United States General Accounting Office

GAO Report to Congressional Requesters

June 1998 FEDERAL PRISON

INDUSTRIES

Delivery Performance

Is Improving But

Problems Remain

GAO/GGD-98-118

GAO United States

General Accounting Office

Washington, D.C. 20548

General Government Division

B-278134 

June 30, 1998

The Honorable Peter Hoekstra

The Honorable Mac Collins

The Honorable Roscoe G. Bartlett

The Honorable Nathan Deal

House of Representatives

This report responds to your July 8, 1997, request for information on

whether Federal Prison Industries (FPI) delivers its products and services

in a timely manner. Our objectives were to (1) develop and assess

statistics on FPI delivery performance and (2) obtain the views of selected

customer agencies’ procurement officials on FPI delivery practices. As

agreed with your offices, our work for the first objective involved

developing information on how often FPI met delivery due dates during

fiscal years 1996 and 1997, including an analysis by customer agency and

product category. As part of this work, we considered FPI’s efforts to track

delivery performance and its practices with regard to setting due dates.

Our work for the second objective primarily involved holding discussions

with selected customer agency officials—from the Defense Logistics

Agency (DLA), General Services Administration’s Federal Supply Service

(FSS), Social Security Administration (SSA), and Department of Veterans

Affairs (VA)—about their experiences with FPI delivery performance, the

due-date setting process, their efforts to monitor FPI delivery performance,

and available remedies for late deliveries. You requested this work

because of concerns you had about FPI’s ability to meet customers’ due

dates and its lack of incentive to do so. Because of its status as a

mandatory source supplier, agencies are required to buy FPI products.

Background FPI is a wholly owned government corporation managed by the

Department of Justice’s (DOJ) Bureau of Prisons (BOP). FPI was created by

Congress in 1934 and serves as a means for managing, training, and

rehabilitating inmates. Under the trade name UNICOR, FPI markets about

150 types of products and services to federal agencies. Products include

furniture, textiles, and electronic components. Services include data entry,

engine repair, and furniture refinishing. In fiscal years 1996 and 1997, FPI

had net sales of about $496 and $513 million, respectively, in products and

services. In addition to buying products directly from FPI, agencies buy FPI

products from central supply agencies like FSS or, in the case of the

military, from DLA. FSS and DLA stock some FPI products for sale to

customers; FPI delivers other products directly to customers when orders

are placed with FSS or DLA. According to FPI, agencies generally deal

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directly with FPI when procuring services. When making orders for FPI

products and services, agencies typically send FPI a hard copy order;

transmit the order electronically, including through the Internet; or place

the order by telephone.

To attain certain public policy objectives, federal law provides for certain

exceptions to the full and open competition requirement that governs

most acquisitions. One of these exceptions is set forth in 18 U.S.C. 4124,

which provides that federal agencies are generally required to purchase FPI

products if they meet the buying agency’s requirements, and the prices

charged do not exceed current market prices. Subpart 8.6 of the Federal

Acquisition Regulation (FAR) implements this statutory provision. If FPI

cannot meet the buying agency’s requirements, the FAR allows agencies to

seek waivers from FPI.

1 FPI’s mandatory source status for products does

not apply to the services that it offers to its federal customers.

Over the years, supporters and critics of FPI have debated FPI’s mandatory

source status and whether FPI provides quality goods, at a reasonable

price, and on a timely basis. Both sides recognize that FPI has a social

objective to manage, train, and rehabilitate inmates through work

programs. However, some critics have questioned whether FPI’s products

and services have satisfied federal customers in terms of timeliness, as

well as quality and price, and whether FPI’s mandatory status results in

unfair competition with the private sector. In recent years, FPI has placed

increased emphasis on timeliness as a performance indicator, as well as on

overall customer satisfaction.2

 In its fiscal year 1996 operating plan, one of

FPI’s eight long-term strategic goals was to “promote total customer

satisfaction by being competitive in marketplace price, quality, customer

service, and delivery standards.” One of its corporate objectives for fiscal

year 1996 was to “meet or exceed all customer requirements for price,

quality, delivery, and service.” Beginning with its fiscal year 1997 operating

plan, FPI established a specific goal for on-time delivery performance,

stating that it would publicly recognize factories that reached 90 percent.

1

Because FPI is a mandatory source provider for items it produces, FPI’s customers are required to

obtain FPI’s written authorization prior to placing an order for a similar item through outside sources.

Federal agency customers can request a waiver by mail, electronically, or by facsimile. The waiver

request asks the customer to justify that the product does not meet the basic needs of the agency.

Requests are to be evaluated on a case-by-case basis by FPI sales consultants, but systems furniture

waivers are handled by FPI’s systems projects group. Waivers that are denied can be appealed to the

FPI ombudsman in Washington, D.C.

2

In March 1998, we reported that FPI did not have a systematic or structured process for collecting and

analyzing customer satisfaction data so that conclusions can be drawn about customer satisfaction.

See Federal Prison Industries: Limited Data Available on Customer Satisfaction (GAO/GGD-98-50,

Mar. 16, 1998).

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For fiscal year 1998, FPI increased its on-time performance goal to

98 percent. FPI officials viewed these goals as ambitious; however, they

said that setting them represented an important step toward focusing on

the need to improve delivery performance.

Results in Brief FPI delivery performance is improving—our work showed an upward trend

in the latter part of fiscal year 1997. In fact, our analysis showed that 8 of

the 12 months in fiscal year 1997 had better on-time delivery performance

than the same months in fiscal year 1996. In addition, FPI had data to track

timeliness and an approach for evaluating results that showed

improvements in fiscal year 1998. However, our work also showed that FPI

fell short of meeting its goal of 90 percent in fiscal year 1997. Also, there

was a wide variation in FPI performance by customer agency and some

variation by product category. Specifically, our analysis showed that FPI

shipped 72 and 76 percent of customer orders on or before the due date in

fiscal years 1996 and 1997, respectively. In 1997, on-time performance

ranged from 47 percent for VA to 92 percent for the federal judiciary. In the

same year, factories producing systems furniture were the most timely at

85 percent, and factories producing electronics were the least timely at

73 percent.

The results of our analysis and FPI’s own timeliness evaluations should be

viewed with two caveats in mind. First, they both likely overstate

timeliness because they did not account for shipping time for orders with

due dates specified as the day the order should arrive at its destination.

Due dates specified by customers can be origin—meaning that the orders

should be shipped by the due date—or destination, meaning that the

orders should arrive at the customer’s location by the due date. FPI did not

have data or a workable approach that would allow us to account for

shipping time for orders with destination due dates. As a result, our

analysis, as well as FPI’s own evaluations of timeliness, considered all

shipments to be on time if FPI data showed that they left the factory on or

before the due date. Accounting for shipping time for orders with

destination due dates would have improved the accuracy of the timeliness

evaluations and provided a better picture of performance.

Second, our review of 109 randomly selected orders showed that over

one-half of them had due dates in FPI’s system that were later than what

customers had originally requested. Arriving at mutually agreeable due

dates may involve negotiation and compromise between the supplier and

the customer, whether the supplier is FPI or a commercial vendor, because

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B-278134 

customer-requested due dates cannot always be met. In addition, FPI’s

Chief Operating Officer said that one reason due dates in FPI’s system

could have been later than what customers originally requested was that

FPI may have determined that the customers’ due dates were inconsistent

with FPI production capabilities at the time the order was placed, not

accepted the customer-requested due dates, and revised them to reflect

production lead times. However, because of limited documentation, we

could not always determine the reasons due dates were different,

including whether FPI had not accepted them, or whether customers were

notified of the reasons for changes and approved of the revised due dates.

Although the results for these 109 orders were not projectable to the

universe of FPI orders, they raised questions about which due dates should

be used to measure timeliness, especially from the customer’s perspective.

FPI officials said that they could do a better job of documenting the

reasons due dates that customers request cannot be met and whether the

customers were notified of the reasons for changes and approved of the

new due dates.

Just as our analysis by customer agency showed wide variation in FPI

delivery performance, customer agency officials within DLA, FSS, SSA, and VA

had mixed views on FPI’s delivery performance, despite FPI’s goal to

promote total customer satisfaction. For example, these views ranged

from officials at FSS’ National Furniture Center and VA saying that FPI’s

performance was very poor and that FPI was very difficult to deal with; to

DLA officials, who said they were generally pleased with FPI delivery

performance. Although we sought the views of only selected customers,

several of the key procurement officials within these agencies were clearly

dissatisfied with FPI’s delivery performance and practices. In addition, we

noted during our review that FPI does not currently develop delivery

performance data by customer agency. Without these data, FPI was not in a

good position to easily detect individual agencies’ problems with its

performance and to improve overall customer relations.

Scope and

Methodology

To meet our first objective, we obtained and analyzed computerized files

from FPI’s customer order entry database (COED) for fiscal years 1996 and

1997, involving over 140,000 agency orders. FPI uses COED, which is

maintained at its Customer Service Center in Lexington, KY, to track and

record information on agency orders for products and services. Agency

orders can contain one to several hundred line items. Each line item

identifies a specific product and quantity and has a distinct due date. Large

orders with many line items can have multiple products and due dates.

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Because agency orders can vary tremendously, we generally followed the

same approach that FPI uses to define orders when it evaluates timeliness.

Specifically, we defined an order as a shipment of products or provision of

services expected by a customer for a given order on a given day. We used

the COED data to determine whether orders, defined as such, were shown

as being shipped in full by their respective due dates.

We also examined how FPI accounts for shipping time for those orders for

which the due date is when deliveries should arrive at the customer’s

location, not the date by which they should be shipped. To perform a

limited reliability assessment of the COED data, we obtained hard copies of,

and other available documentation for, 109 randomly selected agency

orders and compared various data items in the orders with data in COED.

We also obtained and analyzed the results of FPI’s evaluations of timeliness

for fiscal year 1997 and the first half of 1998. We compared FPI’s 1997

results with ours and reconciled any differences. We did not independently

verify FPI’s analysis for fiscal year 1998. In doing our work, we held many

interviews and discussions about FPI delivery practices with FPI staff at the

Customer Service Center in Lexington, KY, and at FPI headquarters in

Washington, D.C. We did not determine the reasons individual agency

orders were delivered late or assess the effect of individual late deliveries

on federal agencies.

To meet the second objective, we interviewed key procurement officials

from four agencies that are among FPI’s largest buyers: the General

Services Administration’s (GSA) Federal Supply Service (FSS) in Arlington,

VA; the Defense Logistics Agency (DLA) in Ft. Belvoir, VA; the Social

Security Administration (SSA) in Baltimore, MD; and the Department of

Veterans Affairs (VA) in Washington, D.C. Collectively, these agencies

accounted for over one-quarter of FPI’s 1996 sales of $496 million. DLA was

the second largest buying component within the Department of Defense

(DOD) next to the Army. The other three agencies were among the top four

civilian agencies that buy from FPI.

In addition to contacting headquarters procurement officials at these

agencies, we also contacted one of GSA’s nationwide commodity centers,

FSS’ National Furniture Center (NFC), and three of DLA’s nationwide supply

centers: the Defense Supply Center Philadelphia (DSCP) in Philadelphia,

PA; the Defense Supply Center Columbus (DSCC) in Columbus, OH; and the

Defense Supply Center Richmond (DSCR) in Richmond, VA. Within SSA, we

spoke with officials from the two buying components that purchase

products from FPI: the Office of Property Management (SSA/PM) and the

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B-278134 

Office of Operations, Contracts, and Grants (SSA/OCG). Within VA, we spoke

with officials from the Office of Administration and the Office of

Acquisition and Materiel Management, as well as officials with the

Veterans Health Administration (VHA) from the offices of Patient Care

Services and Environmental Management Services.

We obtained information and views from these officials on several topics

related to timeliness, including how FPI performed in meeting due dates,

how due dates were set, whether due dates were driven by FPI production

capabilities or mission needs, what processes were used to monitor FPI

delivery performance and that of private vendors, and what remedies were

available in the event of a late delivery from FPI and private vendors. Using

FPI’s waiver database, we also determined the extent to which FPI granted

customers waivers from buying FPI products for reasons related to

timeliness.

We did our work between July 1997 and May 1998 in accordance with

generally accepted government auditing standards. Appendix II contains a

more detailed discussion of our objectives, scope, and methodology. We

requested comments on a draft of this report from the Director, Bureau of

Prisons (BOP). These written comments are discussed near the end of this

letter and are reprinted in appendix III. We also held exit conferences with

program officials of the customer agencies we visited to verify applicable

data, facts, and opinions presented in this report.

Timeliness Statistics

and Their Limitations

Our analysis using FPI data and its general approach for measuring

timeliness showed that FPI shipped 72 and 76 percent of customer orders

on or before the due date in fiscal years 1996 and 1997, respectively. It also

showed a wide variation in FPI performance by customer agency and some

variation by product category. FPI did not meet its 90 percent on-time

delivery goal in any of the months in 1997 or in any of the product

categories for the year as a whole. However, FPI’s performance improved

toward the end of 1997, reaching 87 percent for the month of July, and its

own data showed that timeliness reached 89 percent in March 1998. In

addition, our work showed that the average amount of time it took FPI to

ship products in all but one of the product categories decreased from 1996

to 1997.

These statistics provide insights into FPI delivery performance, such as the

variation by product category and customer agency. However, it is

important to recognize that they likely overstate timeliness because they

Page 6 GAO/GGD-98-118 FPI Delivery Performance
B-278134 

did not account for shipping time for orders with due dates specified as

the day the order should arrive at its destination and not the day by which

the order should be shipped. As a result, our analysis, as well as FPI’s

evaluations of timeliness, considered all shipments to be on time if they

left the factory on or before the due date. In addition, our review of 109

randomly selected orders showed that over one-half of them had due dates

in FPI’s system that were later than what customers had originally

requested. Because of limited documentation, we could not always

determine the reasons due dates had changed or whether customers were

notified of the reasons for the changes and approved of them.

Furthermore, although the results for these 109 orders were not

projectable to the universe of FPI orders, they raised questions about which

due dates should be used to measure timeliness, especially from the

customer’s perspective. If customers are not satisfied with due dates or if

this limitation is not reflected in the analysis, the usefulness of any

timeliness evaluations that rely on them comes into question.

Statistics on Timeliness FPI shipped 72 and 76 percent of customer orders on or before their due

dates in fiscal years 1996 and 1997, respectively. FPI improved its

performance in the latter months of fiscal year 1997, reaching 87 percent

for July 1997. In fact, our analysis showed that 8 of the 12 months in fiscal

year 1997 had better on-time delivery performance than the same months

in fiscal year 1996. It should be noted, however, that timeliness did

decrease to 84 and 82 percent, respectively, for August and September of

1997, and FPI did not meet its 90 percent on-time delivery goal in any of the

months in 1997. For the 2-year period, timeliness ranged from a low of

59 percent in November 1995 to a high of 87 percent in July 1997. On

average, 6,663 orders were due in each month of 1996 and 1997, ranging

from 5,057 in February 1996 to 8,227 in September 1997. These orders

covered the range of products FPI manufactures, as well as services, such

as engine repair, data entry, and furniture refinishing. Figures 1 and 2 and

tables I.1 and I.2 in appendix I show the results of our analysis by month

for fiscal years 1996 and 1997.

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Figure 1: FPI Timeliness for Fiscal

Year 1996

0

10

20

30

40

50

60

70

80

90

100

Percent orders on time

October 95

November 95December 95

January 96

February 96

March 96

April 96

May 96

June 96

July 96

August 96

September 96

Month

Timeliness for fiscal year

Timeliness by month

Source: GAO analysis of FPI data.

Page 8 GAO/GGD-98-118 FPI Delivery Performance
B-278134 

Figure 2: FPI Timeliness for Fiscal

Year 1997

0

10

20

30

40

50

60

70

80

90

100

Percent orders on time

October 96

November 96

December 96

January 97

February 97

March 97

April 97

May 97

June 97

July 97

August 97

September 97

Month

Timeliness by month

Timeliness for fiscal year

FPI timeliness goal

Source: GAO analysis of FPI data.

FPI’s six major product categories—data graphics,3 electronics, furniture,

metals, systems furniture, and textiles—showed some variation in delivery

performance. Our analysis showed that factories producing metals—which

include metal shelving, lockers, and storage cabinets—were the most

timely in 1996 at 86 percent. Factories producing furniture—which

includes desks, bookcases, and ergonomic chairs—were the least timely in

1996 at 66 percent. In 1997, factories producing systems furniture were the

most timely at 85 percent, and factories producing electronics—which

include cables, connecters, and circuit assemblies—were the least timely

3

The data graphics category includes signage, printing, and data entry, as well as some other

miscellaneous products and services, such as optics, brushes, and laundry services.

Page 9 GAO/GGD-98-118 FPI Delivery Performance
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at 73 percent. Median production times in 1996 ranged from 23 days for

data graphics factories to 102 days for factories producing furniture. In

1997, production times ranged from 14 days for data graphics factories to

89 days for factories producing furniture. For 1997 as a whole, none of the

averages for the six product categories met FPI’s 90-percent goal. However,

timeliness in four of the six product categories improved from 1996 to

1997; and production time decreased in every product category except

metals, where it increased slightly. Table I.3 in appendix I shows the

results of our analysis by product category for 1996 and 1997, as well as

some examples of the types of products under each category.

Our analysis by customer agency showed wide variations in performance.

To examine the data by agency, we focused on the top buyers of FPI

products according to FPI’s fiscal year 1996 sales report. Orders shipped on

or before the due dates to different customer agencies ranged from a low

of 47 percent for VA orders to a high of 88 percent for federal judiciary

orders in 1996. In 1997, VA and the federal judiciary were again the lowest

and highest at 47 and 92 percent, respectively. Table I.4 in appendix I

shows the results of our analysis by customer agency for 1996 and 1997.

In addition, we analyzed products from FPI’s “quickship” program. FPI

guarantees that it will ship products in this program within 30 days of

receipt of agencies’ orders. Products in FPI’s quickship catalogue include

certain types of ergonomic chairs and other furniture, linens, clothing,

targets, and traffic signs. Despite FPI’s guarantee that it will ship these

products within 30 days, we found that only 75 and 70 percent of quickship

items were shipped within 30 days or less in fiscal years 1996 and 1997,

respectively. Our analysis also showed that only 79 and 63 percent of the

due dates for quickship products that were in FPI’s system for fiscal years

1996 and 1997, respectively, were within the 30-day time frame.

As mentioned before and explained in detail in appendix II, we generally

followed the approach FPI uses to define orders when evaluating

timeliness, because agency orders vary tremendously, often involving

multiple products and due dates. On-time delivery was one of several

performance indicators—which include sales and earnings, inventories,

and inmate staffing—that FPI updated on a regular basis. FPI monitored

on-time delivery performance on a monthly basis and by product category

and factory. However, we noted during our review that in evaluating

timeliness, FPI did not track performance by customer agency. The

monthly trend shown in our analysis for 1997 (fig. 2) generally matched

FPI’s results. However, FPI’s results were slightly higher—by an average of

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just over 2 percent for the months in 1997. On the basis of discussions with

FPI staff, we determined that this was likely due to two minor differences

between our analysis and FPI’s.

First, as is discussed in appendix II, we did not group the orders, as we

defined them, by factory as FPI does for its evaluations, because we were

not assessing the performance of individual factories from month to

month. The effect of this added grouping was that the base number of

orders FPI used was higher, and slightly more of these additional orders

were counted as being on time rather than late. This accounted for most of

the difference between the two analyses. Second, FPI’s analysis included

blanket orders, which have regular shipments over an extended period of

time. These orders make up about 3 percent of the orders, but they involve

a large volume of data. Early in our review, we decided to request data

only on regular orders, excluding the blanket orders, to minimize the

amount of data we were requesting, which ultimately included over

600,000 line items.

For the first half of fiscal year 1998, FPI’s timeliness statistics showed that

about 85 percent of the orders were on time in October and November. In

December and January, the percentages went down to 79 and then

78 percent and then increased to 83 and 89 percent in February and March,

respectively. According to FPI officials, timeliness reached 90 percent in

April 1998. As mentioned before, FPI set a goal of reaching 98 percent

on-time delivery in fiscal year 1998.

Statistics Did Not Account

for Shipping Time

A limitation of our analysis and FPI’s timeliness evaluations is that they did

not account for shipping time for due dates specified by customers as the

day the order should arrive at its destination. Due dates specified by

customers can be origin—meaning that the orders should be shipped by

the due date—or destination, meaning that the orders should arrive at the

customer’s location by the due date. FPI had data on estimated shipping

times for only 18 of its 96 factories that we could have used in our analysis,

and we found that several of the other factories received orders with

destination due dates. Estimated shipping times for the 18 factories ranged

from 3 to 10 days. In addition, FPI staff who wrote FPI’s computer program

for evaluating timeliness said they had problems developing a workable

approach for accounting for shipping time where appropriate. In the

absence of data or a workable approach for incorporating shipping time,

our analysis, as well as FPI’s timeliness evaluation, considered all

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shipments to be on time if FPI’s data showed that they left the factory on or

before the due date.

The FPI official who compiled the performance indicators acknowledged

that the inability to account for shipping lead times was a fault in FPI’s

system. This official said that FPI’s efforts to measure timeliness have

always been hampered by the fact that FPI never knows exactly when the

customer receives the products. The official said that subsequent FPI

efforts to estimate shipping time have been unsuccessful. The official

indicated that ideally, orders with destination due dates could be flagged

as they come in, and a standard process could be used to estimate

shipping time for incorporation into the due date, depending on the type of

order.

Because we could not account for shipping time for orders with

destination due dates, our analysis and FPI’s timeliness evaluations likely

overstate timeliness because they treated every due date as an origin date.

Although we could not determine how much our statistics on timeliness

would decrease if we could account for shipping time where appropriate,

our work indicated that accounting for shipping time would have some

impact. First, although our data were not projectable, we found that 53 of

the 109 orders we randomly selected to assess the data in FPI’s system had

due dates that customers had specified as destination. Second, as

mentioned before, available data for 18 of the factories showed that

estimated shipping times ranged from 3 to 10 days; and about 16 percent of

the 428,000 line items that were on time in orders due in 1996 and 1997

were shipped on 1 of the 2 days prior to the due date or on the due date

itself. In these cases, if the line items had destination due dates, they likely

would have been late given the minimum estimate of 3 days for shipping

time.

Original CustomerRequested Due Dates Were

Being Changed

Our review of 109 randomly selected orders showed that 84 of them had

due dates in FPI’s order entry system that were different from what

customers had originally requested. Specifically, 63 of the orders had due

dates that were later than what customers originally requested, and 16 had

due dates that were earlier. Five orders involved a combination of due

dates for different line items that were both later and earlier than what

customers originally requested. Differences between originally requested

due dates and the later due dates in FPI’s system ranged from 2 to 333 days,

and differences for due dates that were earlier ranged from 1 to 58 days.

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Only 25 of the 109 orders had due dates in FPI’s system that reflected what

the customers had originally requested.

Of the 68 orders with due dates that were later than what customers

requested—the 63 with dates that were later plus the 5 with a combination

of later and earlier due dates—available documentation and information in

FPI’s system showed that 7 due date changes were initiated or caused by

the customer. Nineteen had due dates that were later than what the

customer had originally requested, because FPI’s production capacity was

overloaded at the time the order was placed, or FPI determined that the

lead time the customer specified was insufficient. In the remaining 42

cases, the documentation FPI provided for the orders and information in its

system did not explain the reasons the due dates were later than what the

customers had originally requested. FPI researched the 42 orders and

provided an explanation for most of the differences. These explanations

included customers specifying insufficient lead times for production, FPI’s

production capacity being overloaded at the time the order was placed,

and factory or project managers changing due dates for no specified

reasons. The officials indicated that in the orders for which due dates were

made earlier than the customer requested, FPI most likely was able to

provide the product sooner than the customer anticipated.

FPI’s Chief Operating Officer said that one reason due dates in FPI’s system

could have been later than what customers originally requested was that

FPI may have determined that the customers’ due dates were inconsistent

with production lead times at the time the order was placed, not accepted

the customer-requested due dates, and revised them to reflect production

lead times. In these instances, the Chief Operating Officer said that FPI

considered the revised due dates to be the original due dates, not the

customer-requested due dates that were not accepted. In contrast, he said

that a true due date change, from FPI’s perspective, would involve FPI

accepting a customer order and its accompanying due dates and then

revising them after acceptance. However, he pointed out that in such

instances, the original due dates should remain unchanged in FPI’s system

unless the customer initiated the due date revision.

Officials at the Customer Service Center in Lexington, KY, pointed out that

FPI’s production lead times and capabilities can vary throughout the year.

For example, in a peak time such as the end of the fiscal year, production

lead times for some product groups can increase from 90 to 150 days.

These officials said they made every effort to meet customers’ needs

through negotiating due dates, offering alternative products and discounts,

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and offering waivers from buying FPI products if necessary. Furthermore,

they said that in many cases, they maintained close working relationships

with customers; and for large orders, field representatives from the

individual factories were often in contact with customers regularly.

Our review also showed that there was limited documentation or

information in FPI’s system showing that customers had been notified that

the due dates they requested could not be met, the reasons for the

changes, and that customers approved of the changes. FPI officials told us

that it is their policy to notify the customer and request approval if

customer-requested due dates cannot be met, although they added that if

they received no response from the customer, they assumed that the new

dates they developed were acceptable. As mentioned before, 68 orders had

due dates that were later than what customers requested—available

information showed that changes for 7 of these were initiated by or caused

by the customer. Of the 61 remaining orders, 23 had available

documentation or information in FPI’s system showing that customers

were notified that the due dates they requested could not be met and the

reason for the changes.

In another 24 cases, FPI provided us with order acknowledgement letters

they said were sent to customers. These acknowledgement letters

identified the new due dates FPI had developed on the basis of its

production lead times and capabilities at the time the order was placed.

However, the acknowledgement letters did not provide the customers with

the reasons the due dates they requested could not be met or ask for the

customers’ approval of the changes. In addition, these acknowledgement

letters gave no indication that FPI did not accept the customers’ requested

due dates or that the dates were inconsistent with FPI’s production lead

times. For the other 14 orders, FPI had no documentation or information in

its system showing that customers were notified that the due dates they

requested could not be met. For the 61 orders, documentation or

information in FPI’s system showing that the customers had approved of

the date changes was available in only 11 of these cases.

In doing our work, we also found that in 16 of these 61 orders, FPI was able

to ship the orders by the original customer-requested due dates, despite

the due date changes that occurred. However, FPI missed original

customer-requested due dates in the rest of the orders, except for one

where we could not make a determination because we could not identify

the exact due date. In addition, FPI missed revised due dates that were in

its system in 24 of these orders. The results of our work related to the 109

Page 14 GAO/GGD-98-118 FPI Delivery Performance
B-278134 

orders were not projectable to the universe of agency orders; however,

they provided us with insights into the COED data, as well as into FPI

delivery practices.

We recognize, as FPI officials pointed out, that due dates initially requested

by customers may be inconsistent with production capabilities and that a

number of valid reasons can exist for due date changes. In addition, FPI

may encounter increases in workload and other scheduling difficulties, as

any supplier would, at times when customers are under pressure to meet

their agencies’ mission needs. As a result, arriving at mutually agreeable

due dates may involve negotiation and compromise between the supplier

and the customer, whether the supplier is FPI or a commercial vendor. This

is particularly so in orders placed with commercial vendors involving

indefinite delivery type contracts. FAR Sections 16.501-2 through 16.504

describe these types of contracts as having delivery schedules not known

at the time of contract award and deliveries to be scheduled by placing

orders with the contractor. Nonetheless, the lack of documentation

showing the reasons due dates in FPI’s system were different from what

customers requested and whether customers were notified of these

reasons and approved of the changes impeded our ability to assess the

appropriateness of many of the due dates for the sample of orders.

Although the results for these 109 orders were not projectable to the

universe of all FPI orders, they raised questions about which due dates

should be used to measure timeliness, especially from the customer’s

perspective. FPI officials said that they could do a better job documenting

why customer-requested due dates could not be met and whether the

customers were notified of the reasons for changes and approved of the

new due dates.

Selected Customer

Agency Views on FPI

Delivery Issues

Just as our analysis by customer agency showed wide variations in FPI

delivery performance by customer agency, officials within DLA, FSS, SSA,

and VA who were involved in buying FPI products had mixed views on FPI’s

performance in meeting delivery due dates, as well as on related FPI

delivery practices. Headquarters officials in FSS and DLA, officials at two of

the DLA supply centers, and an official in the Office of Property

Management at SSA for the most part spoke positively about FPI’s overall

delivery performance. In contrast, officials from VA, FSS’ National Furniture

Center, one of the DLA supply centers, and SSA’s Office of Operations,

Contracts, and Grants had negative experiences. Officials from DLA, FSS,

and one of the two offices we contacted in SSA said that delivery due dates

were driven primarily by FPI production capabilities and not agency

Page 15 GAO/GGD-98-118 FPI Delivery Performance
B-278134 

mission needs—some of the officials expressed concern with this practice.

VA officials said that it seemed that FPI attempted to work with them to

reach mutually agreeable due dates; however, these officials said that FPI

generally performed poorly in meeting those dates. The views expressed

by these customer agency officials may not be representative of the views

of all FPI customers. However, despite FPI’s goal to promote total customer

satisfaction, our work showed that certain key agency customers were

clearly dissatisfied with FPI’s delivery performance and practices.

These agencies—DLA, FSS, SSA, and VA—all said they monitored timeliness

while administering contracts for all vendors, including FPI.

4

 Although

some components within these agencies had data on FPI and commercial

vendor delivery performance, none of the agencies had overall data

comparing FPI performance to that of commercial vendors. Nonetheless,

contracting officers’ leverage in resolving procurement problems was

different for FPI from the leverage contracting officers had for private

sector vendors, because the rules that typically govern contracts with

commercial vendors do not apply to FPI. However, agencies can use

performance information to seek waivers from FPI so they can buy

products commercially and can seek remedies, including damages for late

deliveries.

Views on FPI Delivery

Performance Were Mixed

As mentioned before, our analysis showed wide variation in FPI

performance by customer agency. Our discussions with selected customer

agency officials we contacted from DLA, FSS, SSA, and VA also reflected this

mixed FPI performance by agency. Headquarters FSS officials said that FPI’s

delivery performance had generally improved over the last 10 years and

that overall, FPI met FSS’ needs. FSS did not have overall data comparing FPI

delivery performance to that of commercial vendors.5 FSS officials did say,

however, that the workload associated with addressing delinquent FPI

deliveries was significant. Officials at FSS’ National Furniture Center (NFC)

in Arlington, VA, had more significant problems and discussed the

increased workload and their general dissatisfaction with FPI delivery

performance. This commodity center acts as an agent for federal

4

In this report, we use the term “contract” to include agency agreements with FPI.

5

We reported in March 1998 (GAO/GGD-98-50, Mar. 16, 1998) that both commercial vendors and FPI

contracts were on FSS’ Contractor Alert List (CAL), which identifies contractors that fail to meet some

portion of their contract terms and are considered to be a higher risk to the government as future

contractors. FSS officials told us that as of August 1997, 17 of FPI’s 60 contracts with FSS were on the

CAL because of timeliness problems. Being placed on the CAL for timeliness problems means that less

than 90 percent of the orders for a contract were on time.

Page 16 GAO/GGD-98-118 FPI Delivery Performance
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customers who buy furniture—FPI’s largest product line—through GSA’s

special order and multiple award schedules programs.

FSS/NFC officials said that FPI delivery performance was a big problem for

the center. They said that the additional workload caused by having to

address FPI delivery problems exceeded staff resources available and that

this was compounded by FPI’s nonresponsiveness, such as not returning

phone calls. They believed that FPI was not sensitive to the due dates it

agreed to with customers nor to the needs of customers ordering furniture.

They added that customers often did not want to acquire furniture from FPI

because of previous experiences when FPI was unreliable. FSS/NFC staff

provided us with data showing that for fiscal year 1997, FPI delivered

69 percent of the 12,688 line items of furniture the center ordered on time.

DLA headquarters officials, as well as officials at two of the three supply

centers we contacted, were generally pleased with FPI delivery

performance and generally thought it compared favorably with that of

commercial vendors. Although these officials said that DLA did not have

overall data comparing FPI performance to that of commercial vendors,

they said that DLA routinely stocked extra products, and the officials did

not perceive that their mission had been hampered by FPI delivery

performance. Despite this, officials from the Defense Supply Center

Philadelphia (DSCP) said that FPI was unable to meet the needs of the Army

in Bosnia for body armor. According to FPI officials, FPI experienced

difficulty in obtaining raw materials from its vendors on these contracts.

DSCP’s Deputy Director of Clothing and Textiles said that this example

illustrated the danger of allowing a mandated supplier to be the sole

provider of a product manufactured to military specifications. This official

said that commercial suppliers cease manufacturing products when this

happens, because they know federal agencies must buy from the

mandatory source and there is an insufficient civilian market for many

military products. Because of this experience, DSCP now has a back-up

supplier for body armor.

Data from two of the DLA supply centers we contacted—DSCP and the

Defense Supply Center Columbus (DSCC)—showed mixed FPI performance.

DSCP reported that FPI’s overall delinquency rates on all products were 29

and 21 percent in fiscal years 1996 and 1997, respectively. The commercial

supplier rates for this center were 8 and 5 percent, respectively. DSCC

provided data from electronics acquisitions that showed that FPI

performed better overall in timeliness and quality combined than

commercial vendors—98 out of 100 points—compared to a score of 79 out

Page 17 GAO/GGD-98-118 FPI Delivery Performance
B-278134 

of 100 for all commercial vendors. Defense Supply Center Richmond

(DSCR) officials did not have any data on FPI performance, but they said

that their experience had been generally positive.

FPI’s two main buyers within SSA—the Office of Operations, Contracts, and

Grants (SSA/OCG) and the Office of Property Management (SSA/PM)—had

differing views of FPI performance. SSA/OCG handles small orders for

furniture that are sent to FPI on an as-needed basis, and SSA/PM handles

mostly systems furniture orders that are scheduled up to a year in

advance. The Director of the Center for Ergonomic Property in SSA/PM said

that FPI had not missed a delivery due date since 1993 and had sometimes

exceeded the specified time frames. On the other hand, the Director of

Operations Contracts in SSA/OCG told us that commercial vendors were

much more responsive than FPI and delivered products in a shorter time

period. This official indicated that although the effect of missed delivery

dates was fairly negligible, SSA/OCG was generally dissatisfied with the

requirement to do business with FPI because of problems with timeliness,

as well as other factors.

Although VA has not developed overall data on FPI delivery performance,

headquarters officials from the Office of Acquisition and Materiel

Management, as well as program officials with the Veterans Health

Administration (VHA), said that FPI’s delivery performance had been a

continuing, significant problem. Products with delivery problems have

been furniture, seating, and signage for VA’s major renovation of its

headquarters building and other facilities, textile products for the

day-to-day operating needs of VHA medical centers, and patient care

requirements for prescription eyeware. For example, for the renovation of

VA’s headquarters building between 1992 and 1996, VA requested a waiver

for the entire requirement from FPI because of past performance problems.

FPI granted the waiver for the systems furniture portion of this project but

denied the waiver for the case goods (such as credenzas and bookcases),

seating, and signage. VA contracting officials responsible for this project

said that a commercial supplier met the delivery requirements for the

systems furniture; however, FPI delivery performance on the remaining

requirements was poor. In addition, they said that many of the products

were defective and unacceptable, and customer support was almost

nonexistent.

According to the VHA officials we contacted, another area with significant

delivery problems was prescription eyeware for veterans. According to an

official with VHA Patient Care Services, many commercial suppliers were

Page 18 GAO/GGD-98-118 FPI Delivery Performance
B-278134 

able to provide prescription eyeglasses in 5 to 7 days; and a Navy optical

laboratory, which meets DOD’s needs for eyeglasses, was able to provide

them to military personnel in 4 to 6 days. An official with the American

Optometric Association said that wholesale laboratories now have an

average turnaround time of about 2 days for complete jobs. Under FPI’s

mandatory source status, VA believed it was required to purchase

eyeglasses from FPI, until an opinion was issued by VA’s Office of General

Counsel in July 1997 concluding that FPI was not a mandatory source of

supply for VA’s procurement of eyeglasses. VA’s experience with FPI showed

that the private sector provided much more timely delivery. VA officials

told us that in 1993, they requested a blanket waiver from FPI so they could

buy eyeglasses commercially. FPI did not approve the blanket waiver but

said that individual medical centers could request waivers, and FPI would

review them on a case-by-case basis. Consequently, numerous individual

hospitals tracked FPI performance and requested waivers. For example,

this official said that the VHA medical center in Pittsburgh, PA, monitored

FPI deliveries over a 2-month period in 1996 to support requesting a waiver

from FPI and found that although FPI had promised the eyeglasses within 7

days of receiving the order, only 17 percent were delivered in that time

period. In fact, he said that 32 percent of the deliveries took more than 20

days.

In light of the problems VA has had with FPI delivery performance, as well

as product quality and pricing, an official with VA’s Environmental

Management Service said that VA had submitted a legislative proposal to

the Office of Management and Budget (OMB) each year since 1988 to

exempt VA from FPI’s mandatory source requirement for certain products.

OMB has not approved any of these proposals. In July 1997, VA’s Office of

General Counsel issued an opinion that FPI is not a mandatory source for

VA’s purchase of eyeglasses. The opinion concluded that VA could procure

eyeglasses from the commercial marketplace because 38 U.S.C. 8123

allows VA to procure prosthesis devices in a manner the Secretary

determines proper without regard to any other provision of law and VA has

defined eyeglasses as a prosthesis device. According to FPI’s Chief

Operating Officer, FPI did not dispute this decision; therefore, VA may now

purchase eyeglasses commercially. FPI officials said that seven VA hospitals

were still buying eyeglasses from FPI and provided data indicating FPI’s

on-time delivery for these hospitals, using a 7-day delivery standard,

ranged from 71 to 86 percent for the period October 1, 1997, through

May 21, 1998.

Page 19 GAO/GGD-98-118 FPI Delivery Performance
B-278134 

Due Dates Often Reflected

FPI Production

Capabilities

As discussed earlier, FPI officials said that due dates were often driven by

FPI’s production lead times. Officials from DLA, FSS, and one of the two

offices we contacted in SSA also said that delivery due dates were driven

primarily by FPI production capabilities and not agency mission needs.

Headquarters FSS officials pointed out that its General Services

Administration Acquisition Regulation (GSAR) specifically states that

“contracting officers shall establish delivery schedules based on the lead

time required by FPI.”6

 These FSS officials said that due dates were set on a

case-by-case basis and usually involved working with FPI to reach a mutual

agreement. They said that when contracting with FPI and developing due

dates, their approach was to weigh heavily on FPI’s ability to deliver. One

top FSS official indicated that from a practical standpoint, it would not

make sense to set due dates that FPI factories could not meet.

Although the headquarters FSS officials indicated that FSS worked with FPI

within its production capabilities, FSS/NFC officials viewed the due date

setting process with FPI as more problematic. FSS/NFC’s officials said that

for certain furniture products, FPI dictated the due dates to FSS/NFC staff.

They said that agencies often came to FSS/NFC for contracting support

when purchasing furniture from FPI. FSS/NFC staff tried to negotiate due

dates with FPI, but the officials said that FPI’s proposed due dates rather

than the customers’ were generally used in the contracts. They said that

better prices, better quality furniture, and better delivery times were often

available through commercial suppliers on FSS’ schedules.

DLA headquarters officials said that the due dates were driven mostly by FPI

production capabilities, but they did not view this as a problem. For the

most part, these officials said that DLA planned its orders well in advance

and often stocked extra levels. They said that DLA inventory managers and

DLA’s automated systems alerted contracting officers when it was time to

make an order to FPI so that future needs would be met. These officials

said that there were exceptions to this practice, such as when a critical

need arose. In these cases, they negotiated due dates with FPI. Although

DLA officials focused on the fact that they stock items and are able to work

within FPI’s production capabilities, we have reported on several best

practices that have been successfully used in the private sector to reduce

inventory levels and logistics costs.7

 In general, these practices provide

6

This requirement, in GSAR at 48 C.F.R. Part 508, entitled “Required Sources of Supplies and Services,”

applies only to GSA. The other agencies, DLA, SSA, and VA, do not have a similar requirement in their

acquisition regulations.

7

Inventory Management: Greater Use of Best Practices Could Reduce DOD’s Logistics Costs

(GAO/T-NSIAD-97-214, July 24, 1997).

Page 20 GAO/GGD-98-118 FPI Delivery Performance
B-278134 

inventory users with a capability to order supplies as they are needed and

then to deliver those items directly to the customer within hours after the

order is placed. DLA has successfully used this approach in some areas. If

DLA begins relying more on these practices, it would seem that the due

dates it sets with its suppliers—including FPI—would take on greater

importance.

The Director of the Center for Ergonomic Property in SSA/PM was the only

official we contacted who said that due dates were driven by agency

mission needs. This official said that the delivery schedules are set to

accommodate SSA installation needs and that FPI always meets those due

dates. On the other hand, the Director of Operations Contracts in SSA/OCG

said that due dates were mostly dependent on FPI production capabilities

and less so on the particular need of the requesting office within SSA. This

official added that on the basis of past experience, SSA/OCG expected that

FPI would miss the due dates that FPI itself established. For example, this

official said that on August 28, 1996, SSA/OCG placed an order for 83 chairs

and agreed with FPI to a due date of November 15, 1996. SSA/OCG then

received a notice from FPI on September 6, 1996, indicating that it was

unable to obtain the raw materials needed to produce the chairs and that

the new due date was December 3, 1996, to which they agreed. FPI was

then unable to ship the chairs until January 11, 1997. The SSA/OCG official

added that missed due dates often involved partial shipments, in which

most of the order arrived on time but some small portion was late. This

official also said that FPI often would change due dates, and the

procurement officer would not find out about the changes until after the

requesting office did not receive the expected delivery.

VA officials did not have a view on whether due dates were primarily

driven by production capabilities or agency mission needs. VA officials said

that it seemed that FPI attempted to work with them to reach mutually

agreeable due dates. However, they said that FPI generally performed

poorly in meeting those due dates, which our analysis of FPI’s data

confirmed with regard to VA.

As mentioned before, we recognize that arriving at mutually agreeable due

dates may involve negotiation between the supplier and the customer,

whether the supplier is FPI or a private vendor. In addition, the views

expressed by the agency officials we contacted about the due date setting

process, as well as FPI’s delivery performance overall, may not be

representative of the views of all FPI customers. However, meeting

agencies’ due dates is important for customer satisfaction, and our work

Page 21 GAO/GGD-98-118 FPI Delivery Performance
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showed that certain key agency customers were clearly dissatisfied with

FPI delivery performance and practices. Also, as mentioned before, FPI

monitored on-time delivery performance on a monthly basis and by

product category and factory; however, it did not monitor performance by

customer agency. This may have made it difficult for FPI to recognize when

certain agencies or agency components were experiencing a low rate of

timeliness with FPI deliveries.

Agencies’ Use of

Performance Information

and the Waiver Process

DLA, FSS, SSA, and VA all said they monitored timeliness while administering

contracts for all vendors, including FPI. Although some components within

these agencies had data on FPI and commercial vendor delivery

performance, none of the agencies had overall data comparing FPI

performance to that of commercial vendors. Nonetheless, as we reported

in March 1998, contracting officers’ leverage in resolving procurement

problems was different for FPI from the leverage the contracting officer

had for private sector vendors, because the rules that typically govern

contracts with commercial vendors do not apply to FPI.

8

 Further, when

agencies develop varying types of information on current and past

performance of vendors, including FPI, there are major distinctions in how

agencies can use this information.

Specifically, for commercial vendors, agencies can use past performance

information showing timeliness problems as a factor to consider in the

award of contracts. However, for FPI, agencies cannot use this information

to deny awarding a contract to FPI because, under the law, FPI is a

mandatory source of supply. Agencies can, however, use this information

to negotiate with FPI on delivery time frames or to seek a waiver from FPI

so they can buy from a commercial vendor that can better meet their

delivery requirements. As with awarding contracts, agencies cannot use

current performance information to cancel or terminate an existing

contract with FPI unless agencies request cancellation or termination

provisions during the negotiation process and FPI agrees to include them in

the contract. According to FPI, agencies can, however, use current

performance information to seek other remedies against FPI, including

damages for late deliveries. We did not determine the extent to which

agencies seek, or FPI agrees to authorize, these remedies; nor did we

compare or evaluate the use of remedies by contracting officers in

connection with contracts with FPI or commercial vendors.

8

GAO/GGD-98-50, Mar. 16, 1998.

Page 22 GAO/GGD-98-118 FPI Delivery Performance
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Regarding waivers for reasons related to timeliness, our analysis of FPI

waiver data showed that 36 and 29 percent of the 21,900 and 24,300 line

items for which FPI had granted waivers in 1996 and 1997, respectively,

were because FPI could not meet customers’ time frames. Inability to meet

customers’ time frames was the most common reason FPI granted waivers

in these years. FPI also provided data showing that it approved 85 and

83 percent of the line items for which customers requested waivers for any

reason in fiscal years 1996 and 1997, respectively. Our discussions with

agency officials showed that they generally do not seek waivers for

reasons related to timeliness, with the exception of VA. FSS officials said

that their staff typically did not request waivers but instead worked with

FPI to find an acceptable solution short of requesting a waiver. This may

have involved extending the due dates for orders or requesting that FPI

change the production point. An FSS official said that using this approach,

although resource intensive, was often in the best interest of the customer,

because the customer would get the product sooner than if FSS had to

obtain the waiver and initiate a new procurement.

FSS/NFC officials explained that even though NFC experienced frequent,

poor delivery performance on contracts with FPI, it typically did not seek

waivers, because its staff had a large workload and the time invested

attempting to get a waiver would be unproductive. They added that in

many instances, FPI did not respond to FSS/NFC staff efforts to coordinate

on delinquent deliveries. In these cases, FSS/NFC was left without any

remedies other than to wait until FPI finally shipped the products.

DLA headquarters officials said that they typically did not seek waivers,

because they planned for deliveries far in advance; they had a good

working relationship with FPI that promoted reliable performance; and

their procurement staff visited the factories to detect and avert delays as

they developed. However, these headquarters officials and the three

supply centers said that DLA had on occasion requested waivers in the past

for such reasons as FPI’s inability to produce an item or DLA’s desire to

purchase part of the requirement commercially.

Both SSA officials we contacted said that they seldom sought waivers for

timeliness, but SSA/OCG used the waiver process for reasons related to

price. The SSA/OCG official we spoke with estimated that waivers were

requested in 10 percent of SSA’s potential purchases from FPI, mostly for

reasons related to price. However, FPI granted a waiver on one major

systems furniture order in 1995, because arbitrators for SSA’s unionized

Page 23 GAO/GGD-98-118 FPI Delivery Performance
B-278134 

employees required the installation of systems furniture by a certain date

in 1997 that FPI could not meet.

VA officials said that they had sought waivers from buying FPI products for

reasons related to timeliness, including the headquarters renovation

example mentioned before. However, the VA officials we contacted said

that because their agency is so decentralized, they could not comment on

whether VA typically sought waivers for reasons related to timeliness. They

said, however, that if they had gotten a waiver for the casegoods, seating,

and signage for the headquarters renovation, they believed they would not

have had nearly as many problems. They also said that the process of

getting waivers was resource intensive. For example, prior to VA’s legal

opinion that eyeglasses were not subject to the mandatory source

requirement, they said that VA’s medical centers had to individually

develop data and justify waivers when they wanted to purchase

prescription eyeware from commercial sources because of concerns about

FPI timeliness.

Conclusions FPI officials recognize the importance of delivering products and services

on time and have data used to track delivery performance and an

approach for evaluating results, including on-time goals for fiscal years

1997 and 1998. Although FPI as a whole did not meet its 90 percent on-time

delivery goal in any month during 1997, it improved its delivery

performance and production times in that year, and FPI data showed

improvements in 1998. Our statistics, as well as FPI’s evaluations of

timeliness, provided insights into delivery performance and identified

areas needing improvement. However, it is important to recognize that the

statistics likely overstate on-time delivery performance, because they did

not account for shipping time for orders with destination due dates. FPI did

not have data or a workable approach that would allow us to account for

shipping time for such orders. Accounting for shipping time where

appropriate would improve the accuracy of future evaluations of

timeliness and provide a better picture of performance.

Furthermore, over one-half of 109 randomly selected orders showed that

the due dates in FPI’s system were later than what customers had originally

requested; and FPI had limited documentation explaining the differences

and whether customers were notified of the reasons for the changes and

approved of the revised due dates. We recognize, as FPI officials pointed

out, that due dates initially requested by customers may be inconsistent

with production capabilities regardless of whether FPI or a private vendor

Page 24 GAO/GGD-98-118 FPI Delivery Performance
B-278134 

is the supplier, and a number of valid reasons can exist for due date

changes. However, our work raised questions about which due dates

should be used for measuring timeliness, especially from the customer’s

perspective. Better documentation could have given us, as well as FPI,

greater insights into the reasons for due date changes and whether the due

dates in its system were appropriate for measuring timeliness.

Just as our analysis showed a wide variation in FPI performance by

customer agency, officials within DLA, FSS, SSA, and VA had mixed views on

FPI’s performance in meeting delivery due dates, as well as on FPI delivery

practices overall. These views ranged from very negative to extremely

positive. Officials from DLA, FSS, and one of the two offices we contacted in

SSA said that delivery due dates were driven primarily by FPI production

capabilities and not agency mission needs, and some of the officials

expressed concern with this practice. We recognize that arriving at

mutually agreeable due dates may involve negotiation between the

supplier and the customer, whether the supplier is FPI or a private vendor.

In addition, the views expressed by the agency officials we contacted

about FPI’s delivery performance overall, as well as the due date setting

process, may not be representative of the views of all FPI customers.

However, our work showed that (1) certain key agency customers were

clearly dissatisfied with FPI delivery performance and, to some extent, with

its practices with regard to setting due dates; (2) FPI’s delivery

performance varied widely by customer agency; and (3) FPI did not

evaluate delivery performance by customer agency. Given this and FPI’s

stated commitment to total customer satisfaction, there appear to be

opportunities for FPI to begin evaluating and monitoring delivery

performance by customer agency and to promote better customer

relations by attempting to resolve the specific concerns key customers

have with delivery performance.

Recommendations In order for FPI to have a more accurate and reliable measure of timeliness

for use in evaluating its delivery performance, we recommend that the

Director of BOP direct FPI’s Chief Operating Officer to

• identify orders with destination due dates and account for shipping time

for these orders when evaluating delivery performance;

• develop and implement an approach for documenting the reasons for due

date revisions, whether customers were notified of the reasons for

changes, and whether customers approved of revised due dates; and

Page 25 GAO/GGD-98-118 FPI Delivery Performance
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• appropriately consider due date revisions and whether customers

approved of them in evaluating timeliness.

In light of the concerns raised in this report by some of the top officials

from FPI’s major buying agencies and in light of FPI’s stated broad

commitment to total customer satisfaction, we also recommend that the

Director of BOP direct FPI officials to contact these key customers to begin

the process of resolving problems and improving relations. In addition, the

Director of BOP should direct FPI’s Chief Operating Officer to begin

evaluating and monitoring delivery performance by customer agency to

develop data to use in its efforts to achieve greater customer satisfaction.

Agency Comments In written comments dated June 1, 1998, BOP agreed with the report’s

conclusion that delivery performance is improving but problems remain

and said that BOP would implement the report’s recommendations. In

commenting on the report, BOP specifically acknowledged that FPI needs to

improve its documentation and customer notification processes when

customer due dates cannot be met or are changed. BOP also provided its

perspective on some of the other issues raised in the report. First, BOP

acknowledged the importance of on-time delivery and highlighted the

actions FPI is taking to improve its performance and the progress it is

making. Second, BOP said that FPI would like to know how it would

compare to some of the larger vendors in delivery performance and that

FPI believes that for complex projects, issues related to delivery

performance are not unique to FPI. Third, FPI was encouraged that some

officials in DOD—FPI’s largest customer—were generally pleased with FPI’s

delivery performance. BOP also noted that FPI has informed DOD that FPI will

no longer be the sole provider of “Go to War” items unless DOD specifically

makes such a request. Appendix III contains the full text of BOP’s written

comments.

We also obtained oral technical comments from FPI’s Chief Operating

Officer and his staff and from program officials in the customer agencies

we contacted on various portions of a draft of this report. These technical

comments have been incorporated in this report as appropriate.

As agreed with your offices, unless you publicly announce the contents of

this report earlier, we plan no further distribution until 30 days from its

issue date. At that time, we will send copies of this report to the Attorney

General, the Director of BOP, the Chief Operating Officer of FPI, the

Page 26 GAO/GGD-98-118 FPI Delivery Performance
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Director of the Office of Management and Budget, the Administrator for

Federal Procurement Policy, and the heads of the customer agencies we

contacted. We will also make copies available to interested congressional

committees, as well as others on request.

Major contributors to this report are listed in appendix IV. If you or your

staffs have any questions, please contact me on (202) 512-8387.

Bernard L. Ungar

Director, Government Business

 Operations Issues

Page 27 GAO/GGD-98-118 FPI Delivery Performance
Contents

Letter 1

Appendix I 

Timeliness Statistics

30

Appendix II 

Objectives, Scope,

and Methodology

33

Appendix III 

Comments From the

Bureau of Prisons

38

Appendix IV 

Major Contributors to

This Report

44

Tables Table I.1: FPI Timeliness by Month for Fiscal Year 1996 30

Table I.2: FPI Timeliness by Month for Fiscal Year 1997 30

Table I.3: FPI Timeliness by Product Category, Fiscal Years 1996

and 1997

31

Table I.4: FPI Timeliness by Customer Agency, Fiscal Years 1996

and 1997

32

Figures Figure 1: FPI Timeliness for Fiscal Year 1996 8

Figure 2: FPI Timeliness for Fiscal Year 1997 9

Page 28 GAO/GGD-98-118 FPI Delivery Performance
Contents

Abbreviations

BOP Bureau of Prisons

CAL Contractor Alert List

COED customer order entry database

DLA Defense Logistics Agency

DOD Department of Defense

DOJ Department of Justice

DSCP Defense Supply Center Philadelphia

DSCC Defense Supply Center Columbus

DSCR Defense Supply Center Richmond

FAR Federal Acquisition Regulation

FPI Federal Prison Industries

FSS Federal Supply Service

GSA General Services Administration

GSAR General Services Administration Acquisition Regulation

HHS Department of Health and Human Services

NFC National Furniture Center

OMB Office of Management and Budget

SSA Social Security Administration

SSA/OCG SSA/Office of Operations, Contracts, and Grants

SSA/PM SSA/Office of Property Management

VA Department of Veterans Affairs

VHA Veterans Health Administration

Page 29 GAO/GGD-98-118 FPI Delivery Performance
Appendix I 

Timeliness Statistics

Table I.1: FPI Timeliness by Month for

Fiscal Year 1996

Month order due

Percent of orders shipped on or

before due date

October 1995 68

November 1995 59

December 1995 61

January 1996 66

February 1996 74

March 1996 81

April 1996 81

May 1996 78

June 1996 77

July 1996 75

August 1996 73

September 1996 74

Timeliness for fiscal year 1996 72

Note: These statistics do not reflect shipping time for those orders that had destination due dates.

In addition, these statistics are based on due dates from the customer order entry database. The

limitations associated with these factors are discussed in the report.

Source: GAO analysis of Federal Prison Industries data.

Table I.2: FPI Timeliness by Month for

Fiscal Year 1997

Month order due

Percent of orders shipped on or

before due date

October 1996 78

November 1996 72

December 1996 65

January 1997 62

February 1997 67

March 1997 72

April 1997 77

May 1997 79

June 1997 81

July 1997 87

August 1997 84

September 1997 82

Timeliness for fiscal year 1997 76

Note: These statistics do not reflect shipping time for those orders that had destination due dates.

In addition, these statistics are based on due dates from the customer order entry database. The

limitations associated with these factors are discussed in the report.

Source: GAO analysis of Federal Prison Industries data.

Page 30 GAO/GGD-98-118 FPI Delivery Performance
Appendix I 

Timeliness Statistics

Table I.3: FPI Timeliness by Product Category, Fiscal Years 1996 and 1997

1996 1997

Product category/examples

Percent of orders

shipped on or before

due date

Median production

time (days)

Percent of orders

shipped on or before

due date

Median production

time (days)

Data graphics (signs, printing, optics) 75 23 76 14

Electronics (cables, connectors, circuit

assemblies) 74 37 73 16

Furniture (desks, bookcases,

ergonomic chairs) 66 102 78 89

Metals (shelving, lockers, casters) 86 63 75 66

Systems furniture 75 97 85 78

Textiles (clothing, linens, mailbags) 77 52 83 49

Note 1: These statistics do not reflect shipping time for those orders that had destination due

dates. In addition, these statistics are based on due dates from the customer order entry

database. The limitations associated with these factors are discussed in the report.

Note 2: Median production times exclude quickship items, which FPI aims to ship within 30 days.

Median production times for quickship items were 21 days in both 1996 and 1997.

Source: GAO analysis of Federal Prison Industries data.

Page 31 GAO/GGD-98-118 FPI Delivery Performance
Appendix I 

Timeliness Statistics

Table I.4: FPI Timeliness by Customer

Agency, Fiscal Years 1996 and 1997

Agency

Percent of orders

shipped on or before

due date in fiscal year

1996

Percent of orders

shipped on or before

due date in fiscal year

1997

Agriculture 74 80

Air Force 70 77

Army 72 75

Commerce 76 78

Defense Logistics Agency 66 71

Department of Defense

(miscellaneous nonservice

components) 69 77

Energy 77 83

Environmental Protection Agency 54 73

General Services Administration 77 74

Health and Human Servicesa 60 73

Housing and Urban Development 76 69

Interior 71 80

Judiciary 88 92

Justice 78 79

Labor 86 86

Marine Corps 71 73

Navy 69 73

Postal Service 86 91

State 55 70

Transportation 75 78

Treasury 72 72

Veterans Affairs 47 47

Note: These statistics do not reflect shipping time for those orders that had destination due dates.

In addition, these statistics are based on due dates from the customer order entry database. The

limitations associated with these factors are discussed in the report.

aFPI’s system coded Social Security Administration (SSA) orders as Health and Human Services

(HHS) orders; SSA became an independent agency in the executive branch in 1995. SSA orders

accounted for over one-half of the orders in fiscal year 1997 that were coded as HHS.

Source: GAO analysis of FPI data.

Page 32 GAO/GGD-98-118 FPI Delivery Performance
Appendix II 

Objectives, Scope, and Methodology

Our objectives were to (1) develop and assess statistics on FPI delivery

performance and (2) obtain the views of selected customer agencies’

procurement officials on FPI delivery practices. As part of this work, we

considered FPI’s efforts to track delivery performance and its practices

with regard to setting due dates. Our work for the second objective

primarily involved holding discussions with selected customer agency

officials about their experiences with FPI delivery performance, the due

date setting process, their efforts to monitor FPI delivery performance, and

available remedies for late deliveries.

To meet our first objective, we obtained and analyzed computerized data

involving over 140,000 agency orders for over 600,000 line items of

products and services from FPI’s customer order entry database (COED) for

fiscal years 1996 and 1997.9 FPI uses COED, which is maintained at its

Customer Service Center in Lexington, KY, to track and record

information on agency orders for products and services. Agency orders

can contain one to several hundred line items. Each line item identifies a

specific product and quantity and has a distinct due date. Large orders

with many line items can have multiple products and due dates. Because

orders vary tremendously, a key factor in determining whether orders are

delivered on time is how an order is defined. For its own evaluations of

timeliness, FPI groups line items within orders by due date and factory. FPI

defines each of these groupings—which essentially are the shipments

expected for an order from a given factory on a given date—as individual

orders for the purpose of measuring timeliness. This approach allows FPI

to track the performance of individual factories on a weekly and monthly

basis.

For our analysis, we generally followed the approach FPI uses to define

orders and developed timeliness statistics by month, year, product

category, and customer agency. Specifically, we grouped the line items

within each order by date and compared the shipping date for each line

item with its due date, as FPI does for its timeliness indicator. If one of the

line items within each grouping was late, that grouping, or order, was

counted as late. This approach allowed us to develop monthly data that we

could use to examine trends. We also developed data showing FPI’s

delivery performance for each of its major customer agencies using this

approach. To identify these agencies, we analyzed FPI’s fiscal year 1996

sales report.

9

Because of concerns we had about the manageability of such a large volume of data, we did not

request all the variables from COED and did not request data on blanket orders, which make up about

3 percent of the orders.

Page 33 GAO/GGD-98-118 FPI Delivery Performance
Appendix II 

Objectives, Scope, and Methodology

For our analysis by month, year, and customer agency, we did not group

the line items by factory as FPI does because we did not focus on the

performance of individual factories. However, we had to use this

additional grouping when isolating orders from factories that produce

products and services in six product categories—data graphics,

electronics, furniture, metals, systems furniture, and textiles. We also

developed timeliness statistics for products in FPI’s quickship program. FPI

guarantees that it will ship products in this program within 30 days of

receipt of agencies’ orders. Products in FPI’s quickship catalogue include

certain types of ergonomic chairs and other furniture, linens, clothing,

targets, and traffic signs.

As part of our work, we also obtained and analyzed the results of FPI’s

internal timeliness measure for fiscal year 1997 and the first half of 1998.

We compared FPI’s results with our fiscal year 1997 analysis and reconciled

any differences. We did not independently verify FPI’s analysis for fiscal

year 1998. We also examined how FPI accounts for shipping time for those

orders where the due date is when deliveries should arrive at the

customer’s location, not the date by which they should be shipped. Due

dates specified by customers can be origin—meaning that the orders

should be shipped by the due date—or destination, meaning that the

orders should arrive at the customer’s location by the due date. In doing

our work, we did not determine the reasons individual agency orders were

delivered late or assess the effect of individual late deliveries on federal

agencies. In addition, we rounded the timeliness statistics presented in this

report to the nearest percentage.

We performed a limited reliability and validity check of FPI’s COED data by

comparing a sample of hard copy customer orders with the data in the

COED system. According to an FPI official knowledgeable of customer

orders, FPI received more than 60 percent of its orders by hard copy in

fiscal year 1997. The remainder of the orders were submitted

electronically. We did not attempt to validate any electronic orders

because printouts with data from these orders that FPI showed us had

much less information than the hard copy orders. We selected a random

sample of 240 customer orders from orders that were placed in fiscal year

1997. This sample was designed to ensure that we selected orders that had

many line items as well as orders that had only a few line items. In

addition, we oversampled because we knew that many of the orders

probably would have been placed electronically and would not have hard

copies.

Page 34 GAO/GGD-98-118 FPI Delivery Performance
Appendix II 

Objectives, Scope, and Methodology

FPI sent us copies of the original customer orders and related

documentation that were available, such as correspondence to and from

customers, for 136 of the orders. Five of FPI’s six major product categories

were represented in these orders. Only electronics, which accounted for

less than 7 percent of orders in fiscal year 1997, was not represented. The

remaining orders from the 240 we randomly selected were unavailable

because either the agencies had filed their orders electronically, or the

orders were not centrally located and could not be obtained in a timely

manner from the individual factories. FPI officials told us that they sent us

all the documentation that was readily available for the 136 orders. In

addition, FPI provided us with access to its COED database in Lexington,

which enabled us to review all the electronic information that was

available for these orders. We reviewed the information that was available

for these 136 orders and determined that 109 had due dates that customers

had specified.

Our timeliness analysis used three dates from the COED system. These were

the dates the orders were entered into the COED system (order date), the

dates the orders were due (due date), and the dates the orders were

shipped (last ship date). We could not focus on the order dates because

we knew there would be a time lag between the date the order was signed

and the date it was entered into the COED system. In general, we noticed

that this time lag was between 2 to 3 weeks. However, we could not assess

whether these time lags were due to (1) delays by the customer in mailing

the order, (2) the timeliness of the mail carrier, or (3) delays by FPI in

entering the orders into the COED system. We could not assess the

reliability of the last ship dates, because we did not have the resources to

contact the agencies directly and find out if they had records of receiving

the items FPI had shipped to them. Therefore, we focused on the due dates

agencies had specified in the orders.

We compared the customer-requested due dates with the due dates

entered into COED. We attempted to document any instances where a due

date for a line item in COED was different from the due date the agency had

originally requested in its order. Using the information available for these

orders, we also attempted to document the reasons for due date changes

and other pertinent information, such as whether customers were notified

of the reasons for due date changes and whether they approved of the

revisions. We also documented whether customers had specified that the

due dates in the orders were for destination or origin. For orders where

we could not determine the reason for due date changes, FPI staff at the

Customer Service Center in Lexington researched the orders to identify

Page 35 GAO/GGD-98-118 FPI Delivery Performance
Appendix II 

Objectives, Scope, and Methodology

the reason for date changes, as well as other information, such as whether

the customer was notified regarding any due date changes that may have

occurred and approved of them. In addition, FPI headquarters officials

provided us with other documentation for these orders at the end of our

review. The results of our work related to the 109 orders are not

projectable to the universe of agency orders placed in 1997 because we

were only able to obtain usable information on 109 of the 240 orders in our

original sample, which represented a response rate of about 45 percent.

This response rate was mainly due to the fact that many of the orders were

placed electronically rather than through hard copy.

To meet the second objective, we interviewed key procurement officials

from four agencies that we judgmentally selected who were among FPI’s

largest buyers: the General Services Administration’s (GSA) Federal Supply

Service (FSS) in Arlington, VA; the Defense Logistics Agency (DLA) in Ft.

Belvoir, VA; the Social Security Administration (SSA) in Baltimore, MD; and

the Department of Veterans Affairs (VA) in Washington, D.C. Collectively,

these agencies accounted for over one-quarter of FPI’s 1996 sales of

$496 million. DLA was the second largest buying component within DOD,

next to the Army. The other three agencies were in the top four buyers

among civilian agencies. In addition to contacting headquarters

procurement officials at these agencies, we also contacted one of GSA’s

nationwide commodity centers, FSS’ National Furniture Center (NFC),

because furniture is FPI’s largest product line. We contacted three DLA

supply centers: the Defense Supply Center Philadelphia (DSCP) in

Philadelphia, PA; the Defense Supply Center Columbus (DSCC) in

Columbus, OH; and the Defense Supply Center Richmond (DSCR) in

Richmond, VA. Within SSA, we spoke with officials from the two buying

components that purchase products from FPI, the Office of Property

Management (SSA/PM) and the Office of Operations, Contracts, and Grants

(SSA/OCG). Within VA, we spoke with officials from the Office of

Administration and the Office of Acquisition and Materiel Management, as

well as officials in the Veterans Health Administration (VHA) from the

offices of Patient Care Services and Environmental Management Services.

We obtained information and views from these officials on several topics

related to timeliness, including how FPI performed in meeting due dates;

how specific due dates were set; whether due dates were driven by FPI

production capabilities or mission needs; what processes were used to

monitor FPI’s delivery performance and that of private vendors; and what

remedies were available in the event of a late delivery from FPI and private

vendors, including a discussion of FPI’s waiver process. Although the views

Page 36 GAO/GGD-98-118 FPI Delivery Performance
Appendix II 

Objectives, Scope, and Methodology

officials at these agencies expressed and the information they provided

may not be representative of all FPI customers, they provided useful

insights into FPI delivery practices from the customer’s perspective. We did

not verify data we obtained related to our discussions with agency

officials. Related to our discussion with these officials about the FPI waiver

process, we used FPI’s waiver database to determine the extent to which

FPI granted customers waivers from buying FPI products for reasons

related to timeliness.

We did our work between July 1997 and May 1998 in accordance with

generally accepted government auditing standards. We requested written

comments on this report from the Director, Bureau of Prisons (BOP). These

comments are discussed near the end of the letter and are reprinted in

appendix III. FPI also provided oral technical comments, which we

considered in preparing the final report. We also held exit conferences

with program officials of the customer agencies we visited to verify

applicable data, facts, and views presented in this report.

Page 37 GAO/GGD-98-118 FPI Delivery Performance
Appendix III 

Comments From the Bureau of Prisons

Note: GAO comments

supplementing those in the

report text appear at the

end of this appendix.

See p. 26.

See p. 26.

Page 38 GAO/GGD-98-118 FPI Delivery Performance
Appendix III 

Comments From the Bureau of Prisons

See p. 26.

See p. 26.

See comment 1.

Page 39 GAO/GGD-98-118 FPI Delivery Performance
Appendix III 

Comments From the Bureau of Prisons

See comment 2.

See comment 3.

Page 40 GAO/GGD-98-118 FPI Delivery Performance
Appendix III 

Comments From the Bureau of Prisons

Page 41 GAO/GGD-98-118 FPI Delivery Performance
Appendix III 

Comments From the Bureau of Prisons

The following are GAO’s comments on the Bureau of Prisons’ letter dated

June 1, 1998.

GAO Comments 1. BOP said that it is not FPI’s policy that due dates be driven by production

capabilities rather than agency missions. This seemed different from the

statements made by FPI’s Chief Operating Officer during the review that it

often did not accept the due dates customers requested because they were

inconsistent with FPI’s production capabilities. Seeking clarity, we

contacted an FPI official who was involved in preparing the written

comments. This official said that the intent of the comment and the

paragraph that followed was to emphasize an important point. That is, if

FPI does not accept an agency-requested due date and proposes alternative

dates that would impede the customer agency’s mission, FPI would likely

issue a waiver if the customer requested one.

2. BOP pointed out that the random sample of orders that we used to test

the accuracy and reliability of the due dates that FPI used to measure

timeliness was not representative of the orders FPI receives. Specifically,

BOP was concerned that a disproportionate number of high-dollar value

systems furniture orders led to a skewing of the information collected

because these orders have more frequent due date changes. This condition

however, does not affect our conclusions on this matter or the overall

message of the report. As discussed in the report, we recognize that the

specific results from our work related to the 109 orders cannot be

projected to the universe of FPI orders. However, the results of our analysis

did, as FPI agreed in its written comments, raise questions about the due

dates being used to measure timeliness, especially from the customer’s

perspective.

3. BOP said that of the 61 orders that involved due dates that were later

than the customer originally requested, 23 did not involve a change.

According to BOP, the delivery dates requested by customer agencies for

these orders did not provide sufficient lead time and, therefore, FPI had to

revise the dates as a condition of accepting the order. BOP acknowledged

in its written comments that nevertheless, FPI needs to improve its

documentation and customer notification processes when customer due

dates cannot be met or are changed. As we discussed in the report, the

lack of documentation showing the reasons due dates in FPI’s system were

different from what customers requested and whether customers were

notified of the reasons and approved of the changes impeded our ability to

Page 42 GAO/GGD-98-118 FPI Delivery Performance
Appendix III 

Comments From the Bureau of Prisons

assess the appropriateness of many of the due dates for measuring

timeliness.

Page 43 GAO/GGD-98-118 FPI Delivery Performance
Appendix IV 

Major Contributors to This Report

General Government

Division, Washington,

D.C.

Gerald Stankosky, Assistant Director

David E. Sausville, Evaluator-in-Charge

Martin de Alteriis, Senior Social Science Analyst

Joanne D. Meikle, Senior Social Science Analyst

Delois Richardson, Computer Specialist

Catherine M. Hurley, Senior Computer Specialist

William J. Dowdal, Senior Evaluator

Dallas Field Office Robert T. Griffis, Senior Evaluator

Patricia Sari-Spear, Senior Evaluator

(240267) Page 44 GAO/GGD-98-118 FPI Delivery Performance
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