GSA Shares its Purchasing Power

Cooperative purchasing for state and local governments could mean savings of both time and money

by / August 11, 2003
SACRAMENTO, Calif. -- Virginia Congressman Tom Davis has a soft spot in his heart for local government, in part, because he was once chairman of the Fairfax County Board of Supervisors. Consequently, when an earlier attempt to provide state and local government access to the Federal Supply Services schedule for IT contacts failed to make it out of a congressional committee, he launched a second attempt that produced positive results as a part of the 2002 Electronic Government Act.

Wild, Wild West
David Marin, spokesman for Davis and the congressman's point person on the bill, says the opportunity to leverage the federal government's buying power is significant. "By giving access t o GSA schedules you can help those state governments more rapidly deploy e-government and other solutions," he observed. "This also accomplishes the cross-government integrated digital environment that officials at every level say is needed."

In addition, the federal marketplace can provide some uniformity to a previously unwieldy system. "Basically he [Rep. Davis] has seen for years that procurement at the local and state levels is like the wild, Wild West if you are a government contacting company," Marin said. "There are different rules for different localities and that makes it hard for vendors and local governments to get the best bang for their buck." Davis is chairman of the House Government Reform Technology and Procurement Policy Subcommittee.

Since May, a growing number of non-federal government agencies have been taking advantage of the GSA's "most favored" status that offers competitive pricing on over 500,000 IT services and products. In July, GSA estimated that at least 30 states are positioned to buy off the contract. Some state and local governments will require changes to existing procurement laws before they can use GSA Schedule 70.

According to Pat Mead, assistant commissioner for acquisition management, GSA Federal Supply Service, state and local governments purchased approximately $7.5 million from the schedule in just under two months time. "We are actually surprised it is that much," Mead said. "It will take time to develop and not all states have legislation that allows them to do this."

But, Mead adds that the economic incentive should spur increasing participation. "The benefits are there and state and local budgets are under a lot of pressure these days," she said. Not only does the federal schedule offer its leveraged pricing to buyers, it streamlines the process by eliminating the need for state and local agencies to run through paper-based and time consuming procurement processes. "It helps reduce the prices, ultimately, to the taxpayer," Mead said.

Learning Curve
John Adler, state procurement administrator for the state of Arizona recognizes these benefits but says state and local government buyers need to educate themselves before dealing in the federal marketplace. He says procurement officials should be aware of several factors, such as the opportunity to negotiate even better prices with GSA vendors and also how Schedule 70 buys might impact their local vendors. Adler was so concerned about educating the state's buyers that he wrote a paper on the topic.

"I tried to get on top of this GSA thing before it got on top of us," he said. "I wanted to make sure our political subdivisions understood what they could and couldn't do with respect to purchasing."

Adler acknowledges that access to 3,000-plus contractors with savings leveraged by the federal government's $40 billion of annual purchases is, indeed, a good thing for state and local agencies. But, he has some caveats. Adler says that jurisdictions need to be certain they have the political ability to use the GSA schedule and they need to be aware that "GSA contracts are ceilings and, depending on circumstances of the buy ... pricing may be negotiated downward."

In addition, Adler thinks that using the GSA contract could mitigate a purchasing problem that is unique to technology -- by the time some state and local purchases make their way through the slow bureaucratic process, some technology buys could be obsolete. "There are also political issues you have to look at," he added. "You have to take care of your small and local businesses."

This concern is shared by other state and local officials. Ron Bell, director of purchasing and supply for the commonwealth of Virginia, says his office is interested in using the agreement but is proceeding cautiously. "The only thing we are evaluating is the impact on small and women-owned minority business," he said. But, according to Bell, rather than shutting small businesses out of the market, opportunities could be expanded if those businesses also signed onto the GSA schedule as a supplier. "They could sell well beyond their borders," he said, adding that Virginia looks favorably upon the cooperative purchasing agreement. "I think it is a great move. The states have wanted to use this agreement for a long time," he added. "I think it is a great step forward." Virginia has been repeatedly recognized for its progressive procurement management.

Unintended consequences
Amid interest in using the GSA schedule to save time and money, however, there has been some quiet criticism about just how the federal government is rolling out the program. One state CIO said that federal officials had not engaged state and local governments in the design of the program -- an oversight that might produce some unintended consequences. The official also said the potential impact on small and minority businesses is understated and could have a deleterious effect on local economies. Then, there is the issue of resellers, accustomed to providing technology products and subsequent servicing of those products. In some cases, those firms have been economic anchors in communities. What happens if they are left with only the servicing end of contacts?

These concerns led to the Information Technology Association of America to be cautious in its endorsement of the cooperative purchasing agreement, according to Olga Grkavac, ITAA executive vice president. "We feel it does provide an alternative choice for state and local governments. Right now there is major confusion at GSA and among the vendors about which states can even use co-op purchasing and that needs to be sorted out," she said. There is a large education effort that has to be made by GSA and the companies, before we can give it a fair test."

Grkavac said the issue of local governments making local purchases is important and played a role in prior failed efforts to create cooperative purchasing. Chief among the opponents that included small businesses was the powerful pharmaceutical industry.

"We don't think it's a program for everyone," she observed, "but it's an option. It's one of those programs that will probably grow over the years -- particularly in the large counties and municipalities."

Alia Mendonsa, research programs manager for the Center for Digital Government and an expert on state e-procurement programs, said the cooperative purchasing agreement might have a positive, although unintended, consequence. "It could significantly improve the reporting capabilities of states for IT commodities and services purchased through the GSA schedules," she said. "If the GSA provides reporting capabilities to users, it would facilitate improved tracking of expenditures for items purchased through Schedule 70." Mendonsa explained that, although many states had launched e-procurement pilots over the last three years, only a handful have fully implemented systems to date. Consequently, information about purchases made by state agencies is often scattered and difficult to access. "There is the potential for state and local IT expenditures to be tracked in a central environment," she added. GSA charges a one percent transaction fee for use of the schedule. Mendonsa said this indicates that GSA can track IT purchases and should be able to provide states with an accounting.

Among states that were successful in the full roll out of e-procurement are Virginia, Maryland, and Maine according to Mendonsa.

Moving Forward
GSA's Mead agrees that there is a steep educational curve. She said the agency is working with a number of associations, such as the National Association of State Procurement Officers, to disseminate information about the opportunities to use the GSA schedule. In addition, GSA has online resources. "There is a knowledge center about how to use the schedules and best practices and a legal corner," she said. "And, we are building more that is tailored to state and local government. We've also got a site with frequently asked questions -- with a lot of questions coming from state and local government." Online resources are at www.umas.gsa.gov.

Mead says there is a lot to leverage from the monetary muscle of the federal sector. "It is a streamlined procurement method, it allows them [governments] to focus on just their requirements," she said. "They can focus and not have to worry about basic terms and conditions and what is fair and reasonable pricing." In addition, she sees an opportunity for intergovernmental cooperation. "Sometimes there is unfavorable press about the lack of sharing between the federal and state sectors," she added. "And this is a way we can work together."

The program is currently operating under an interim rule published in May by the GSA. The agency is soliciting comments until late summer when officials expect to issue a final rule.

Photo: Tom Davis
Darby Patterson Executive Editor at Large