**DISCLAIMER**

> While, at the time this document was prepared, I was a Government
> employee and an employee of the U. S. General Services Administration,
> it is **not** in this capacity that these comments are presented but
> in my individual capacity as a taxpayer who is interested on how
> public funds are expended.

**MAS Advisory Panel Presentation**

> In March 2003 a GSA contracting officer found an item in the GSA
> Advantage database at three different prices: \$583.00, \$1,035.44 and
> \$6,249.99 (see attachment 1).
>
> The contracting officer found this vast disparity because a vendor
> proposed to add the product to their MAS contract at a price only a
> little above \$6,249.99.
>
> Would that price have been reasonable?
>
> If the high price is not reasonable, does it follow that either of the
> two other prices is reasonable?
>
> *How can that be?*
>
> Following this part number discovery, I asked for weekly database
> downloads by manufacturers\' part number so that we could detect and
> eliminate those kinds of pricing anomalies.
>
> To date no such action has been taken.
>
> *How can that be?*
>
> Buried on page 67 of GSA\'s 2007 Annual Performance and Accountability
> Report is the startling admission that an agency was able to get a
> discount of \"**90 percent off GSA Schedule prices**.\"
>
> The Federal Acquisition Regulation asserts in 8.404(d) that \"**GSA
> has already determined the prices** of supplies and fixed-price
> services, and rates for services offered at hourly rates, under
> schedule contracts **to be fair and reasonable**\" \[emphasis added\].
>
> If GSA has determined the price to be reasonable, how is it possible
> for an agency to get an additional 90 percent discount?
>
> Are the customers who order at GSA Schedule prices overpaying by 900
> percent?
>
> *How can that be?*
>
> It seems to me that the 800-pound gorilla that no one wants to talk
> about is that we are industrially funded.
>
> Historically before IFF started in 1996, the annual MAS sales were
> flat, ranging between four and five billion dollars (see GAO-05-229
> page 6 at attachment 2 below).
>
> Once FSS became industrially funded, it became necessary to partner
> with industry, absorb some of our industry partners\' costs like
> marketing, ignore audits and award MAS contracts at the highest prices
> that we can possibly support.
>
> The expenditures of taxpayer dollars for MAS contracts took off at
> about a sixty degree angle zooming to \$32,000,000,000 in 2004.
>
> The fact that we are industrially funded put FSS and now puts FAS in
> an unavoidable conflict of interest situation.
>
> The primary metric is the comparison of the costs of operations with
> the operating funds that are provided by the Industrial Funding Fee
> (IFF).
>
> In order to be perceived as successful, the operating costs must
> decrease or the sales that generate the IFF operating funds must
> increase.
>
> These measures of success drive the organization to reduce costs by
> churning personnel in never-ending reorganizations and awarding
> contracts at the highest supportable prices.
>
> The consequences of FSS\'s Office and Scientific Center (the old FCG)
> failing to spend more taxpayer money and increase revenue was that the
> center was dissolved and the people and programs were reassigned.
>
> Was anyone ever properly recognized and commended when the FSC 70
> contracts filled all FSC 70 requirements at a lower cost to the
> taxpayer?
>
> Since we don\'t collect data on how many boxes of FSC 70 product or
> how many hours of FSC 70 services are performed, I submit that this is
> a fair construction of available data.
>
> If FSS was \"on the take\" from our contractors, it was O.K. because
> we were \"on the take\" by act of Congress.
>
> Is this a problem? I think that it is.
>
> Can GSA fix the problem? No.
>
> Congress created this mess by abdicating its budgetary responsibility
> and Congress has to fix the mess.
>
> Can GSA mitigate the problem? Partially.
>
> This is an organizational conflict of interests issue.
>
> We need separation between our MAS negotiators and our budget shop,
> the same kind of separation that we would insist that a contractor
> provide.
>
> We should be flagging this problem in our vulnerability assessments so
> that a long-term fix will actually happen.
>
> Congress needs to reassert its budgetary authority and fund us.
>
> This is an election year, it shouldn\'t play well in Peoria and we may
> get lucky.
>
> In the mean time, we need to keep the price reduction clause and stop
> punishing contracting officers for negotiating low prices.
>
> What metrics are appropriate?
>
> It is not feasible for GSA to collect data on how many boxes of
> products or how many hours of services are represented by the sales
> dollars.
>
> Prior to IFF, success was measured by savings from retail.
>
> That metric should be added to those currently used.
>
> If sales are growing but savings are growing faster, it would be a
> good thing.
>
> If sales decline and savings are growing, it would be a great thing.
>
> If the metrics shows that GSA\'s reduction in sales revenue is based
> on increased taxpayer savings, the Congress should cheerfully bale out
> any operating losses because the taxpayers have benefited.
>
> On July 9, 2008 Administrator Bibb released a message to all GSA
> Employees \"Highlighting GSA\'s Achievements.\"
>
> The first three trends listed (\"Gross revenues are up\...Business
> with the Department of Defense is up\...Our flagship Multiple Award
> Schedules are up\...\") all involve costing the taxpayer more money.
>
> It is a sad day when GSA touts costing the taxpayer more money.
>
> **DISCLAIMER**
>
> While, at the time this document was prepared, I was a Government
> employee and an employee of the U. S. General Services Administration,
> it is **not** in this capacity that these comments are presented but
> in my individual capacity as a taxpayer who is interested on how
> public funds are expended.
>
> Herman S. Caldwell, Jr.