better price.
Mr. Perry. Well, I should say we are beginning to do some
of that now, a little bit of it. That is what you are referring
to is in the case of our Multiple Award Schedules, there is a
schedule price, which is a ceiling. There are some acquisitions
that agencies would make against that--let us say they were
buying two computers. Well, they might judge it is not worth
doing a special effort to get the price down. They will just go
with the scheduled price.
Senator Coburn. Yes.
Mr. Perry. But if they are buying 500 computers, they
really should. What we are now doing in our Chief Acquisition
Officer's Office is we are going to customer agencies who use
the schedule and asking that very question. In how many of the
instances where you made acquisitions did you conduct a
separate competition with an effort to get a price lower than
the scheduled price? We will be tracking that. But that is on
an audit based as opposed to an automated basis.
Senator Coburn. But you understand what I am saying.
Mr. Perry. Yes.
Senator Coburn. Why shouldn't the whole systemwide system
be set up to track the information so that when you want to
really measure any aspect of your--at Timken, you all knew what
you paid for something, right?
Mr. Perry. Sure.
Senator Coburn. You knew, and then you put out bids for
steel and everything else the next year and the clips for the
bearings and your grinding wheels for the steel and all this
other stuff. You put it out and you knew, based on the bids
that you got, how you tracked it, you knew exactly how much you
bought and you knew what you could go back to negotiate the
next year with based on that.
And my question is, take that same application from Timken
for telephone sets in the Federal Government. How many were
bought? Nobody knows. You know how many computers to a degree,
but you don't know how many computers we actually bought
because, first of all, the Pentagon isn't hooked in----
Mr. Perry. Right.
Senator Coburn [continuing]. Through the system. So what I
am asking you is--what I am looking for is a culture change so
that your information systems in GSA become designed to measure
any performance across the government----
Mr. Perry. Right. I was going to say----
Senator Coburn [continuing]. And that is how you will get
the business back.
Mr. Perry. And that is through what is called our FPDS,
Federal Procurement Data System, which, as you certainly know,
begins to capture some of that information, but not at the
granular level that it needs to be. We are making an
improvement upon that, but it still doesn't go to the extent
that you are saying. My answer to your question is we would
need to go yet further than anything that is on the drawing
boards on an across-the-government basis to be able to analyze
the data in terms of what the government purchases.
I would make one other observation, and that is--I will use
the Timken case. When we did our purchasing, as I think we
should do it here, you would make a stratification as to what
are your really strategic items? Where are the elephants that
have the biggest opportunity for savings? I think it wouldn't
be unwise of us to start there.
For example, one of the things we are doing now and over
the last year or so is a strategic purchasing initiative that
we call SmartBuy. We know the government spends a tremendous
amount of money on software. We know that various agencies
spend differing amounts of money on software. And so to your
point, we were not able to go to the FPDS system and get all
the information that should have readily available as to what
are we spending by agency for software and then types of
software. We were able to gather that information, though,
through other means, by making a data call and using agency
data to bring that together.
But I don't disagree. It would be ideal to do that more
globally. But I am also saying that even in this interim period
before we have that, there is some strategic sourcing that we
can do. We can improve upon the value that we are getting now
as we are putting that other system in place.
Senator Coburn. And that is great, but what about all the
other agencies that are buying and we are losing the buying
power of being combined because they have their own buying
power? In other words, that is like Pfaffner. Pfaffner was a
competitor of Timken.
Mr. Perry. Pfaffner, that is correct.
Senator Coburn. So we have got Pfaffner and Timken here and
they are both buying the same product, but we are not
leveraging the fact that they have tremendous more buying power
if they buy together. Now, in this country, it is illegal
because they are competitors, but it is not illegal to combine
the Federal Government.
So if we can't direct--if we don't have the information,
then we are not going to ever get the best value. We are going
to go to a level, and I guess what I am asking is to rethink
the model to think bigger than what you are doing today because
to me, it makes no sense to have 13 different buying agencies
in the Federal Government, none. It makes no sense for the
Defense Department to procure outside of you, or some agency,
whichever it is, or at least not use their combined buying
power to facilitate the rest of the Federal Government's
purchasing.
Mr. Perry. Absolutely right.
Senator Coburn. So the question I have to you is, how do we
get to the point where all these guys who are in these other
Federal buying agencies can't compete with you anymore because
you know price, you know availability, you know value, you know
numbers, and I don't understand why that is not a priority on
the catalog stuff, for example.
Mr. Perry. Well, as a matter of fact, Senator, to some
extent, I would say that some of those customers, while they
view price as important, they don't view it as the final
determinant.
For example, the Department of Defense, who is a big
customer of ours, and I think for the most part we provide them
with services that they are very satisfied with, but I have had
discussions with base commanders and others who say, I have to
make sure that I have a reliable source, that it is consistent
and compliant. If it costs me 10 percent more to do it myself,
then it is so important to the achievement of my mission that I
am willing to do that. So what we have to convince them of, not
only that we are lower cost, we are able to do that now, but
also that we are absolutely reliable, consistent, and
compliant.
Senator Coburn. But in Timken, if you had assistant
purchasing agents that didn't perform, you would fire them.
Mr. Perry. Right.
Senator Coburn. OK. And so what we are saying is if you
don't perform, there is no cost. We will just go do it
ourselves. That is what the military is saying, based on their
value of feeling comfortable about having--value is quantity,
price, and service----
Mr. Perry. Right.
Senator Coburn [continuing]. And having that delivered at a
fixed time that they feel comfortable with. My point is, that
is achievable if you have measurable systems operating
throughout your IT that says, we know what the performance
indicator, and in terms of the military, timeliness of delivery
is just important. That is their big component for value.
So I think it is the same thing. All these parameters can
be measured if you put the system in to measure. Did we get it?
Did we get what we thought we were going to get? Is it at the
right price, at the right time? That is called measured
performance, and that is how we used to measure purchasing
agents. Did you get it in on time, and did you get us a good
term?
Mr. Perry. Right, and we----
Senator Coburn. And we pay for it in 90 days instead of 30.
Mr. Perry. Well, the reason I said that there are certainly
cases where we do exactly what you are saying and some cases
where we don't, it is a little more difficult.
Senator Coburn. Well, I am trying to stay just on the
catalog here for a minute.
Mr. Perry. OK. You are just----
Senator Coburn. Just stay on the catalog. I know that there
are technical things like IT purchases and things like that. I
haven't even begun to look at that.
Mr. Perry. OK.
Senator Coburn. We haven't even begun to look at leases and
we haven't begun to look at building purchases and things like
that, which we are going to. But just on the catalog, you
cannot--and I think this is true, and tell me--you cannot tell
us what was bought, how much, and what price was paid through
that catalog.
Mr. Perry. We can tell you from the Federal Procurement
Data System how much was spent totally by agency. We could tell
you by certain categories. We could tell you how much was spent
on IT. What we can't do is say how much of that IT was for
laptops, which is what we need. We need to get to the next
level of granularity. But we can, for example, say how much was
spent on furniture, how much was spent on supplies. There are
certain categories that we can map out.
Senator Coburn. Right, but I am talking down to the line
item in the catalog.
Mr. Perry. Right. We can't do that.
Senator Coburn. It comes with the same computer
transmission that transmitted anything else back. It is just a
subcategory.
Mr. Perry. Right. What would happen----
Senator Coburn. Which book did you buy?
Mr. Perry. Right. And where that information resides,
because as I mentioned, the individual agencies use our
Multiple Award Schedules independently--what would be required
is that their acquisition systems would have to feed that line
item-level detail into the system, which does not happen today.
Senator Coburn. Well, we can get it today. I have gone to
get it on several things. You know where I get it? The
supplier.
Mr. Perry. And that would be--you talked about Timken, and
let me go back to that.
Senator Coburn. Yes.
Mr. Perry. That is exactly what we did in many instances.
You take the grinding wheel suppliers----
Senator Coburn. Yes, Norton----
Mr. Perry. Norton was our primary. We picked two or three,
not ten, two or three who would be our strategic partners. Part
of the deal would be we share information. Where we got the
information in the case of the software purchases was, again,
going back to suppliers, and we could do that in some of these
cases, as well. But sometimes, we----
Senator Coburn. You see where I am going with that.
Mr. Perry. Yes.
Senator Coburn. All right. Let me see where I want to go
next. My staff just gave me a reminder of something we talked
about earlier. If you go and compare GSA purchasing to the
private sector programs that are out there today, what I just
described to you, they can tell you in 30 minutes on anything
that is on their line. They know what was bought, they know how
much was bought, they know what price was bought, they know the
delivery rate it was bought, and they know the terms it was
bought.
So if the private sector has that software technology, we
ought to be able to get it. First of all, we are the biggest
purchaser, so it is a big purchase in software, but we ought to
be able to buy it cheaper than anybody can buy it, correct?
Mr. Perry. That is right, probably.
Senator Coburn. So you will concede that in some of the
buying mechanisms that are out there competing in the private
sector, this has already been accomplished.
Mr. Perry. Yes. I think the software is not the challenge.
Senator Coburn. OK. What is the challenge?
Mr. Perry. The challenge would be for each agency to input
the data, either manually or through some automatic or
automated process at the level of granularity that we need in
order that the database of information would be available for
analysis.
Senator Coburn. But they are purchasing most of that
through a purchase requisition that has to get paid someway.
Mr. Perry. Right.
Senator Coburn. And I am not talking about the petty cash
purchases and the small things.
Mr. Perry. Right.
Senator Coburn. I am talking about how do we leverage what
we do to where we get a better price.
The second area I want to spend some time with you on is--
--
Mr. Perry. I would say, as we do that, my judgment is, on
systems development or in this case implementation of system
data collection, one of the questions is do you do everything
at once or do you start with a phase where you are dealing with
your most strategic sourcing opportunities, and I would just
suggest that as we do this, we would select the one or two or
five areas where we really believe the greatest value is there.
We might not put pencils and papers in the first phase.
Senator Coburn. I think that is a management decision you
should make. What I am looking for is how do I help you get
that, facilitate, get that done, either through legislation or
appropriation riders or things like that to where you can
accomplish it.
But the other thing that needs to be accomplished is if we
agree that more information and more detailed information will
result in leveraging buyer power to a greater degree, then we
ought to be having all these others--when they are inputting,
it doesn't take much to transmit--if they have it in their
computers, they are buying it on a purchase requisition, so
they know what they are buying, they know what the price is,
since they are negotiating the price below the ceiling price
sometimes, so they know what that is. That data is there. All
it is is reporting it----
Mr. Perry. Right.
Senator Coburn [continuing]. And they can do that once a
month to you. But we need to have a central collection of what
everything is bought so we can actually enhance the buying
power, because if you go to a vendor right now on your catalog
and you say, here is what we want. We are going to qualify you
as a vendor. What is this----
Mr. Perry. Schedule?
Senator Coburn [continuing]. Central contractor
registration, you have 350,000 people registered and you have
9,500 people on the schedule. We are going to put you as a
vendor on the schedule and we are going to collect the data.
But if you don't know it for the whole country, we may not be
able to get the best ceiling price. If I understand the
testimony properly and the history properly, your procurement
officers--price isn't the No. 1 thing that they are working on.
They are working on value and quality and deliverability----
Mr. Perry. Right.
Senator Coburn [continuing]. And then they look at price.
And they are looking for the best price at the time, but that
is not part of their stated goal, correct?
Mr. Perry. That is not price alone, if that is what you are
saying.
Senator Coburn. Yes. It is value.
Mr. Perry. Value.
Senator Coburn. But in terms of value, when you take this
350,000 people that are on this contractor registration form,
how do we get more of those people in the mix? In other words,
we have 9,500 and we have 350,000 people out here that are on
it, and I know there is a web placed application to do that.
But what I hear is that it takes forever. For example, a
minority-owned business that can't pay a consultant to walk
this thing through, they are never going to get on the list.
Mr. Perry. Well, that is an interesting question, Senator.
First of all, I agree with you that it takes too long, and I
also know that we have been taking some steps to bring that
time down, including putting it online. We had a meeting just
last week or 2 weeks ago with a firm who said they did all of
their own paperwork, processing to get on schedule with the
help of the GSA folks, never used a consultant, and they did it
over a period of 6 to 8 weeks. In the same room was another
similar-sized company who said, ``I paid $25,000 to a
consultant to provide me that same service.''
So we have been telling our small businesses that want to
get on schedule, you really don't have to pay what consultants
are charging. I don't know what the consultants promise. Maybe
they promise they will work with you not only to get on
schedule, but will work with you to get your first contract.
Some say that.
All I am saying is that we have taken steps to streamline
the process. We need to do more. We should not have a situation
where a small business has to pay an unaffordable amount for
them to get on the government contract schedule.
Senator Coburn. And if you would agree in principle that if
you have more vendors of quality and value competing, the price
is likely to go down.
Mr. Perry. To some extent.
Senator Coburn. Yes. But in regular markets----
Mr. Perry. Yes.
Senator Coburn. If you are at GM and they have five guys
competing for seat belts----
Mr. Perry. Right.
Senator Coburn [continuing]. Versus two guys competing for
seat belts, the likelihood that the price for the seat belt is
going to go down.
Mr. Perry. That is right.
Senator Coburn. OK.
Mr. Perry. But the question is, when you go from 5 to 15 or
5 to 10, will it actually go down further?
Senator Coburn. And I understand that. I know that there is
not always going to be a price decline. But the fact is, if we
had 350,000 vendors on there now competing for the same list of
items that are on your schedule, is it not conceivable to think
that the price on each one of those items might be somewhat
less?
Mr. Perry. That is logical. I am only--I don't disagree. I
am only reflecting, there are certain places where we have 400
or 500 vendors listed to provide a certain commodity or product
or service, and when we put that solicitation out, of that 400
on the list, we may only get four to six bidders.
Senator Coburn. Yes.
Mr. Perry. The point I am making is, I don't know that all
400 will focus on every solicitation or acquisition that is out
there. The number that we tend to get----
Senator Coburn. But in principle, the more purchases you
have--the more vendors you have and the more competition you
have, if quality and service is the same, the better the price.
Mr. Perry. That is right.
Senator Coburn. You agree. So to create a system to where
you have the maximum number of vendors who are qualified, and I
know you have to have somebody that says, this is a fly-by-
night company. We don't want them selling to the government.
Mr. Perry. Right.
Senator Coburn. And I understand that. But that process
should be very short and not be an average 6 months, which is
what it averages today, which cuts a lot of people who have
something great to offer, especially minority businesses,
because they don't have the capital to put up front, and the
government is a great contractor because you are a good payer.
You are not going broke on them. And so their risk to sell is
less.
I just want to come to an agreement that if we could, both
in terms of trying to create the information that needs to be
there to measure performance, and not just at GSA, across the
government----
Mr. Perry. Right.
Senator Coburn [continuing]. And two, is that the more
vendors there are and the easier it is for quality vendors to
get on your list off of the CCG, the better off we are liable
to be. And then once we know numbers government-wide and
increased number of vendors, then the capability of squeezing
them based on price, once quality and service are the same, the
ability to squeeze on price is there.
Mr. Perry. Right. Competition will have that effect.
Senator Coburn. Let me ask you one general question. If you
were to look--and this is subjective and I am not holding you
to this at all--when you buy the same thing that, let us say, a
Wal-Mart buys for use in their business, not to resell but in
use in their business, when you buy something, do you think you
get as good a value as they do? Do you think you all buy it as
well?
Mr. Perry. I would say in our technology arena, I think we
are as good as anybody. I don't know, let us say, for something
like tools. Some of us can go in a hardware store and sometimes
see a tool on sale for a price less than our own GSA schedule.
We see that all the time. We had that when I was at Timken,
because when you negotiate a price, it doesn't say that that
company couldn't somehow on occasion have sales that are
actually below your price. But at any rate, I would say in the
area where we have really focused, and technology being one, I
am not so sure that we don't do as well as Wal-Mart.
The other is the one I mentioned at the outset. We do
compare ourselves in the area of real estate, and I know that
is not your focus here, but there is a real-time set of
information available as to what companies are achieving when
they lease space and we are double-digit below that rate
specifically.
Senator Coburn. I really hope that is true, and we will
have a hearing on that.
Let me tell you my experience as a Congressman. When I
became a Congressman, we were in the Federal Building and the
rate the Federal Building paid for my office was twice what I
could rent private space, nicer and bigger. And so my own
personal experience--I don't doubt that is true, because I was
buying little space and paying. But I have no doubt to say that
you will probably do a great job in that.
And remember, this isn't about me trying to criticize GSA.
It is for me--my goal is to make sure that the new movement in
terms of management in the Federal Government gets extended as
far down as it can. With the CFO Act in terms of the President
making sure we have Chief Financial Officers everywhere, where
we have accountability and transparency so we can measure
performance so that we know what is going on.
You have been great. I appreciate you coming. We will go
through these other questions, and Senator Carper is here, just
in time, so that is great.
Senator Carper, we have just had a great discussion. I am
learning about the GSA, and it is all yours.
Senator Carper. I presume you have already talked a bit
about pre-award and post-award audits?
Mr. Perry. A little bit.
Senator Coburn. We did a little bit, but it needs to
probably be covered a little bit more.
Senator Carper. If we could just revisit a little bit, we
heard some testimony, I think over the summer, about the
benefits of pre-award versus post-award audits, at GSA and
maybe the Veterans' Administration. I think maybe the VA uses
them somewhat more aggressively, I don't know. But from what I
have heard, what we have heard, the benefits can be
significant, and I understand that GSA is in the process of
increasing the number of contracts that you audit, is that----
Mr. Perry. On a pre-award basis?
Senator Carper. I think so.
Mr. Perry. Yes. For example, a few years ago the number
was, I think, 17. Next year, it will be over 100. So we are
doing a great deal more in pre-award and we are using not only
our GSA folks, but engaging the Inspector General in our office
to provide the resources to do some of that. So we are, and we
had gotten lax in terms of doing pre-award audits so there is a
substantial increase in the number of pre-award audits that are
occurring now.
Senator Carper. Why do you suppose you all got lax?
Mr. Perry. Well, again, and I was saying to Dr. Coburn, it
is speculation on my part to some extent, but I think we had a
focus on meeting the needs of our customers doing things as
quickly as we possibly could in many instances and we got into
a mindset of it is OK to cut this corner. It is OK to not do
this step in the process because we will be able to process
more orders for our customers.
What we discovered, though, in the course of doing
everything we could to meet the needs and growing needs of our
customer agencies, that some of those corner-cutting was not a
good thing for us to do. So now we have gone back, we have
reestablished our acquisition processes in such a way that each
of the steps that need to be a part of that process are back
in.
Senator Carper. It is probably premature to ask this
question, but is it possible that in the past, that the audits
were deemed to be burdensome either for the GSA or for the
vendors? Did you ever hear any of that?
Mr. Perry. Well, the post-award audits certainly are deemed
to be burdensome, particularly by the industry, partly because
it is not in the specifications, in the document up front.
There are, in the course of administering the contract, during
the time the contract is being executed, that is actually the
best time to make sure that the vendor is complying with all
the terms and conditions of the contract, as opposed to coming
along 6 months later and doing it. Their view was that we are
doing that during the course of the contract. It shouldn't be
necessary to do it again after the fact.
And also, I am not sure this is the case, but some
indicated that they would have to retain records for an
extended period of time until we conducted the post-award
audit.
But at any rate, we are still reviewing that factor. We had
a hearing on it, a public hearing. We requested information
from the public, and that includes the industry. We are
reviewing that information as it has been received and will be
making a determination as to how to go forward on that.
Senator Carper. I am going to switch gears, if I could, and
if you already got into this, you can just truncate your
response. Could you just please explain, at least for me and
maybe for us, the impact that the merger between the Federal
Supply Service and Federal Technology will have on customer
service----
Mr. Perry. Yes.
Senator Carper [continuing]. And on, I guess, oversight of
contract negotiations, and do you think it will help with your
efforts to ensure that GSA is offering the best value?
Mr. Perry. I absolutely do on all three of those points.
One of the aspects of bringing these two components of our
agency together is the fact that we today have two separate
revolving funds that we use, one for the acquisition of
information technology products and services, and another for
essentially everything else. It is a commercial item other than
facilities.
There was a point in time when I think it was a good
practice to keep IT acquisitions completely separate from
everything else, in the early 1990s and before when the
government was getting very much involved in that. There needed
to be some tracking of that, maybe some management control of
it. There probably was even some incentive to say, let us do
more and more of that for purposes of improving the operations
of government agencies.
But today, when agencies make acquisitions of major
technology systems, it is a combination of IT, professional
services, and maybe telecommunications to make an overall
system. Today, we have to account for those separately. We have
to make those as separate acquisitions. In fact, the Inspector
General makes a finding against us if we buy a camera that is a
part of a border control system that ties into computers if our
judgment was that that camera was a part of an information
technology system and the IG's judgment was that the camera is
a camera and it is not IT. So when you think about it, you say,
well, why should we have that separate accounting? So we have
asked Congress for the authority to put those two funds
together, and that is someplace where I would encourage your
support.
At the same time as we look at bringing the funds together,
we looked at the fact that we have certain other duplication
between our two services that is not useful or meaningful from
a customer perspective. So we think that by bringing them
together, actually taking out several layers of senior
management that were over that, consolidating that, we will be
able to have more people focused on meeting customer
requirements. We should be more efficient, more effective. It
ought to give us a more streamlined approach to deal with
management controls, both at our national office and our 11
regional offices.
So in the case of all three components of your question,
yes, we will provide better customer service, we will be more
efficient, and our management controls will be applied in a
more effective way.
Senator Carper. You just mentioned one area where you think
we could be helpful and supportive of you. Are there other
things that we need to be mindful of? You may have already
mentioned some of these to our Chairman, but any other ideas
that come to mind where we can be supportive of your efforts to
provide better value at a better price?
Mr. Perry. The combining of the two funds is certainly one.
We did have some discussion of the fact that a system that we
use as a government-wide system, not just a GSA system, but we
have a big role in it, the FPDS, the Federal Procurement Data
System is a system that can be used and further developed as a
means of capturing government-wide data with respect to our
purchases so that we can analyze data and use that as a basis
for our strategic sourcing. We are doing some of that today.
Since we can't get the granular level of information from the
overall system, we do it through the use of data calls and
asking agencies or suppliers to provide information that we can
then analyze and use for purposes of strategic sourcing.
I can't say that, and I say this just so that none of us on
the acquisition side use this as an excuse, because some would
say, well, until 2008 when that Federal Procurement Data System
is up and running and providing all of the information, then we
will just stay in place. My view is that there is some
strategic sourcing we can do in the interim and we should be
focusing on getting that done even as we work on enhancing the
Procurement Data System.
Senator Carper. OK. Mr. Chairman, could I ask maybe just
one more question?
Senator Coburn. Sure.
Senator Carper. While I am looking for my question, I will
just say I went to my other hearing with Senator Voinovich, and
I walked in mindful of the fact that you had been a member of
his cabinet and I said, I just came from a meeting with Steve
Perry and he said to tell you hi.
Mr. Perry. Great.
Senator Carper. And he said, ``Steve Perry?'' He said, ``I
love Journey.'' [Laughter.]
No, I am just kidding. He said to tell you hello, give you
his best.
I understand that the amount of business contracted through
GSA has increased, and I am told dramatically. The size of the
GSA staff has pretty much stayed the same----
Mr. Perry. Gone down.
Senator Carper. Has it? OK. And I would just ask, do you
think you have the resources and staff that you need to conduct
more audits or even to effectively negotiate a large number of
contracts?
Mr. Perry. Well, I was going to answer that question in one
way before you said more audits. We probably--we are using the
Inspector General and we are using some of our people who are
most highly skilled on Federal Acquisition Regulations to
conduct the audits. That is a precious resource. We don't have
enough people to do that.
But the other point I was going to make is, and it is
really one of the underlying reasons that we want to do the
FAS, the FTS and FSS reorganization, we believe that it is
always going to be difficult for us to expand measurably the
size of our organization, although in a moment I can make an
argument that maybe that is exactly the right thing we ought to
do.
So anyhow, part of our reason for the organizational design
is to, with the same number of people, expand our
organizational capability, just to do things better, faster,
smarter with the resources that we have. That is the plan that
we are on.
But to help make the argument that we must at least do
that, and maybe we should do more, you are all aware that, as
you were just pointing out, our acquisitions of information
technology products and services for government agencies has
really grown. It went from $1 or $2 billion just a few years
ago to about $9 or $10 billion now.
Senator Carper. Say those numbers again.
Mr. Perry. One or two billion dollars probably 6 or 8 years
ago to $9, close to $10 billion now.
Senator Carper. OK.
Mr. Perry. The same could be said for the growth of our
Multiple Award Schedule. I don't know what it was 5 or 6 years
ago, but it probably wasn't more than $20 million. It is $40
billion now.
So what that means is that GSA is making more and more
acquisitions on behalf of other agencies. We think that is a
statement that says that they find value in using our service.
But it also is the case that, one, we have fewer people doing
it today than we had 4 or 5 years ago, many fewer people. Two,
you read reports that use that same statement as it relates to
government-wide. The government as a whole now is purchasing
over $300 billion a year with far fewer people in its
acquisition workforce than we had a few years ago.
Some people contend that the solution to that problem is
for each agency to add to its acquisition staff. I think that
is a big mistake. I think this would be the opportunity to say,
OK, GSA or maybe it is three or four agencies. It may be not
just one. We are going to rely upon you as the government's
central entity to really bring about productive acquisitions,
and if we did that, we would say, instead of expanding the
acquisition workforce in each agency, we are going to expand it
in GSA and diminish it elsewhere.
That might address the issue of the franchise funds. As we
were talking, there are a number of other agencies who are
involved in the acquisition of information technology, although
it is not their core mission, and they, in fact, use the
revenue in excess of expenses from those activities to fund the
basic program, which is another issue.
And then one last point related to that, I use this
statistic with our folks all the time when we are trying to
make the point that our up-sight potential at GSA in terms of
making us a more and more viable part of our Nation's Federal
Government is this. I mentioned that today, GSA is involved in
the acquisition of maybe $10 billion of the IT, but the
government as a whole spends $65 billion. So that says there
are a lot of agencies out there doing their own thing.
With respect to telecommunications, we know that the unit
price that we have negotiated for long-distance and local
telephone service, voice and data, is better than the best
commercial prices that those providers offer to their largest
commercial customers, and yet in some parts of our country,
only 10 percent of the Federal agencies in those locations use
the GSA contracts.
So there is a lot more value that we could be providing if
we could focus on GSA as the agency who has the responsibility,
and there is some amount of work that has to be done to get the
other agencies to, even though it is voluntary, recognize that
if there is a better value here, in those cases where we can
demonstrate it, as we can in the instance of telecommunication
services, they should do it.
Senator Carper. Thanks, Mr. Chairman.
Senator Coburn. Let me just make one point. If you had the
kind of information I wanted you to have, you would never have
to do a post-award audit, right?
Mr. Perry. Well, if you were still trying to----
Senator Coburn. If you knew by price, by vendor, by
purchasing segment in the Federal Government, if you had that
data, you would know what they were charging and you would know
whether or not you can go to the government agency, if they
have got the quality and service, and they can tell you that,
and then you can measure price and you can measure quantity if
you had the kind of data that I am talking about, the
information system.
Mr. Perry. Right.
Senator Coburn. So you would agree with that?
Mr. Perry. I would agree with that.
Senator Coburn. OK. I will tell you, the House has passed
the legislation. It is stuck in our Committee. You have my
commitment in terms of combining----
Mr. Perry. Funds? Thank you.
Senator Coburn. You have my commitment----
Mr. Perry. Thank you.
Senator Coburn [continuing]. To have the support to try to
get that through. I will talk with Senator Collins on it
tomorrow. My staff will talk with Senator Collins and see if we
can't get that through to help you on that.
If you don't have anything else, Senator Carper, I think
the one thing that I look at is we don't know what we are
buying, what we are paying for it, the satisfaction levels. We
do in certain areas, and I think in terms of the IT and things
like the specialized areas that you do, but on this area
outside IT and outside buildings, the other things, especially
catalog, we don't really know.
My belief is, as a former businessman, without that
knowledge, we are not going to ever do as good as we could do.
Now, that doesn't mean that we are not doing a good job, and I
am not accusing anybody of that.
I think that there is a vacuum of data, and I know the new
system and the fact that the Pentagon isn't on it and they
should be on it. I am going to be looking at that, too. why
aren't you on it? But I want it to go further. Everybody here
that is computer literate knows that if you have got something
in front of you and you are going to punch it in and put it in
a file, it can all go into the file or you can take some out.
But the point is, is it in there, and if it is something that
is already there, it is collectable, and that is what the
wonderful part of computers are, is they can make data
available in an array that you never would have been and to
give you an analysis that you never would have gotten with
clerks trying to run this down.
So I would first of all tell you how much I enjoyed your
testimony. Thank you. I think your leadership style is great. I
think we still have some real procedural difficulties in the
Federal Government. The fact that we have 10 or 13 different
groups purchasing and not using, like you were talking about,
voice and data rates, that they are not getting the best thing.
If that was designed to get competition, how do we measure that
we are getting a better price? We don't know that.
If anybody ought to be able to develop the capability to
measure our purchasing value, it ought to be us, and I want to
work with you to try to do that.
Mr. Perry. Thank you.
Senator Coburn. We are going to look forward to working
with you on some of these other areas, too. Thank you, Mr.
Perry.
Mr. Perry. Thank you, Dr. Coburn. Thanks, Senator.
Senator Coburn. The hearing is adjourned.
[Whereupon, at 4:13 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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