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INTERAGENCY CONTRACTS—PART I AND II 

HEARINGS 

BEFORE THE

AD HOC SUBCOMMITTEE ON CONTRACTING 

OVERSIGHT 

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

FEBRUARY 25, 2010 

OVERVIEW AND RECOMMENDATIONS FOR REFORM—PART I 

JUNE 30, 2010 

MANAGEMENT AND OVERSIGHT—PART II 

Available via the World Wide Web: http://www.fdsys.gov 

Printed for the use of the Committee on Homeland Security 

and Governmental Affairs 

( 

(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

ROLAND W. BURRIS, Illinois 

PAUL G. KIRK, JR., Massachusetts 

SUSAN M. COLLINS, Maine 

TOM COBURN, Oklahoma 

SCOTT P. BROWN, Massachusetts 

JOHN MCCAIN, Arizona 

GEORGE V. VOINOVICH, Ohio 

JOHN ENSIGN, Nevada 

LINDSEY GRAHAM, South Carolina 

MICHAEL L. ALEXANDER, Staff Director 

BRANDON L. MILHORN, Minority Staff Director and Chief Counsel 

TRINA DRIESSNACK TYRER, Chief Clerk 

PATRICIA R. HOGAN, Publications Clerk and GPO Detailee 

AD HOC SUBCOMMITTEE ON CONTRACTING OVERSIGHT 

CLAIRE MCCASKILL, Missouri 

CARL LEVIN, Michigan 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

JON TESTER, Montana 

PAUL G. KIRK, JR., Massachusetts* 

EDWARD E. KAUFMAN, Delaware 

(*replaced Senator Kirk for June hearing) 

SCOTT P. BROWN, Massachusetts* 

(*replaced Senator Bennett for June hearing) 

ROBERT F. BENNETT, Utah* 

SUSAN M. COLLINS, Maine 

TOM COBURN, Oklahoma 

JOHN MCCAIN, Arizona 

LINDSEY GRAHAM, South Carolina 

MARGARET DAUM, Staff Director 

ALAN KAHN, Counsel 

MOLLY WILKINSON, Minority Staff Director for Senator Bennett 

BILL WRIGHT, Minority Staff Director for Senator Brown 

KELSEY STROUD, Chief Clerk 

(III) 

C O N T E N T S 

Opening statements: Page 

Senator McCaskill ............................................................................................ 1, 33 

Senator Bennett ................................................................................................ 2 

Senator Brown .................................................................................................. 34 

Prepared statement: 

Senator Bennett ................................................................................................ 69 

Senator Brown .................................................................................................. 94 

WITNESSES 

THURSDAY, FEBRUARY 25, 2010 

Ralph C. Nash, Jr., Professor Emeritus, Frederick J. Lees, E.K. Gubin Professor Emeritus of Government Contracts Law, The George Washington 

University Law School ......................................................................................... 6 

Marshall J. Doke, Jr., Partner, Gardere Wynne Sewell, LLP ............................. 8 

Steven Schooner, Associate Professor of Law and Co-Director of the Government Procurement Law Program at The George Washington University 

Law School ............................................................................................................ 9 

Joshua Schwartz, E.K. Gubin Professor of Government Contracts Law; CoDirector of the Government Procurement Law Program, Faculty Chair of 

the Presidential Merit Scholars Program, The George Washington University Law School .................................................................................................... 11 

WEDNESDAY, JUNE 30, 2010 

John K. Needham, Director, Acquisition and Sourcing Management, U.S. 

Government Accountability Office ...................................................................... 37 

Hon. Daniel I. Gordon, Administrator, Office of Federal Procurement Policy, 

U.S. Office of Management and Budget ............................................................. 40 

Steven J. Kempf, Acting Commissioner, Federal Acquisition Service, U.S. 

General Services Administration ........................................................................ 42 

Richard K. Gunderson, Deputy Chief Procurement Officer, U.S. Department 

of Homeland Security .......................................................................................... 44 

Diane J. Frasier, Director, Office of Acquisition and Logistics Management, 

National Institutes of Health, U.S. Department of Health and Human Services ......................................................................................................................... 45 

ALPHABETICAL LIST OF WITNESSES

Doke, Marshall, J., Jr.: 

Testimony .......................................................................................................... 8 

Prepared statement .......................................................................................... 74 

Frasier, Diane: 

Testimony .......................................................................................................... 45 

Prepared statement .......................................................................................... 136 

Gordon, Hon. Daniel I.: 

Testimony .......................................................................................................... 40 

Prepared statement .......................................................................................... 116 

Gunderson, Richard K.: 

Testimony .......................................................................................................... 44 

Prepared statement .......................................................................................... 133 

Kempf, Steven J.: 

Testimony .......................................................................................................... 42 

Prepared statement .......................................................................................... 127 

Page

IV 

Nash, Ralph C., Jr.: 

Testimony .......................................................................................................... 6 

Prepared statement .......................................................................................... 71 

Needham, John K.: 

Testimony .......................................................................................................... 37 

Prepared statement .......................................................................................... 96 

Schooner, Steven: 

Testimony .......................................................................................................... 9 

Prepared statement .......................................................................................... 80 

Schwartz, Joshua: 

Testimony .......................................................................................................... 11 

Prepared statement .......................................................................................... 85 

APPENDIX 

Questions and responses submitted for the Record from: 

Mr. Needham .................................................................................................... 141 

Mr. Gunderson .................................................................................................. 143 

Mr. Kempf ......................................................................................................... 148 

Mr. Gordon ........................................................................................................ 152 

Ms. Frasier ........................................................................................................ 154 

(1) 

INTERAGENCY CONTRACTS: OVERVIEW AND 

RECOMMENDATIONS FOR REFORM—PART I 

THURSDAY, FEBRUARY 25, 2010 

U.S. SENATE, AD HOC SUBCOMMITTEE ON CONTRACTING OVERSIGHT, OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:32 p.m., in room 

SD–342, Dirksen Senate Office Building, Hon. Claire McCaskill, 

Chairman of the Subcommittee, presiding. 

Present: Senators McCaskill and Bennett. 

OPENING STATEMENT OF SENATOR MCCASKILL 

Senator MCCASKILL. I want to open this hearing and begin by 

thanking the incredibly important witnesses we have today. I do 

not know how many people there are in this town that have great 

respect for all of you and the work you do, but I am one of them 

because this is an area that I care deeply about and have tried to 

really wade in, in this area, since I arrived in the Senate. So I 

know all of you by reputation, although I do not know you personally, and it is great to be here with you today, and I look forward 

to being informed by your testimony. 

We are here today to examine the rapid growth in interagency 

contracts. One of the principal functions of this Subcommittee is to 

ensure that government contracting is as efficient and effective as 

possible, and hopefully this hearing will help us further that goal. 

Interagency contracting refers to the practice where agencies buy 

goods and services from, or on behalf of, other Federal agencies. 

They do this through a variety of types of contracts and other arrangements with a bewildering number of acronyms. I am glad 

that I am on the Armed Services Committee because that is where 

you go to ‘‘Acronym University,’’ since the Department of Defense 

cannot speak without at least three acronyms in every sentence. So 

I have good training to deal with the area of interagency contracting. 

Some types of interagency contracting, like General Services Administration’s Federal Schedules program, have existed for decades. Many others were created or developed within the last 15 

years. When I first came to Washington, out of the auditor’s office 

in Missouri, I had no idea that most of these types of contracts 

even existed. Frankly, most Americans have no idea these contracts exist. And let me go a step further; most Members of Congress do not know that these contracts exist. 

2 

I imagine that the overwhelming majority of people outside of 

this room have never heard of a MAC or GWAC or a franchise 

fund, and I imagine that many of them would be as astonished as 

I was to learn that many agencies are now in the business of making a profit from charging other agencies to use their contracts. 

Over the years, interagency contracting has been promoted as a 

way to streamline contracting, increase efficiency and leverage the 

massive spending power of the Federal Government. This does 

have the potential to result in lower prices for the government and 

savings on behalf of the taxpayer. That is good news for everyone. 

But from what I can see, interagency contracting does not necessarily seem to have gotten us there. 

First, there has been a massive increase in interagency contracting vehicles. I am somewhat troubled that all the discussion 

and effort at Federal agencies have focused on simply creating 

more vehicles, not whether the additional vehicles are necessary or 

whether the existing vehicles are necessary on getting us from 

Point A to Point B in an efficient and effective manner. 

I am also concerned that interagency contracts may not be resulting in lower prices, both because there may not be enough competition and because the negotiated prices are too high. 

And I am unaware of any analysis that has been done to demonstrate that these types of contracts are actually improving government contracting. One reason for this is that there is almost no 

data available that would allow anyone to draw those conclusions. 

As a result, the government, Congress and the taxpayers are in the 

dark about these types of contracts, and we remain in the dark despite the recommendations of the Government Accountability Office 

(GAO), agency inspectors general and the distinguished SARA 

Panel, that government agencies collect and publish this kind of information. Why is this taking so long? 

At a conservative estimate, interagency contracts now represent 

hundreds of billions in the government’s budget, and that is way 

too much money to lose sight of. 

I intend to ask these questions and more at today’s hearing. We 

are joined, as I said before, by a panel of very distinguished legal 

scholars and practitioners who have studied interagency contracting for decades. I hope that their testimony will help us get 

a clearer picture of how and why Federal agencies use interagency 

contracting and what steps we should be taking to make sure that 

it works the way it should and works in a way that saves the taxpayer dollars. 

Later this year, I intend to call officials from the GSA, the Office 

of Federal Procurement Policy (OFPP) and other responsible agency officials to a subsequent hearing to address what we learn here 

today. 

I want to thank our witnesses, and I look forward to your testimony and to our discussions. 

And now I would like to turn it over to my colleague, the Ranking Member of this Committee, Senator Bob Bennett. 

OPENING STATEMENT OF SENATOR BENNETT 

Senator BENNETT. Thank you very much, Madam Chairman. 

3 

As I have mentioned before, when I graduated from college, I 

began my business career as a purchasing agent. I did not think 

when I left that particular assignment that I would be here reliving those kinds of experiences as a U.S. Senator, but interesting 

things happen to us in life. 

Let me start out with the macro of what we are talking about. In fiscal 2009, the Federal Government spent over $536 billion on 

goods and services. Now that number is thrown around Washington almost to the point of abstraction. That is a little over half 

a trillion. 

Let’s put it into perspective. That means that the Federal Government purchasing comprises 3.7 percent of GDP, and if we were 

an economy all by ourselves, just the government, we would rank 

18th in the world, bigger than all the other countries below that 

number. And to compare our spending to the private sector, to take 

the largest company in the world, $536 billion is nearly $150 billion 

greater than the total revenue of Wal-Mart. We are the largest consumer in the world. 

All right, now let’s go from the macro to the micro. We are all 

familiar with the basic buying and selling of goods, and we know 

that if you are purchasing at a large scale you usually expect a 

break in the price from the seller. As the largest purchaser in the 

world, the Federal Government expects to get these same kinds of 

wholesale prices. In fact, it should be receiving some of the best 

prices for goods and services available to anybody in the marketplace, and that is at the core of the hearing today on interagency 

contracts. 

Is the purchasing power of the Federal Government being used 

efficiently, and are the systems that have been developed and expanded in recent years the most efficient way for the Federal Government to buy stuff? 

And, of course, this goes to the fundamental question that we as 

politicians have to answer: Are these contracts yielding the best 

cost savings for the American taxpayers who sent us here? 

Well, encouraging business to sell to the Federal Government is 

an essential part of these cost savings, and it is my belief that the 

greater competition gained through the participation of new companies in the marketplace, who come in saying we can do better than 

your present supplier, will have a greater effect on the price that 

the government pays than its aggregated purchasing power. With 

a greater number of companies competing for the government dollars, the Federal Government should have access to the best goods 

and services available, at the best price, and the efficiencies of the 

market yielding significant cost breaks and savings to the American taxpayer. 

Unfortunately, having been a businessman who has looked at the 

issue of selling to the government, I know from firsthand experience and from that of my constituents that many businesses, and 

small businesses in particular, find the barriers to entering the 

Federal marketplace simply too large to overcome. I have said it 

before—I will say it again I am sure—the Federal Government’s 

complicated procurement system is simply too difficult to navigate. 

It keeps potential vendors out. And, from the perspective of small 

business, it is too costly, it is too slow, and it is confusing. 

4 

And I will confess as a business consultant, on occasion when 

someone has come to me for advice as to where they can seek new 

markets, I have told them stay away from the Federal Government. It will cost you too much money and too much grief. It troubles me that I think that was good advice. 

Now it also troubles me that when we seek a serious cost-benefit 

analysis of the interagency contracting, we do not really know quite 

where we are. Three years ago, the SARA Panel, to use the acronym that the Chairman has used, published a seminal report on 

interagency contracts, and today we still find the government 

struggling to implement that panel’s most basic recommendations. 

For example, the panel recommended a comprehensive database 

that would list the interagency contracts in place and assist agencies in making prudent businesslike decisions, and 3 years later 

the database is not only not here, it is not even in development. 

Now I have said in previous hearings that the serious analysis 

of acquisitions cannot take place until we replace the anecdotal evidence of the status quo with serious empirical analysis. I hope this 

panel—you are billed, I think appropriately, as some of the best 

minds on this topic—will be able to give us some ideas on how we 

do that. 

Now interagency contracts, I have discovered, have existed in 

various forms for nearly 80 years. The most famous example, of 

course, is GSA schedules. Today, there is a panoply of large-scale 

contracts that do a wide range of purchasing, a wide variety of purchasing, and I am sure some of these other large-scale contracts 

are necessary, especially ones that are tailored to the unique needs 

of the agencies that have a specific mission. 

But I am suspicious that some of these contracting vehicles have 

grown, both in number and in size, simply because the agencies 

want to protect their turf—that using them is easy, facile, and that 

the sponsoring agency believes it can save money through creating 

their own expertise even when the fees for other programs, like the 

schedules, are in fact fairly modest. 

So we have seen time and again in acquisitions that agencies 

tend to focus on their own missions and interests, but in doing so 

subordinate the interest of what is best for the entire Federal Government. Once again, without a full accounting of what interagency 

contracts are out there and what they do and how much they cost, 

we are left with merely speculating as to whether or not this wide 

array of contracts is the most efficient way for the government to 

make its purchases. 

So I am eager to get the panel’s perspectives on these points, 

Madam Chairman. I thank them for being here. I thank you for 

calling the hearing, and look forward to sharing the panel’s perspectives with the agency witnesses at the next hearing that we 

will have. 

Senator MCCASKILL. Thank you, Senator Bennett. 

Let me introduce the witnesses. The first witness is Ralph C. 

Nash, who taught at George Washington University Law School 

from 1960 to 1993, when he retired to become Professor Emeritus. 

In 1960, he co-founded the university’s government contracts program. Professor Nash now serves as a consultant for government 

agencies, private corporations and law firms, and is the author and 

5 

co-author of numerous foundational case books and articles on government contracting. In the 1990s, he was a member of the DOD 

Advisory Panel on streamlining and codifying acquisition laws, also 

known as the Section 800 Panel. Professor Nash is a renowned expert on government contracting, and I am pleased to welcome him 

here today. 

Marshall Doke, Jr. is a partner specializing in government contracts in the Dallas office of Gardere Wynne Sewell, LLP. Mr. Doke 

previously served on the Acquisition Advisory Panel created by the 

Services Acquisition Reform Act (SARA), and also is President of 

the U.S. Court of Federal Claims Bar Association. Mr. Doke has 

been described by leading legal publications as the Nation’s top 

government contracts lawyer. 

Steven Schooner is an Associate Professor of Law and Co-Director of the Government Procurement Law Program. Before joining 

the faculty, Professor Schooner was the Associate Administrator for 

Procurement Law and Legislation, a senior executive service position at the Office of Federal Procurement Policy. He is a member 

of the Board of Advisors of Certified Professional Contracts Managers, and serves on the Board of Directors of the Procurement 

Roundtable. 

Joshua Schwartz is the E.K. Gubin Professor of Government 

Contracts Law at The George Washington University Law School. 

Professor Schwartz has been at the law school since 1985 and has 

been Co-Director of the LL.M. Program in Government Procurement Law since 1992. Professor Schwartz also served as a member 

of the Acquisition Advisory Panel. He is the author of many articles 

and book chapters on the subject of procurement law. 

It is the custom of the Subcommittee to swear in all witnesses 

that appear before us. So, if you do not mind, I would ask you to 

stand and swear that the testimony you give before this Subcommittee will be the truth, the whole truth, and nothing but the 

truth, so help you God. 

Mr. NASH. I do. 

Mr. DOKE. I do. 

Mr. SCHOONER. I do. 

Mr. SCHWARTZ. I do. 

Senator MCCASKILL. Thank you all very much. 

We will be using a timing system today, although I am so grateful to have you all here. I am not going to do what a court reporter 

did to me one time in the courtroom when, as I kept talking and 

the time had gone over, she shouted to me, have you looked at your 

watch? I will not do that to you. 

We would ask you to try to keep your testimony to no more than 

5 minutes, and your written testimony obviously will be printed in 

the record in its entirety. 

And, Professor Nash, we will begin with you. 

6 

1The prepared statement of Mr. Nash appears in the Appendix on page 71. 

TESTIMONY OF RALPH C. NASH, JR.,1 PROFESSOR EMERITUS, 

FREDERICK J. LEES, E.K. GUBIN PROFESSOR EMERITUS OF 

GOVERNMENT CONTRACTS LAW, THE GEORGE WASHINGTON UNIVERSITY LAW SCHOOL 

Mr. NASH. Thank you very much. I agree with what I have been 

hearing so far, almost completely. I am not sure that—you may 

know more about this than I do. 

Let me just point out, one, what I think is a factual thing that 

is very important, and that is that you talk about going back to 80 

years, the Federal Supply Schedule, but that was a Federal Supply 

Schedule. And if you are going to buy paper or pens or that kind 

of stuff, presumably you can induce people to give you a pretty 

good price if it is for the whole Federal Government, in theory. 

And remember we used to have mandatory schedules. We used 

to have schedules where you had to buy, and fill requirements contracts. They are all gone now. 

The big thing that has happened that is really important is that 

what we are buying on these interagency contracts now is primarily services, and the Federal Government does not know how 

to buy services. I think you could say almost unequivocally that we 

do not. There is no guidance on services. If you look at Part 37 of 

the FAR, it is almost totally useless; that is the part on services. 

It says virtually nothing that is any use to anybody. 

So what we have done is to transpose, I think, supply buying 

ideas to service buying ideas. For example, we say that the prices 

on the Federal Supply Schedule have been determined by GAO to 

be fair and reasonable. Well, what price is on a Federal Supply 

Schedule for services? It is a fixed labor rate, which has virtually 

nothing to do with whether what the government ultimately is 

going to pay. 

I mean I can pay a $50 fixed labor rate to somebody who is not 

very competent, who will spend 10 hours to get a job done, where 

I could pay $100 fixed labor rate to somebody who is really competent and could do the same job in 2 hours. So we have transposed our logic from supplies to services, I think, without really 

thinking through what this is all about. 

Now having said that, which just sort of underpins, I think, 

thinking about this, it seems to me that what we need to do is 

identify what the goals are for our interagency contracting. 

Senator McCaskill, you mentioned one of them which is trying to 

accumulate government needs, so we get better prices, and I think 

that perhaps is one of the goals. I have about as much skepticism 

as you do, I believe, as to whether we have actually gotten any better prices by accumulating those needs, if we have accumulated 

needs. I am not even sure we have in some cases. 

We have had some line of business initiatives which are a little 

bit outside interagency, where we have tried to do some of that, 

and people are making efforts in that regard, but I would guess 

that most interagency contracts do not really accomplish that purpose very well. 

Another possible goal would be to set up some agency that is so 

good at buying a certain class of things, whatever. IT would be the 

7 

GWACs IT. It seems to be probably one of the goals of the GWACs 

in the Clinger-Cohen Act was to somehow get somebody who is 

competent to buy IT. I am still searching for that somebody. 

What we have in lieu of that, we seem to have a lot of people 

who set up GWACs and various other forms of interagency contracting including Schedule 70 on the Federal Supply Schedule, but 

I am not sure anybody has shown competence. 

So, again, if that is a goal, then we need to pin that down and 

say, all right, fine, who is it? 

And it probably should not be 10 different agencies. If somebody 

is really good at buying IT, remember the old Brooks Act, that was 

the theory of Jack Brooks. How many years ago was that? Forty, 

50 years ago. It did not work because GSA delegated the procurement right back to all the agencies. They could have picked up the 

ball and run with it. It would have been fabulous, but they did not 

do it. 

So that is another goal. 

The one goal that I think was underlying some of the things that 

happened in the 1990s was this idea that if we could get contracting officers to compete with each other, that we would make 

the contracting officers better. And I can guarantee you if that was 

anybody’s idea, that was wrong. It did not make anybody any better. What it created was a lot of requirements people running 

around their own contracting office, which they should not have 

been doing. DOD has seen that and remedied that problem, I 

think. 

I do not know about the other agencies. I am not sure about the 

agencies you are looking at. 

But issue No. 1, what are we trying to accomplish? If we do not 

figure that out, I do not think we will ever make sense of interagency contracting. So that is where I would start. 

Then once I had figured that out, then I try to figure out, all 

right, who can do that? Who can actually do that? Who can get me 

better prices? Who can create the expertise? Who can build that 

kind of expert? 

One of the franchise funds, if you go back and look at the Web 

site—and I am probably beyond my time. One of the franchise 

funds, when their Web site first came out, they basically said, we 

can buy everything better than anybody else. 

Now the government buys a lot of everything, right—construction, services, supplies, weapon systems. Nobody can buy everything better than anybody else, and that is preposterous to even 

have put that on the Web site. Somebody should have read that 

Web site and said, you are out of business, because that cannot be. 

I agree with you. We need what the panel recommended. Look 

from the point of view of companies. We have created a hunting license world, right, and the companies have to have a lot of hunting 

licenses. It is crazy. It does not make any sense. 

Senator MCCASKILL. Thank you very much, Professor Nash. Mr. 

Doke. 

8 

1The prepared statement of Mr. Doke appears in the Appendix on page 74. 

TESTIMONY OF MARSHALL J. DOKE, JR.,1 PARTNER, GARDERE 

WYNNE SEWELL, LLP 

Mr. DOKE. Good afternoon, Chairman McCaskill and Ranking 

Member Bennett. 

I first want to say that I am a past president of the Court of Federal Claims Bar Association. The current president might give me 

a bad time if I do not correct that on the record. 

My written statement discusses the Acquisition Advisory Panel’s 

work on interagency contracts. This afternoon, however, I want to 

limit my remarks to a brief summary of my supplemental comments on improving competition, which you asked me to address 

and which are included in the Advisory Panel’s Report that is on 

the Internet. 

What is competition? All real or fair competition—whether it is 

sports, gambling, or contracts—must have rules, and those rules 

must be disclosed, and then the rules must be enforced. The rules 

tell you what is required and what you must do to win, how you 

will be scored. 

My view is that we do not have real competition today in the 

competitive proposal or best value method of government contracting. The fact that we call it competition does not make it competition. As Abraham Lincoln said, you can call a dog’s tail a leg, 

but it is still a tail. 

We have had requirements for competition for government contracts for over 200 years in order to prevent fraud, favoritism, and 

collusion. I believe we have had more reported fraud in government 

contracts in the last 10 years than we have had in the previous 40 

years combined. 

And I believe that some of this increase is attributable to the use 

of, and the deficiencies in, the best value, or competitive proposals, 

method of procurement. By the way, competition is a subset of 

interagency contracts. Many of them are required to use the same 

rules of competition as any other agency is for any contracting. 

In the sealed bidding method, price and price-related factors are 

the sole basis for award of the contract. Bids are publically open, 

and there is not much chance for fraud unless it is the bidders who 

are colluding. 

In competitive proposals, price is only one factor, and the procurement regulations place no limitation specifying the percentage 

or weight that must be given to price. It could be 90 percent or it 

could be 10 percent. The number of other non-price evaluation factors can be 10, 20, or 30 percent, sometimes even more, and each 

can be highly subjective. These factors often are related to financial 

strength, years of experience, and management capability. 

The relative weights of evaluation factors are disclosed to the 

competitors, but there is no requirement to disclose the specific 

percentages the government evaluators will use. The use of nonprice factors in evaluation allows agencies to award a contract and 

pay more money to an offeror more highly rated on non-price factors than other competitors offering lower prices. That difference 

between the lowest price offered by a technically acceptable proposal and the contract award price for the higher rated proposal is 

9 

1The prepared statement of Mr. Schooner appears in the Appendix on page 80. 

called a price premium. That is the premium or higher price paid 

by the government resulting from consideration of these non-price 

factors and subfactors. 

The Federal Acquisition Regulation provides absolutely no guidance on what, which, or how many evaluation factors can be used, 

the relative importance that should be given to the various factors, 

even any limitation on the maximum percentage that can be paid 

for a price premium in selecting the awardee. Price premiums must 

be justified in the contract file, but there is no requirement, financial, or other management report to anyone above the contracting 

officer level regarding the amounts of these price premiums that 

agencies are paying for these non-price evaluation factors. 

Supreme Court Justice Brandeis said that sunshine is the best 

disinfectant. I believe there is something this Subcommittee can do 

that will save our government more money, sooner, than anything 

else you possibly could do, and that is recommend legislation requiring that contracting officers report for all contracts, including 

interagency contracts, the amount of all price premiums paid to the 

next higher management level, and go up the agency chain to the 

department level and be made subject to public inspection. I predict that such a requirement would have a dramatic impact on reducing the amounts of these price premiums. 

Now I do not mean to imply that paying price premiums is sometimes not appropriate and needed, but there should be some regulatory guidance or limitations on those payments. 

I hope you will also consider the discussion in my written statement about how the deficiencies and competition process are adversely affecting our small business concerns. 

Senator Bennett, this is one of the biggest obstacles that small 

business concerns have to overcome in competition, and that is 

overcoming the inherent advantage that large, giant businesses 

have because of putting these responsibility type evaluation factors, 

and this is discussed in my written material. 

And I thank you for asking me to be here today. 

Senator MCCASKILL. Thank you very much. Professor Schooner. 

TESTIMONY OF STEVEN SCHOONER,1 ASSOCIATE PROFESSOR 

OF LAW AND CO-DIRECTOR OF THE GOVERNMENT PROCUREMENT LAW PROGRAM AT THE GEORGE WASHINGTON 

UNIVERSITY LAW SCHOOL 

Mr. SCHOONER. I appreciate the opportunity to discuss the government’s ongoing need to effectively manage interagency contracts. But as I sit here with Mr. Nash to my right, I have to take 

just a moment to mention that last Thursday evening nearly 500 

people joined in the historic Mellon Auditorium while we recognized Mr. Nash and celebrated 50 years of government contract law 

at the George Washington University. It was a great event. 

Most of what I am going to do in starting will actually echo some 

of the things Mr. Nash said anyway. Centralized purchasing, particularly of commodities and certain types of nonpersonal services, 

is a globally accepted practice, particularly when governments can 

achieve economies of scale. Governments also routinely employ cenVerDate Nov 24 2008 08:30 Apr 20, 2011 Jkt 056844 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 P:\DOCS\56844.TXT SAFFAIRS PsN: PAT
10 

tralized purchasing where one agency’s unique experience can benefit other agencies. But as we sit here today, there is no experience 

that suggests that competition between agencies to provide these 

services, particularly for a fee, is going to help anything, and in 

fact we know that it introduces externalities—unanticipated incentives and disincentives—into the procurement process. 

Fee-based purchasing offices need revenue to survive. The pursuit of fees, rather than any congressionally mandated mission of 

serving the public, therefore drives these purchasing organizations. 

As a result, these vehicles routinely produce insufficient competition and poorly justified sole-source awards. 

In theory, there was supposed to be competition to get into the 

umbrella contract. Unfortunately, that never materialized. In effect, firms are granted a hunting license, as Mr. Nash pointed out, 

and similarly no competition or real competition is also absent at 

the task order stage. Because all of the contract holders can market 

their services directly to individual agencies, those agencies frequently will obtain those services on a sole-source or noncompetitive basis because it gives them greater speed, more convenience, 

personal preference or, simply, human nature basically says why 

deal with the bureaucracy if I can bypass it. 

This has created a race to the bottom. The fee-based purchasing 

instrumentalities lack a sufficient stake in the outcome of the contracts they award. A program manager at the purchasing agency 

will willingly pay a franchise fee to a servicing agency to avoid bureaucratic constraints, like competition, that might slow down the 

process. 

In turn, the servicing agency has no vested interest in the purpose of the procurement, will gladly streamline the process, and are 

often more than willing to permit personal services contracts for 

employee augmentation. 

Once the contract is awarded, the servicing agency has no interest in administering, nor does it have sufficient resources to manage those contracts. The post-award contract management vacuum 

that we have seen created may be the most pernicious effect of the 

proliferation of these vehicles. 

Finally on this, the vehicles simply lack or fail to meet the high 

standards for transparency that we aspire to in our procurement 

system. 

Now we have Mr. Doke and Mr. Schwartz here. Since 2005, GAO 

added the interagency contracts to the high-risk list—step in the 

right direction. The AAP, the 1423 panel, their recommendations 

moved the ball in the right direction as well, but there is plenty 

of room left for improvement. 

In my written statement, I summarized a couple of anecdotes. In 

the interest of time, I will skip them, but I do want to just mention 

the anecdote from the Abu Ghraib prison, where the military ended 

up relying on one of these vehicles that was managed by the Department of Interior’s National Business Center. They used contractor personnel to assist in interrogations in Iraq and Guantanamo Bay. 

The inspector general basically just hit the nail on the head, indicating that the pursuit of fees distorted the moral compass that 

we would otherwise hope would animate our procurement officials, 

11 

1The prepared statement of Mr. Schwartz appears in the Appendix on page 85. 

and here is what he said: ‘‘The inherent conflict in a fee-for-service 

operation, where government procurement personnel, in the eagerness to enhance organization revenues, have found shortcuts to 

Federal procurement procedures and procured services for clients 

whose own agencies might not do so.’’ 

I mean it seems to me this is a fundamental problem. 

Before I close, however, I do want to indicate that, as has been 

suggested and I think you will hear more of this from Mr. 

Schwartz, much of the problem that underlies why we have relied 

on these vehicles so much is that we have huge problems in the 

acquisition workforce. And on that regard, I want to applaud both 

of you for S. 2901, the Acquisition Workforce Improvement Act of 

2009. Obviously, that will not fix any of these problems today, but 

if we can have legislation like that, forward-looking legislation 

where we can invest in the acquisition workforce and do better, 

maybe we will not be having the same discussion a generation from 

now. 

Thanks for the opportunity to be here. 

Senator MCCASKILL. Thank you, Professor. Mr. Schwartz. 

TESTIMONY OF JOSHUA SCHWARTZ,1 E.K. GUBIN PROFESSOR 

OF GOVERNMENT CONTRACTS LAW, CO-DIRECTOR OF THE 

GOVERNMENT PROCUREMENT LAW PROGRAM, FACULTY 

CHAIR OF THE PRESIDENTIAL MERIT SCHOLARS PROGRAM, 

THE GEORGE WASHINGTON UNIVERSITY LAW SCHOOL 

Mr. SCHWARTZ. Thank you, Chairman McCaskill and Senator 

Bennett, for this opportunity to share my thoughts about the challenges and opportunities associated with interagency contracting by 

the U.S. Government. 

I have had the opportunity to think about the potential for interagency contracting and its problems, both in my research and writing, as Co-Director of the Government Procurement Law Program 

at George Washington University and for 2 years, along with my 

friend Marshall Doke, as a member of the Government’s Acquisition Advisory Panel. There are several key points I would like to 

make, and like my friend, Steve Schooner, I agree with the things 

you have said, so I am focusing my attention elsewhere. 

First, interagency contracting is simply a tool. It is neither inherently abusive as critics have sometimes suggested, nor is it a panacea for all the ills of government procurement as its fans have 

sometimes suggested. 

I would rather think of it as like the proverbial miner’s canary. 

The mushrooming growth of interagency procurement shines a 

sharp spotlight on underlying weaknesses and problems in our procurement system. So the challenge for the Congress and for the Executive Branch is to guide the use of this procurement device so as 

to reduce abuse, increase competition, enhance accountability, all 

in the use and management of interagency contracts. 

The rapid growth that we have already acknowledged, of interagency contracting in the last 15 years, certainly justifies the attention that these hearings are giving to this sector of Federal procurement activity. 

12 

That said, it is my view that the most important things to be 

done about interagency contracting, from where we now stand, are 

not actually measures uniquely addressed to interagency contracts. 

The key problem areas in my judgment relate to the inadequacy of 

the Federal acquisition workforce and the need for competition in 

contracting and to the need for sustained attention to effective contract management. You have heard something about each of these 

points from the other panel members. 

Although I strongly believe that we can significantly improve the 

performance of the Federal acquisition system, I think we can do 

so most effectively by investing in the Federal acquisition workforce. It is a cliche, but I think an apt one in this situation, to remember that an ounce of prevention is worth a pound of cure. If 

we were as zealous going forward about properly staffing the Federal acquisition function as we have been in recent years in investigating what has gone wrong with the government’s contracting 

response to Hurricane Katrina, to procuring the needs for our military in Afghanistan and in Iraq, I think we would see better outcomes. 

It may seem to you that I am trying to change the subject here, 

from a focus on a particular acquisition technique to a focus on the 

human infrastructure of Federal acquisition. But, candidly, that is 

exactly where I think the focus needs to be. 

If you look back at the last 30 or 40 years of the evolution of the 

Federal Government’s procurement process, I think what you will 

see is that we have swung back and forth like a pendulum between 

an emphasis on abuses that called for additional regulation and an 

emphasis, particularly in the 1990s, on the excessive rigidities that 

called for more flexibility in the operation of our system. And I 

think there was in fact a time and a role for each of these policy 

responses. But I think we have reached a point at which we would 

be better served, and the taxpayers would be better served, if we 

could damp down this oscillation and that the challenges that face 

us today primarily require better implementation of existing procurement mechanisms and do not call for radical new solutions. 

Let me offer three illustrations of how problems that appear to 

be about the use of interagency contracts can be ameliorated by solutions that appear to be about the acquisition workforce. 

First, agencies with adequate acquisition personnel will not find 

themselves driven to use interagency contracts simply because they 

lack the resources to do the procurement themselves. 

Second, if agencies receive adequate funding for their procurement operations, they will not see the incentives that Professor 

Schooner has referred to, that are far too common today, to host 

interagency contracts simply as a means of sustaining their own 

procurement operations and in effect supporting other activities at 

their own agencies. 

Third, agencies with adequate acquisition personnel should be 

able to devote the resources necessary to the sustained and careful 

management of the contracts that they enter. 

I do not believe that contractors, as a class, are either better or 

worse, more competent or more honest, or less competent or less 

honest than the rest of the human race, but I think it is completely 

unreasonable to expect that government contractors will deliver 

13 

sustained excellent performance unless they know that the government is seriously committed to monitoring their performance. 

Last point, improvement to our Federal acquisition operations 

really should not be a subject for partisan debate or ideological division. This is not about whether markets or government action are 

better means of fulfilling important public needs. 

Public procurement, by definition, is about the interface of markets and public management. To an impressive degree, I think, we 

have actually reached a consensus in the last generation that important public needs can be well served by securing goods and services from private enterprise and from the market. But to make effective use of the productive capacity and the problem-solving abilities of the private sector, we need to invest in consistently effective 

public management of our government contracts, and I do not 

think we have done that adequately. 

Thank you. 

Senator MCCASKILL. Well, thank you all. 

There is a lot here that I would like to get into, but let me start 

with kind of a broad question. As I sit here thinking about how to 

fix some of these things, the typical response in government is, 

well, who is in charge of it? Where do I go to get this fixed? What 

agency head do I call to talk to them about this? 

Now I know we have the Federal procuring policy office. But 

should there be someone in charge of all this overseeing that has 

not been done? 

First of all, let’s be honest. I mean you all are very knowledgeable and interested in this. We are pretty interested in it. I did not 

worry about every seat being full today in the hearing. [Laughter.] 

I did not worry about TV cameras knocking me over as I walked 

in the door. This is a place that has the attention span of a 

kindergartener. This is not some place that people spend a lot of 

time trying to really get their teeth into something that is this 

complex, this stovepiped, this disparate. It is really hard for us to 

fix this thing. 

So you all have years of experience in studying this and understanding it. Where? Who? Other than us just doing legislation, 

which sometimes is a little bit like spitting in the wind, how do we 

find the right overseers, or do we have to do this agency by agency 

and bust up the current system in terms of some of these schedules 

and fee-for-service operations? 

Mr. SCHOONER. If we distinguish, beginning with just the GSA 

schedule, I mean the obvious starting place here is at the Office of 

Management and Budget. Now you mentioned the Office of Federal 

Procurement Policy, but keep in mind if we take the step forward 

after the economy act, a lot of this proliferation comes from the 

Clinger-Cohen Act. And the bottom line is if we again take it apart 

and go back to ITMRA, this is authority that was vested at the Office of Management and Budget. They were supposed to manage it. 

And frankly, what happened was the OMB thought it was a 

great idea. They expected this to be a hyper-competitive environment, with competition to get onto the vehicles and then competition at the task and delivery order level. It did not materialize in 

the 1990s. And when Steven Kelman was still the OFPP administrator he came forward and asked the people who were managing 

14 

these vehicles to enter into what he called at the time a Mayflower 

Compact in which they would commit to at least having fundamental competition, and it failed miserably. 

But at the end of the day, the short answer to your question is 

OMB can be tasked with managing this, and frankly there is no 

reason why OMB should not be put in a position where they ought 

to be shutting these vehicles down. 

Senator MCCASKILL. And do you believe they can shut these vehicles down without any kind of action on our part? 

Mr. SCHOONER. Oh, yes. 

Senator MCCASKILL. OK, that is good to know. 

Mr. NASH. Well, are you saying they will? 

Mr. SCHOONER. No, of course not. 

Mr. NASH. I mean they will if somebody forces them. 

I think we have tried chaos for 20 years, and I would say that 

chaos has not worked all that well. We can probably all agree on 

that. So the answer to your question is, yes, we need leadership, 

absolutely. 

In my written remarks, one thing that I recommended was that 

if we establish an interagency, if we let somebody set up an interagency contract to buy and they become a specialist, let’s say, that 

we ought to, somebody ought to certify them as being a specialist. 

One of the problems—I teach a lot of contracting officers. I just 

came back last night, or this morning—I should have come back 

last night—from teaching 30 contracting people, Navy people. If 

you look at it from their point of view, and they asked me to talk 

about task orders, it is bewildering for them to know which vehicle 

to use. There is no catalogue out there. 

I looked. I found an IG report, just stumbled on it a year or so 

ago. I write a monthly newsletter, and I wrote it up because at one 

interagency vehicle, the labor rates, the fixed labor rates are nationwide. Right next door is another interagency vehicle where the 

labor rates are regional. 

Well, that makes a big difference if you are buying. In New York 

City, you ought to buy off the nationwide. 

Senator MCCASKILL. Right. 

Mr. NASH. If you are buying out where Senator Bennett is, I assume his rates are lower. You are probably better off buying from 

the regional. 

Senator BENNETT. More efficient too. 

Mr. NASH. But the normal contracting officer does not have a 

clue that is the way it operates. So we have created—I mean we 

really do have chaos. I do not know how you make somebody manage something, but we need leadership, absolutely. 

Senator MCCASKILL. It is fascinating to me that government does 

not have to make it work at the bottom line. You cannot add employees in a business until you have the revenue to add employees, 

but we can add employees around here if somebody thinks they 

have a good idea. And what a lot of these things were someone’s 

good ideas that have not, as they have been executed, turned out 

to deliver what people thought they could deliver. 

Now what is fascinating to me is you have these agencies that 

see getting more money for their agency as the end goal. They comVerDate Nov 24 2008 08:30 Apr 20, 2011 Jkt 056844 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 P:\DOCS\56844.TXT SAFFAIRS PsN: PAT
15 

pletely lost sight that it has anything to do about value of the contract. 

Is there any place that you all think that we can go to get a handle on which agencies have done the best job at (A) marketing 

themselves to get more money for their agency, or—well, let’s just 

take that at this point. 

Mr. DOKE. Let me preface that by responding to your previous 

question, and Mr. Nash said leadership is the problem, and I think 

that is largely it. I think there is power that can be used in the 

Office of Federal Procurement Policy. 

The problem you have is that when the administrator tries to 

exert that power, the reaction coming back from the other agencies 

overwhelms him. He does not have the political stroke to make it 

work. He issues a memorandum to the agencies, and then the bigger agencies—you know there is an old saying, that no person with 

a straight flush ever asks for a new deal. Well, that is what happens. The agencies are happy with what they have, so they overwhelm proposals for change. 

Now you can go to the OMB, which can do that, but then politics 

all over enters in. So it is largely exercising leadership that is there 

and is necessary to straighten it out. OMB or the administrator 

has the power to call for the information necessary to make a judgment on, those issues, but it has to be exercised. 

Mr. SCHWARTZ. And what you need is sustained attention to 

these things. The reason I singled out the response to Hurricane 

Katrina or Iraq/Afghanistan addresses the point you raised about 

lack of attention span around here. 

One of the great things of the last decade was that for a brief 

time people outside the Beltway could understand that it really 

made a big difference in the quality of their lives and sometimes 

as to whether people lived or died, whether the government was 

competently spending the money it had to spend. We have seen 

some very disappointing results. 

The problem is that you can engage people’s attention for a short 

time, but management, or legislation for that matter, in reaction to 

the last scandal, is not going to do it. 

So it seems to me I agree with the leadership argument. I agree 

that the OMB and the Office of Federal Procurement Policy need 

to focus attention, and they need to have backing at the highest 

levels in the Executive Branch and from the Congress to understand that this is attention that will continue to be paid. It will not 

be shifted away when that headline is off the front page. 

But you also have to build from the bottom-up, and this is where 

my acquisition workforce focuses in. You need leadership on the top 

to insist on a higher level of performance and sustained attention, 

and you need to hire and promote and pay people who can master 

the very complicated procurement systems that we have now built 

in this country. Essentially, what we have done is keep adding, and 

we never subtract, so that to master the procurement system today 

is just a very demanding task, as Mr. Nash has insisted. 

Mr. SCHOONER. Your question fundamentally begins with a success metric, and the problem is we have totally polarized metrics 

here. For the servicing agency, the only metric is the generation of 

fees. For the purchasing agency, the attraction of these vehicles is 

16 

the ability to bypass bureaucracy and the entire world of congressional and regulatory mandates. 

Senator MCCASKILL. Right. 

Mr. SCHOONER. And I think that the best example that your 

Committee has familiarity with is what happened at the Homeland 

Security Department. They did not have an acquisition workforce. 

They had a tremendous reliance on these vehicles, and this Committee eventually reined them in. 

But if we were to look at the other side, and again I go back to 

the point that Mr. Nash made about how we get into this in the 

first place, economies of scale is a wonderful reason to buy product 

in bulk or in volume. But there is no empirical research that suggests that purchasing services generates economies of scale, which 

begs the question, how did GSA grow so dramatically in the last 

generation? 

GSA has been marketing what they call commercial services. So, 

in effect, rather than having people make good business-based, 

value type assessments as to how to purchase services, they go 

through the GSA filter, they pay the fee and they do not have to 

do any thinking. They get whatever employee augmentation they 

need, so they can have their personal services contractor. That cannot be the way that we need to do business in the long run. 

Senator MCCASKILL. Senator Bennett. 

Senator BENNETT. Well, thank you, Madam Chairman. 

This has been a fascinating discussion, and I have been making 

notes and would like to get into virtually all of it. Let me just share 

off the top of my head a few comments and reactions, again out of 

my own experience. That is always dangerous because it gets you 

into anecdotal stuff. 

But one of the things I learned, you talked about buying primarily services. I ran businesses that were entirely services and 

learned very quickly and told my potential customers a very fundamental truth: You want to go where your account is important. 

Now if you are Ford Motor Company, and you are looking for an 

ad agency, you want to hire J. Walter Thompson, one of the biggest 

in the world. I am using ancient circumstances here rather than 

getting to where we are because Ford Motor and J. Walter Thompson were an item for a long period of time. 

If you are a relatively small operation in Salt lake City, you do 

not want to hire J. Walter Thompson. 

Mr. NASH. That is right. 

Senator BENNETT. The criteria you were talking about, Mr. Doke, 

you might say, well, you have to take into consideration the management, the experience and so on, and J. Walter Thompson would 

always appear as the first choice. But you would be far better off 

in a much smaller ad agency that could not possibly handle Ford 

but where your account was very important, and you would get the 

attention of the head of that agency, who would probably be better 

than the very junior person J. Walter Thompson might apply. 

Of course, that is presumably the philosophy behind best value, 

that you do not want to say, OK, we are going to create a sufficient 

regulatory strait jacket that says you can only buy this. 

You are depending on—to your point, Mr. Schwartz—that the 

person doing the purchasing has a little bit of ability, has a little 

17 

bit of capacity to make a judgment that says this is the best one. 

Even though it may not be the best price, I am going to an agency 

where my account is important. And how you do that in the personnel pool that makes up the Federal purchasing group becomes 

an enormous training problem. 

I also felt when I was CEO of the company, my biggest challenge 

was training my own people to do the right thing rather than directing them to do the right thing because it was a whole lot more 

efficient if they were trained and they made the decision closer to 

the problem than if every decision had to come up to me, and I 

would clearly, my obvious brilliance to the contrary notwithstanding, make a whole lot more dumb decisions than they would 

if they were properly trained. 

All right, the conversation about OMB. I am one of the few Senators who has worked in the Executive Branch, and I have dealt 

with OMB, and I have learned that the law of inertia is not just 

a law of physics—and not only the inertia at rest, but far more pernicious is the inertia of motion. A body in motion tends to stay in 

motion and in the same direction, and this is the way we have always done it, and so this is the way we are going to do it. 

My own hobby horse is that in spite of the fact that the M was 

put in OMB during the Nixon Administration, or during the time 

I was in the Nixon Administration, it has never really showed up. 

Mr. NASH. That is right. 

Senator BENNETT. OMB is still Harry Truman’s Bureau of the 

Budget, and just putting another name in it and another initial to 

its acronym does not mean that they spend very much time on 

management. 

The solution I have tried to peddle within the Congress, Madam 

Chairman, has been to switch us to a 2-year budget instead of a 

1-year budget, so that they can spend 1 year developing the budget 

and the other year on the M of OMB. 

I give you the anecdote of the commandant of the Coast Guard 

who was a good friend of mine. I was in the Department of Transportation. The Coast Guard used to be there. The Coast Guard gets 

kicked around more than any other agency. It starts out in Treasury, goes to Transportation and ends up at Homeland Security. 

Where are they going next? 

When he became the commandant of the Coast Guard, he said, 

now I can finally do the kinds of things the Coast Guard needs to 

have done. And when I retired as the commandant of the Coast 

Guard, I had accomplished none of them because I spent my entire 

time preparing budgets. 

Every year, there had to be a new budget. It had to be prepared, 

and then it had to be defended. Then the year was over, and a new 

budget had to be prepared and had to be defended. I never got 

around to all of this. 

Those are my reactions to the conversation that you have had. 

Now let me get to a specific question. I think this is probably 

aimed at you, Professor Schooner. Let’s talk about another regulation that will go in, that in my opinion will interfere with management, intelligent management. I am letting my prejudice here advance the question. But are you familiar with the high road labor 

preference? 

18 

Mr. SCHOONER. Alas, yes. 

Senator BENNETT. Alas, yes. All right. I think maybe we are on 

the same page. Would you give us your understanding of it and 

how you think that would impact this quality I have been talking 

about of having intelligent people properly trained to make the 

right kind of decision, or does it put a strait jacket on circumstances that will make the procurement process worse? 

Mr. SCHOONER. So, in a nutshell, the underlying theory behind 

high road contracting as it has been articulated, is that the Federal 

Government would give an evaluation preference, would give a leg 

up to firms that paid their employees higher than the minimally 

required wages under the relevant labor minimum standard for 

that type of contract. So, in effect, the theory is that the firms that 

paid their employees the most would be competitively advantaged 

when they competed for government contracts. 

Again, I may have signaled this, but I find this terribly frustrated. The Administration has been in office now for a year. They 

have spent a disproportionate amount of their energy in the public 

procurement space, focused on using the public procurement process to benefit union members and other special interests, and it 

simply does not make any sense. 

On the one hand, it is simply inconceivable that the government 

would incentivize a contractor to pay its workers more, particularly 

in this economy. I mean the bottom line is the government should 

be getting bargains because we have excess capacity out in the 

workplace. 

But I think that the real issue here that is the most frustrating 

is if you were to ask what the government should be focused on, 

the government should be focusing on getting the greatest value for 

its money in everything that it purchases. And the secondary consideration for that, which is actually the same, is the government 

should be trying to maximize the customer satisfaction of the agencies that are spending that money. The bottom line is the redistribution of wealth, rather the generation of value, is simply the 

wrong path to take in public procurement. 

Senator BENNETT. Mr. Doke. 

Mr. DOKE. Let me comment on what I will call the elephant in 

the room in best value procurement. What people do not think 

about is that no government contract can be awarded anywhere, by 

anybody, unless the contracting officer makes an affirmative finding of responsibility. Now the regulations cover a number of factors 

in responsibility, but what it boils down to is the contracting officer 

must decide that this person can perform the contract satisfactorily. 

Now if that is true, if offerors can do that, then if you are paying 

more money to someone who has a higher rating on management 

capability, on financial strength, on experience, more years of experience, what you are doing is saying this person can perform the 

contract more than satisfactorily. 

If you do that, you are paying for more than you need. It means 

that the government has not described what ‘‘satisfactory’’ is, if it 

is higher than you need, and the minimum needs doctrine has almost been forgotten in government procurement. That doctrine 

19 

says that the government cannot buy what it wants; it can only 

buy what it needs. 

It is limited to what it needs. Why? Because, in 99 percent of the 

cases, the only authority to contract comes from Congress, and it 

is from your appropriation of money. It is implied authority, and 

you cannot imply that Congress intended for the government to 

buy more than it needs. 

But we forget it when you pay the price premiums, when you pay 

the very large businesses more because they have more experience 

than the small business concern, and so forth. In best value procurement, you even can give added points for exceeding the specification. Now, if you give more money to somebody for exceeding 

the specification, and you do not even have to disclose it in RFP, 

then you are paying money for things you do not need, and that 

is just part of this problem that is causing some of the dilemma we 

see today. 

Senator BENNETT. Anyone want to comment on that? 

Mr. SCHWARTZ. I guess I have a somewhat different view. I have 

learned to disagree with my friend, with diffidence, but I guess I 

think I am coming out in the middle on the spectrum here. That 

is, as I tell my introductory classes, if it is your brother or sister 

jumping out of the airplane, you do not want the government to 

buy the cheapest parachute it can get. 

And yes, there is a role for specifications, and there is a role for 

responsibility, but I just do not accept the view that there is nothing to be measured and that in the private sector we would not 

take into account things that are not always wholly tangible, that 

enter into quality and value for the taxpayer. 

The high road program takes this a step further, and it does not 

say you can exercise some judgment. It mandates the way you are 

going to exercise that judgment, and that is what I take to be controversial. So I do think there is a role for contracting officers, and 

I am not looking to write a lot more regulations to constrain that 

judgment. 

The other thing that I think is important to say is if you give 

people judgment, it is not true that they will never make mistakes. 

But if you do not give them any discretion, they will always make 

mistakes. 

Mr. NASH. Let me comment on Marshall’s thought. I do not agree 

with the way Marshall said it, but he did a look at GAO decisions 

in 1996, I think it was, and he could not figure out what the government was getting for the additional dollars that they paid on 

these individual procurement decisions. And it is hard to figure out 

from a GAO decision because they do not give you an absolutely 

full description of the procurement. 

I did the same thing in 1997, because I wanted to see what he 

saw, and I looked at 44 decisions where the government had paid 

more in that particular year, and I agreed with him. I could not 

figure it out either. 

His recommendation that people—I have no problem with paying 

more for something, but my perception is that an awful lot of contracting officers think that best value means we should pay more, 

and in a lot of cases it is wrong. 

20 

If you read the GAO decisions, it is fascinating. For example, in 

the newsletter, I took the last nine decisions where the tradeoff 

was between past performance and price. Past performance is a 

way to evaluate the risk of nonperformance, right. If somebody has 

not done well in the past, there is a risk that they might not do 

your job well. 

In eight of the nine decisions, the agency had paid more for better past performance. In a few of the cases, they had paid 15 or 

20 percent more for very small differences in past performance— 

the difference between very good and excellent, for example. It 

makes you wonder. 

I agree that we ought to have a bunch of wonderfully competent 

contracting people out there, but it is going to take a long time to 

get there. 

I think Marshall’s suggestion is an excellent one, that if we just 

use transparency and put that data out there in the open—how 

much more did you pay and what did you get for it—I think that 

would do a great deal to cast light on this system of how we are 

buying things, just what kind of decisions. It is great to have a lot 

of discretion, but we ought to take a look every once in a while and 

see how that discretion is being exercised. 

Senator BENNETT. Right. 

Mr. DOKE. Let me mention that I am certainly not against best 

value procurement. That term was introduced into our world as a 

marketing tool by a former OFFP administrator. We have had that 

type of procurement for 50 years. It started as cost-technical tradeoffs, but we have had the method for a long time. 

You had to have best value procurements in some cases because, 

sometimes, the government cannot describe its needs adequately. 

Research and development contracts, many other things, they just 

cannot describe it adequately. So the technical aspect of it was extremely important. 

Certainly, when you have that, sometimes the government needs 

to buy more than what is satisfactory. You need the best, the very 

best, and a technical evaluation is necessary. And price premium 

certainly was appropriate in those cases, where you need the best— 

health, safety, security, and so forth. 

But it is in these other areas where these evaluation factors are 

placed that really exclude small businesses, put them out of the 

game totally because they really relate to responsibility. The government can set its own standard for what is required to perform 

satisfactorily, and that is ‘‘responsibility.’’ And if it does that, you 

do not need those factors to do it comparatively. 

Senator BENNETT. Anyone on this one? I have more, but we will 

go back to you, Madam Chairman. 

Senator MCCASKILL. OK. I will take one. We will go every other 

one, how is that, until we get worn out. 

Parking of funds, that is one of the unintended consequences of 

what we have, the chaos that we are living through as it relates 

to interagency contracting, that and the notion that they are supposed to be giving back to the Treasury Department whatever they 

are collecting that is over and above what they are due, based on 

direct and indirect costs of what they are executing. Any comments 

on this phenomenon? 

21 

One of the things that is scary about this is we have a couple 

of GAO reports where they found this, but we do not have anything 

that is overarching as to how common this is. Do you all have a 

sense that we are having anti-deficiency violations on an annual 

basis as the end of the fiscal year rolls around and everybody looks 

for some place to park money? 

Mr. SCHOONER. Yes, but they are not really Anti-Deficiency Act 

violations because the way the system has been set up, it is a tolerated practice. It was never intended. I mean I think that my written testimony has all the cites in there. But the bottom line is 

there is supposed to be a bona fide need in the fiscal year. 

But because of the nature of the revolving funds, one of the 

things that the servicing agencies are offering to the other agencies 

is do not let your money expire. Just tell me what you think you 

want next year. Park it with me, and we will figure out what you 

want to spend it on next year. 

I mean there is plenty of GAO reports on this. And once again, 

if you decided that you wanted OMB to actually manage this, they 

could manage it. 

Another way to deal with it is to simply have, and again there 

is plenty of audits going on, on a million different things, but you 

could simply shut down the agencies that do it. Just shut them 

down. There is no reason for it whatsoever. It is just one more pernicious effect of a vehicle. It is a race to the bottom. 

Senator MCCASKILL. Well, I think it would be kind of hard to 

shut down. For example, when they did that on the Border Patrol, 

I do not think we could. 

Mr. SCHOONER. No. I am not telling you to shut down the agency, 

but you can really shut their procuring off. 

Senator MCCASKILL. Shut down their services and their fee-forservice. I see, yes, their franchisement. 

Mr. SCHOONER. Right. Again, look, there are many revolving 

funds that the government uses that make a lot of sense. For example, I gave you the anecdote of the government printing office, 

and I believe that when I talked about that, there is a difference 

between saying, for example, that members of the public should not 

be able to mail their holiday cards if they are not going to buy 

stamps from the Postal Service, and we know that the Postal Service is constantly generating income to deal with their future requirements and that we adjust the price of stamps periodically because we expect them to basically be playing at a zero-sum game. 

This is a completely different animal. This is all Federal appropriated money that is being passed around. It is a shell game. 

Senator MCCASKILL. Right. 

Mr. SCHOONER. And if anybody tells you that the fees are not a 

shell game, they are simply coming up with a highfalutin theory 

for what is going on. There is no need for this to happen whatsoever. 

Mr. NASH. I went back and looked at the franchise fund legislation, and it looked to me like the theory was quite sound. As I understood the way it came out, the theory was that this is six different agencies—— 

Senator MCCASKILL. Right. 

22 

Mr. NASH [continuing]. That could buy things, could in effect be 

providers of some category of services, OK. In effect, they were sellers, not buyers, and that to the extent that they could have been 

sellers. And I guess that gets us back to the special expertise, but 

to the extent that they could have been sellers accumulating, sort 

of like warehousers in a way. We can provide this kind of service, 

economies of scale and all the rest. Parking funds probably makes 

sense, right, because then they are selling you something. 

But it turned out all they were selling was buying services. They 

were not accumulating anything. They were not becoming great at 

something, and of course that eventually said that is sort of scandalous because it is all phony. 

But I sort of think the original idea was probably an OK idea. 

It was the implementation that got it. This 4 percent fee became 

the goal. 

Senator MCCASKILL. Right. 

Mr. SCHOONER. Just very briefly on this, if you go back to this 

original vision that Mr. Nash describes, the theory was that OMB 

would manage it, and they did not. 

Senator MCCASKILL. Right. 

Mr. SCHOONER. And they could have. 

Mr. NASH. One of the curious things in the franchise funds is 

when the Treasury Department decided they did not want theirs 

anymore, they tried to peddle it, and nobody would buy it. I guess 

it is gone. Is that right? 

Mr. DOKE. It is. It dissolved in October of last year. 

Mr. NASH. They went around to the whole Federal Government 

and said, would anybody like to have this thing? We do not want 

it anymore. 

Nobody would buy it, which I think tells you what its value was. 

Senator MCCASKILL. Yes. 

Mr. DOKE. Which brings up another point. I think Mr. Schwartz 

may agree with me on this. In observing the witnesses, and we had 

a lot of witnesses at the Advisory Panel, two things that stuck with 

me: One, we have talked about, the problems associated with the 

charging fees and how much and setting the fees and the problems, 

but another problem is the turf battles that you saw, that came out 

of the testimony. Once you have an agency, it is their turf, and 

they are very protective of it. That almost precludes any cooperation in trying to solve some of these problems. 

Senator MCCASKILL. Senator Bennett. 

Senator BENNETT. All right, let’s go back to a specific proposal 

that is before us, and we are back to high road for just a minute. 

I would anticipate that this would have a very chilling effect on 

small business trying to compete for Federal purchases. I said in 

my opening statement I have had the experience of small businesses running into far too much difficulty in trying to penetrate 

the Byzantine labyrinth of Federal procurement procedures, and 

one of the additional problems now is a requirement that you not 

only go through all of the procedures, but you change your competitive position in your nongovernmental marketplace by increasing 

your labor costs or other activities. 

I do not think it is specifically tied to labor. The Federal Government could say, well, if you are going to compete for Federal 

23 

money, you have to have this kind of carbon footprint. You have 

to have fill in the blank, whatever the flavor of the month for either a Republican or a Democratic Administration, of the kinds of 

things they would like to see happen. And if you will not do this, 

you cannot compete. 

Maybe I am overreacting from my own background as a small 

businessman, but I see this as a pretty bad slope to start to slip 

down in terms of the way you use the contracting, the opportunity 

to sell to the government, as a club to beat people up to get them 

to do other things that they would not otherwise do. And if they 

do decide to take that, it puts them at a competitive disadvantage 

in a free marketplace. 

Mr. NASH. Well, a normal company, the big company, one thing 

they have learned is that you do not sell to the Federal Government out of the same unit that you do commercial work with because of the additional costs. They are mostly overhead costs, mostly indirect costs, but they are huge. We do not know exactly how 

much. 

The only study we have ever had of that was the one that was 

done by the Analytical Sciences, TASC, the Analytical Sciences 

Company, when Jacques Gansler was running it, and they did. It 

is not a precise study, but they did do a fairly detailed study, and 

they came up with an 18 percent premium that it costs to do business with the Department of Defense, mostly in indirect costs. 

Senator BENNETT. So Boeing has two divisions: One that produces airliners for American airlines and one that produces—— 

Mr. NASH. Sure. 

Senator BENNETT. I was not aware of. 

Mr. NASH. There is a wonderful example in Scottsdale. Motorola 

had a commercial division and a government division about a mile 

apart in Scottsdale, and the commercial people were so scared of 

the government virus they would not deal with the government division. Finally, the Motorola company decided to sell the government division to General Dynamics because they already had the 

virus, and it could not hurt them any. 

Mr. DOKE. But before they decided to sell it, the government contract division, who could not afford to take their own division’s electronics from a competitor because that would not look good, they 

took, they bought from their Federal source—I mean from their 

electronics microchip company—and they gave it to the government. They put it on their proposal as zero cost, so the government 

could not come in and audit it. They had to do that because they 

just would not let the Federal Government in the door. 

Mr. NASH. That is very common. I mean that is across the board, 

and you have to. 

My advice to small companies has always been you can sell to 

the government if you have a product that they will not touch. 

They will not make you change it any. They will just buy your 

product, firm fixed price, and that is it. But if you begin to get into 

modifying your product—— 

Senator BENNETT. Or services. 

Mr. NASH [continuing]. All that kind of stuff, government specs, 

you are in trouble. It is going to cost a lot more money. It is going 

to raise your whole cost of doing business. 

24 

Mr. SCHOONER. Just going back to the original question, though, 

the issue is far broader than high road. Keep in mind that right 

after the inauguration, the Administration immediately pumped 

out three Executive orders that fundamentally gave union contractors a competitive advantage in the marketplace. 

Now you may, or any individual member of Congress or the 

President may, conclude that the single best purpose of your public 

procurement regime is to redistribute wealth, and you may be in 

favor of unions, you may be opposed to them. But as we sit here 

today, I believe that most of us speak for the public procurement 

process, which is focused on value for money for the government 

and customer satisfaction, so that government agencies can actually achieve their missions. 

All of these social policies, whether it is pro-union or anything 

else, at the end of the day, what they do is they increase barriers 

to entry. They increase the complexity of the process. They add to 

the work that the acquisition workforce actually needs to do. 

Therefore, they reduce competition. So, in the long run, they are 

not intended to maximize the ability of the public procurement system to be efficient and to serve its ultimate purpose. 

Now again, countries all over the planet use the public procurement system to redistribute wealth, but at some point it seems to 

be me we ought to start with value and customer satisfaction, and 

then worry about redistributing the spoils. 

Mr. NASH. Incidentally, it is the 30th anniversary of GAO’s recommendation that you repeal the Davis-Bacon Act. They made that 

recommendation in 1980, and that was a sound recommendation 

then, and it is still a sound recommendation. 

Mr. SCHOONER. Could we at least raise the threshold? I am 

sorry. 

Mr. SCHWARTZ. Dual regulation, I think this is something you 

will get an unusual degree of agreement on, is a bad idea. I mean 

I think that we ought to restrict carbon output, but those obligations should not be different for government contractors. Whatever 

they should be, they should be. So the idea that you have a backdoor channel of regulating your economy, or any subsector of it, because you want to be a government contractor is inherently a bad 

idea. That we agree on. 

But as the Davis-Bacon Act example suggests, it is relatively 

hard to get people to agree across the board that we are going to 

focus singlemindedly on value, that we are not only not going to 

introduce new distractions from value, but that we are going to go 

back and reconsider all the old ones. 

Again, I will start with an introductory class, and I say, I bet you 

I can find some collateral social and economic policy where you are 

willing to say, I do not want my government spending my taxpayer 

dollars that way even if it is not best value. So we all have our soft 

underbellies on this. 

And if somehow you could get an agreement to comprehensively 

devote yourself to value in the procurement system and not to do 

other things, but that would, among other things, involve some 

things that maybe some folks in the room will not be happy with, 

including the things that we do to prefer small businesses. So, if 

we took the gloves off entirely and said, we are going back to value 

25 

and nothing but, I think people on both sides of the aisle would 

find the places where they are unhappy, and there has not been 

a willingness to do that across the board. 

Mr. NASH. Yes, I agree with that. 

The big breakthrough we made on the 800 Panel back in 1991 

and 1992 and came into FAS in 1994 was we said we cannot get 

rid of all these policies. Most of them, people agree with. 

Let’s try to simplify. Let’s raise what used to be the Small Purchase Threshold; it is now called the Simplified Acquisition Threshold. We raised that to $100,000, and we also put rules in that said 

let’s write a commercial buying set of rules that does not have to 

comply with all these policies, and we did that. That is in Part 12 

of the FAR. 

So, in buying commercial products and services, and in procurements under the Simplified Acquisition Threshold, I think we made 

great strides in cutting a lot of that mess out. So your small business can probably do OK selling a commercial product or selling 

under $100,000. 

Senator BENNETT. All right. Yes, sir. 

Mr. DOKE. When I get a new client, the first thing I ask when 

they want to get their first government contract or their first big 

government contract, I request the opportunity to talk to their top 

management, board of directors if possible. I sometimes get it, 

sometimes I do not. 

The whole point of it is to ask to discuss with them the difference 

between commercial contracting and government contracting, and 

the point I try to make is that the government is not just another 

customer. It is a different business. And if you are not willing to 

understand that it is a different business, and either have the experience and expertise or be willing to invest in it to get it, you 

should not take that government contract. 

After I spend about 11⁄2 to 2 hours with them in answering questions, most of them go forward, but I say I have done my job. 

I am not trying to say it is a bad business. I make my living in 

this business, so I am not trying to talk you out of it, although you 

think I am. What I am trying to tell you is as a matter of ethical 

obligation, that if you are not willing to do these things, you better 

stay away from it. Some of them stop right there and do not go forward. 

Senator BENNETT. OK. Well, I think I am hearing implementation of high road would make many companies less competitive for 

government contracts, that most small businesses could not absorb 

the additional costs, and it would, for those that try, push them 

into unionization where they otherwise would not go. Is that a fair 

summary? 

Mr. SCHOONER. I think the only quibble I would have with that 

is the absorption of the costs. I mean it is a pass-through. 

Senator BENNETT. Oh, I see. 

Mr. SCHOONER. So the bottom line is it is not going to have any 

impact to the corporate bottom line, but the government arguably 

would pay more for labor than it otherwise would. 

Senator BENNETT. The pass-through would be government. 

Mr. SCHOONER. Right. 

26 

Senator BENNETT. Yes, which is not necessarily something we 

want. 

Mr. SCHOONER. It does seem somewhat inconsistent with many 

of the goals for our public procurement system—paying more for 

the same service. 

Senator BENNETT. Yes. Thank you. 

Senator MCCASKILL. Let me talk about some of the other issues 

here, and I want to wrap this up with transparency, all of them, 

because it appears to me that what we did not have 20 or 30 years 

ago was the ability to put these things out for everyone to see realtime in a fast and efficient way. Have any of you given any thought 

or can you direct us to any written works that you are aware of? 

I get your point that you made, Mr. Doke, about just making 

them reveal price premium. Just that alone would have an amazing impact. Really, what is really going on here is all of this stuff, 

you all know about it, but this is really a little like the Wild West 

in that nobody really is watching. Nobody is paying attention. Nobody knows. 

Now Hurricane Katrina, Iraq, and Afghanistan, I mean we figured out. I was reminded of that when you talked about better past 

performance. I would like to meet the contracting officials that are 

evaluating that better past performance since I have watched 

award fees being handed out for contractors who have been miserable at the execution of their contracts. 

But this transparency issue is fascinating because it seems like 

to me if we could do something as simple as after the fact you have 

to show all the laundry. You have to show exactly what the price 

premium was. You have to show exactly what the differentials 

were. Maybe we could even figure out how many Alaska Native 

corporations are fronting for major corporations in major contracting all over this government. It seems to me that transparency 

piece, with what we have now with the Internet, could really be a 

game-changer. 

Mr. DOKE. There is just one line item, on a report that has to 

be made now, that could be added, that would solve that problem 

on price premiums. There are wonderful reports that go up, that 

are required all the time through the budgeting allocation and so 

forth, and every contract is recorded. But that information is not 

it, and it would be very simple to require it. 

Mr. SCHOONER. But we can do much better. I mean we can take 

these steps. If we just take a simple example, look how far we have 

come just in the last few years with regard to the Federal Procurement Data System. It used to be you could only get these reports 

in print. Finally, we have the FPDS online, then the FPDS next 

generation, but we did not get the leapfrog forward until we went 

to USASpending.gov—— 

Senator MCCASKILL. Right. 

Mr. SCHOONER [continuing]. Which frankly was piggybacked on 

a private sector initiative, but again a big step forward. 

Take the next step. It was not so long ago where the Commerce 

Business Daily came out in print. We moved to FedBizOpps. Now 

you can get the solicitations online. So we are making progress. 

It has frustrated me for years that the public and the media 

seem to have no interest whatsoever in the number of contractor 

27 

personnel that are dying in Iraq and Afghanistan instead of our 

military personnel every year. You read in the newspapers about 

the military personnel that die. You do not read anything about the 

contractors who are driving the truck dying all the time. We are 

talking one out of every four bodies that came home in a bag or 

a box since 2007, and the public will not even talk about it. 

But we just saw serious improvements on that because the Department of Labor recently started publishing the contractor fatality data from the Defense Base Act insurance claims on the Web. 

They just did this recently. It is very easy. 

But I want to go to Marshall’s point and take it the next step 

forward. We have consistently collected and published data on the 

awards of government contracts. What we have no insight into 

whatsoever is what value the government actually gets for their 

money. Let’s focus on outcomes of contracts, not just the beginning, 

because it is a night and day difference. We could do that. 

Senator MCCASKILL. OK. Talk about what that would look like. 

Mr. SCHOONER. Well, the bottom line is one thing that we could 

do is correlate, at a minimum. We already have the entry when the 

contract is awarded. Why do we not have an entry for what the 

final delivered price of it was? 

And again, Marshall talked about premiums. We have PPIRS. 

We have this past performance database. 

Senator MCCASKILL. Right. 

Mr. SCHOONER. There are many ways that we can—— 

Senator MCCASKILL. Which has its flaws. 

Mr. SCHOONER. Oh, just a few, but at least, but again they are 

working on that, and it shows you how far we have come and how 

much progress we can make. 

But we can literally demand anything we want in terms of information on outcomes, and it seems to me that the information is 

easily available, but at some point we need to take the step forward, saying this is valuable to us as consumers. 

Last point on this, on the defense side of things, we constantly 

talk about major systems acquisitions and all of the terrible things 

about major systems acquisitions, but we only track three metrics. 

We track the original price of the contract, we track the original 

schedule for deliveries, and we track the original performance criteria. But those are irrelevant by the time the system gets delivered 5, 10, or 15 years later. It has evolved. 

What we need to be thinking about are meaningful metrics that 

track the value the government gets for the money they spend, and 

we are talking about the kinds of things that private businesses do 

every single day. They teach it in the business schools. Successful 

executives know how to do it. The government can do it too. 

Mr. NASH. Let me give you an example that I just wrote up. GAO 

has put cost-type contracts on the high-risk list. Cost-type contracts 

are a big thing up here on the Hill. They are bad contracts, terrible 

contracts, everybody is saying. 

In the last GAO report, they went through all the stuff about 

they do not motivate anybody and all this theory. But the one question they never asked was: How many of the cost-type contracts 

that are awarded get fully performed at the original cost? 

28 

When I ask industry people that, they say most of our cost-type 

contracts, we perform at the cost. We do not come in and ask for 

more money. 

But we do not, and that is the outcome issue. We do not know 

that. So we say, theoretically, cost-type contracts are a bad form of 

contract. 

Senator MCCASKILL. I think you are right. I think we have not 

analyzed. But I would tell you in some of the contracts I have really waded around in significantly, they did not deliver at the price. 

The original LOGCAP contract was estimated to be $700 million a 

year, and the first year it came in at $20 billion. 

Mr. SCHOONER. With all due respect, keep in mind the value of 

the contract is that it is all about surge capacity. 

Mr. NASH. Yes. 

Mr. SCHOONER. The contract is an unlimited vehicle that permits 

the U.S. Military to send an unlimited number of troops anywhere 

on the planet and sustain them indefinitely, regardless of the requirement. 

Senator MCCASKILL. No. I am telling you the original estimate 

in theater by the contingency operation was $700 million. 

Mr. SCHOONER. I will not dispute that there are warts in the 

LOGCAP contract. But I believe a generation from now at the National Defense University, at the War College, at the military academies, we will look back and say despite the problems at the margin, that it may be that the LOGCAP contract is the single most 

significant advance in military history. Never before has a military 

been able to project such potency, modality, and sustainability anywhere on the planet. We can send our military anywhere in any 

numbers and keep them there indefinitely, and we can fight and 

have our troops well rested, well fed, clean, and effective. 

I am not saying that there cannot be better cost control, but the 

vehicle itself is a remarkable achievement that military historians 

will be talking about for generations. 

Senator MCCASKILL. I absolutely could not agree with you more, 

that logistical support on a contractual basis is a breakthrough, but 

we could spend 4 hours debating how they did LOGCAP and the 

way it was executed. 

You talk about, and some of you had some really good testimony, 

about oversight of the management of the contract. When I have 

somebody look at me in the eye, in theater, and I ask them, why 

did that contract go from $20 billion to $15 billion in 1 year, and 

the person in charge of the contract looked at me and said, it was 

a fluke. This is not a contract management that we need to be putting down in the history books as well managed. 

Mr. SCHOONER. And we come back to personnel once again which 

is the one thing you have heard from all of us. 

Senator MCCASKILL. Exactly. So, hopefully, by the time we have 

refined our logistical support contracts that began with LOGCAP 

I and now we have the evolution of LOGCAP IV, we will have 

something that we can be very proud of. But I would say LOGCAP 

I and II is not something that any of you would want to teach. 

Mr. NASH. Let me suggest that if it had been a fixed-price contract, it would have been equally badly mismanaged. 

Senator MCCASKILL. I am sure it would have. 

29 

Mr. NASH. The type of contract would not have impacted how it 

was managed. 

Senator MCCASKILL. I am sure it would. 

Mr. NASH. But I will tell you one thing it would have done. It 

would have made Marshall Doke rich. [Laughter.] 

Because if it had been fixed-price, there would have been change 

orders—— 

Senator MCCASKILL. Right. 

Mr. NASH [continuing]. To process probably 20 a day in the history of the contract. 

Senator MCCASKILL. You are exactly right. You could not be 

more right about that. There would have been a new history-making change order operation. 

Mr. DOKE. Let me disagree with that. I was fortunately broken 

into this business as counsel to the Army Contract Adjustment 

Board. And you remember when the missile crisis came, and we 

were building those silos. There were claims before that board 

where they were having 2,000 change orders a day on that effort. 

Mr. NASH. That is right. I was working for one of the companies, 

and we converted our contract to a cost reimbursement contract because it did not make any sense. 

Senator MCCASKILL. Right. 

Mr. DOKE. I want to toss Mr. Schwartz the softball because the 

data, having the system for the data is one thing. But as we found 

on the Advisory Panel, there is a great reporting requirement, but 

we could not rely on the data because the people who were entering 

the data did not know what they were doing. So it was totally unreliable. 

Senator MCCASKILL. So we get back to acquisition personnel 

again. 

Mr. DOKE. Acquisition workforce. 

Mr. NASH. I have to comment on that. Regarding increasing the 

acquisition workforce, a group of these contracting people yesterday 

asked me this: Who would you hire? 

What I said to them, if you are going to increase your staff in 

the contracting office, do not hire any more 1102s. You have plenty 

of 1102s. Hire clerical people because the contracting people are 

doing clerical work 30 percent, 40 percent of their time. 

Senator MCCASKILL. Right. 

Mr. NASH. And I say to them, not only are they underutilizing 

your skills, but you are all lousy clerks. You are overskilled, and 

that is why the data is no good, because they are not good clerks. 

If you just hired a good high school graduate who wanted to be a 

clerk and had the competence to be a clerk, you would get a lot better data. 

Mr. SCHWARTZ. I think there are other reasons, and one of them 

is that what we heard on the panel was that it is easy to issue 

mandates to collect this data or that data. But a contracting officer 

faced with a choice of getting the contract out and acquiring the 

goods and services you need, the last thing at the end of the day 

is to fill in some data report. And so if you want good data, you 

have to pay for it. It is not free. 

It is certainly true that we found that the government’s data 

were unreliable, and because we had a variety of expertise within 

30 

the panel sometimes you could do a special query, and you would 

come back with numbers that we all knew could not be right. 

Senator MCCASKILL. Right. 

Mr. SCHWARTZ. So we have come a long way, but there is a long 

way to go to getting reliable data. 

And take Marshall’s example. I happen to think the middle 

ground between us is disclosure of data on things like price premiums. That is a good idea. But if you tell a contracting officer, do 

everything you are doing and do this too, something is going to 

break. 

Mr. NASH. Yes. 

Senator MCCASKILL. Senator Bennett. 

Senator BENNETT. I think we have plowed most of the ground we 

need to plow. I want to thank the panel for your expertise and your 

willingness to mix it up between yourselves, and thank you, 

Madam Chairman, for calling the hearing. 

Senator MCCASKILL. Let me see if I cannot, for the record, summarize some of the high points, so that we can tee off on these 

areas as we go forward and as we begin to prepare for the hearing 

with the OMB personnel and with procurement policy folks. 

Transparency is important, particularly as it relates to price premium. 

We need to look at whether or not we are developing competency 

in an area that is providing these services to other agencies instead 

of it being a free-for-all with every agency thinking they can provide every type of service with competency. 

More guidance in the FAR about what competition really is, since 

we have not really defined that. We all use the word, but it does 

not mean that it is. I will remember Abraham Lincoln and his tail. 

Contract management by agencies is lacking because many times 

the people who are entering into the contracts are not the people 

using the services, and therefore you have a disconnect in the system in terms of overseeing the contracts and managing them appropriately in terms of getting value because the folks who are 

using the services have nothing to do with executing the contracts. 

And overall, we have the acquisition workforce. Senator Collins, 

who normally sits in your chair, Senator Bennett, would be glad 

that we are ending with that because obviously she has worked on 

this for a while, and I have joined her in that effort. And I know 

Senator Bennett agrees that you do get what you pay for, and we 

will not fix most of these problems until we get to the point that 

we have an acquisition workforce that is the right size and the 

right competence, to administer these contracts in a way that taxpayers will get value. 

There is an awful lot of work to do in this area. Frankly, there 

are some questions that I had that we did not get to. But we may 

prevail upon you, a couple of you or maybe all of you, and will not 

give all of you all of the questions but divide them up, because I 

think all four of you could speak with authority on any of the questions we would have in this area, in a way that is very reliable and 

that frankly I would take to the bank. 

Senator BENNETT. I agree with your summary, Madam Chairman, but let the record show the Ranking Member also summarizes that he does not like high road. [Laughter.] 

31 

Senator MCCASKILL. I think we figured that out. I think we figured out the high road part. 

Once again, you all generously gave a significant part of your 

time this afternoon. This is something I actually enjoy, this area 

of government policy. I actually read IG and GAO reports as recreational reading. I know I am weird, but I do, and I am going to 

continue down this path with hopefully some tenacity and see if we 

cannot prevail upon OMB. 

As I tell the White House how you feel about high road, Senator 

Bennett, I am going to also prevail upon them to see if we cannot 

get OMB and maybe Jeff Zients, who is supposed to be performing 

a government-wide performance function. This would be a perfect 

area for this performance officer to dive into because it is government-wide and there could be real impact with a little bit of effort 

from OMB. 

So, thank you all very much. 

The hearing is adjourned. 

[Whereupon, at 4:12 p.m., the Subcommittee was adjourned.] 

(33) 

INTERAGENCY CONTRACTS: 

MANAGEMENT AND OVERSIGHT—PART II 

WEDNESDAY, JUNE 30, 2010 

U.S. SENATE,

AD HOC SUBCOMMITTEE ON CONTRACTING OVERSIGHT,

OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:32 p.m., in room 

SD–342, Dirksen Senate Office Building, Hon. Claire McCaskill, 

Chairman of the Subcommittee, presiding. 

Present: Senators McCaskill and Brown. 

OPENING STATEMENT OF SENATOR MCCASKILL 

Senator MCCASKILL. We have plenty to talk about today, so we 

will go ahead and get started. I think that Senator Brown will be 

joining us and hopefully we will find Mr. Gordon somewhere before 

too long so he has an opportunity to speak today. He is an important part of this subject matter. 

We are here today for the Subcommittee’s second hearing on 

interagency contracts. At the first hearing on this subject, I told 

our distinguished witnesses, four of the leading experts on government contracting, that I really enjoy this area of government policy. That certifies that I am a weirdo, because most people don’t 

enjoy the world of government contracting, and especially interagency contracting, because, frankly, even within the purview of 

government contracting, this is very inside baseball. To really get 

into the kind of arcane and acronym-laden world of interagency 

contracting, you have to have tenacity, perseverance, and maybe a 

screw loose. 

But I think it is incredibly important that we begin to take a 

much closer look at interagency contracting, what it is trying to be, 

what it is, and what it has dramatically failed to be, and I think 

as we look at interagency contracting and really try to understand 

it, we can improve it, particularly if we get people from the various 

agencies that are represented here all talking amongst ourselves 

and figuring out what works and what doesn’t work. 

Thank you, Senator Brown, for being here. 

It is intended, interagency contracting, to provide a benefit to the 

government. Among those benefits, it should streamline contracting. It should increase efficiency. It should leverage the massive spending power of the government in order to get better value 

for the taxpayer dollar. 

34 

At our hearing in February, I asked our witnesses whether interagency contracting was getting those kinds of results. I heard from 

them that it wasn’t, that the government had too many contract vehicles, that it wasn’t getting the best prices, that nobody knew 

whether these vehicles were actually improving government contracting because nobody was in charge or even trying to collect accurate data as it relates to interagency contracting. 

Last month, the GAO reported many of the same problems. According to the GAO, there is duplication among interagency contracts. It is unclear whether or not these vehicles are saving any 

money. And the government doesn’t have enough information about 

interagency contracts to even know if they are saving money. 

This isn’t the first time that GAO has reached such conclusions, 

and GAO’s recommendations echo prior recommendations of the 

Special Panel on Government Contracting, called the SARA Panel, 

and agencies’ Inspectors General that were never implemented. I 

plan to ask our witnesses today, who together have decades of distinguished service as leaders in Federal acquisition, why these recommendations to improve interagency transparency and accountability have been ignored for so long. I will also ask our witnesses 

how and why interagency contracting works the way it does today 

and what steps we should use to make it work better. 

I also plan to continue the Subcommittee’s oversight of interagency contracts. This is not something we are going to fix overnight. But, frankly, we are never going to fix it unless we improve 

our attention span as it relates to oversight. A GAO report every 

4 or 5 years repeating the same recommendations, the same failed 

policies of not collecting the data, of not requiring the kind of documentation to prove that we are getting a better value, if we do not 

continue to shine a bright light of attention on this problem, it is 

going to languish where it is right now for decades to come, and 

I think all of us, if we are brutally honest, know that. We are going 

to keep on this until we can get some real change in the area of 

interagency contracting. 

I want to thank all of our witnesses for being here today and I 

look forward to our discussion, and I would let Senator Brown 

make an opening statement, but he disappeared on me. See if he 

would like to. He can always do it after the witnesses testify, if he 

would rather. 

Senator BROWN. Just my wife calling. Sorry. 

Senator MCCASKILL. And you are welcome to make an opening 

statement if you so choose. 

OPENING STATEMENT OF SENATOR BROWN 

Senator BROWN. Thank you. I will get the old glasses, too. Thank 

you, Madam Chairman. It is good to be back at this hearing with 

you, and as the Ranking Member of this Subcommittee, it is an 

honor to join with you in exploring the important issues of this 

Subcommittee that go to the core of how government conducts business. 

Unfortunately, I was not a Member of the Subcommittee at the 

time of the Part I hearing, where the subject matter experts from 

academia and industry provided key insights into what is working 

and what is not with regard to interagency contracting. Taking 

35 

these lessons learned and applying them to the way the U.S. Government traditionally does business is vital to getting the best 

value for the American taxpayer and the best value for our dollars, 

I think is really what concerns me most, and we have had these 

conversations before. 

As the largest single consumer on the planet, our Federal Gov- ernment has spent over $537 billion on goods and services last year 

alone. That is $130 billion more than the annual revenue of WalMart. We are all familiar with the buying and selling of goods, and 

we know that if you are purchasing on a large scale, you expect to 

get a break. You expect to get the best bang for your dollar. As the 

largest purchaser in the world, the Federal Government should receive these same wholesale prices. In fact, it should be receiving 

the best prices for goods and services in the marketplace, in the 

United States or throughout the world, quite frankly. 

Unfortunately, that is rarely the case, and the premise of harnessing this purchase power is at the core of our hearing today, 

Madam Chairman, and how we can efficiently and effectively use 

interagency contracts to leverage the purchasing power of the Federal Government to achieve maximum savings for the taxpayers. 

Let me be clear up front. The use of interagency contracting has 

significant benefits when used properly, as we all know. It allows 

the government to leverage its aggregate buying power and reduce 

acquisition costs through simplified and expedited methods for procuring goods and services. However, more needs to be done. We 

need to think outside the box. We need to do it better. The people 

expect us to do just that. 

And just as every successful business does, the U.S. Government 

should be strategically assessing its requirements and capabilities, 

using the most efficient mechanism to achieve the best value for 

the American taxpayer. Interagency contracting can achieve these 

goals, but as the GAO’s recent report indicates, the government is 

falling short of these objectives. The GAO report raises the same 

troubling questions on interagency contracting that have continued 

for over a decade. How can we expect the government to leverage 

its buying power to get the best prices when we continue to create 

multiple contracts to purchase the same kinds of goods and services from the same vendors? 

As you know, Madam Chairman, the President in December 2009 

implemented a requirement that the government save $40 billion 

annually by fiscal year 2011. An important component of his initiative is the strategic sourcing and the kinds of tough problems we 

are taking on here today, and even as the Administration concedes 

that the benefits of strategic sourcing and smarter contracting have 

not yet been fully utilized. 

So the GAO report also identified significant obstacles that prevent government buyers from realizing the advantages of interagency contracts. A key problem identified by the GAO is the government buyers lacked the necessary data on the available contracts to make fully informed decisions. They also identified the 

lack of a cohesive policy for agencies to follow on interagency contracting. This lack of a clear plan creates a leadership void that 

pushes agencies to establish their own contracts with their own 

vendors rather than using existing contracts and saving money. 

36 

And this duplication of effort exacerbates the strain on an already 

stressed acquisition workforce. 

In the report, the GAO also questioned whether the GSA, who 

manages the Multiple Award Schedules (MAS) program, the largest interagency government contracting program, is achieving the 

best prices for the taxpayer. Once again, are we getting the best 

bang for the dollar? The key problem GAO identified in the MAS 

program was the lack of available transactional data that could be 

assessed by GSA to negotiate better prices for the government, and 

with you, Madam Chairman, I am interested in exploring the actionable solutions in today’s hearing to address these longstanding 

issues. 

And I would like to leave here knowing who in the Administration is accountable for ensuring that the government delivers on its 

promised acquisition savings. What policies and guidance are necessary to achieve the benefits of interagency contracting? I look forward to hearing the witnesses perspectives on these critical issues. 

Thank you. 

Senator MCCASKILL. Thank you, Senator Brown. 

Let me introduce the witnesses. John Needham is Director in the 

Government Accountability Office’s Office of Acquisition and 

Sourcing Management. He is also the lead GAO for the State of 

Mississippi for GAO’s ongoing evaluation of American Reinvestment and Recovery Act program in Mississippi. 

Dan Gordon is the Administrator for the Office of Federal Procurement Policy. Welcome, Mr. Gordon. I know this is your first 

time in front of the Subcommittee and we welcome you. In that capacity, he is responsible for developing and implementing acquisition policies for the Federal Government. Prior to his current position, Mr. Gordon served 17 years at the Government Accountability 

Office, and was also a member of the adjunct faculty at George 

Washington University Law School, one of the finest law schools in 

the country, I think. A good law school. Well, not as good as 

Mizzou, but I was just trying to be nice. He is a new witness in 

front of the Subcommittee. I am trying to give him a break here. 

[Laughter.] 

Steve Kempf is the Acting Commissioner for the General Services Administration’s Federal Acquisition Service. In that capacity, 

he sets strategic direction and oversees the delivery of over $50 billion worth of products, services, and solutions to the Federal customers. Mr. Kempf also has held numerous other positions within 

the GSA throughout his government career. 

Rick Gunderson is the Acting Chief Procurement Officer for the 

Department of Homeland Security (DHS). In that capacity, he is 

the lead executive responsible for the management, administration, 

and oversight of the Department’s acquisition programs. He previously served as the Assistant Administrator for Acquisition and 

Chief Procurement Executive for the Transportation Security Administration (TSA). 

Diane Frasier is the Director of the Office of Acquisition and Logistics Management and the Head of Contracting Activity at the 

National Institutes of Health (NIH), where she oversees all acquisition, property, supply, and transportation programs. Prior to joinVerDate Nov 24 2008 08:30 Apr 20, 2011 Jkt 056844 PO 00000 Frm 00040 Fmt 6601 Sfmt 6601 P:\DOCS\56844.TXT SAFFAIRS PsN: PAT
37 

1The prepared statement of Mr. Needham appears in the Appendix on page 96. 

2The chart referenced in Mr. Needham prepared statement appears in the Appendix on page 

106. 

ing NIH, Ms. Frasier had a long career with the Department of Defense (DOD). 

Welcome to all of you. It is the custom of this Subcommittee to 

swear in all witnesses that appear before us, so if you don’t mind, 

I would ask you to stand. 

Do you swear that the testimony you give before the Subcommittee will be the truth, the whole truth, and nothing but the 

truth, so help you, God? 

Mr. NEEDHAM. I do. 

Mr. GORDON. I do. 

Mr. KEMPF. I do. 

Mr. GUNDERSON. I do. 

Ms. FRASIER. I do. 

Senator MCCASKILL. Thank you very much, and we will begin 

with Mr. Needham from GAO. 

TESTIMONY OF JOHN K. NEEDHAM,1 DIRECTOR, ACQUISITION 

AND SOURCING MANAGEMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. NEEDHAM. Madam Chairman and Senator Brown, I am 

pleased to be here to discuss the Subcommittee’s interest in improving the management and oversight of interagency and enterprise-wide contracts. 

There are four types of contracts that agencies use to leverage 

their buying power. As you can see from the chart here,2 we have 

the Multi-Award Schedules, which is run by GSA and the Veterans 

Administration. We have the Multi-Agency Contracts (MACs) and 

the Government-Wide Acquisition Contracts (GWACs). Those are 

the interagency contracts. These, along with the GSA Schedule contracts, are also enterprise-wide contracts, which agencies just use 

within one department, but they also provide that ability to leverage an agency’s buying power, as well. 

In addressing the Subcommittee’s interest, I will draw on our recently completed work at 10 Federal agencies to discuss transparency issues and the need for a framework for managing 

GWACs, MACs, and enterprise-wide contracts, as well as management and pricing issues specifically associated with the Multiple 

Award Schedules program. 

In recent years, sales under the MAS program have been relatively flat and obligations on the GWACs have declined slightly. 

Importantly, the total amount of money spent in 2008, using the 

three enterprise-wide contracting programs that we reviewed, is 

approaching the amount spent for all GWACs during the same period. Collectively, Federal agencies use these types of contracts to 

buy at least $60 billion in goods and services during fiscal year 

2008, with the bulk of the spending, about $47 billion, being spent 

on the mass program within GSA and the VA. 

Senator MCCASKILL. Could I interrupt your testimony just for a 

minute? 

Mr. NEEDHAM. Sure. 

38 

Senator MCCASKILL. Would you go back through, Mr. Needham, 

and explain clearly what the difference is between these different 

programs, just so that we have it very clear on the record—— 

Mr. NEEDHAM. Sure. 

Senator MCCASKILL [continuing]. The difference between a 

GWAC and a Schedule and so forth. 

Mr. NEEDHAM. We will start with the Multiple Award Schedules, 

which is probably the oldest, and that is run by GSA and through 

delegation by VA for the medical area. Essentially, these are indefinite delivery, indefinite quantity (IDIQ) contracts. They basically 

open up and they have a certain amount of dollars that they allow 

that agencies can then basically buy off of. They don’t have to go 

through the procedures of doing an independent procurement. And 

so they basically get task and delivery orders, depending if it is a 

service or some goods. And that has been around since early, I 

guess, really since before 1950, they have been using that. 

The second is what is called the Multi-Agency Contract, which is 

also an IDIQ contract, and that is within the particular agency. 

Now, they can open it up for access by other agencies, and that is 

where it becomes an interagency contract, but it functions very 

much like the Award Schedules at GSA or the VA. 

And then third is the GWACs. Now, the GWACs was created 

back in the 1990s through the Clinger-Cohen Act and it was essentially designed to facilitate the procurement of information systems 

(IT). 

The last contract, which is not an interagency contract, is enterprise-wide. These are essentially like a MAC, but they are for a department as a whole. So instead of having multiple small contracts, 

they have one large contract where they—it works somewhat like 

with the GSA, where you have a large number of vendors available 

and the terms and prices have been pre-negotiated. The Department of Navy has SeaPort, and Homeland Security has the EAGLE 

program. So those programs are relatively recent. They were given 

that name by the SARA Panel. The SARA Panel called for kind of 

a creation of these types where you have these large agency-type 

programs. 

But those are the four types. Three of them are interagency and 

one is not. The growth of the enterprise-wide contracts has been 

pretty significant in recent years. 

Senator MCCASKILL. But other agencies can’t buy from the enterprise-wide? 

Mr. NEEDHAM. No. Only agencies within that department or—— 

Senator MCCASKILL. So the only people that can buy from Eagle 

are people in DHS? 

Mr. NEEDHAM. Exactly. 

Senator MCCASKILL. OK. Got it. Sorry to interrupt. 

Mr. NEEDHAM. That is OK. 

Senator MCCASKILL. I will give you extra time. [Laughter.] 

Mr. NEEDHAM. Thank you. Leveraging the government’s buying 

power and providing a simplified and faster procurement method 

are benefits that these vehicles promise. However, because the Federal Government does not have a clear and comprehensive view of 

who is using these contracts and if their use maximizes the governVerDate Nov 24 2008 08:30 Apr 20, 2011 Jkt 056844 PO 00000 Frm 00042 Fmt 6601 Sfmt 6601 P:\DOCS\56844.TXT SAFFAIRS PsN: PAT
39 

ment’s buying power, their benefits can only be assumed, not assured. 

The most basic problem is one of data and governance. No one 

knows the universe of contracts available, and when there is information, there are inaccuracies in the data. Also problematic is the 

lack of consistent government-wide policy on the creation, use, and 

cost of awarding and administering some of these contracts. I 

would point out that it is the least problem with the GWACs. 

While recent legislation and OMB initiatives are expected to 

strengthen oversight and management of MACs, there are no initiatives underway to strengthen approval and oversight of the 

growing use of enterprise-wide contracts. This can lead to a situation where agencies unknowingly contract for the same goods and 

services across a myriad of contracts, with many of the same vendors providing similar products and services on multiple contracts. 

This only increases cost to both the vendor and the government. 

As you can see on this new chart here, the top 10 GWAC vendors 

offered their goods and services in a variety of government contracts that all provide information technology, goods, and services. 

Of the 13 different contract vehicles, five of the 10 vendors were 

on 10 or more of these. You might ask, why are there so many contracting vehicles? Basically, when we talked with the departments 

and agencies we visited with, they told us that they want to avoid 

paying fees for the use of another agency’s contract. They want to 

gain more control over procurements within their own particular 

organization. And they want to allow for the use of cost reimbursement contracts, which can’t be done under IDIQ contracts, which 

is like the General Services Multiple Award Schedules program, for 

instance. 

To get a better handle on these contracts, we have recommended 

that OMB improve the transparency of and the data available on 

these contracts, building on earlier work that they had done. And 

also to develop a framework that provides a more coordinated approach in awarding MACs and enterprise-wide award contracts, especially since it is the vehicle for the Administration’s Strategic 

Sourcing Initiative. And last, we recommended to OMB that they 

ensure that agencies do a business case analysis in which they address potential duplication with existing contracts before new 

MACs and enterprise-wide contracts are established. 

Now, I would like to turn to GSA’s MAS program—which is the 

largest provider of interagency contracts—needs to focus on being 

a provider of choice for government agencies. To do so, it needs to 

address key challenges in effectively managing the mass program 

and offer the best prices to its customers. When we recommended 

to GSA they need to collect transactional data on the mass task 

and delivery orders and prices paid and then provide this information to the people who are negotiating the contracts in the agencies 

so they have actual data they can work with so they can negotiate 

on their own. 

To make use of its pricing tools, such as pre-award audits, and 

between 2004 and 2008, they saved $4 billion in cost avoidance by 

using these pre-award audits. Also to use greater use of their prenegotiation clearance panels—it is kind of a quality control device 

40 

1The prepared statement of Mr. Gordon appears in the Appendix on page 116. 

they have within that—to get the best price and obtain insight into 

the marketplace. 

And furthermore, GSA needs to strengthen its Program Office’s 

authority, clarify roles and responsibilities, and realign its structure to facilitate consistent implementation of the policies and the 

sharing of the information across the multiple units within the 

business portfolios. 

And it also needs to improve its measurement of the program 

performance through more consistent metrics across the GSA units 

that manage the interagency program, including metrics for pricing, and I will give you an example on this. We found that they 

look at the competitiveness of their prices with the private sector. 

They need to look at the competitiveness of their prices with other 

agency contracts. That would be one area in terms of pricing where 

they need to focus. 

And finally, GSA needs to put a greater emphasis on customer 

satisfaction and outreach, starting with improving their customer 

surveys, so that they can get the kind of insights they need to 

evaluate program performance. Perhaps, Madam Chairman, a more 

responsive GSA would lead to agencies looking to GSA for goods 

and services rather than creating their own vehicles to meet their 

own needs. 

In agreeing with our recommendations, both OMB and GSA recognize the importance of addressing these problems and the need 

to resolve them so as to take advantage of the government’s buying 

power for more efficient and more strategic contracting. 

Madam Chairman, this concludes my prepared statement. I will 

be happy to answer any questions you or Senator Brown may have. 

Thank you. 

Senator MCCASKILL. Thank you, Mr. Needham. Welcome, Mr. 

Gordon. 

TESTIMONY OF HON. DANIEL I. GORDON,1 ADMINISTRATOR, 

OFFICE OF FEDERAL PROCUREMENT POLICY, U.S. OFFICE 

OF MANAGEMENT AND BUDGET 

Mr. GORDON. Thank you, Chairman McCaskill, Ranking Member 

Brown. I am very appreciative of the invitation to be here and to 

speak with you about this important topic. Let me begin by commending the Subcommittee for focusing attention on this very important subject. 

Interagency contracting, as you said, can be a way for the 

government to leverage its buying power, and as Senator Brown 

pointed out, to make better use of its overstretched acquisition 

workforce. But there are serious risks when management has been 

deficient, and I believe that GAO was right to include interagency 

contracting on its High-Risk List in 2005. 

I believe, though, that there have, in fact, been improvements, 

and today, notwithstanding the ongoing challenges that I will be 

talking about, the facts are better than they are often portrayed to 

be and better than they were just a few years ago, partly due to 

the efforts of you, Madam Chairman, and other Members of Congress. 

41 

We have succeeded in addressing the abuses that raised justifiable concerns just a few years ago: Out-of-scope work, inadequate 

competition, improper parking of funds, and unclear responsibilities of the various agencies. Those were issues that caused GAO 

to put interagency contracting on its High-Risk List in 2005, and 

I think it is notable that they are not issues in GAO’s most recent 

report. But we have much more work to do, especially in leveraging 

the government’s buying power. 

Let me say a couple of words about the improvements to the 

management of the process, because management has not been 

adequate in the past. GAO, as well as the SARA Panel, the Acquisition Advisory Panel, have praised the management improvements 

put in place over the past few years, especially with regard to 

OMB’s role in considering business cases by any agency that wants 

to serve as the executive agent for a GWAC. 

Second, we have put management controls in place with respect 

to assisted acquisitions, situations where one agency helps another 

one conduct a procurement. Again, the lack of clarity about the two 

agencies’ respective responsibilities was cited by GAO in 2005 as 

one reason that interagency contracting was added to the HighRisk List. OFPP issued guidance on interagency acquisitions in 

2008 that addressed this management responsibility, and I think 

with some success in terms of implementation by the agencies. Notably, DOD and the Department of Interior did an assisted acquisition together recently in a way that can serve as a model for interagency contracting. The result was increased competition, lower 

cost, and the services that are being purchased will provide better 

support for our service members and their families. 

But we need to do more to improve management, especially with 

respect to what are called Multi-Agency Contracts. This is the area 

where I think there has been the greatest concern about the problems with data and with proliferation, and we have shared that 

concern. OFPP will be issuing guidance this summer requiring that 

agencies do a business case before they award a contract with the 

intent of having it widely used by other agencies. 

I should note, though, as I explain in my written testimony, that 

the review we have conducted over the past several months has 

persuaded me, at least, that the MACs, as they are called, are not 

used as much as is often thought. Some have suggested that agencies are placing more than $100 billion worth of orders on other 

agencies’ contracts, and in fact, I think the accurate figure is probably below $5 billion. Notwithstanding that, we need to improve 

management in this area and we, in OFPP, will continue to focus 

on it. 

I would like to spend a moment talking about our efforts to leverage the government’s buying power. In this regard, schedules probably represent the greatest opportunity for strategic sourcing, and 

we have only begun to tap that potential. Recently, at the beginning of this month, GSA awarded a set of Blanket Purchase Agreements (BPAs), that offer real potential for substantial governmentwide savings on office supplies, of which the government buys over 

$1 billion worth a year. The bottom line is that these BPAs were 

negotiated government-wide and they will be open to every Federal 

42 

1The prepared statement of Mr. Kempf appears in the Appendix on page 127. 

employee at every Federal agency government-wide, with expected 

savings of something like $200 million over the next 4 years. 

In conclusion, progress has been made, but we recognize that we 

in OMB have much more work to do with our agencies in the Executive Branch. We will continue to focus on improving management 

and on leveraging the government’s buying power. 

This concludes my opening statement. I would welcome any 

questions. Thank you. 

Senator MCCASKILL. Thank you very much, Mr. Gordon. Mr. 

Kempf. 

TESTIMONY OF STEVEN J. KEMPF,1 ACTING COMMISSIONER, 

FEDERAL ACQUISITION SERVICE, U.S. GENERAL SERVICES 

ADMINISTRATION 

Mr. KEMPF. Good afternoon, Chairman McCaskill and Ranking 

Member Brown. My name is Steven Kempf and I am the Acting 

Commissioner of the Federal Acquisition Service within the U.S. 

General Services Administration. Thank you for inviting me to appear before you today to discuss the Government Accountability Office’s report findings and to speak about the benefits of interagency 

contracting. 

GSA’s Administrator, Martha Johnson, has focused on three specific goals in our agency: Operational excellence, customer intimacy, and innovation in all that we do at GSA. The Federal Acquisition Service, FAS, seeks to instill these three principles in how 

we support our customers and conduct our operations. FAS offers 

a wide array of products and services, including our fleet of over 

215,000 vehicles, the government’s largest telecommunications program, Networx, and the issuance and management of over three 

million purchase and travel cards, to name just a few. We also 

manage five Government-Wide Acquisition Contracts, and the Multiple Award Schedules program, which provides a vast selection of 

over 22 million professional services, equipment, and supplies on 

over 18,000 contracts with the private sector. 

With respect to the GAO report, I would like to state that GSA 

agrees with the recommendations made and actions were already 

underway to address each one of them identified in the report. Furthermore, we have been working with our Office of the Inspector 

General (OIG) to target mass contracts for pre-award audits. We 

have asked our IG to perform more audits, but with shorter durations and with a focus on delivering actionable information to our 

contracting officers. 

The Schedules program had nearly $50 billion in sales last fiscal 

year. Given the breadth and scope of the program, we take the 

stewardship of the Schedules very seriously. We strive for operational excellence in all we do, and here is what we are doing to 

improve our performance. 

GSA is investing in its acquisition processes to develop a more 

agile, modular system which will drive process improvements and 

deliver better quality contracts. Our Enterprise Acquisition Solution is a long-term multi-year effort that will support the creation 

of an electronic end-to-end contracting system. When we embarked 

43 

on this endeavor, our very first priority was the pricing module. 

This module is currently in user testing and will be piloted on 

three schedules this fall. This new tool will greatly enhance our 

contracting officers’ capability to negotiate better prices under the 

Schedules. 

GSA is also enhancing our customer-facing systems. One of these 

systems is GSA Advantage. GSA Advantage was actually launched 

before Amazon and is the government’s online shopping tool. Each 

day, GSA Advantage records 500,000 hits from its pool of 600,000 

registered users. This fall, the upgrade to GSA Advantage will include using Web tool features such as enhanced search capabilities, 

product recommendations, price comparisons, commercial pictures 

and description of offerings, and direct links to companies’ shipping 

and tracking Web sites. The enhancement of Advantage will also 

allow for easier price comparison for all of our users, whether they 

are purchasing from GSA or not. 

GSA’s eBuy is yet another e-tool available to our customers to 

support acquisitions. This is an online tool used to compete procurements. This fiscal year alone, GSA eBuy has already seen 

agencies post almost 30,000 requests for quotations, an increase of 

over 14 percent from last year. Industry has responded with almost 

90,000 quotes, resulting in contracting officers making an estimated $3.4 billion in awards this year using the eBuy system. 

eBuy is a convenient tool for conducting competitions under both 

the Schedules program and our GWACs. 

GSA is currently in the second generation of its GWAC offerings. 

The Office of Management and Budget has designated GSA to 

manage GWACs for information technology services. Ours are 

Alliant, Alliant Small Business, VETS, COMMITS, and 8(a) 

STARS. Four of the five managed GWACs are devoted solely to 

small businesses. 

GSA has a special commitment to support service-disabled veteran owned businesses through its VETS GWAC. The statutory 

government-wide procurement goal for these businesses is 3 percent. In 2008, agencies did not even reach half of that goal. The 

VETS GWAC program is ideally suited to help close the gap. 

Alliant, GSA’S only enterprise GWAC, provides agencies access 

to highly qualified industry partners. This past week, Alliant exceeded over $1 billion in awards in just its first 14 months of operation. Alliant generates robust competition among our industry 

partners, with an average of four bids per task order, and Alliant 

Small Business, also in its first year, is providing strong competition, receiving an average of five bids per task order. 

GSA has an obligation to assure that we work with contracting 

officers to ensure that they understand how best to utilize our acquisition vehicles. To this end, FAS has partnered with the Federal 

Acquisition Institute (FAI) to develop training, which we expect to 

be available early this fall. This first course will be GSA’s internal 

use, focusing on the proper award of mass contracts. A second 

course will be a Schedules 101 course for our customers, and finally, an advanced use of Schedules course. Future plans include 

courses on GWACs, sustainable acquisition practices. This year at 

the GSA Training Conference and Expo, we delivered over 20,000 

44 

1The prepared statement of Mr. Gunderson appears in the Appendix on page 133. 

hours of training on 152 different courses, free of charge for our 

customers. 

GSA’s programs offer enormous cost and time savings to our Federal customers. We continue to strive to deliver operational excellence in all that we do at GSA and support to assist other agencies 

in the delivery of their mission. The value in consolidating requirements and leveraging the buying power of agencies across the government is a role uniquely managed by GSA. 

Thank you for allowing me to appear before you today, and I am 

happy to answer any questions you might have. 

Senator MCCASKILL. Thank you, Mr. Kempf. Mr. Gunderson. 

TESTIMONY OF RICHARD K. GUNDERSON,1 DEPUTY CHIEF 

PROCUREMENT OFFICER, U.S. DEPARTMENT OF HOMELAND 

SECURITY 

Mr. GUNDERSON. Madam Chairman and Ranking Member 

Brown, thank you for this opportunity to appear before you to discuss the Department of Homeland Security’s contracting program, 

and in particular, its use of interagency contracts. As the Acting 

Chief Procurement Officer for DHS, I am the lead executive responsible for the management, administration, and oversight of the 

DHS acquisition program. In that capacity, I oversee and support 

nine procurement offices within DHS. The mission of my office, in 

conjunction with the component contracting offices, is to provide 

the needed products and services to meet the DHS mission and to 

do so in a way that represents sound business and demonstrates 

that we are good stewards of taxpayer dollars. 

The threats we face are variable, and as a result, the acquisition 

program must be flexible and provide alternatives to deliver effective solutions. Similarly, the contracting officers and program managers must assess each requirement and determine the optimal acquisition and procurement strategy to meet the given need. This 

strategy includes the examination of existing contracts, both internal and external to DHS, as well as the award of new contracts. 

Determining the procurement strategy is an important part of 

the pre-award process and is critical to the execution of the program and delivery of needed capability in a timely and cost-effective manner. In accordance with the Federal Acquisition Regulation, the contracting officer first considers required sources for particular supplies and services. They also consider existing available 

contracts, including the General Services Administration’s GWACs, 

Multiple Award, and Federal Supply Schedules. Additionally, if a 

particular need is covered by a Federal Strategic Sourcing Initiative, the contracting officer will leverage the vehicle to achieve 

demonstrated savings as well as to limit the resources necessary to 

execute a new procurement. 

While these different contracting alternatives are utilized regularly, given the unique scope of the DHS mission, there is often a 

need to conduct a new procurement. In situations where there are 

like needs across the Department, an enterprise-wide contract may 

be determined to be the best strategy. An enterprise-wide contract 

can provide a combination of benefits, including, one, support of 

45 

1The prepared statement of Ms. Frasier appears in the Appendix on page 136. 

specific mission needs; two, support of strategic sourcing initiative; 

three, a vehicle to be used by various contracting activities in lieu 

of conducting multiple new procurements; and four, assisting in 

achieving socio-economic objectives, such as small and small disadvantaged business goals. 

As noted in a GAO report, DHS regularly leverages its EAGLE 

and First Source contracts, enterprise-wide vehicles for IT services 

and products, respectively. Shortly after DHS was formed, the 

Chief Information Officer recognized a need to establish an enterprise architecture for DHS and to develop a strategy for an IT infrastructure that both integrated systems and eliminated inefficiencies. Given the preexisting IT environments, we recognized that 

this would be a challenging undertaking and would not be completed in a short time frame. As a result, we determined that a 

cadre of contractors that were familiar with the DHS IT infrastructure would be best positioned to deliver the needed capability in 

the most cost effective and timely manner possible. While the products and services available under these contracts are similar to 

those found under GSA programs, this rationale justified the award 

and use of the contracts. 

Another example when an enterprise-wide contract is the best 

strategy is our Professional, Administrative, Clerical, and Technical 

Services (PACTS) program. This service-disabled veteran owned 

small business set-aside was established to increase opportunities 

for SDVOBs and better position DHS to meet the Federal-wide goal 

of 3 percent. Since the award of these contracts, DHS has increased 

its awards and we are currently on target to meet the Federal goal 

this year. 

While enterprise-wide contracts have been integral to our contracting program, contracting officers and program managers have 

effectively utilized GSA contracts where appropriate. Over the past 

31⁄2 fiscal years, DHS has awarded approximately $9.6 billion on its 

EAGLE and First Source contracts, but also awarded $7 billion on 

GSA contracts, including nearly $1.4 billion on IT efforts. Having 

the flexibility afforded by alternative contracting vehicles has proven both effective and beneficial to the contracting and program offices in their efforts to deliver mission capability. 

Thank you for your continued support of the DHS acquisition 

program and for the opportunity to testify today, and I look forward to your questions. 

Senator MCCASKILL. Thank you, Mr. Gunderson. Ms. Frasier. 

TESTIMONY OF DIANE J. FRASIER,1 DIRECTOR, OFFICE OF 

ACQUISITION AND LOGISTICS MANAGEMENT, NATIONAL INSTITUTES OF HEALTH, U.S. DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Ms. FRASIER. Good afternoon, Chairman McCaskill and Ranking 

Member Brown. Thank you for the invitation to appear before you 

today to discuss efforts by the NIH to ensure competition, efficiency, and transparency in its interagency contracting program. 

In response to the Clinger-Cohen Act, NIH established the NIH 

Information Technology Acquisition Assessment Center (NITAAC), 

46 

program to provide technical and acquisition subject matter expertise in the area of technology management to the NIH. NITAAC established several indefinite delivery contracts with the goal of providing a means for the NIH acquisition community to acquire in 

the most efficient manner the most up-to-date information technology solutions and products for its laboratories and programs. 

News of the value and effectiveness of using the acquisition vehicles established by NITAAC quickly spread and other components 

within HHS, as well as other Federal agencies, began using these 

vehicles in order to meet their information technology needs. 

In September 2000, NIH was designated as an Executive Agent 

by the Office of Management and Budget to establish and administer Government-Wide Acquisition Contracts. Three contract programs were established with 128 prequalified and well-recognized 

prime contractors, offering a full array of IT expertise and solutions 

in the form of customized IT support services, maintenance, and 

computer products. 

Since the inception of NIH GWACs, 14 Federal departments and 

more than 21 agencies have utilized them to fulfill critical information technology needs. During fiscal years 2001 through 2009, departments and agencies have placed task and delivery orders 

against these NIH contracts, resulting in obligations ranging from 

$68 million to $1.1 billion for a given fiscal year, totaling $6.7 billion. 

Currently, NIH is not managing any multi-agency contracts. NIH 

does take advantage of the GSA Multiple Award Schedules to obtain supplies and services that it cannot acquire either through its 

internal inventories or through other NIH contracts. 

With each iteration of its GWACs, NIH strives to enhance competition, efficiencies, and transparencies. These GWACs give Federal agencies access to the most progressive and innovative technologies and solutions available from contractors that are expert in 

both IT and health-related fields. Further, within the advent of the 

Affordable Care Act, solutions made available through these vehicles will go far in assisting Federal agencies in executing reform 

initiatives and aligning with the Federal health architecture. 

NIH continually strives to ensure that small and small disadvantaged businesses receive a fair proportion of the total dollars 

awarded under the NIH’s GWACs. In fact, 70 percent of our GWAC 

awards were made to small businesses. 

NIH has streamlined the task order process under the GWACs 

through the development of agile Web-based tools that enable Federal agencies to ensure fair opportunity and obtain the highest 

level of service at fair and reasonable prices. NIH also provides its 

customers with acquisition and technical expertise to assist them 

in defining the requirements in a manner that promotes high-quality solutions. 

NIH’s GWACs offer competitive pricing. In fact, HHS designated 

one of these GWACs as a strategic source as it offers pricing at 

rates lower than established catalog or market prices. 

Pursuant to its Executive Agent designation, NIH is required to 

maintain transparency with respect to its overall management of 

the GWAC program. In this regard, NIH regularly reports to OMB 

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47 

tracting practices, competition, and financial management. Transparency is further achieved through outreach to customer and contractor communities, active involvement in NIH’s Industry Advisory Committee, which is utilized to enhance communications between NIH acquisition management personnel and the GWAC 

holders, and a Web site containing a wealth of useful information. 

As an Executive Agent, NIH provides an alternative to Federal 

Government agencies in meeting their IT requirements through a 

value proposition that best supports health care reform initiatives, 

efficiency, competition, and transparency through acquisition process and meaningful small business participation. 

Thank you for the opportunity to testify before you today. I am 

happy to answer any questions you may have. 

Senator MCCASKILL. Thank you, Ms. Frasier. 

Let us get started with the overall problem that we don’t really 

know if these contracts are saving money, and if so, how much, because of the lack of reliable data that we can compare across these 

various contracting vehicles. I am always hesitant to start talking 

about databases because we have already had so many hearings 

about flawed databases in this room that I have a headache from 

it. Creating a database doesn’t do you much good if it is not gathering accurate information consistently, if it is not reliable, and 

just creating another database doesn’t work. 

For example, flat-screen TVs. The Federal Government probably 

buys thousands and thousands of them every month. Is there any 

place I could go right now if I wanted to know what the average 

price of a flat-screen TV that we are paying for in the government? 

Is there anyplace I could go and find that information? Anyone? 

Mr. KEMPF. I think there are some places you could go and get 

some prices on it. I think GSA Advantage is one place that would 

list some prices that we have negotiated under the schedules for 

prices for those kinds of products. 

Senator MCCASKILL. And, Mr. Gunderson, before you buy a flatscreen TV at DHS, do you look at those schedules? 

Mr. GUNDERSON. The buying activity would examine—for that 

type of item, they definitely—— 

Senator MCCASKILL. You need to hit your microphone, sir. 

Mr. GUNDERSON. Oh, I did. I am sorry. Definitely, the contracting officer would utilize the GSA opportunities for those types 

of items and go there and they would do a competitive buy off of 

there. 

Senator MCCASKILL. OK. So are you saying with confidence, and 

I know, Ms. Frasier, you escaped DOD. I hate to take you back 

there, because that is a contracting morass, a special kind of contracting morass that I am fairly familiar with. Are you all confident 

that anywhere you go in the Federal Government that they are 

checking the GSA Schedule and they are getting at or near the 

lowest price on the GSA Schedule for a 47-inch flat-screen TV? 

Ms. FRASIER. The community is taught that they should be reviewing all the prices and selecting the best price available. However, in practice, whether they are or not, that is debatable. But 

they have been instructed that it is the rules under the Federal Acquisition Regulation that is what they should be doing, seeking the 

best prices, making the price analysis. 

48 

Senator MCCASKILL. And who is in charge of trying to figure out 

if we are doing that? This is so fragmented. That is why there is 

no accountability. And I know Mr. Needham could probably talk all 

day about that. But they are supposed to, right? And I am talking 

about something really simple, a flat-screen TV. But is there any 

confidence that people are actually doing that? I don’t sense that 

there is. 

Mr. GORDON. Chairman McCaskill, if I could—— 

Senator MCCASKILL. Sure. 

Mr. GORDON. Your example of a flat-screen TV is actually a particularly good one because the approach we are taking as we are 

moving forward with strategic sourcing is to focus on lines of business, if you will. In IT, as I am sure you have heard, we in OMB 

are taking initiatives to rethink the way the government is doing 

its IT projects with my colleague, Vivek Kundra. We are rethinking 

how that works. 

I will give you an example of another line of business, overnight 

delivery services. We discovered, and this is consistent with your 

question, all sorts of agencies had all sorts of arrangements with 

the companies that do overnight delivery. We were paying a whole 

range of prices. So what we have now done is a Government-wide 

Strategic Sourcing Initiative, and we now have good prices for overnight delivery. 

One of the challenges, though, for us at OMB is ensuring that 

the entire government uses that contract. Once we have those good 

prices, we need to get the word out and be sure that the agencies 

are taking advantage of those good prices rather than, as is implicit in your question, not checking and perhaps paying more than 

we should. 

Similarly, with our new Blanket Purchase Agreements (BPAs), 

for office supplies, one of our responsibilities at OMB, working with 

our partners at GSA, of course, is to get the word out so that a contracting office, whether it is someone sitting in a national park in 

Wyoming or a military base overseas, knows we have these BPAs. 

That is where we should be buying. 

Senator MCCASKILL. Well, it would be nice if they could call 

them something other than BPAs, because that is part of the problem here. In preparing for this hearing, I felt like I was in the 

Armed Services Committee. You guys have as many acronyms as 

they do. BPAs is our version of Costco, right? 

Mr. GORDON. Actually, I am not a member of Costco, so I am not 

positive. [Laughter.] 

Senator MCCASKILL. Well, it is an attempt—a BPA is a Blanket 

Purchase Agreement where you know there is a widget that everyone uses and you get a best price possible for that widget. Then everybody can buy the widget for that price. 

Mr. GORDON. Yes, but the problem is, too often, we have had single-agency BPAs, which in my view defeats the purpose. 

Senator MCCASKILL. Right. 

Mr. GORDON. That is why in office supplies we said, we are not 

doing single-agency BPAs. These BPAs are going to be available 

not only to every Federal employee, but the Federal employee 

doesn’t need to know the name BPA. They don’t need to know the 

acronym. They don’t need to know a number. They don’t need to 

49 

say, ‘‘Hello, I would like the BPA price.’’ If they walk up to one of 

these 11 small businesses and one large business—that large business is Office Depot—if they walk into an Office Depot with their 

government charge card, they will get those prices. They don’t need 

to ask for them. They don’t need to come up with acronyms and 

numbers. 

Senator MCCASKILL. And can they click and get those prices and 

have them delivered? 

Mr. GORDON. You bet. They will get them automatically. 

Senator MCCASKILL. OK. So why don’t we just require everybody 

to do that? 

Mr. GORDON. We are moving out right now on that front. But 

this is the beginning of a process. Office supplies are our first success story. We need to do more. IT is one of the areas where, in 

my opinion, we have the richest areas of opportunity for more strategic sourcing. 

Senator MCCASKILL. Well, if we have one big vendor and 11 

small ones and we have Internet capability, I guess I don’t get why 

don’t you just say you have to? Why don’t you just say, everybody 

in the Federal Government, you can no longer buy office supplies 

except through this vehicle. I mean, if this were a business, we 

would have done this decades ago because we would have cared 

how much money we spent. 

Mr. GORDON. I appreciate the point, and let me tell you, when 

we met with industry, and I was there in the meetings with industry in December and January, they said, if you want to get good 

prices on these BPAs, you are going to need written commitments 

from the agencies that their people will have to use them. So we 

heard, we went to the agencies—and GSA was very helpful on 

this—we came with letters of commitment of a quarter-of-a-billion 

dollars a year, where agencies said, we will tell our people to use 

these BPAs. We are right in line with your question. 

Senator MCCASKILL. Well, I guess I am curious, why do we have 

to get it in writing from them? Why don’t we just say they have 

to? I mean, can’t the President just say to the Executive Branch, 

you guys have to buy office supplies through this purchasing mechanism? 

Mr. GORDON. We certainly want them to, but there could be reasons—there can be all sorts of specialized reasons, unique circumstances. I am not sure that it is helpful to make—— 

Senator MCCASKILL. For office supplies? 

Mr. GORDON. I am not sure that we need to make it illegal to 

buy elsewhere, but we certainly want this to be their—this should 

be the default. This is where they go. They buy from these BPAs. 

Senator MCCASKILL. I think you are going to be disappointed unless you make it illegal. 

Mr. Needham, yes? 

Mr. NEEDHAM. We looked at BPAs last year and what we found 

is that of 320 cases, they didn’t go for discounts in 47 percent of 

the cases that we looked at. And it is often incumbent—it is like 

with task orders on these interagency contracts. You need to have 

some initiative at the contracting officer level to do this. They have 

to have some incentive. Right now, they are held accountable for— 

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50 

able for playing by the rules. They want to make sure they follow 

the rules and they want to make sure they do it well and quickly. 

But in terms of getting a discount, there is no incentive for—— 

Senator MCCASKILL. There is no incentive for a lower price. 

There is incentive for getting it there on time, because the people 

who they are serving are—that is the squeakiest wheel that they 

have got. 

Mr. NEEDHAM. Right. Another point on BPAs, when we looked at 

them, of the 320, they are required every year under the FAR to 

go back and review whether or not the prices they negotiated originally are good. In only 19 of the 320 cases, or about 6 percent, did 

they actually do that. 

Senator MCCASKILL. Oh, Lord. 

Mr. NEEDHAM. So there is that issue that there has to be initiative at the contracting officer level to make sure—— 

Mr. KEMPF. Chairman McCaskill, that is one of the things that 

we have started to do at GSA, and I talked a little bit in my testimony about some of the training. And one of the things that we 

recognize, and I think it was apparent in the first panel, is that 

we have an acquisition corps that needs a little bit of training. 

One of the things that I always hear when I go out and talk 

about the Schedules program is they are difficult. They don’t understand how to use them. We run into some of the things that Mr. 

Needham spoke about with respect to how do you do a BPA? How 

do I get the right prices? How do I manage it? 

So that is one of the things we were working with FAI in developing a couple of courses—— 

Senator MCCASKILL. What is FAI? 

Mr. KEMPF. The Federal Acquisition Institute. 

Senator MCCASKILL. Thank you. 

Mr. KEMPF. To develop courses on how to use the Schedules appropriately and how to use the Schedules in an advanced manner 

on things like how to develop a BPA and how to get the right 

prices. 

One of the things that we need to learn how to do, the contracting corps, that is, is to learn how to leverage the Schedules 

when they do buy, so aggregating requirements, learning to buy at 

the right times of the month, all of those things that can actually 

drive discounts lower when they compete the procurement, either 

for a single buy or for something like a BPA. 

Senator MCCASKILL. Senator Brown. 

Senator BROWN. Thank you, Madam Chairman. I have enjoyed 

your line of questioning, and just to, if I may, play off it a little 

bit, with regard to the BPAs, it seems like we just need to make 

a decision and stick to it and tell them what they need to do, not 

sort of, kind of. 

I find, being here over 100 days now, that the biggest problem 

we have is people just need to make decisions and stick to them 

and then let people know what the consequences are if they don’t 

do it. It seems kind of common sense. 

I believe, similarly to you, Madam Chairman, that if we don’t do 

it, they will—if we don’t draw the line in the sand, it will not get 

done. So I know the President has made an effort and a commitment to try to save money, and as you know, we are struggling 

51 

with a whole host of things, Madam Chairman. Later, we are doing 

an unemployment extension. We are looking for summer jobs 

money, FMAP, and we are talking $40 billion that the President 

feels he can save in government waste or overpayments or streamlining, consolidating. 

When do we start getting really serious about this and what efforts are you actually doing to save me, my kids, and my 

grandkids—when I have them—some money? I mean, when are we 

going to have that money available so we can put it to other uses, 

because it seems to me, as a newcomer here, that we are just not 

focusing on making those tough decisions, and just doing basic 

things that would save us dollars immediately. So I am wondering 

if each one of you could kind of tell us what you are doing to adhere to the Administration’s request to save $40 billion. 

Mr. GORDON. Senator Brown, if I may, we take it very seriously 

and we view it as our responsibility. I view it as my personal responsibility in this job to see to it that we save that money and reduce the risk that our taxpayers face when we don’t do a good job 

contracting. We are doing it on many different fronts, but I can go 

through the high points here. 

We are terminating programs that are not effective so that we 

are cutting back on acquisition and not buying things that we can’t 

afford or that we don’t need. 

We are focused on strategic sourcing. We are focused on cutting 

back and revamping the way we do IT procurements, the way we 

do financial systems management procurements. We need to save 

money. We have gone too long getting used to the idea that contractors can go over the budget, beyond the Schedule, and not deliver what they have promised us. 

Senator BROWN. And get rewarded. 

Mr. GORDON. Absolutely. We are trying to change that culture. 

I will tell you, and it is a point that you mentioned, Senator, in 

your opening remarks, and I think it is absolutely true, part of the 

problem here is that our acquisition workforce has not been supported. We have not invested in them adequately. The President’s 

budget includes $158 million to build up our civilian agency acquisition workforce. That is sorely needed. We pay a price when we 

don’t have well trained, adequately staffed acquisition offices. 

We are also working to reduce the use of no-bid or sole source 

contracts. We have to be sure that we get adequate competition. 

That drives prices down. 

We have got to be moving more to fixed price contracts, because 

cost reimbursement contracts and especially time and materials 

contracts risk costing us too much. 

Let me stop there, but we are completely focused on the very concerns you are raising. 

Senator BROWN. So do you have a number that you have ultimately saved to date or you plan to save in the future? 

Mr. GORDON. We are focused on the $40 billion challenge from 

the President. Our report that came out recently talked about $19 

billion in savings plans. Both the terminations and the strategic 

sourcing will provide very real savings. 

Senator BROWN. OK. Does anyone else want to comment? 

52 

Mr. GUNDERSON. Yes, thank you. I am going to echo some of 

what Mr. Gordon said, because in response to last July’s OMB 

memo on achieving these savings and reductions of high-risk contracts, we actually developed a plan and submitted it and it addressed a lot of the things that Mr. Gordon mentioned, such as 

what are we going to do to reduce the use of cost type, time and 

material, labor hour contracts? What are we going to do to increase 

competition? 

A lot of that gets to how well do you define your requirements. 

A lot of times, if you don’t have good requirements, you are going 

to be forced into cost type contracts. So we are working with our 

program offices to get them better trained and also better staffed 

so they can define those requirements. 

We are also looking at increasing the strategic sourcing opportunities across the Department. Where we can in-source things that 

used to be contracted out which are better suited to be done in 

house, we are doing that, seeing some savings there. And also, 

where it is appropriate to have a program reduction or an elimination, we have also looked at those opportunities. 

I don’t have the numbers with me today, but we already have 

seen millions in savings and we are going to continue to do that 

over the next 2 years to meet the goals. 

Senator BROWN. Madam Chairman, it would be helpful if maybe 

at some point we get an update as to what the goals are and what 

they have saved to date so we can report back to our folks, our citizens at home as well as our leadership. 

The Economy Act was passed in 1932. It is a method of avoiding 

duplication of work on the government’s behalf, and as you know, 

it was done in an effort to foster broader interdepartmental procurement. It provided one Federal agency would buy goods and 

services from another rather than from private industry. In addition, we have 34 separate funding authorities for multiple agencies, 

some dating back as early as 1958. 

On the funding authorities, and this question is to the GAO and 

OFPP, on the funding, are there still 34 funding authorities, and 

if so, why? Should these dated funding authorities be reviewed to 

align with how the Federal Government does work today? 

Mr. NEEDHAM. Senator Brown, that is an interesting question. In 

terms of 34 funding authorities, we will work to get that defined. 

I don’t have an answer right now for you. But I know going 

through, there are multiple authorities, and I was thinking of a 

book that was written about a dozen years ago. It was called ‘‘The 

Tides of Reform,’’ and it started with the Economy Act. It talked 

about all the different pieces of legislation that have occurred over 

the years, and the author, who used to work for this Subcommittee 

at one point, said that administrative sediment just builds up and 

builds up, and there has not been really a comprehensive lookback, because we passed a number of reforms back in the 1990s 

and there is not really a systematic thinking of how do these all 

fit together and how do they interplay so that they actually can be 

operationalized by that contracting officer. 

It is a difficult job for the person who is trying to write the contract and do the buying for the government because they have so 

many rules they have to comply with. Now, General Counsels’ ofVerDate Nov 24 2008 08:30 Apr 20, 2011 Jkt 056844 PO 00000 Frm 00056 Fmt 6601 Sfmt 6601 P:\DOCS\56844.TXT SAFFAIRS PsN: PAT
53 

fices will typically try to make those work for them, but there are 

a lot of rules. 

In terms of those different funding authorities, they are pretty 

well defined for each in the FAR, and so people know where they 

are. But in terms of the actual inventory of them, we can get that 

information for you later. 

Mr. GORDON. Senator Brown. 

Senator BROWN. Yes. 

Mr. GORDON. It is interesting that you raise this issue because 

it reminds me that we actually have made some progress. If we 

had been having this hearing six or 7 years ago and we talked, for 

example, about franchise funds, which are one of those funding authorities that have caused confusion, where I worked at the time, 

GAO had concern that these franchise funds were being abused, 

that one agency would use another to do an assisted acquisition. 

That is to say, the Department of X would have the Department 

of Y run an acquisition for them. And we discovered when I was 

at GAO that one year’s funds would be shifted over, parked there, 

and then they could be used in future years, taking advantage of 

what was essentially a loophole, and it was a cause for real concern. 

The Department of Interior’s National Business Center was one 

of those franchise funds that came under a lot of criticism for that 

very reason. At one point, DOD was prohibited from using those 

franchise funds outside the Department until the situation was corrected. The situation was corrected, and in fact, the National Business Center has received a clean bill of health from the Inspectors 

General at both DOD and the Department of Interior. That is why 

this past year DOD was able to again do an assisted acquisition 

with Interior for the Military One Source program in a way that 

turned out to be a model use of the flexibilities that interagency 

contracts provide. 

It is, I think, a very nice case study of a problem that was recognized here on the Hill and elsewhere, the problem being addressed, 

and the situation being improved. 

Senator MCCASKILL. So nobody is parking funds anymore, Mr. 

Gordon? 

Mr. GORDON. I would not be willing to say that no one was parking funds. 

Senator MCCASKILL. I am willing to bet there is some parking 

still going on. 

Mr. GORDON. What I will tell you is people, if they are doing it, 

know that it is not proper. And in fact, 6 or 7 years ago, and this 

was mentioned, I think, in either a GAO report or an IG report, 

one of the agencies, one of the franchise funds that I think no 

longer is in operation in the acquisition area actually had on their 

Web site one of the attractions of using them was that you could 

park your funds. Those days are gone, which is not to say we have 

perfection. We don’t have perfection, but we have addressed the 

problem. People at least know that it is not proper. 

Senator MCCASKILL. Well, since we have talked about parking 

funds, the thing that got my attention in this area when I first arrived here there was a hearing, I believe in this Subcommittee, 

where there was a lot of talk about interagency contracting and 

54 

there were examples of advertisements that we examined, including the ability to park funds and then the fees. 

Why are agencies able to charge other agencies fees, and has 

that been the appropriate incentive to streamline and maximize 

value for taxpayers? Or, in fact, have the fees been just a way that 

we can play a shell game with the public’s money? 

Mr. GORDON. I am perfectly willing to go first, but I don’t want 

to deny my colleagues the ability to respond. 

Senator MCCASKILL. Well, you can start, Mr. Kempf, because I 

think some of the agencies say they are starting their own enterprise efforts because you are too expensive. 

Mr. KEMPF. Well, the General Services Administration, especially 

the Federal Acquisition Service, and I think the Public Buildings 

Service (PBS), to a certain extent, as well, we recoup our costs 

through the setting of fees. We don’t intend to ever collect more 

than we actually need or the costs of our operations. We get very 

limited appropriation, and in our mind, it creates an incentive for 

us to hold down costs, to deliver goods/services, and provide what 

the customers want. 

So it makes us look at the breadth of services we have and to 

make sure that they are—in many ways, it is just like entrepreneurship that you would see in the private sector to make sure we 

are delivering what the agencies want, because they do not have 

to use us, with limited exceptions. They can go elsewhere, which 

sometimes they do. 

Senator MCCASKILL. Well, let me ask Mr. Gunderson and Ms. 

Frasier, do you think that your agencies have looked inward in 

terms of providing interagency contracting vehicles because the 

fees at GSA were too high? 

Mr. GUNDERSON. In the case of EAGLE and First Source, our IT 

contracts, that was not the primary driver of deciding that we 

needed to have those contracts. If you probably do the math, we 

could probably say that from a financial perspective, we are better 

off. But the reason EAGLE and First Source were set up was to 

meet the kind of the strategic IT mission that we saw, bringing all 

these different IT legacy environments together. How are we going 

to consolidate the number of data centers? How are we going to get 

to an enterprise architecture? 

We felt having a suite or a cadre of contractors that would become more familiar with the Department’s IT environment over a 

short period of time, they would be better positioned to respond to 

the individual orders going forward. So in that situation, the fees 

were not the primary issue for us. 

Senator MCCASKILL. OK. So the fees were not the primary issue. 

I get the sense that EAGLE really came about because you all 

wanted your own deal. 

Mr. GUNDERSON. In the sense we felt that it would both meet the 

mission need better, delivering the products and services, and from 

a business standpoint, we also felt it was going to be a good business deal for the Department and the public. 

Senator MCCASKILL. Was that intuitive that you felt it was going 

to be a good business deal, or is there any data that you can give 

us to support that? 

55 

Mr. GUNDERSON. If you look at, historically, what we have spent 

to date—if you want to look at it financially first, if you look at—— 

Senator MCCASKILL. I do. 

Mr. GUNDERSON [continuing]. The amount of money that we have spent, on EAGLE, I believe it is over $8 billion so far. If you look 

at the fees associated with that, and there are some caps that 

would be invoked in there, there would still be millions of dollars 

of fees that would be associated with that. 

And if you look at the cost, the estimated cost to establish those 

contracts, the EAGLE and First Source internally, we estimated 

those to be a few million dollars. I would probably say $3.5 to $4 

million. So from a financial perspective, we see it in a positive 

manner. 

Senator MCCASKILL. Well, I would really like to see the numbers. 

The auditor in me would like to see you demonstrate that what you 

have done has saved taxpayers money. 

Mr. GUNDERSON. Yes. The estimates I gave you, they are based 

on labor hours of FTE that were associated with the program and 

setting that up, also other miscellaneous costs, support contract 

costs, facility costs associated with establishing a competition, and 

things like that. So we can provide information to you. 

Senator MCCASKILL. Mr. Gordon, I know that you are supposed 

to be policy. Part of the problem here is that there is no one really 

in charge, and I know the challenges that DHS had in its infancy. 

They were significant. You were cobbling together a bunch of agencies and you were asked to do it overnight and there were incredible demands in terms of IT capability. I understand that it is almost instinctive, almost a reflex that you would want to have this 

inside and not be relying on outside contracting with another government agency. 

But I don’t get the sense that these decisions are being made 

with money as the primary driver. I get the sense these decisions 

are being made so the agencies can maintain flexibility and responsiveness as opposed to whether or not any money is going to be 

saved. 

And I guess I am saying that, Mr. Gunderson, because I don’t 

think that it is easy for you—I don’t think there was a financial 

analysis done prior to making the decision to do EAGLE, was 

there, an in-depth financial analysis as to the costs? 

Mr. GUNDERSON. That preceded my time at the Department, so 

I would have to go back to see when the numbers came together. 

Senator MCCASKILL. Mr. Gordon, so do you require that the 

numbers come together before something like this happens? 

Shouldn’t there be somebody saying that you are going to have 

to jump through the hoop of a cost-benefit analysis prior to creating 

another contracting vehicle which adds to the complexity and to 

the maze, that adds to the stress to the acquisition, that makes the 

acquisition force even more confused, that makes it even less likely 

that we are going to get a handle on all this? 

Mr. GORDON. I very much share your concerns, especially regarding the burden on our acquisition force and the confusion that this 

can create and the extra cost to industry. 

As I said in my opening statement, the business case model, I 

think, makes sense. We have used it successfully in GWACs so that 

56 

when NASA, for example, wanted to be allowed to continue to be 

the executive agent for a GWAC, our rules require them to come 

to OMB. They need to tell us what fees they are going to charge 

and we need to review them to be sure that those are reasonable, 

because these should not be profit centers. These should be reimbursing costs, but not profit centers. 

We want to know why it makes sense for them to do it. What 

advantage do they have? With respect to NASA, for example, they 

told us they can provide high-end, high-tech IT and draw on their 

in-house scientists and engineers. So they could make a strong 

business case. 

But in our view, before any agency creates a new multi-agency 

contract, they should have to do a business case, and in fact, we 

will be issuing guidance later this summer that requires that. 

Beyond that, I think that even in the case of an enterprise-wide 

contract, a business case approach should be taken. Agencies 

should not create these confusing vehicles without being sure that 

they are justified. 

Senator MCCASKILL. Ms. Frasier, while we are on this subject, 

GAO indicates that NIH gets high marks from its customers. Now, 

I don’t think most taxpayers would understand why the National 

Institutes of Health is a store of choice for government agencies 

buying stuff. 

Explain to me why you think you are, and if you all are so good 

at it, why don’t we just take those people that are doing it for you 

and give them to Mr. Gordon and grow his shop to the point that 

they could really direct, not just policy, but direct acquisitions in 

the Federal Government? 

Couldn’t we cherry-pick the best out of all the agencies, put them 

in one place, dredge all the law out there that you were talking 

about, the multi-layering of the different laws that the people sitting in these chairs have done because they thought they were 

doing the right thing, dredge all that out, start with a fresh slate 

of rules, maybe a new piece of legislation that would clean out all 

the old stuff and make it modernized, make it more IT-friendly as 

it relates to acquisition and purchasing? Give me an argument why 

we shouldn’t do that. 

Ms. FRASIER. Well, first of all, just let me say why NIH is involved in IT procurement. Back in 1996, we had needs for IT for 

both the folks in our labs, all of our centers and institutes, and we 

developed the NITAAC program for NIH. What happened was that 

we never precluded any other agency from using our vehicles, and 

when word got out about our vehicles being available, they began 

to use it. 

The infrastructure that we have established, and actually established in great part due to OMB’s guidance and oversight, is an infrastructure that looks at customer service as being our primary 

focus, making sure that we have the contracting officers in place, 

making sure that we have a help desk that is useful to our customers, and a vehicle that is streamlined and efficient, plus using 

IT, since we are an IT program, using IT to reinforce the streamlining and efficiency. 

As far as developing one particular cadre of professionals to look 

at all of IT, there is a reason that we have multiple agencies, and 

57 

there are certain needs that need to be met by those agencies and 

they have that requisite expertise. 

Certainly, we are very proud of our NITAAC program and would 

welcome if Mr. Gordon wanted to take our program and infrastructure and to work closely as we do with some of our industry partners. But we do have to recognize that there are reasons why there 

is a GSA, why there needs to be IG contracts within some other 

agencies, that our vehicles cannot meet their needs. 

Senator MCCASKILL. Senator Brown. 

Senator BROWN. Mr. Gordon, you spoke earlier in your testimony 

that you are recognizing that there is money there that needs to 

be saved, and you are working to meet the goals set up by the Administration. And something, based on the hearing that the Chairman held, which I found fascinating, is that there are many contractors that owe us money, either through overpayments or fraud 

or administrative errors and the like that is hundreds of millions 

of dollars and has been owed forever. 

When you were talking about contracts, you talked about not 

only the structure of contracts, the type of contracts, and even if 

they don’t deliver, they still get a bonus. And we have another situation where we know who owes us the money. We know that it has 

been certified appropriately as to what that number is, yet we 

haven’t gone out and actually gotten it. Do we have a lot of extra 

money lying around, or should we go collect it? I mean, as an attorney, I remember I didn’t have any receivables, because you have 

to pay the bills. Well, the Federal Government needs to pay the 

bills, as well. Is there a plan to collect that money? 

Mr. GORDON. Absolutely, Senator. I appreciate the point. We are 

very much supportive—there has been a recent initiative to avoid 

improper payments. Actually, Chairman McCaskill, I believe, has 

sponsored legislation that would help crack down on tax delinquents that are trying to get Federal contracts. Now, it is true that 

IRS already has a program in place so that it can offset tax debts, 

but too often, we have situations where contractors with tax debts 

or tax delinquencies are nonetheless getting contracts and we need 

to address that and be sure that it is justified if it does happen. 

So we are very much focused on avoiding improper payments. 

There is a ‘‘do not pay’’ list that was recently announced. We need 

to take steps to be sure that when you have, as you said, Senator, 

you have a settled obligation to the Federal Government, we need 

to collect on that obligation. 

Senator BROWN. Well, I commended the President for that ‘‘do 

not pay’’ list. I thought that was a good first step, and I am wondering what is being done to try to collect the money that is owed. 

What is actually being done? Do you have attorneys? Do you have 

collection? How is it being done? 

Mr. GORDON. A number of steps are underway, including, as I 

said, through the IRS. Incidentally, you mentioned another important point, which is this problem that GAO has highlighted of contractors getting award fees even when not justified. We are providing further guidance to see to it that companies don’t get award 

fees when their performance doesn’t justify that. 

Senator BROWN. Yes, please address that. That is driving me and 

many other just average citizens crazy when the government is the 

58 

only place where you don’t perform and you get a bonus. It just 

blows my mind. 

Interagency usage fees, Mr. Kempf. As you know, the GAO report discusses some of the reasons the agencies establish and use 

multi-agency contracts and enterprise-wide contracts is to avoid 

fees and have more control over procurement, so I would like to 

just focus on those fees. Why are there fees in the first place? Just 

three very short questions, you can answer them in whatever order 

you want. What are your fees and how are they determined, and 

what is actually done with the revenue collected from the fees? 

Mr. KEMPF. Basically, GSA, at least the Federal Acquisition 

Service, is not funded through appropriations, so we run ourselves 

much like a business. We recover our costs and only our costs. 

Each year, we set our fees and decide how to spend our money with 

personnel and with all the other things we need to run our organization. We pay our own rent. We also pay for overhead for the services we get from something like our Chief People Officer and all the 

rest of that. So we set our fees in line with our cost structure. 

We also invest in equipment and systems, like our Enterprise Acquisition System, GSA Advantage, eBuy, and some of the other etools that support our program and that the customers use to buy 

through GSA. So, essentially, we are set up by statute that way. 

The Federal Acquisition Service was set up by statute and that was 

the way that they determined we would operate. 

Senator BROWN. So do you actually have a budget? Do you have 

a yearly budget? Because I know the Federal Government doesn’t 

have a budget yet, but do you actually have one? 

Mr. KEMPF. Actually, last week, myself and our Management 

Council got together and we decided how many people we could 

hire, what we were going to invest in in terms of our IT infrastructure, what kinds of things we were going to do with the money. We 

set up a rate structure for what we would charge for the many 

services we provide. 

And we do a little investment on things. One of the things that 

we are doing this year is providing agencies a carbon footprint tool 

that was developed with some of our money. So we, like almost 

every other entrepreneurial organization, does invest some of our 

money into tools and infrastructure and research and development, 

if you will, for future services and products for the agencies. 

One of the things that we did this year was invest money in 

training, in development and training, because we felt that our customers needed to learn how to use our tools and our contracts better than they were using. So we invested some money with the 

Federal Acquisition Institute to develop some training for our customers. 

Senator BROWN. Do you run a surplus or a deficit? 

Mr. KEMPF. We try to get to zero. But, of course, we have $9 billion a year that runs through our program. Last year, we had a 

$200 million surplus. 

Senator BROWN. And what happens to that? Does it just go back 

to the general Treasury? 

Mr. KEMPF. We have a cost and capital plan that was set up in 

our legislation. One of the things we did with the surplus money 

last year was to increase our reserve fund. We need about a monthVerDate Nov 24 2008 08:30 Apr 20, 2011 Jkt 056844 PO 00000 Frm 00062 Fmt 6601 Sfmt 6601 P:\DOCS\56844.TXT SAFFAIRS PsN: PAT
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and-a-half reserve to operate the program, and our reserve fund 

was low, so we invested most of the surplus into the reserve so that 

we would have adequate financial capital to run the organization. 

We also invested a lot of the money that actually was surplus 

last year that actually came from—one of the things that we do is 

we run the Federal Government’s fleet, so one of the things we 

have to do is guess what gas prices are going to be, and one of the 

things we did last year was we guessed a little wrong, so we got 

a little extra money in there from that. So what we did, we invested that $70 million that we thought came from that in the fleet 

in alternative fuel vehicles where we could provide those to the 

agencies at a cost that would buy a regular sedan for. 

Senator BROWN. And are you in good fiscal shape this year? 

Mr. KEMPF. Absolutely. Right now, we are running—we think we 

will be probably at about $100 million in the black, but we don’t 

know exactly what is going to happen between now and the end of 

the year. One of the things that we have set up is we have to upgrade our infrastructure. Like I said, we are spending some money 

on what we call FSS–19, was the backbone of most of the services 

that we provide and we are upgrading that so that Advantage is 

much better. We have an Enterprise Acquisition System that we 

are putting in place for all of our contracting across FAS so it will 

be much more robust and will also provide some other tools, including transparency and more pricing information. 

One of the things that we need to do is get better business intelligence through our operations. I think GAO talked about that. One 

of the ways we will be able to do that is with the new infrastructure, we will be able to collect better information, share it with our 

customers, and make better decisions about what we would need 

to do to get better prices for the agencies. 

Senator BROWN. Now, I know the Administration is trying to 

save that $40 billion. Is some of the profit the hundreds of millions 

that you are, in fact, making or saving or whatever? Is there any 

plan to turn it over to the people? 

Mr. KEMPF. Well, actually, in addition to what we do, we are also 

following the same guidance from the President on saving money, 

so we are watching what we spend with our—we are using our own 

BPAs to cut our costs in terms of our office supplies, our real estate 

expenses. So we also watch what we spend, too, so that we can either keep our costs at the same rate or in some cases lower them. 

Senator BROWN. Mr. Gordon, we talked about the importance of 

having a business case to mitigate the rapid growth of these contracts, and from your testimony, you indicated that business cases 

are currently required only for Government-Wide Agencies, GWAC 

vehicles. Can you explain to me what specific criteria OFPP uses 

to determine whether or not to approve an IT GWAC? For example, 

in the GSA Alliant and the Alliant Small Business GWACs, what 

unique requirements did these two contracts have that other existing IT GWACs don’t have? 

Mr. GORDON. Thank you. Mr. Kempf may actually want to address this, as well, but I—— 

Senator BROWN. Yes, both of you, if you could. That would be 

helpful. 

60 

Mr. GORDON. Absolutely. From our point of view, the question is, 

is there justification for another GWAC? The fact is, just a few 

years ago, there were more GWACs and there were more executive 

agencies. We have cut back. Today, the only Executive Agents are 

GSA, NIH, and NASA. To have a GWAC, in our view, the agency 

needs to show justification. They need to show that they will be 

meeting a need. 

In NIH’s case, the unique aspect of health IT is one of the key 

reasons that it made sense, just as, as I mentioned in the case of 

NASA, there was the issue of very high-end, high-tech IT, where 

they were able to draw on their scientists and engineers within 

NASA. They also need to show us that they will be charging a reasonable fee structure, responding to your concern, Senator. 

This is not an effort to set up profit centers at the agencies. They 

need to tell us how they are going to manage these contracts. We 

need to have an assurance that we in OMB will get regular full reports about what is happening. We need transparency about the 

transactions under the GWACs. 

And I think it is noteworthy that both GAO and the Acquisition 

Advisory Panel, the SARA Panel, have actually commended that 

process within OMB and said that the business case approach 

works. What we want to do is expand it so that it applies to multiagency contracts and probably enterprise-wide, as well. 

Senator BROWN. And just not to jump in, Mr. Kempf, so what can 

we do in the Senate to assist you folks in doing what you need to 

do, because taking off what Senator McCaskill said, I am sensing 

that the government is so big, it can’t get out of its own way. There 

are so many rules and regulations, so you need an attorney. Now 

you need attorneys to kind of review all the contracts to make sure 

that they match and this and that. It just seems like we are so 

overwhelmed with rules and regulations. We need to streamline 

and be lean and mean and be able to react, not only as we are dealing with, like, the situation in the Gulf, but just basic purchasing. 

I mean, how long does it take to buy the paper products? It takes 

forever. We need to do it better. 

Is there something that we can do, that we are missing? I mean, 

it is nice to bring you folks up here and have you testify and we 

do the whole boogie-woogie—I call it back home—but give us some 

suggestions because I am happy to work with the Chairman and 

try to come up with some solutions to make it easier and save us 

real money without going through the machinations. Is there something that we are missing and we can help with? You are all silent. 

Mr. NEEDHAM. I would say that—— 

Senator MCCASKILL. Really, they are not asking us to do anything. 

Senator BROWN. Especially lately. 

Mr. NEEDHAM. To pick up on the Chairman’s earlier point about 

shining a bright light, the fact that you are paying attention to 

this, the fact that there is this Subcommittee, is a very important 

step, because when you start asking questions, people have to start 

thinking about what they have done or not done or where things 

stand. 

I mean, we are now beginning—we are rethinking a lot of the approaches to what we are doing in terms of work. This whole issue 

61 

of interagency fees is an issue we looked at about 8 years ago. We 

need to go back to it. There needs to be constant follow-up and improvement. I think the word that was very popular years ago is 

called continuous improvement, and to do that, you need to pay attention to it, and what you are doing here helps doing that, and 

what we do and also what the agencies are doing to keep that 

mindset of continuous improvement and keep going back and using 

some good data to say, OK, we have moved forward and how do 

we keep doing it again. 

Mr. GORDON. I very much agree. I think that the fact that this 

Subcommittee exists, the fact that you are focused on improving 

our contract management is a service to the Congress. I hate to say 

this, it sounds masochistic, but I think you should bring me back 

up here at some point and ask me further questions and say, Mr. 

Gordon, have you made progress, because I think we need to be 

held, in our agencies and at OMB, accountable for this. We need 

to ensure that strategic sourcing is working, that we really are saving the $40 billion, that we really are reducing the risk. That is our 

commitment. That is our plan. We have made progress. But we expect to be held accountable. 

Senator MCCASKILL. Go ahead, Mr. Gunderson. 

Mr. GUNDERSON. In addition to the continued awareness that we 

have here, I think, any opportunity there is to support workforce 

initiatives in the acquisition workforce is critical. The things that 

have been talked about today, certainly in your opening remarks 

about best value, being more efficient, being more effective, if you 

ask any contracting officer or any program manager, they want to 

accomplish that, and they are doing the best that they can to try 

and find that balance between mission and business. As much as 

we can continue to invest in that workforce, get them the training, 

get the appropriate staffing in the respective offices, that will go a 

long way. 

Senator MCCASKILL. Well, I know Senator Collins has done great 

work on acquisition workforce and I have been happy to work with 

her, and I know Senator Brown supports those efforts, also. The acquisition workforce is very important. 

I would like you all to give some thought to the multi-layers of 

laws that bring to bear in this area, because there is a tendency 

around here to always think prospectively about what law needs to 

be passed rather than retroactively what laws need to be changed 

that are currently on the books. We have a tendency—I thought 

the analogy of the sediment was a good one, where we layer and 

layer and layer, and we go back and look at something that was 

passed in the 1930s and it probably doesn’t work as well today as 

maybe a new way of looking at it, a new way of writing. And the 

rules and regulations get in the way. 

I am usually somebody who is saying we need more rules and 

regulations, because without them, you get waste, fraud, and 

abuse. And sometimes with them and because of them, you get 

waste, fraud and abuse, because they get so darn complicated. So 

we need to find that where the pendulum is in the middle, where 

we have enough regulation that people can get in trouble for waste, 

fraud, and abuse, but not so much regulation that they get in trouble for waste, fraud, and abuse because they were so darn conVerDate Nov 24 2008 08:30 Apr 20, 2011 Jkt 056844 PO 00000 Frm 00065 Fmt 6601 Sfmt 6601 P:\DOCS\56844.TXT SAFFAIRS PsN: PAT
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fused. And I think we are dangerously close to that area right now 

because this is such a thicket of acronyms and contracting vehicles 

and different types of things. 

Let me ask GSA, you really are the bulk of the money in terms of what we are purchasing. I think the GAO report said about $60 

billion a year, and close to $50 billion of that was through GSA. 

We talk about the GWACs and the multi-agency contracts and the 

government-wide contracts, but that is really still a pretty small 

piece of the action. Where most of the action is is in GSA. 

And when I asked the experts in February, what should your 

role be, what should GSA be doing, what are they doing right and 

what are they doing wrong, and there was not an unanimity of 

opinion on that panel as to what your role should be. Do you think 

your mission is still valid, and if it is still valid, should we be focusing on your acquisition workforce with the thought that if we get 

your acquisition workforce up to par, we get more bang for our 

buck because of the number of contracts that are actually running 

through GSA as opposed to the other contracting vehicles? 

Mr. KEMPF. I would say that GSA’s mission today is more important than ever, and I think this hearing highlights that. Our Administrator, Martha Johnson, has set out three areas for us to look 

at to guide our actions moving forward. Those are operational excellence, customer intimacy, and innovation. She feels, as do I, that 

if we focus on those things, we will get done right what we need 

to do to support our programs. 

And that is why we are spending some money focusing in on our 

systems so that—one of the interesting things we get to do with 

our job every once in a while is talk to some of the foreign governments who come here, and one of the things that they invariably 

want to look at is how the Schedule program works and our system 

like GSA Advantage. They are thrilled when they see GSA Advantage, and my CIO and I always say, oh, if we could just start with 

a blank slate and start all over, and that is essentially what we are 

doing, is upgrading our systems so that they support the kind of 

decisions that our contracting officers make, that we can add efficiency. 

One of the things we did about 2 years ago was starting—the 

first thing we did was look at an acquisition process improvement 

program, where we laid out the requirements from start to finish 

for all acquisition processes in GSA, and we are developing a system that will support that from beginning to end. 

The other thing that we are doing is looking at the process improvement particularly in the Schedules program, where we have 

looked at how do we improve the many kind of steps that we take, 

the big steps that we take, the modification of the contracts, the 

exercise of the option, how long the contracts ought to be, how does 

a contracting officer work in that program, and really get down and 

make the system and make the process as effective as it can be so 

that they can make the right decisions. 

One of the things we focused in on specifically was a pricing tool. 

We saw that people were using spreadsheets. They were getting information in from the vendors that was paper, and we are moving 

toward a paperless environment. But one of the tools I looked at 

the other day, I talked about our Enterprise Acquisition System, is 

63 

actually looking at getting all of that data in electronically, and the 

way that the contracting officers can look at that data in a way 

that they couldn’t before. 

So the only way that they could get this data—think about a contractor like Dell that might have 1,000 different kinds of component IT products on their Schedule. Somebody would have to actually build a spreadsheet. One of the things that this system will do 

is actually build—well, you get the information in electronically. 

You can see the differentiation in the price on the products. You 

can compare it to other products in Advantage and even import information from other contracts, whether they be governmental or 

commercial, and compare the prices so that you can see as a contracting officer, are you getting the very best price on that kind of 

product. 

So the power of that tool and the flexibility will give the contracting officers greater flexibility and better intelligence to make 

decisions about how to award the contract, at what price, and they 

will even be able to see where the contractors might be playing a 

game with the way they are doing the pricing. So those kinds of 

things are essential for us doing well. 

We have about 300 contracting officers that are warranted in the 

Federal Acquisition Service. We have about 800 1102s, which is the 

contracting professional series. We probably could use more. We 

have been able to hold our own in hiring. We continue to increase 

the ranks, try to bring more in so that we can deliver and get the 

products onto Schedule quickly, that we can staff the GWAC programs and all of our other programs that we haven’t talked about 

today that are very important, like running the credit card programs, the City Pair program for airline tickets, and the Networx 

program. All of the other ones that require contracting resources at 

all, as well. 

Senator MCCASKILL. Well, I know that as someone who doesn’t 

have time to shop anywhere but on the Internet, that the private 

sector has figured this out pretty well. There are very few things 

that I can’t easily compare quickly with a few clicks. For the consumer out there, the electronic methodology is growing by leaps 

and bounds in terms of delivering the best value most effectively, 

and I just know that the Federal Government is lagging behind. I 

know that we are going to get there. I just worry how many contractors and how many different IT contracts is it going to take for 

us to get there. 

Mr. KEMPF. Well, that is one of the things I talked about earlier 

that we are doing with Advantage. As I said, Amazon actually 

started after Advantage. We were actually one of the first in the 

market in it. But we didn’t have the resources to build the technological advances in it that they did. But I think the advances that 

we are going to build into the system that are scheduled to be released this fall will be really important for that tool. 

One of the things that the other contracting officers using the 

GSA Schedules have been asking for years, when you go to an 

Amazon Website, you see that bright, clear picture and description. 

We are going to be using commercial descriptions that we get from 

a service that will look like an Amazon—— 

Senator MCCASKILL. Are you going to have reviews? 

64 

Mr. KEMPF. Excuse me, which reviews? 

Senator MCCASKILL. You should have reviews for the products. 

Mr. KEMPF. Oh, yes. 

Senator MCCASKILL. You should have the various agencies—— 

Mr. KEMPF. Well, this is—— 

Senator MCCASKILL [continuing]. Post reviews, so when other 

agencies come to look, they can say, hey, don’t trust this contractor—— 

Mr. KEMPF. Don’t buy that one. 

Senator MCCASKILL [continuing]. He didn’t deliver what he said 

he was going to deliver. You should put up there shopping reviews 

just like the consumers have. There is no reason not to. 

Mr. KEMPF. We will take that under advisement. But one of the 

things we will be able to do—— 

Senator MCCASKILL. Don’t be so worried about getting sued. 

Mr. KEMPF. Yes, that would never happen. [Laughter.] 

But one of the things that this will actually do when we get there 

is once you pull up a product, you will be able to see other products 

similarly priced. That is one of the things that our current infrastructure doesn’t support. So we will be able to be much more useful for the contracting officers in making decisions. 

One of the things that they have been saying to us is the pictures, I can’t tell from the pictures, because one of the things that 

we say, when you get your Schedule, you have to give us the pictures and we post them. Some of the contractors will give us like 

their icon. So when you are looking to see the picture, you see an 

icon of their company because they didn’t have the wherewithal to 

provide the kind of pictures—— 

Senator MCCASKILL. Well, if they can’t figure out how to give you 

a digital picture of what they are trying to sell the government, we 

probably shouldn’t be doing business with them. In this day and 

age, seriously. 

Mr. KEMPF. Well, we are going to fix it for them one way or the 

other. 

Senator MCCASKILL. My teenagers could handle that for them. 

[Laughter.] 

So I think that is something you need to be more adamant about. 

Mr. KEMPF. Absolutely. 

Senator MCCASKILL. I think sometimes the relationship between 

the vendors and the government gets a little confusing sometimes. 

I think that we forget how much money these vendors potentially 

have to be made off the Federal Government. There is not a bigger 

purchaser in the world than the U.S. Federal Government. That is 

not something I am bragging about. I am a little worried that I can 

say that. But we have incredible power and it is untapped. Make 

no mistake about it, it is untapped. We are doing—we are nibbling 

around the edges in unleashing the purchasing power we have. 

But I think that this particular panel has demonstrated, and I 

know there are many others like you, dedicated government employees that are not in this for the big money. You don’t go into 

acquisition in the government because you want to be a star. You 

go into it because you are driven by a desire for public service and 

trying to do the right thing, and I do think that there is great potential. 

65 

I have an unrelated question to this subject matter. Senator 

Brown, do you have any other follow-up questions on this subject? 

Senator BROWN. I just have one. 

Senator MCCASKILL. OK. 

Senator BROWN. Mr. Gordon, one of the things I enjoyed when 

the President was in his early days is he was going to do a topto-bottom review of every Federal program to see where the waste 

was and attack it and get rid of it, streamline, consolidate, etc. You 

can do this offline because I know we are kind of getting along 

here, but I would love to know what has been done, what the plan 

is to continue with that effort. Have we realized any savings? Is 

there anything, once again, we can help in that regard? 

And then also, I will just throw this out there. Is there a mechanism—I would rather pay the people who are working for you in 

the form of a retention benefit of sorts to say, OK, listen. Here is 

our budget. This is what we spend. You spend us X and you are 

going to get a little piece, almost like an attorney getting his third 

or whatever, to incentivize the people who are working for us for 

retention and obviously enjoying coming to work and be kind of pit 

bulls to find out where the waste is and go after it and have it be 

interagency competition, whatever. Just get everyone thinking outside the box. Is there a program like that at all or not? 

Mr. GORDON. Senator, thank you. I will tell you that my boss, 

Jeff Zients, our Deputy Director for Management, is the country’s 

Chief Performance Officer and he is very focused on the fact that 

we need to get rid of programs that are not performing. OMB recently talked about an initiative to address the 5 percent of the 

weakest programs and to see to it that we are moving forward with 

what works and stopping what is not working. We would be happy 

to discuss it further with you offline, if you would like. 

Senator BROWN. Thank you. I am sorry, sir. Mr. Needham, did 

you want to—— 

Mr. NEEDHAM. I was just going to mention that GAO has a body 

of work underway under the Acquisition Workforce and we are 

looking at many facets, but we are going to probably try to look at 

some of those issues of incentives as well as the training and so 

forth that they are undergoing, because there is an issue of retention. Once you train people, you need to be able to keep them. 

Senator MCCASKILL. Well, and that is—somebody who is really 

qualified and trained in acquisition in the Federal Government is 

so ripe for the picking by the private sector. There is nobody that 

a government contractor wants more in their operation than somebody who really understands the process of government acquisition, 

because I talk to business people all the time that just give up on 

trying to do business with the Federal Government because they 

can’t get past the complexity of it. So if you have an acquisition 

professional in your private company, then all of a sudden, you 

have got a leg up and you know how to do business with the government. 

So I think looking at that, I think it is a great idea that GAO 

would look at the incentives, could we do financial incentives for 

acquisition personnel on cost savings. The most frustrating thing 

about government is that we want it to behave more like a business, and frankly, it is not, but in the area of acquisition, we cerVerDate Nov 24 2008 08:30 Apr 20, 2011 Jkt 056844 PO 00000 Frm 00069 Fmt 6601 Sfmt 6601 P:\DOCS\56844.TXT SAFFAIRS PsN: PAT
66 

tainly can get much closer to that goal of having some kind of bottom-line capability of, well, can we save this year compared to last 

year? How can we—and giving a little bit of that money to the people who helped figure out how to do it, I think is a great idea. 

Mr. NEEDHAM. I think it may contribute to stability. I mentioned 

to Ms. Frasier when we came in, I met her about 7 years ago, and 

very often as I go across agencies, I don’t meet the same people 

year in and year out. They change over. When you do see stability, 

that helps add into the quality of the work that they are doing. 

Senator MCCASKILL. Thank you, Ms. Frasier, for staying put. 

I want to thank all of you for being here today, but while I have 

Mr. Gordon here, I want to ask him an unrelated question. I have 

been working very hard to do away with the notion that we have 

corporations in this—doing business with our Federal Government 

that don’t have to compete and that aren’t small and aren’t economically disadvantaged. I have no problem with the 8(a) program. 

I think the 8(a) program has a wonderful purpose for small companies trying to get their foot in the door. 

There are very few Alaska Native corporations that fit that definition, and we all know that they were given special status for an 

inexplicable reason, frankly. I am not really sure why. I wish them 

great success. I think they can continue to be very successful as 

corporations. I just don’t understand why they don’t have to compete. 

So I have been working on this and was very pleased that we 

passed a law, a law that is now on the books that all sole source 

contracts over $20 million, that there must be a justification, and 

I have learned that there has been a delay of the implementation 

of this law and that there is Tribal consultation going on and I 

wanted to give you an opportunity to answer on the record why the 

implementation of the $20 million cap is not occurring and what 

is the time line. How quickly can this law actually go into effect, 

because it is the law. 

Mr. GORDON. I appreciate it, Senator. It is the law and I can assure you that the Administration is very supportive of increasing 

competition. Nonetheless, in this case, because the law will affect 

Indian Tribes as well as Alaska Native corporations, we are doing 

outreach to those groups. We want that outreach to be fair, but we 

also want it to be expeditious. We expect to move forward very 

promptly with outreach and then with issuing a new regulation to 

implement the statute. 

Senator MCCASKILL. Well, I am going to be watching this very 

carefully, and I am not really sure what the consultation is about. 

It is not like you are going to change the law in these meetings. 

I think a $20 million cap on non-compete is fair. While there may 

be some of these corporations that justifiably belong in the 8(a) program because they are small and they are trying to find their way, 

as you are well aware, as everyone that does anything in government acquisition is aware, there are a whole bunch of them that 

haven’t been small for a long time. They are mega, multi-national 

corporations, and the notion that some of these corporations, as 

large as they are, never have to compete should be offensive. It 

should be offensive to anybody in the field of acquisition. 

67 

So I urge you to put a burner under this effort and make it go 

quickly. I certainly admire you wanting to do outreach at all points 

of your job. I think that is important. But I am frustrated that this 

isn’t going more quickly and I am going to continue to express that 

frustration and I wanted to get that on the record today. And I 

apologize to all of you, since it is not particularly on the subject 

matter. Now you really will look forward to coming back the next 

time, because you know anything is fair game, Mr. Gordon, when 

you come in front of this Subcommittee. 

Mr. GORDON. Thank you, Senator. I would be honored to be invited to come back. 

Senator MCCASKILL. If it has to do with contracting, it is fair 

game. 

Thank you all, and we will continue to follow up. 

The hearing is adjourned. 

[Whereupon, at 4:21 p.m., the Subcommittee was adjourned.] 

(69) 

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