OFFICE SUPPLIES

Recent GSA Pricing Study 

Had Limitations, but New 

Initiative Shows Potential 

for Savings

Statement of William T. Woods, Director 

Acquisition and Sourcing Management

Testimony 

Before the Subcommittee on Contracting 

and Workforce, Committee on Small 

Business, House of Representatives

For Release on Delivery 

Expected at 2:00 p.m. EDT

Thursday, June 7, 2012

GAO-12-705T

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-705T, a testimony 

before the Subcommittee on Contracting and 

Workforce, Committee on Small Business, 

House of Representatives 

June 7, 2012 

OFFICE SUPPLIES 

Recent GSA Pricing Study Had Limitations, but New 

Initiative Shows Potential for Savings 

Why GAO Did This Study

The GSA estimated that federal 

agencies spent about $1.6 billion 

during fiscal year 2009 purchasing 

office supplies from more than 

239,000 vendors. Concerned that 

federal agencies may not be getting 

the best prices available, Congress 

directed GSA to study office supply 

purchases by the 10 largest federal 

agencies. GSA delivered the results of 

its study in November 2010. The study 

also discussed GSA’s efforts to 

implement an initiative focused on 

leveraging the government’s buying 

power to realize savings when buying 

office supplies, known as OS II. 

Congress directed GAO to assess the 

GSA study, with particular attention to 

the potential for savings. 

This testimony is based on the findings 

and conclusions of GAO’s December 

2011 report, GAO-12-178, and focuses 

on (1) the support for the findings and 

conclusions in GSA’s study, and 

(2) how GSA's new office supply 

contracts support the goal of 

leveraging the government’s buying 

power to achieve savings.

What GAO Recommends

GAO did not make any 

recommendations in its report, and is 

not making any in this testimony. 

What GAO Found

In 2010, the General Services Administration’s (GSA) pricing study found that 

during fiscal year 2009, the 10 largest federal agencies accounted for about 

$1.3 billion, or about 81 percent, of the total $1.6 billion spent governmentwide in 

14 categories of office supplies. About 58 percent of their office supply purchases 

were made outside of the GSA schedules program—a simplified process to take 

advantage of price discounts equal to those that vendors offer “most favored 

customers.” Most of these purchases were made at retail stores. GSA also 

reported that agencies paid an average of 75 percent more (a price premium) 

than schedule prices for their retail purchases and 86 percent more compared to 

Office Supplies II (OS II) prices. 

While the GSA acknowledged some limitations with the study data, we identified 

additional data and other limitations that lead us to question the magnitude of 

some of GSA’s reported price premiums and assertions. More specifically, we 

determined that the study may not have properly controlled for quantities, used 

two different formulas to calculate price premium estimates, and relied on 

interviews with senior level acquisition officials instead of purchasers to 

determine whether buyers compared prices before making purchases. We were 

not able to fully quantify the impact of these limitations. Additionally, other 

agencies questioned the study’s specific findings related to price premiums, but 

their own studies of price premiums support GSA’s conclusion that better prices 

can be obtained through consolidated, leveraged purchasing.

Available data show that the OS II initiative has produced savings of $39.2 million 

from June 2010 through March 2012. According to GSA, the OS II initiative is 

demonstrating that leveraged buying can produce greater savings and has 

provided improvements for managing ongoing and future strategic sourcing 

initiatives. For example, GSA reports that OS II allowed it to negotiate discounts 

with vendors who were selected for the initiative. As governmentwide sales 

surpass certain targets, additional discounts are applied to purchase prices. 

Further, OS II has spurred competition among schedule vendors that were not 

selected for OS II, resulting in decreased schedule prices. The initiative is also 

expected to lower governmentwide supply costs through more centralized 

contract management. Another key aspect of the initiative is that participating 

vendors provide sales and other information to GSA to help monitor prices, 

savings, and vendor performance. Finally, GSA is capturing lessons learned from 

OS II and is attempting to incorporate these lessons into other strategic sourcing 

initiatives. 

View GAO-12-705T. For more information, 

contact William T. Woods, (202) 512-4841 or 

WoodsW@gao.gov. 
 

Page 1 GAO-12-705T 

Chairman Mulvaney, Ranking Member Chu, and the Members of the 

Subcommittee on Contracting and Workforce:

I am pleased to be here today to discuss the General Services 

Administration’s (GSA) efforts to reduce prices that federal agencies pay 

for office supplies. My statement is based on a report1 we issued last year 

for the Subcommittees on Financial Services and General Government of 

the Senate and House Committees on Appropriations. Concerned that 

federal agencies may not be getting the best prices available, the 

conferees on the Consolidated Appropriation Act, 2010, directed GSA to 

conduct a study of the office supply purchases made by the top 10 largest 

federal agencies.2

To conduct our work, we analyzed the data GSA used for its study; met 

with and obtained documentation from officials at GSA and the 

Departments of Homeland Security, Air Force, Navy, and Army, which 

were among the 10 agencies in GSA’s study; and reviewed contract 

documentation associated with the OS II initiative. For purposes of this 

hearing, we updated GSA’s savings estimates for the OS II initiative. We 

conducted our work in accordance with generally accepted government 

auditing standards. Those standards require that we plan and perform the 

audit to obtain sufficient, appropriate evidence to provide a reasonable 

basis for our findings and conclusions based on our audit objectives. We 

believe that the evidence obtained provides a reasonable basis for our 

findings and conclusions based on our audit objectives.

GSA provided the results of its study to the House and 

Senate Committees on Appropriations in November 2010 and also 

reported on its efforts to implement the Federal Strategic Sourcing 

Initiative—Office Supplies II (OS II), an initiative focused on leveraging 

the government’s buying power to realize savings. The conferees also 

directed GAO to assess the GSA study, with particular attention to the 

potential for savings.

GSA estimated that federal agencies spent about $1.6 billion during fiscal 

year 2009 purchasing office supplies from more than 239,000 vendors. 

Federal agencies can use a variety of different approaches to purchase 

 

1

GAO, Strategic Sourcing: Office Supplies Pricing Study Had Limitations, but New 

Initiative Shows Potential for Savings, GAO-12-178 (Washington, D.C.: Dec. 20, 2011).

2

H.R. Conf. Rep. No. 111-366, at 918 (2009).

 

Background
 

Page 2 GAO-12-705T 

office supplies. For relatively small purchases, generally up to $3,000, 

authorized personnel can use their government purchase cards. For 

larger purchases, agencies may use other procedures under the Federal 

Acquisition Regulation, such as awarding a contract or establishing 

blanket purchase agreements. Alternatively, agencies can use the 

Federal Supply Schedule program (schedules program), a simplified 

process for procuring office supplies where GSA awards contracts to 

multiple vendors for a wide range of commercially available goods and 

services to take advantage of price discounts equal to those that vendors 

offer their “most favored customers.” The schedules program can 

leverage the government’s significant aggregate buying power. In 

addition, agencies can make office supply purchases under GSA’s new 

initiative, the OS II program. The OS II program is an outgrowth of an 

earlier attempt by GSA to offer agencies a simplified process for fulfilling 

their repetitive supply needs while obtaining prices that are lower than 

vendors’ schedule prices. By July 2010, GSA had awarded 15 blanket

purchase agreements3

For its study, GSA reviewed office supply purchases in 14 categories of 

mostly consumable office supplies, ranging from paper and writing 

instruments to calendars and filing supplies. The report did not include 

non-consumable items such as office furniture and computers because 

they are not part of the standard industry definition of office supplies. The 

GSA report estimated that during fiscal year 2009, the 10 agencies

competitively to support the OS II initiative, 13 of 

which went to small businesses.

4 with 

the highest spending on office supplies accounted for about $1.3 billion, 

or about 81 percent, of the total $1.6 billion spent governmentwide in the 

14 categories of office supplies. Further, it stated that about 58 percent of 

office supply purchases were made outside of the GSA schedules 

program, mostly at retail stores. Additionally, GSA reported that agencies 

paid an average of 75 percent more (a price premium) than schedule 

prices and 86 percent more than OS II prices, for their retail purchases.

 

3

Blanket purchase agreements are a simplified method of fulfilling repetitive needs for 

supplies and services that also can provide an opportunity to seek reduced pricing from 

vendors’ schedule prices. See FAR 13.303-1(a). 

4

Departments of the Army, Air Force, Navy, Homeland Security, Veterans Affairs, State, 

Health and Human Services, Justice, Commerce, and Agriculture.
 

Page 3 GAO-12-705T 

While the GSA report acknowledged some limitations with the data, we 

identified additional data and other limitations that lead us to question the 

magnitude of some of GSA’s reported price premiums. We were not able 

to fully quantify the impact of these limitations. Additionally, other 

agencies questioned the study’s specific findings related to price 

premiums, but their own studies of price premiums support GSA’s 

conclusion that better prices can be obtained through consolidated, 

leveraged purchasing.

Since purchasing of office supplies is highly decentralized, GSA obtained 

data for its study from multiple disparate sources, such as the Federal 

Procurement Data System-Next Generation, the Department of Defense 

(DOD) electronic mall, and purchase card data from commercial banks. 

To determine the amount of funds spent on office supplies and to conduct 

related analyses, GSA had to sort through about 7 million purchase 

transactions involving over 12 million items. The agency took steps to 

clean the data prior to using them. For example, it removed duplicate 

purchases and items that did not meet its definition of office supplies. The 

GSA study noted that the estimated amount of funds and related 

calculations were to be considered sound and reliable estimates derived 

from rigorous data analysis techniques.

We also identified additional data and other limitations in GSA’s study, 

including:

• GSA may not have been able to properly control for purchases of 

different quantities of the same item. Because there is no consistency 

in how part numbers are assigned, manufacturers may assign the 

same part number to both individual items and to packages of items in 

some cases. GSA tried to exclude transactions that had large 

variations in retail prices for apparently identical items to control for 

these occurrences. However, when we reviewed data for 10 items 

within the writing instruments category, we found that retail prices for 

6 of the 10 items varied by more than 300 percent, such as Rollerball 

pens, which ranged from $9.96 to $44.96.

• Two different formulas were used for calculating price premium 

estimates. However, the study only described one of these specific 

formulas. The use of the unreported formula did not have a 

substantial impact on the retail price premium calculations for most 

categories of office supplies or the overall conclusions of the study, 

but the GSA report could have been more complete had it fully 

disclosed all the formulas used for all categories of office supplies.

GSA Report Had Data 

and Other Limitations
 

Page 4 GAO-12-705T 

• GSA did not identify or collect any data about price comparisons 

conducted by the purchase cardholders. GSA concluded that 

purchase cardholders compared costs at some level prior to making a 

purchase based on its interviews with senior-level acquisition officials. 

While these officials may have had a broad understanding of agency 

procurement policies and practices, they were not representative of 

the approximately 270,000 credit cardholders making purchasing 

decisions. GSA officials said that given the reporting time frame for 

the study, they did not have the resources or time needed to survey a 

representative sample of the 270,000 purchase cardholders.

Additionally, officials from the Departments of Air Force, Army, Navy, and 

Homeland Security believed that the price premiums reported by GSA 

when buying outside the GSA schedule were overstated based upon their 

own studies. For example, the Air Force determined that the OS II blanket 

purchase agreements could save about 7 percent in a study of the 125 

most commonly purchased items. However, these agencies agreed with 

GSA’s overall conclusion that better prices can be obtained through 

leveraged buys and that prices available through the new OS II blanket 

purchase agreements were better than the prices available from their 

existing agency blanket purchase agreements.

According to initial available data, GSA’s OS II blanket purchase 

agreements have produced savings. The OS II initiative, more so than 

past efforts, is demonstrating that leveraged buying can produce greater 

savings and has provided improvements for managing ongoing and future 

strategic sourcing initiatives. GSA is using a combination of agency and 

vendor involvement to identify key requirements and cost drivers, 

increase the ease of use, and obtain the data necessary to manage the 

program.

On the basis of the sales data provided by OS II vendors, GSA estimates 

the federal government saved $39.2 million between June 2010 and 

March 2012 by using the 15 blanket purchase agreements established for 

this program. These savings were estimated by comparing the lowest 

prices of a set—or market basket—of over 400 items available on GSA’s 

schedules program contracts before OS II with prices and discounts being 

paid for the same items on the OS II blanket purchase agreements. 

Importantly, and unlike GSA’s report, GSA’s conclusions about savings 

realized under OS II are based on data from vendors—which they are 

New Strategic 

Sourcing Initiative for 

Office Supplies Shows 

Potential for 

Generating Savings

GSA’s Analysis of OS II 

Data Shows Savings Are 

Being Achieved
 

Page 5 GAO-12-705T 

required to collect and provide in the normal course of business—and not 

on data collected after the fact from sources not designed to produce 

information needed to estimate savings.

GSA’s comparison of the market basket of best schedule prices against 

the OS II blanket purchase agreement vendors’ prices found that prices 

offered by OS II vendors were an average of 8 percent lower. The 

average savings, however, is expected to fluctuate somewhat as the OS 

II initiative continues to be implemented and the mix of vendors, products, 

and agencies changes. For example, GSA found that savings, as a 

percentage, declined slightly as agencies with historically strong office 

supplies management programs increased their use of OS II. Conversely, 

they expect the savings percentage to increase as agencies without 

strong office supplies management programs increase their use. In 

addition to the savings from the blanket purchase agreements, GSA 

representatives told us that they are also seeing prices decrease on 

schedules program contracts as vendors that were not selected for the 

OS II program react to the additional price competition created by the OS 

II initiative. 

The agency decided to extend the OS II blanket purchase agreements for 

an additional year after negotiating additional price discounts of about 

3.9 percent on average with 13 of the 15 vendors in the program. The 

blanket purchase agreements also include tiered discounts, which apply 

when specific sales volume thresholds are met. Sales realized by 5 of the 

vendors reached the first tier discount level as of April 2012, and the 

vendors have since adjusted their prices to provide the corresponding 

price discounts. GSA anticipates that additional vendors will reach sales 

volumes that exceed the first tier discount threshold in the first option 

year, which will trigger additional discounts.

An additional benefit of OS II may be lower contract management costs, 

as agencies can rely on GSA to administer the program instead of their 

own staffs. While this may create some additional burden for GSA, 

officials believe the overall government costs to administer office supply 

purchases should decrease.
 

Page 6 GAO-12-705T 

GSA has incorporated a range of activities representative of a strategic 

procurement approach5

GSA obtained commitments from agencies and helped set goals for 

discounts to let businesses know that the agencies were serious in their 

commitment to the blanket purchase agreements. This also helped GSA 

determine the number of blanket purchase agreements that would be 

awarded. As part of the overall strategy, a GSA commodity council 

identified five overarching goals, in addition to savings, for the OS II 

initiative. These goals and the methods used to address them are in 

table 1.

into the OS II initiative. These activities range 

from obtaining a better picture of spending on services, to taking an 

enterprisewide approach, to developing new ways of doing business. 

They also involve supply chain management activities. All of these 

activities involve some level of centralized oversight and management. 

GSA is capturing lessons learned from OS II and is attempting to 

incorporate these lessons into other strategic sourcing initiatives.

 

5

See GAO, Best Practices: Taking a Strategic Approach Could Improve DOD’s Acquisition 

of Services, GAO-02-230 (Washington, D.C.: Jan. 18, 2002), for more information on 

strategic sourcing.

OS II Includes Key 

Management Goals and 

Practices to Enhance 

Oversight and Manage 

Suppliers
 

Page 7 GAO-12-705T 

Table 1: Goals for Office Supplies II

Goal Methods to address the goal

Capture data Vendors are required to provide monthly sales data 

including at the line-item level at no additional charge. 

Line-item-level data provide details on the transactions, 

such as the manufacturer’s part number, freight amount, 

small business category (if applicable), product codes, 

and product description.

Enable achievement of socioeconomic goalsGSA awarded 13 of the 15 blanket purchase 

agreements to small businesses to assist agencies in 

meeting the statutory requirement that the 

governmentwide small business contracting goal be 

established at not less than 23 percent of the total value 

of all prime contracts awarded for each fiscal year.

Drive compliance with statutes

and mandates

Vendors are required to be in compliance with statutes 

and executive orders.

Conform with agency business 

practices

Vendor administration requirements include maintaining 

a current catalog conforming to the terms and conditions 

of agency portals; meeting catalog requirements; 

providing no restriction on payment methods; offering 

training; and having a dedicated agency manager.

Increase ease of use Vendors are required to make the OS II prices available 

through government portals, vendor websites, retail 

stores, and by phone; include a point of sale discount, 

where blanket purchase agreement prices are 

automatically charged and tax exempted whenever a 

government purchase card is used for all items covered 

by the blanket purchase agreement; and apply blanket 

purchase agreement prices unless the ordering agency 

specifically opts not to use OS II.

Source: GAO analysis of GSA data.

Several new business practices have been incorporated in the OS II 

program to meet the goals. For example, to meet the capture data goal, 

GSA is collecting data on purchases and vendor performance that are 

assimilated and tracked through dashboards, which are high-level 

indicators of overall program performance. The dashboard information is 

used by the GSA team members responsible for oversight to ensure that 

the vendors are meeting terms and conditions of the blanket purchase 

agreements and that the program is meeting overall goals. The 

information is also shared with agencies using OS II. Our review of GSA’s 

OS II vendor files found that GSA has taken a more active role in 

oversight and is holding the vendors accountable for performance. For 
 

Page 8 GAO-12-705T 

example, GSA has issued Letters of Concern to four vendors and has 

issued one Cure Notice6

In addition, to increase savings and ease of use, OS II includes a point of 

sale discount, under which blanket purchase agreement prices are 

automatically charged whenever a government purchase card is used for 

an item covered by the blanket purchase agreement rather than having 

the buyers ask for a discount. Additionally, purchases are automatically 

tax exempt if the purchases are made using a government purchase card. 

State sales taxes were identified by GSA’s report as costing the federal 

agencies at least $7 million dollars in fiscal year 2009.

to a vendor. These letters and notices are used 

to inform vendors that the agency has identified a problem with the 

vendor’s compliance. To support the OS II management responsibilities, 

GSA charges a 2 percent management fee, which is incorporated into the 

vendors’ prices. This fee, which is higher than the 0.75 percent fee 

normally charged on GSA schedules program sales, covers the additional 

program costs, such as the cost of the six officials responsible for 

administering the 15 blanket purchase agreements, as well as their 

contractor support.

GSA’s experience with OS II is being applied to other strategic sourcing 

initiatives. For example, GSA set up a commodity council for the Federal 

Strategic Sourcing Initiative Second Generation Domestic Delivery 

Services II program. The council helped identify program requirements 

and provide input on how the program operates.

GSA’s office supplies report contained some data and other limitations, 

but it showed that federal agencies were not using a consistent approach 

in both where and how they bought office supplies and often paid a price 

premium as a result of these practices. The magnitude of the price 

premium may be debatable, but other agencies that have conducted 

studies came to the same basic conclusion about the savings potential 

from leveraged buying. The GSA study helped set the course for a more 

 

6 A cure notice is issued by the government to inform the contractor that the government 

considers the contractor’s failure to perform a contractual provision a condition that is 

endangering performance of the contract. The cure notice specifies a period (typically 10 

days) for the contractor to remedy the condition. If the condition is not corrected within this 

period, the cure notice states that the contractor may face the termination of its contract 

for default. 

Concluding 

Observations
 

Page 9 GAO-12-705T 

strategic approach to buying office supplies—an approach that provides 

data to oversee the performance of vendors, monitor prices, and estimate 

savings. Additional savings are expected as more government agencies 

participate in the OS II initiative and further leverage the government’s 

buying power.

Chairman Mulvaney, Ranking Member Chu, and the Members of the 

Subcommittee on Contracting and Workforce, this completes my 

prepared statement. I am happy to answer any questions you have.

For future questions about this statement, please feel free to contact me 

at (202) 512-4841 or woodsw@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this statement. Individuals making key contributions to this statement 

include: Cheryl Andrew, Assistant Director; Jean K. Lee; and Marie 

Ahearn

GAO Contact and 

Staff 

Acknowledgments

(121073)
This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately.
The Government Accountability Office, the audit, evaluation, and 

investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and 

policies; and provides analyses, recommendations, and other assistance 

to help Congress make informed oversight, policy, and funding decisions. 

GAO’s commitment to good government is reflected in its core values of 

accountability, integrity, and reliability.

The fastest and easiest way to obtain copies of GAO documents at no 

cost is through GAO’s website (www.gao.gov). Each weekday afternoon, 

GAO posts on its website newly released reports, testimony, and 

correspondence. To have GAO e-mail you a list of newly posted products, 

go to www.gao.gov and select “E-mail Updates.”

The price of each GAO publication reflects GAO’s actual cost of 

production and distribution and depends on the number of pages in the 

publication and whether the publication is printed in color or black and 

white. Pricing and ordering information is posted on GAO’s website, 

http://www.gao.gov/ordering.htm. 

Place orders by calling (202) 512-6000, toll free (866) 801-7077, or 

TDD (202) 512-2537. 

Orders may be paid for using American Express, Discover Card, 

MasterCard, Visa, check, or money order. Call for additional information.

Connect with GAO on Facebook, Flickr, Twitter, and YouTube. 

Subscribe to our RSS Feeds or E-mail Updates. Listen to our Podcasts. 

Visit GAO on the web at www.gao.gov. 

Contact:

Website: www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470

Katherine Siggerud, Managing Director, siggerudk@gao.gov, (202) 512-

4400, U.S. Government Accountability Office, 441 G Street NW, Room 

7125, Washington, DC 20548

Chuck Young, Managing Director, youngc1@gao.gov, (202) 512-4800

U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, DC 20548

GAO’s Mission

Obtaining Copies of 

GAO Reports and 

Testimony

Order by Phone

Connect with GAO

To Report Fraud, 

Waste, and Abuse in 

Federal Programs

Congressional 

Relations

Public Affairs

Please Print on Recycled Paper.