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24–242 PDF 2006

S. Hrg. 109–515

GSA: THE PROCUREMENT PROCESS FROM START

TO FINISH

HEARING

BEFORE THE

FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT 

INFORMATION, AND INTERNATIONAL 

SECURITY SUBCOMMITTEE

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

SEPTEMBER 29, 2005

Printed for the use of the Committee on Homeland Security 

and Governmental Affairs

(

(II)

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

SUSAN M. COLLINS, Maine, Chairman 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

NORM COLEMAN, Minnesota 

TOM COBURN, Oklahoma 

LINCOLN D. CHAFEE, Rhode Island 

ROBERT F. BENNETT, Utah 

PETE V. DOMENICI, New Mexico 

JOHN W. WARNER, Virginia 

JOSEPH I. LIEBERMAN, Connecticut 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK DAYTON, Minnesota 

FRANK LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas

MICHAEL D. BOPP, Staff Director and Chief Counsel 

JOYCE A. RECHTSCHAFFEN, Minority Staff Director and Chief Counsel 

TRINA DRIESSNACK TYRER, Chief Clerk 

FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, AND 

INTERNATIONAL SECURITY SUBCOMMITTEE 

TOM COBURN, Oklahoma, Chairman 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

LINCOLN D. CHAFEE, Rhode Island 

ROBERT F. BENNETT, Utah 

PETE V. DOMENICI, New Mexico 

JOHN W. WARNER, Virginia 

THOMAS CARPER, Delaware 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

MARK DAYTON, Minnesota 

FRANK LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas

KATY FRENCH, Staff Director 

SHEILA MURPHY, Minority Staff Director 

JOHN KILVINGTON, Minority Deputy Staff Director 

LIZ SCRANTON, Chief Clerk 

(III)

C O N T E N T S 

Opening statements: Page 

Senator Coburn ................................................................................................. 1

Senator Carper ................................................................................................. 3

WITNESS 

THURSDAY, SEPTEMBER 29, 2005

Stephen A. Perry, Administrator, U.S. General Services Administration: 

Testimony .......................................................................................................... 5

Prepared statement .......................................................................................... 34

APPENDIX 

GAO Report GAO–05–960R Improvements Needed to Federal Procurement 

Data System—Next Generation .......................................................................... 27

(1)

GSA: THE PROCUREMENT PROCESS FROM 

START TO FINISH 

THURSDAY, SEPTEMBER 29, 2005

U.S. SENATE, SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, AND INTERNATIONAL SECURITY, COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, Washington, DC. 

The Subcommittee met, pursuant to notice, at 3:02 p.m., in room 

562, Dirksen Senate Office Building, Hon. Tom Coburn, Chairman 

of the Subcommittee, presiding. 

Present: Senators Coburn and Carper. 

OPENING STATEMENT OF CHAIRMAN COBURN 

Senator COBURN. The Federal Financial Management Oversight 

hearing will come to order. 

I asked for this hearing because as I looked at GSA, I was having 

trouble figuring out how GSA works and where the transparency 

was and what was the goal, what are the parameters, how do you 

measure the goal, and how do you measure whether you are doing 

that? The purpose of the hearing today, Mr. Administrator, is to try 

to get a better understanding and see if we are getting a good 

price. 

Americans have given us their credit card. They are on a hook 

for a bill with ever-accumulating interest. That bill is so big right 

now, our generation certainly won’t pay it off. Our children’s generation won’t pay it off. And maybe our grandchildren’s generation 

might pay it off, but they will pay it off through a markedly decreased standard of living. 

We have a moral obligation to take the trust that has been given 

to us with their money and do that in a wise way. When they ask 

to see the receipt, they shouldn’t get an answer that is so complex 

that we can’t explain why they can’t see the receipt. The demands 

that Americans are making aren’t really very complicated. They 

want to know what we bought on their dime, how much it cost, did 

we do everything we could to get the best price out of it and get 

the best deal, and I believe they deserve to have those questions 

answered. 

The budget of the United States now stands at $2.6 trillion. That 

means the Federal Government spends over $7 billion a day. Federal Government spending has skyrocketed, as we all know, from 

the 1960s, especially in the last 4 to 5 years, it has grown at about 

a 5 to 7 percent rate, greater than its historical rate. Because the 

2

government is not spending within its means, it means that the 

Treasury is forced to borrow hundreds of billions of dollars each 

year to pay for that, which translates to our children and our 

grandchildren. 

One important way we can reduce the burden on the American 

taxpayer and help spare our grandchildren a lower standard of living is to make sure the goods and services the Federal Government 

buys are bought at the best price, at the best terms. And we don’t 

really have a good answer for them for anything other than that. 

We are the largest purchaser in the world of almost anything. 

The purchasing power is massive. GSA was established to harness 

that incredible purchasing power by providing central oversight 

and coordination of procurement. As the government grows, it becomes all the more important for agencies’ procurement efforts to 

be tracked and coordinated in order to build efficiencies and purchase in bulk whenever possible. 

Some questions we are going to try to address at today’s hearing 

are, are we doing better than the ceiling price in the GSA catalog? 

The GSA fee structure, is it appropriate? Accountability requiring 

transparency—do we have transparency in terms of being able to 

measure performance indicators for GSA? And discuss about the 

competing procurement agencies out there that you compete with, 

the purpose for them and what is going on in that area. 

I want to thank Administrator Perry for being here today. I 

would note that the questions that we submitted in the middle of 

August were delivered to my office an hour ago, which handicaps 

our ability to be informed for this because my staff hasn’t had a 

chance to read the answers to those. So what it probably will entail, based on what is in those answers, is another hearing, which 

we could have facilitated not having had we had the answers in a 

more timely way. I recognize you have a lot of things to do besides 

answer questions to us. We are going to ask some questions today 

and we would just appreciate a little more timely response so that 

we can do our job in terms of oversight.

PREPARED STATEMENT OF SENATOR COBURN 

Americans have given us their credit card. They are on the hook for the bill and 

the ever-accumulating interest. Already, that bill is so big that they can’t pay it off, 

but their children and grandchildren will. Congress has a moral obligation to take 

this trust seriously, and shop for the best price. We shouldn’t throw everything into 

our shopping cart without even comparing price. When they ask to see the receipt, 

they shouldn’t get an answer that is so complex that we can hardly hold a coherent 

hearing on the subject in plain English. The demands Americans are making aren’t 

complicated. They want to know what we bought on their dime, how much it cost, 

and if we did everything we could be haggle for the best deal. It’s their grandkids’ 

future on the line, and they deserve to have these questions answered. 

The budget of the U.S. Government now stands at $2.6 trillion dollars. That 

means the Federal Government spends an average of over $7 billion every day. Federal Government spending has skyrocketed at a rate unseen since the 1960s. Because the government is not spending within its means, the Treasury is forced to 

borrow hundreds of billions of dollars each year to pay for it. Our grandchildren will 

have to pick up the tab when the bill comes due. 

One important way we can reduce the burden on the American taxpayer, and help 

spare our grandchildren a lower standard of living, is to make sure that the goods 

and services the Federal Government purchases are bought at the best possible 

price. And quite frankly, there’s no excuse for anything else. The purchasing power 

of the Federal Government in the market is massive—our spending on goods and 

services exceeds the Gross Domestic Product of all but three countries. 

3

1The GAO Report GAO–05–960R appears in the Appendix on page 27. 

The GSA was established to harness that incredible purchasing power by providing some central oversight and coordination of procurement. As government 

grows, it becomes all the more important for agencies’ procurement efforts to be 

tracked, coordinated in order to build efficiencies and purchase in bulk whenever 

possible. 

We know that product prices on the GSA catalogue are ‘‘ceilings’’ rather than the 

best price. GSA negotiates a ‘‘ceiling price’’ from which agencies may further negotiate. One goal of this hearing is to find out whether agencies are actually negotiating down from these ceiling prices. 

We’ll be looking at the incentive structures created by GSA’s operations, especially 

its fee-based system. Does this system create the right incentives for contracting officers to get the taxpayers the best deal? 

Perhaps most important of all for intelligent procurement planning and implementation is good information. We simply must know what we’re buying, for what 

purpose, in what quantity, and at what price. If we don’t, then we can’t possibly 

develop strategies to get better prices, set spending priorities based on what we’re 

actually spending, avoid inefficiencies and duplication, and appropriately steward 

the taxpayers’ financial trust. We will be looking today at the systems we have for 

tracking procurement and if they are adequate to the task. I’ll be particularly interested in transparency of the process—do we have access to the right information, 

and accountability—is someone responsible for what gets bought, and if it gets 

bought at the best price? 

Finally, Federal procurement has come a long way since GSA was first established. There are tons of different ways that agencies can make purchases. They 

don’t have to use GSA at all. They can use different types of vehicles at GSA. They 

can use government competitors of GSA, sometimes referred to as mini-GSAs. They 

can use private sector procurement products. GSA is now performing a minority of 

all government procurement. Our hearing will examine GSA’s evolving mission and 

its relevance to the procurement process.

I would like, without objection from Senator Carper, to submit 

for the record the GAO report that was issued yesterday highlighting the flaws in the data system that tracks procurement. It 

was just released yesterday.1

I would like to introduce Mr. Perry after Senator Carper finishes 

his opening statement. He has advised us that he will have to leave 

for another hearing that is ongoing at the concurrent time and I 

appreciate him so much for being here. I also want to tell him I 

appreciate the fact that we are working together, bipartisan, to 

look at costs and spending and wasteful government spending, and 

that we both have a desire not to single people out, but to make 

sure that after a hearing, there is something accomplished that 

makes us better at what we do. So there is nothing personal intended at any of these hearings, but rather how do we all do a better job for the American people. 

Senator Carper. 

OPENING STATEMENT OF SENATOR CARPER 

Senator CARPER. Thanks, Mr. Chairman. Mr. Perry, I always 

say, everything I do, I can do better, and I think that is probably 

true of most of us, including Federal agencies. We welcome you 

here today. 

I was joking with Mr. Perry that I heard a song riding in to catch 

the train this morning, on the radio, an old song by Journey whose 

lead singer was Steve Perry. I hear him on the radio in the morning——

Senator COBURN. And now he is testifying before you. 

Senator CARPER [continuing]. And now he is testifying. We will 

see if he is as good in person as he was on the radio. We are glad 

4

you are here, and Mr. Chairman, I thank you for inviting him to 

come by and to give us a little bit of a primer on how GSA does 

what it does. 

As the Chairman said, I wish right now I could be two places at 

once. I can’t, and I have made a commitment with Senator 

Voinovich to be with him and some others on trying to figure out 

how to retrofit devices in diesel-powered buses and trucks and 

trains and boats to reduce the emission of bad stuff into our air. 

So I am going to go over there and spend some time with them and 

then I will come back. 

I think this hearing may have been inspired, Mr. Chairman, by 

some testimony that we heard earlier this summer regarding 

whether GSA is doing what it needs to do to be certain that the 

agencies that use its service are getting the very best value, and 

I think that may have been the impetus. While I am going to slip 

out for a while, I just would say I am very interested in hearing 

what you have to say and the man who is sitting right behind me, 

John Kilvington, will make sure that I get a full briefing for that 

which I miss. 

When taxpayers expect that when agencies go to GSA to purchase a good or a service, and I believe some agencies may have 

no choice but to go to GSA for some of what they use, that they 

are not going to pay more than they need to, and that just makes 

common sense. 

I believe we heard at our last meeting that the GSA has been 

doing pure audits of the contracts that they have with outside vendors and this trend coincides with a tremendous interest in the 

level of business that takes place through GSA, and what I am told 

is a decline in the savings negotiated by GSA personnel. 

We look forward to hearing from you, Mr. Perry, today about 

what might be behind these trends, if they are correctly characterized, and also what we are going to be doing going forward. I know 

you have some reforms on the way already at your agencies—at 

least that is what I am told—so we are interested in learning what 

they may mean with respect to savings for your customers and ultimately for the taxpayers we work for. 

Again, thanks for being here and we are glad you are able to 

share this time with us. 

Senator COBURN. Let me introduce Mr. Perry. Stephen Perry was 

appointed the 17th Administrator of the U.S. General Service Administration on May 31, 2001. He is from Canton, Ohio. He was 

a senior business executive who retired March 31, 2001, as Senior 

Vice President, Human Resources, Purchasing, and Communication. His retirement marked the conclusion of a 37-year career at 

the Timken Company of Canton, Ohio, a leading international 

manufacturer—I bought a lot of Timken bearings when I was in 

business, I want to tell you—of highly-engineered bearings and 

alloy steels with annual sales of $2.6 billion and 20,500 workers. 

In 1991, then-governor, now U.S. Senator George Voinovich appointed him to his cabinet as Director of the Department of Administrative Services, which provided services to the State agencies 

that are similar to what GSA provides to Federal agencies. After 

a success in State Government, Mr. Perry returned to Timken in 

1993. 

5

1The prepared statement of Mr. Perry appears in the Appendix on page 34. 

A 1963 graduate of Timken High School in Canton, Mr. Perry 

earned his Bachelor’s degree in accounting at the University of 

Akron in Ohio. I can relate to that. I have a degree in accounting, 

as well. He attended the University of Michigan Executive Development Program and earned a Master’s degree in management from 

Stanford University in California. 

Mr. Perry and his wife, Sandra, have five adult children and six 

grandchildren. 

Mr. Perry, welcome. We are so thankful you are here and we appreciate you. You will have as much time as you would like to 

make your opening statement. Since I am going to be here probably 

by myself, take your time, and what we want to do is just go 

through and get a great understanding. So thank you very much 

for being here. 

Senator CARPER. Mr. Perry, if I could, I am a Buckeye. I was an 

Ohio State Buckeye and it is always nice to welcome a Zipper from 

the University of Akron. I am going to go see George Voinovich 

right now. I will tell him that I was just with you. I am sure he 

will want to be remembered, as well. Thank you. 

Senator COBURN. You may proceed. 

TESTIMONY OF STEPHEN A. PERRY,1 ADMINISTRATOR, U.S. 

GENERAL SERVICES ADMINISTRATION 

Mr. PERRY. Good afternoon, Dr. Coburn and Senator Carper. I 

am pleased to have this opportunity, actually, to talk about the acquisition processes that we use at the U.S. General Service Administration. 

As you know, I have submitted a written statement for the 

record, so I will make my remarks brief and leave most of our time 

for dialogue. 

Let me take the opportunity to say that I do regret the fact that 

in our last appearance before your Subcommittee, we were late in 

submitting testimony to you, and I regret to learn that we were 

also late in submitting the answers to the questions that you presented to us. I know what a hardship that is, and I also know that 

we are making an effort inside GSA to improve upon that. 

As you are certainly aware, GSA’s primary mission is the acquisition of facilities and products and services for other Federal agencies. GSA acquires all the office space and products and equipment 

and telecommunications services and so forth that over 1.1 million 

Federal workers need and use in the successful operations of their 

agencies. We also provide support to the Department of Defense, 

our men and women in uniform, and to first responders in the 

event of situations such as we are suffering through in the Gulf 

States now. 

We believe that by providing these acquisition services, we enable Federal agencies to focus more of their resources and their expertise on achieving their own core mission and leaving the acquisition, if you will, to be accomplished by the folks at GSA. 

We know that we have a very important responsibility. I would 

agree completely with the remarks that you made about how important it is for us to be efficient, to be effective, to be reliable, to 

6

be consistent, and, of course, to be compliant with all the rules and 

regulations that we have to follow in order to provide best value 

for the government for the American taxpayers. 

It has been my privilege to be involved in public service during 

these past four-plus years at the U.S. GSA. I believe that the people who work there do share a strong commitment to meeting the 

mission of GSA. It is an aspiration. We know that we don’t always 

measure up to the extent that we would like, but there is a strong 

aspiration to do so. 

I think also there is a strong understanding among GSA associates that we are part of the value chain of providing government 

services to the people who live in this country, which in one way 

or another actually serves to improve the quality of their life to the 

extent that we do that well. We also know that the extent to which 

we do not do that well, then we are impeding the ability of other 

agencies to provide the government services that are necessary for 

U.S. citizens. 

So we do have that strong commitment and I just wanted to 

iterate that to you. In the course of our discussion, I could talk a 

little bit about the things that we are doing or have done to emphasize that as a foundation, because it is that commitment to excellence in acquisition which forms the foundation on which all these 

other things rest. 

In addition to our commitment to achieve the GSA mission and 

to be efficient and effective, we also have spent a lot of time focusing on and rededicating and enhancing our commitment to what we 

call our GSA values. These are not necessarily values that we 

brought to the agency. These are values that we discovered exist 

at the agency and we have attempted to highlight them, to make 

them a part of our everyday jargon. There are just five. 

The first and foremost is ethics and integrity in everything we 

do. That speaks to a lot of what you have on that chart there. 

A second value is treating our fellow associates with respect, 

which ties directly into our third value which is very important, 

and that is the value of teamwork. 

As we discovered at GSA, as is the case with many Federal agencies or, for that matter, many private sector organizations, as well, 

we were a bit stovepiped. We had our Public Building Service, our 

Federal Technology Service, our Federal Supply Service. We had 

our Chief Financial Officers’ Office, our Chief People Officers’ Office, a number of units which were not working well together. 

There was autonomy. There was a great deal of autonomy, too 

much autonomy, in my view, between our regional offices and our 

national offices. So teamwork, we have discovered in our organization, is critical to being able to meet the needs of our customers. 

We are unlike some large corporations that may have unrelated 

divisions, one division produces light bulbs, another division produces jet engines. It might not be necessary for them to have a 

strong collaboration. But in our case, our customer agencies look to 

us to provide a broad spectrum of products and services that they 

need to operate and they expect us to work together. So this issue 

of treating our fellow associates with respect and teamwork are 

values that are very important to our ability to be successful. 

7

A fourth value is the value of results orientation, which perhaps 

should go without stating, but it is the view of some that in some 

organizations, we can be a little bit academic and not enough focused on results and we are changing that. 

And then the last value is that of professionalism, and I can tell 

you from my experiences in the last four-plus years at GSA that 

I have seen many examples of personal actions or individual decisions or, in some cases, major GSA-wide initiatives that truly do 

reflect these values. I have seen a lot of opportunities for people to 

make decisions or to take actions which clearly reflect the values 

that I have talked about. 

Unfortunately, I also have to report to you that I have seen a few 

examples where we have fallen short of living up to those values. 

However, I can also tell you that the overwhelming part of the 

work that we do is done within the confines, the guidelines of these 

values, and I know that we are committed to continuing to strive 

for full achievement of these values. 

Mr. Chairman, as you may know, the model that is used by the 

Federal Government to consolidate a lot, not all of, but a lot of its 

acquisition of commercial products and services into GSA, I believe 

is a very efficient, effective approach. It is an approach that would 

be used by—as a best practice in the private sector, to take all of 

the purchasing activity that has to occur in Plant A and Plant B 

and various locations around the country or around the world and 

to some extent consolidate that and to leverage the synergies that 

might be captured by doing so. 

So I think the approach that we use is a wise approach. It enables us to bring together the expertise that is necessary to really 

understand the supply markets for the various products and services we are buying, the expertise as it relates to the Federal Acquisition Regulations, as you pointed out, which are very complicated, 

and to leverage the volume of the Federal Government’s purchases 

so that we can have a better opportunity of deriving the best value 

for the government and for the American taxpayers. 

It also, in my judgment, provides a sort of a streamlined approach that makes it actually easier or more effective, or at least 

a little less confusing for the industry to be able to interact with 

the government when they pursue Federal Government contracts. 

Another point that I wanted to make is that GSA operates using 

a revolving fund approach, and what that means is that, in general, we don’t receive direct appropriated funds to cover the cost of 

providing office space or the acquisition services that we provide. 

Rather, we receive reimbursement from the agencies in the way of 

rent or cost of goods sold to reimburse us for the expense that we 

may have incurred to pay for the acquisition of a telecommunications system or what have you. And then, in addition to that, 

there are some amount of fees that we charge in order to cover the 

costs of our overall operation. 

As a general proposition, the fee approach and the revenue receipt approach that we have is intended to be a break-even approach. There is no incentive, or should not be an incentive for us 

to try to derive revenues in excess of our expenses. In the case of 

our Federal Supply Fund, for example, any revenues in excess of 

8

expenses go back into the general Treasury. So, so much about 

fees, and we will talk about that more, I am sure. 

The other point I wanted to make has to do with the approach 

that we have used to manage the operations. In a short expression 

of this, the primary approach that we have used is what I call our 

Performance Management Process, which begins with an understanding of our customer requirements so that we could work with 

them proactively and so that we could set goals for ourselves which 

are commensurate with achieving the customer’s expectations, and 

with those goals in place, then we have developed and documented 

and written out action plans, who is responsible to do what by 

when to achieve those goals, and we have, in addition to organizational goals for each of the organizational units, we now have in 

place Individual Associate Performance Plans which also document 

what is expected of each individual, and that is used as the basis 

of our performance evaluations for accountability and recognition 

at the end of the year. 

We also have put in place what we call a Performance Measurement Tool, which we review on a regular basis—I have personal reviews of each of them on a quarterly basis—to determine where we 

are in terms of achieving the various goals that have been set, getting an understanding of why we are where we are, and then 

spending some time to talk about corrective action that may be 

necessary to get us back on track or to keep us on track with respect to achieving those goals. And in the course of our discussion, 

I will be happy to talk about what some of those goals are and the 

progress we are making toward them. 

In addition to what I called the Performance Management Process, another process we have put in place which comes out of the 

President’s Management Agenda is what is referred to there as the 

Strategic Management of Human Capital, and you know the reasons why that is in place. It is certainly very relevant for GSA. But 

we think the places where we have used this now are places where 

it is bearing very good results. 

In the Strategic Management of Human Capital as we employ it, 

it starts again with an understanding of what our customers’ future performance expectations are of us. And then when we have 

that understanding of what is expected, we make a statement or 

a documentation of what kinds of skills and competencies will be 

necessary for us to successfully achieve those goals. A third step, 

which is the toughest of all, then, is to discover what is the gap 

between our current skills and competencies and that which we 

need for success and what will be our strategy to bridge the gap 

from where we are today to where we need to be. 

We have employed that, for example, in our Public Building 

Service, first at the national office, made, I would say, pretty dramatic change in the way that unit of our organization operates. 

And that in turn, then, was spread to the Public Building Service 

entities within each of our 11 regional units. That process is ongoing. I think the result of it has been and will be that we are being 

much more effective in using the dollars that are available to us 

to provide work space for Federal workers. 

It still is a challenge, obviously, to do that in an efficient and effective way, but again, we have been talking about some of our 

9

goals, for example, the fact that our leased space, we acquire that 

leased space at rates at least double-digit below what would be the 

case if our agencies were using private sector leasing companies or 

brokers to provide that space directly. In the case of providing 

maintenance, including utility costs and cleaning for the public 

buildings that we operate, again, that is double-digit below, in 

some years as much as 14 below the estimates of what that benchmark should be, and that is just true in a number of instances. 

So we think that we are taking advantage of the leverage that 

comes from providing this service and, as a result, providing it at 

rates that could not be achieved if agencies were acting alone. 

At this point in time, we have gone beyond the PBS area in 

terms of organizational design, and as you may know, we are looking at our Federal Technology Service and our Federal Supply 

Service and looking to combine those into one unit that we will call 

our Federal Acquisition Service, and the purposes are the same. 

There was a point in time, we believe, when the separation of those 

two acquisition services might have made some sense. It makes 

less sense in today’s world, and so we are moving to accomplish 

that change. All of those organizational design changes are intended to enhance our organizational capability to meet the future 

needs of our customer agencies. 

And then just one other point that we focused on heavily and 

that is to do what we call Achieve Excellence in Federal Acquisitions, sometimes referred to as our ‘‘get it right’’ plan. You may 

know that there was a point in time, I believe in 2002, late in 2002, 

it began to emerge, and my view is that as a result of our values, 

one of which says ethics and integrity in everything we do, some 

of our associates were coming to our managers and saying, if you 

guys are really serious about ethics and integrity in everything we 

do, I need to tell you about a few of our longstanding practices that 

I am not sure really fit in that value. 

So as we began to look at that, we found that there were enough 

things that we were doing that were not in full compliance with the 

Federal Acquisition Regulations, that we would go beyond just a 

management review and we actually asked our Inspector General 

to come in and to conduct a review at each of our 11 client support 

centers around the country to determine the extent to which we 

had, over the years, gotten to a point where we were cutting a few 

corners. I will say that I think that corner cutting was done in the 

effort to serve our customers, but nevertheless, there is no justification for it, and some of it was bad judgment, some of it was more 

egregious than that. 

I believe that we took appropriate steps not only to eliminate it, 

but, where necessary, to have consequences for those individuals 

that were involved and to provide a way going forward where we 

emphasized the fact that as a result of our discovery of those adversities, we will actually be better than we otherwise would have 

been because of the increased focus that we have made on getting 

it right and going beyond simply getting it right to actually achieve 

excellence in Federal acquisitions. 

So with that, Mr. Chairman, I will stop with my brief opening 

remark and be happy to respond to questions that you might have. 

10

I should also mention, I have asked to join me today some of our 

leaders of the Public Building Service, our Federal Acquisition 

Service, our Chief Acquisition Officer, and they will be happy to 

participate in this dialogue, as well. 

Senator COBURN. Great. Thank you. They are going to be more 

than welcome to if they want. 

First of all, the five parameters you work under are great and 

I am glad to see them installed. I take care of a lot of Federal employees in my medical practice. They are stellar. I think across this 

country, we are very fortunate for the Federal employees we have. 

My questions are going to deal more not with the employees, but 

are we structured right and do we have performance indicators 

that you can actually measure based on what the mission of the 

GSA is. 

The first question I have for you is how is it that GSA ends up 

with all these competitors in the government doing exactly the 

same thing you are doing? How did that happen, and why did it 

need to happen, and if it needed to happen, why? 

Mr. PERRY. Well, I will give you my take on that. As you know, 

the franchise funds were established by Congress. The several that 

exist, as you point out, in many instances purchase items that 

agencies could elect to purchase through GSA. In other cases, they 

are very specific. 

For example, in the Veterans’ Administration, they purchase 

pharmaceuticals and they have a special expertise there. That 

probably makes sense. There are some purchases that may be 

made by NASA that are of a very highly technical nature and it 

might make sense that would happen there, as well. But for those 

agencies who are involved in the purchase of standard commercial 

items off the shelf, it is a question. 

Now, what I have gotten as a response when I have asked the 

same question is that there was a point in time, in our distant history, hopefully, where GSA was not perceived to be fast on its feet. 

We had gotten to be bureaucratic, partly as a result of the fact that 

in our early days, we were a mandatory source. Today, we are not. 

Agencies can elect to use GSA for services are not. There are some 

exceptions. For example, in the leasing of real estate, you still have 

to use GSA unless GSA gives you a delegation of authority. But for 

the acquisition of commercial products——

Senator COBURN. You mean like the SEC did? 

Mr. PERRY. Yes, or the Pentagon is another example. But at any 

rate, I can’t attest as to whether or not that was factual, but that 

seems to be the folklore, that some people felt that by having some 

healthy competition within government, that would cause GSA and 

the other agencies, in fact, who are running these franchise funds, 

to be on their toes and to be the best they could be. 

Senator COBURN. So is there any measurement of that? Is there 

any way to measure whether we are getting a better value as a 

country now that we have all these competing agencies? 

Mr. PERRY. I think there is——

Senator COBURN. And how do we measure that? 

Mr. PERRY. Well, what it would take, for example, is if we took 

the Department of Interior, who has a franchise fund, and if we 

made an apples-to-apples comparison as to what is being invested 

11

by that unit to acquire technology versus GSA, I think that would 

be part of the answer in terms of how efficient the two units are. 

That is not the complete answer. 

The GAO did a study of that and one of the things that they determined was whereas the fees or rates that GSA publishes and 

charges is an all-inclusive rate, that it includes its share of the 

agency overhead, as it should, but what we believe that report 

showed as it relates to the other funds, they were incremental 

rates. In other words, they were not fully-loaded rates. So on the 

surface of it, our view is that if we did that competition and we 

looked at it on an apples-to-apples basis, you would see that the 

GSA rates are lower. 

Senator COBURN. OK. That brings me to my next question. Can 

GSA today take 2004 purchases and know, here is what we bought, 

here is how much we bought, here is what price we compared for 

it, and compare that to the private sector or any one of these other 

agencies? 

Mr. PERRY. Yes, in some of our business lines there——

Senator COBURN. Well, but is the model there to do that everywhere? 

Mr. PERRY. I would say everywhere, and I would have to think 

about whether we could do that in the case of our Multiple Award 

Schedules. That would be the exception that comes to mind. And 

the reason I say that, Senator, is that in the case of the Multiple 

Award Schedules, those are acquisition vehicles that are used directly by our customer agencies without GSA’s direct involvement. 

So if the Department of Interior or Social Security Administration 

or somebody else uses the Multiple Award Schedule, we would be 

able to capture how many dollars were purchased. I don’t know 

whether we would have all the information that we might want to 

have as to——

Senator COBURN. I promise you, you don’t. We have already 

asked this question in the hearing before. 

Mr. PERRY. But there would be some exceptions to that. For example——

Senator COBURN. OK, but I want to get to the point. I believe 

that there are some exceptions, but if we are going to measure performance, why would we not structure GSA to have an information 

system that is designed to measure that? 

For example, you can tell us how many books you buy, and you 

can tell us within a framework what price you paid, but you can’t 

tell us by publisher on value that a competitive price, whether you 

got a good deal or a bad deal unless you do a post-award audit. 

Mr. PERRY. I don’t think even the post-award audit would still 

not address the——

Senator COBURN. Because you are not looking at price in the 

post-award audit——

Mr. PERRY. Right. 

Senator COBURN [continuing]. Which is another question that I 

have. Why in the world would we not look at price in the postaward audit? 

Mr. PERRY. Well, we look at whether or not the contract was carried out in accordance with the terms and conditions of the conVerDate 0ct 09 2002 10:04 Aug 10, 2006 Jkt 024224 PO 00000 Frm 00015 Fmt 6633 Sfmt 6601 C:\DOCS\24242.TXT SAFFAIRS PsN: PAT
12

tract. So we don’t look at whether or not the terms and conditions 

of the contract were the best that they could possibly——

Senator COBURN. For management purposes, once you have done 

the contract, I know you have cut the deal. 

Mr. PERRY. Right. 

Senator COBURN. But for management purposes, why wouldn’t 

you want to know that information? 

Mr. PERRY. The time to know it is prior to——

Senator COBURN. Right. What if you are going to contract with 

them again next year? But if you don’t know that information—in 

other words, what I am trying to get is to why isn’t there in GSA 

a way to know what the Federal—just from you, let alone everybody else—what we bought, how much of it we bought, and what 

price we paid for it? 

Mr. PERRY. I agree with that. 

Senator COBURN. But we don’t have that——

Mr. PERRY. You don’t have that. 

Senator COBURN. We don’t have that. So my question to you then 

is, how do we do that? What do you need from me to help you do 

that? How do I create that where you have the information systems 

that are necessary to evaluate performance, including price and 

value? 

Mr. PERRY. Well, may I start that answer to that question with 

one thing that we do today, and then I will end it with my answer 

to the thing that we have on the horizon which I think gets to your 

basic question. 

When we make our technology acquisitions today, we do make a 

calculation that we call the Independent Government Cost Estimate of what that technology acquisition should cost. So at the outset, we have a target——

Senator COBURN. And that is a large portion of what you buy, 

right? 

Mr. PERRY. Yes. 

Senator COBURN. IT? 

Mr. PERRY. IT, other than buildings. So we do have that Independent Government Cost Estimate, and then as we make the acquisition, we measure ourselves as to whether or not we achieved 

the acquisition somewhere close to or right on or even below the 

estimate. We do the same thing in construction. We obviously have 

on-time, on-budget goals and we measure that. So I just want to 

say, it is not that nothing is measured. Some things are measured. 

Senator COBURN. Oh, I know that, and I have studied, I have 

read the testimony from what we had last time. This is not an attack on what you are doing today. It is in the question of I see, 

coming from the private sector, what I see is the real fact is we 

can’t measure—we don’t know what is exactly bought and at what 

price in this country. 

Mr. PERRY. That is right. 

Senator COBURN. OK. 

Mr. PERRY. We can’t get it at the granular level that is actionable. 

Senator COBURN. But we ought to be able to if we really want 

to leverage purchasing power, would you agree with that? 

Mr. PERRY. I agree with that. 

13

Senator COBURN. OK. So we can’t do that now, and since we 

can’t do that, one of the performance measures of success can’t be 

measured because we can’t go out and compare, did we really get 

the best price, because we don’t know how much it was bought off 

your catalog——

Mr. PERRY. Right. 

Senator COBURN [continuing]. And we don’t know what they paid 

for it. We know what the ceiling is, but we don’t know—for example, when you all negotiate a price——

Mr. PERRY. That is right. 

Senator COBURN [continuing]. Your testimony in the last hearing, or your staff’s testimony in the last hearing before this Subcommittee is you negotiate what you think is the best price and 

that becomes the ceiling. 

Mr. PERRY. Right. 

Senator COBURN. And you have some pre-audit certifications and 

some post-audit to see that they didn’t do it—post-audits, you are 

not looking at price. On pre-audits, sometimes you are. But the 

point is, as that happens, in terms of negotiating, we can’t measure——

Mr. PERRY. Right. 

Senator COBURN. The real matter of the fact is maybe somebody 

else wants to come and sell all of this to you in one lump sum and 

will be available and can do it in a better way and get us a better 

price. 

Mr. PERRY. Well, I should say we are beginning to do some of 

that now, a little bit of it. That is what you are referring to is in 

the case of our Multiple Award Schedules, there is a schedule price, 

which is a ceiling. There are some acquisitions that agencies would 

make against that—let us say they were buying two computers. 

Well, they might judge it is not worth doing a special effort to get 

the price down. They will just go with the scheduled price. 

Senator COBURN. Yes. 

Mr. PERRY. But if they are buying 500 computers, they really 

should. What we are now doing in our Chief Acquisition Officer’s 

Office is we are going to customer agencies who use the schedule 

and asking that very question. In how many of the instances where 

you made acquisitions did you conduct a separate competition with 

an effort to get a price lower than the scheduled price? We will be 

tracking that. But that is on an audit based as opposed to an automated basis. 

Senator COBURN. But you understand what I am saying. 

Mr. PERRY. Yes. 

Senator COBURN. Why shouldn’t the whole systemwide system be 

set up to track the information so that when you want to really 

measure any aspect of your—at Timken, you all knew what you 

paid for something, right? 

Mr. PERRY. Sure. 

Senator COBURN. You knew, and then you put out bids for steel 

and everything else the next year and the clips for the bearings 

and your grinding wheels for the steel and all this other stuff. You 

put it out and you knew, based on the bids that you got, how you 

tracked it, you knew exactly how much you bought and you knew 

14

what you could go back to negotiate the next year with based on 

that. 

And my question is, take that same application from Timken for 

telephone sets in the Federal Government. How many were 

bought? Nobody knows. You know how many computers to a degree, but you don’t know how many computers we actually bought 

because, first of all, the Pentagon isn’t hooked in——

Mr. PERRY. Right. 

Senator COBURN [continuing]. Through the system. So what I am 

asking you is—what I am looking for is a culture change so that 

your information systems in GSA become designed to measure any 

performance across the government——

Mr. PERRY. Right. I was going to say——

Senator COBURN [continuing]. And that is how you will get the 

business back. 

Mr. PERRY. And that is through what is called our FPDS, Federal Procurement Data System, which, as you certainly know, begins to capture some of that information, but not at the granular 

level that it needs to be. We are making an improvement upon 

that, but it still doesn’t go to the extent that you are saying. My 

answer to your question is we would need to go yet further than 

anything that is on the drawing boards on an across-the-government basis to be able to analyze the data in terms of what the government purchases. 

I would make one other observation, and that is—I will use the 

Timken case. When we did our purchasing, as I think we should 

do it here, you would make a stratification as to what are your 

really strategic items? Where are the elephants that have the biggest opportunity for savings? I think it wouldn’t be unwise of us 

to start there. 

For example, one of the things we are doing now and over the 

last year or so is a strategic purchasing initiative that we call 

SmartBuy. We know the government spends a tremendous amount 

of money on software. We know that various agencies spend differing amounts of money on software. And so to your point, we 

were not able to go to the FPDS system and get all the information 

that should have readily available as to what are we spending by 

agency for software and then types of software. We were able to 

gather that information, though, through other means, by making 

a data call and using agency data to bring that together. 

But I don’t disagree. It would be ideal to do that more globally. 

But I am also saying that even in this interim period before we 

have that, there is some strategic sourcing that we can do. We can 

improve upon the value that we are getting now as we are putting 

that other system in place. 

Senator COBURN. And that is great, but what about all the other 

agencies that are buying and we are losing the buying power of 

being combined because they have their own buying power? In 

other words, that is like Pfaffner. Pfaffner was a competitor of 

Timken. 

Mr. PERRY. Pfaffner, that is correct. 

Senator COBURN. So we have got Pfaffner and Timken here and 

they are both buying the same product, but we are not leveraging 

the fact that they have tremendous more buying power if they buy 

15

together. Now, in this country, it is illegal because they are competitors, but it is not illegal to combine the Federal Government. 

So if we can’t direct—if we don’t have the information, then we 

are not going to ever get the best value. We are going to go to a 

level, and I guess what I am asking is to rethink the model to 

think bigger than what you are doing today because to me, it 

makes no sense to have 13 different buying agencies in the Federal 

Government, none. It makes no sense for the Defense Department 

to procure outside of you, or some agency, whichever it is, or at 

least not use their combined buying power to facilitate the rest of 

the Federal Government’s purchasing. 

Mr. PERRY. Absolutely right. 

Senator COBURN. So the question I have to you is, how do we get 

to the point where all these guys who are in these other Federal 

buying agencies can’t compete with you anymore because you know 

price, you know availability, you know value, you know numbers, 

and I don’t understand why that is not a priority on the catalog 

stuff, for example. 

Mr. PERRY. Well, as a matter of fact, Senator, to some extent, I 

would say that some of those customers, while they view price as 

important, they don’t view it as the final determinant. 

For example, the Department of Defense, who is a big customer 

of ours, and I think for the most part we provide them with services that they are very satisfied with, but I have had discussions 

with base commanders and others who say, I have to make sure 

that I have a reliable source, that it is consistent and compliant. 

If it costs me 10 percent more to do it myself, then it is so important to the achievement of my mission that I am willing to do that. 

So what we have to convince them of, not only that we are lower 

cost, we are able to do that now, but also that we are absolutely 

reliable, consistent, and compliant. 

Senator COBURN. But in Timken, if you had assistant purchasing 

agents that didn’t perform, you would fire them. 

Mr. PERRY. Right. 

Senator COBURN. OK. And so what we are saying is if you don’t 

perform, there is no cost. We will just go do it ourselves. That is 

what the military is saying, based on their value of feeling comfortable about having—value is quantity, price, and service——

Mr. PERRY. Right. 

Senator COBURN [continuing]. And having that delivered at a 

fixed time that they feel comfortable with. My point is, that is 

achievable if you have measurable systems operating throughout 

your IT that says, we know what the performance indicator, and 

in terms of the military, timeliness of delivery is just important. 

That is their big component for value. 

So I think it is the same thing. All these parameters can be 

measured if you put the system in to measure. Did we get it? Did 

we get what we thought we were going to get? Is it at the right 

price, at the right time? That is called measured performance, and 

that is how we used to measure purchasing agents. Did you get it 

in on time, and did you get us a good term? 

Mr. PERRY. Right, and we——

Senator COBURN. And we pay for it in 90 days instead of 30. 

16

Mr. PERRY. Well, the reason I said that there are certainly cases 

where we do exactly what you are saying and some cases where we 

don’t, it is a little more difficult. 

Senator COBURN. Well, I am trying to stay just on the catalog 

here for a minute. 

Mr. PERRY. OK. You are just——

Senator COBURN. Just stay on the catalog. I know that there are 

technical things like IT purchases and things like that. I haven’t 

even begun to look at that. 

Mr. PERRY. OK. 

Senator COBURN. We haven’t even begun to look at leases and we 

haven’t begun to look at building purchases and things like that, 

which we are going to. But just on the catalog, you cannot—and I 

think this is true, and tell me—you cannot tell us what was 

bought, how much, and what price was paid through that catalog. 

Mr. PERRY. We can tell you from the Federal Procurement Data 

System how much was spent totally by agency. We could tell you 

by certain categories. We could tell you how much was spent on IT. 

What we can’t do is say how much of that IT was for laptops, 

which is what we need. We need to get to the next level of granularity. But we can, for example, say how much was spent on furniture, how much was spent on supplies. There are certain categories that we can map out. 

Senator COBURN. Right, but I am talking down to the line item 

in the catalog. 

Mr. PERRY. Right. We can’t do that. 

Senator COBURN. It comes with the same computer transmission 

that transmitted anything else back. It is just a subcategory. 

Mr. PERRY. Right. What would happen——

Senator COBURN. Which book did you buy? 

Mr. PERRY. Right. And where that information resides, because 

as I mentioned, the individual agencies use our Multiple Award 

Schedules independently—what would be required is that their acquisition systems would have to feed that line item-level detail into 

the system, which does not happen today. 

Senator COBURN. Well, we can get it today. I have gone to get 

it on several things. You know where I get it? The supplier. 

Mr. PERRY. And that would be—you talked about Timken, and 

let me go back to that. 

Senator COBURN. Yes. 

Mr. PERRY. That is exactly what we did in many instances. You 

take the grinding wheel suppliers——

Senator COBURN. Yes, Norton——

Mr. PERRY. Norton was our primary. We picked two or three, not 

ten, two or three who would be our strategic partners. Part of the 

deal would be we share information. Where we got the information 

in the case of the software purchases was, again, going back to suppliers, and we could do that in some of these cases, as well. But 

sometimes, we——

Senator COBURN. You see where I am going with that. 

Mr. PERRY. Yes. 

Senator COBURN. All right. Let me see where I want to go next. 

My staff just gave me a reminder of something we talked about 

earlier. If you go and compare GSA purchasing to the private sector 

17

programs that are out there today, what I just described to you, 

they can tell you in 30 minutes on anything that is on their line. 

They know what was bought, they know how much was bought, 

they know what price was bought, they know the delivery rate it 

was bought, and they know the terms it was bought. 

So if the private sector has that software technology, we ought 

to be able to get it. First of all, we are the biggest purchaser, so 

it is a big purchase in software, but we ought to be able to buy it 

cheaper than anybody can buy it, correct? 

Mr. PERRY. That is right, probably. 

Senator COBURN. So you will concede that in some of the buying 

mechanisms that are out there competing in the private sector, this 

has already been accomplished. 

Mr. PERRY. Yes. I think the software is not the challenge. 

Senator COBURN. OK. What is the challenge? 

Mr. PERRY. The challenge would be for each agency to input the 

data, either manually or through some automatic or automated 

process at the level of granularity that we need in order that the 

database of information would be available for analysis. 

Senator COBURN. But they are purchasing most of that through 

a purchase requisition that has to get paid someway. 

Mr. PERRY. Right. 

Senator COBURN. And I am not talking about the petty cash purchases and the small things. 

Mr. PERRY. Right. 

Senator COBURN. I am talking about how do we leverage what 

we do to where we get a better price. 

The second area I want to spend some time with you on is——

Mr. PERRY. I would say, as we do that, my judgment is, on systems development or in this case implementation of system data 

collection, one of the questions is do you do everything at once or 

do you start with a phase where you are dealing with your most 

strategic sourcing opportunities, and I would just suggest that as 

we do this, we would select the one or two or five areas where we 

really believe the greatest value is there. We might not put pencils 

and papers in the first phase. 

Senator COBURN. I think that is a management decision you 

should make. What I am looking for is how do I help you get that, 

facilitate, get that done, either through legislation or appropriation 

riders or things like that to where you can accomplish it. 

But the other thing that needs to be accomplished is if we agree 

that more information and more detailed information will result in 

leveraging buyer power to a greater degree, then we ought to be 

having all these others—when they are inputting, it doesn’t take 

much to transmit—if they have it in their computers, they are buying it on a purchase requisition, so they know what they are buying, they know what the price is, since they are negotiating the 

price below the ceiling price sometimes, so they know what that is. 

That data is there. All it is is reporting it——

Mr. PERRY. Right. 

Senator COBURN [continuing]. And they can do that once a 

month to you. But we need to have a central collection of what everything is bought so we can actually enhance the buying power, 

because if you go to a vendor right now on your catalog and you 

18

say, here is what we want. We are going to qualify you as a vendor. 

What is this——

Mr. PERRY. Schedule? 

Senator COBURN [continuing]. Central contractor registration, 

you have 350,000 people registered and you have 9,500 people on 

the schedule. We are going to put you as a vendor on the schedule 

and we are going to collect the data. But if you don’t know it for 

the whole country, we may not be able to get the best ceiling price. 

If I understand the testimony properly and the history properly, 

your procurement officers—price isn’t the No. 1 thing that they are 

working on. They are working on value and quality and deliverability——

Mr. PERRY. Right. 

Senator COBURN [continuing]. And then they look at price. And 

they are looking for the best price at the time, but that is not part 

of their stated goal, correct? 

Mr. PERRY. That is not price alone, if that is what you are saying. 

Senator COBURN. Yes. It is value. 

Mr. PERRY. Value. 

Senator COBURN. But in terms of value, when you take this 

350,000 people that are on this contractor registration form, how 

do we get more of those people in the mix? In other words, we have 

9,500 and we have 350,000 people out here that are on it, and I 

know there is a web placed application to do that. But what I hear 

is that it takes forever. For example, a minority-owned business 

that can’t pay a consultant to walk this thing through, they are 

never going to get on the list. 

Mr. PERRY. Well, that is an interesting question, Senator. First 

of all, I agree with you that it takes too long, and I also know that 

we have been taking some steps to bring that time down, including 

putting it online. We had a meeting just last week or 2 weeks ago 

with a firm who said they did all of their own paperwork, processing to get on schedule with the help of the GSA folks, never 

used a consultant, and they did it over a period of 6 to 8 weeks. 

In the same room was another similar-sized company who said, ‘‘I 

paid $25,000 to a consultant to provide me that same service.’’

So we have been telling our small businesses that want to get 

on schedule, you really don’t have to pay what consultants are 

charging. I don’t know what the consultants promise. Maybe they 

promise they will work with you not only to get on schedule, but 

will work with you to get your first contract. Some say that. 

All I am saying is that we have taken steps to streamline the 

process. We need to do more. We should not have a situation where 

a small business has to pay an unaffordable amount for them to 

get on the government contract schedule. 

Senator COBURN. And if you would agree in principle that if you 

have more vendors of quality and value competing, the price is 

likely to go down. 

Mr. PERRY. To some extent. 

Senator COBURN. Yes. But in regular markets——

Mr. PERRY. Yes. 

Senator COBURN. If you are at GM and they have five guys competing for seat belts——

19

Mr. PERRY. Right. 

Senator COBURN [continuing]. Versus two guys competing for 

seat belts, the likelihood that the price for the seat belt is going 

to go down. 

Mr. PERRY. That is right. 

Senator COBURN. OK. 

Mr. PERRY. But the question is, when you go from 5 to 15 or 5 

to 10, will it actually go down further? 

Senator COBURN. And I understand that. I know that there is not 

always going to be a price decline. But the fact is, if we had 

350,000 vendors on there now competing for the same list of items 

that are on your schedule, is it not conceivable to think that the 

price on each one of those items might be somewhat less? 

Mr. PERRY. That is logical. I am only—I don’t disagree. I am only 

reflecting, there are certain places where we have 400 or 500 vendors listed to provide a certain commodity or product or service, 

and when we put that solicitation out, of that 400 on the list, we 

may only get four to six bidders. 

Senator COBURN. Yes. 

Mr. PERRY. The point I am making is, I don’t know that all 400 

will focus on every solicitation or acquisition that is out there. The 

number that we tend to get——

Senator COBURN. But in principle, the more purchases you 

have—the more vendors you have and the more competition you 

have, if quality and service is the same, the better the price. 

Mr. PERRY. That is right. 

Senator COBURN. You agree. So to create a system to where you 

have the maximum number of vendors who are qualified, and I 

know you have to have somebody that says, this is a fly-by-night 

company. We don’t want them selling to the government. 

Mr. PERRY. Right. 

Senator COBURN. And I understand that. But that process should 

be very short and not be an average 6 months, which is what it 

averages today, which cuts a lot of people who have something 

great to offer, especially minority businesses, because they don’t 

have the capital to put up front, and the government is a great contractor because you are a good payer. You are not going broke on 

them. And so their risk to sell is less. 

I just want to come to an agreement that if we could, both in 

terms of trying to create the information that needs to be there to 

measure performance, and not just at GSA, across the government——

Mr. PERRY. Right. 

Senator COBURN [continuing]. And two, is that the more vendors 

there are and the easier it is for quality vendors to get on your list 

off of the CCG, the better off we are liable to be. And then once 

we know numbers government-wide and increased number of vendors, then the capability of squeezing them based on price, once 

quality and service are the same, the ability to squeeze on price is 

there. 

Mr. PERRY. Right. Competition will have that effect. 

Senator COBURN. Let me ask you one general question. If you 

were to look—and this is subjective and I am not holding you to 

this at all—when you buy the same thing that, let us say, a Wal–

20

Mart buys for use in their business, not to resell but in use in their 

business, when you buy something, do you think you get as good 

a value as they do? Do you think you all buy it as well? 

Mr. PERRY. I would say in our technology arena, I think we are 

as good as anybody. I don’t know, let us say, for something like 

tools. Some of us can go in a hardware store and sometimes see a 

tool on sale for a price less than our own GSA schedule. We see 

that all the time. We had that when I was at Timken, because 

when you negotiate a price, it doesn’t say that that company 

couldn’t somehow on occasion have sales that are actually below 

your price. But at any rate, I would say in the area where we have 

really focused, and technology being one, I am not so sure that we 

don’t do as well as Wal–Mart. 

The other is the one I mentioned at the outset. We do compare 

ourselves in the area of real estate, and I know that is not your 

focus here, but there is a real-time set of information available as 

to what companies are achieving when they lease space and we are 

double-digit below that rate specifically. 

Senator COBURN. I really hope that is true, and we will have a 

hearing on that. 

Let me tell you my experience as a Congressman. When I became 

a Congressman, we were in the Federal Building and the rate the 

Federal Building paid for my office was twice what I could rent private space, nicer and bigger. And so my own personal experience—

I don’t doubt that is true, because I was buying little space and 

paying. But I have no doubt to say that you will probably do a 

great job in that. 

And remember, this isn’t about me trying to criticize GSA. It is 

for me—my goal is to make sure that the new movement in terms 

of management in the Federal Government gets extended as far 

down as it can. With the CFO Act in terms of the President making 

sure we have Chief Financial Officers everywhere, where we have 

accountability and transparency so we can measure performance so 

that we know what is going on. 

You have been great. I appreciate you coming. We will go 

through these other questions, and Senator Carper is here, just in 

time, so that is great. 

Senator Carper, we have just had a great discussion. I am learning about the GSA, and it is all yours. 

Senator CARPER. I presume you have already talked a bit about 

pre-award and post-award audits? 

Mr. PERRY. A little bit. 

Senator COBURN. We did a little bit, but it needs to probably be 

covered a little bit more. 

Senator CARPER. If we could just revisit a little bit, we heard 

some testimony, I think over the summer, about the benefits of preaward versus post-award audits, at GSA and maybe the Veterans’ 

Administration. I think maybe the VA uses them somewhat more 

aggressively, I don’t know. But from what I have heard, what we 

have heard, the benefits can be significant, and I understand that 

GSA is in the process of increasing the number of contracts that 

you audit, is that——

Mr. PERRY. On a pre-award basis? 

Senator CARPER. I think so. 

21

Mr. PERRY. Yes. For example, a few years ago the number was, 

I think, 17. Next year, it will be over 100. So we are doing a great 

deal more in pre-award and we are using not only our GSA folks, 

but engaging the Inspector General in our office to provide the resources to do some of that. So we are, and we had gotten lax in 

terms of doing pre-award audits so there is a substantial increase 

in the number of pre-award audits that are occurring now. 

Senator CARPER. Why do you suppose you all got lax? 

Mr. PERRY. Well, again, and I was saying to Dr. Coburn, it is 

speculation on my part to some extent, but I think we had a focus 

on meeting the needs of our customers doing things as quickly as 

we possibly could in many instances and we got into a mindset of 

it is OK to cut this corner. It is OK to not do this step in the process because we will be able to process more orders for our customers. 

What we discovered, though, in the course of doing everything we 

could to meet the needs and growing needs of our customer agencies, that some of those corner-cutting was not a good thing for us 

to do. So now we have gone back, we have reestablished our acquisition processes in such a way that each of the steps that need to 

be a part of that process are back in. 

Senator CARPER. It is probably premature to ask this question, 

but is it possible that in the past, that the audits were deemed to 

be burdensome either for the GSA or for the vendors? Did you ever 

hear any of that? 

Mr. PERRY. Well, the post-award audits certainly are deemed to 

be burdensome, particularly by the industry, partly because it is 

not in the specifications, in the document up front. There are, in 

the course of administering the contract, during the time the contract is being executed, that is actually the best time to make sure 

that the vendor is complying with all the terms and conditions of 

the contract, as opposed to coming along 6 months later and doing 

it. Their view was that we are doing that during the course of the 

contract. It shouldn’t be necessary to do it again after the fact. 

And also, I am not sure this is the case, but some indicated that 

they would have to retain records for an extended period of time 

until we conducted the post-award audit. 

But at any rate, we are still reviewing that factor. We had a 

hearing on it, a public hearing. We requested information from the 

public, and that includes the industry. We are reviewing that information as it has been received and will be making a determination 

as to how to go forward on that. 

Senator CARPER. I am going to switch gears, if I could, and if you 

already got into this, you can just truncate your response. Could 

you just please explain, at least for me and maybe for us, the impact that the merger between the Federal Supply Service and Federal Technology will have on customer service——

Mr. PERRY. Yes. 

Senator CARPER [continuing]. And on, I guess, oversight of contract negotiations, and do you think it will help with your efforts 

to ensure that GSA is offering the best value? 

Mr. PERRY. I absolutely do on all three of those points. One of 

the aspects of bringing these two components of our agency together is the fact that we today have two separate revolving funds 

22

that we use, one for the acquisition of information technology products and services, and another for essentially everything else. It is 

a commercial item other than facilities. 

There was a point in time when I think it was a good practice 

to keep IT acquisitions completely separate from everything else, in 

the early 1990s and before when the government was getting very 

much involved in that. There needed to be some tracking of that, 

maybe some management control of it. There probably was even 

some incentive to say, let us do more and more of that for purposes 

of improving the operations of government agencies. 

But today, when agencies make acquisitions of major technology 

systems, it is a combination of IT, professional services, and maybe 

telecommunications to make an overall system. Today, we have to 

account for those separately. We have to make those as separate 

acquisitions. In fact, the Inspector General makes a finding against 

us if we buy a camera that is a part of a border control system that 

ties into computers if our judgment was that that camera was a 

part of an information technology system and the IG’s judgment 

was that the camera is a camera and it is not IT. So when you 

think about it, you say, well, why should we have that separate accounting? So we have asked Congress for the authority to put those 

two funds together, and that is someplace where I would encourage 

your support. 

At the same time as we look at bringing the funds together, we 

looked at the fact that we have certain other duplication between 

our two services that is not useful or meaningful from a customer 

perspective. So we think that by bringing them together, actually 

taking out several layers of senior management that were over 

that, consolidating that, we will be able to have more people focused on meeting customer requirements. We should be more efficient, more effective. It ought to give us a more streamlined approach to deal with management controls, both at our national office and our 11 regional offices. 

So in the case of all three components of your question, yes, we 

will provide better customer service, we will be more efficient, and 

our management controls will be applied in a more effective way. 

Senator CARPER. You just mentioned one area where you think 

we could be helpful and supportive of you. Are there other things 

that we need to be mindful of? You may have already mentioned 

some of these to our Chairman, but any other ideas that come to 

mind where we can be supportive of your efforts to provide better 

value at a better price? 

Mr. PERRY. The combining of the two funds is certainly one. We 

did have some discussion of the fact that a system that we use as 

a government-wide system, not just a GSA system, but we have a 

big role in it, the FPDS, the Federal Procurement Data System is 

a system that can be used and further developed as a means of 

capturing government-wide data with respect to our purchases so 

that we can analyze data and use that as a basis for our strategic 

sourcing. We are doing some of that today. Since we can’t get the 

granular level of information from the overall system, we do it 

through the use of data calls and asking agencies or suppliers to 

provide information that we can then analyze and use for purposes 

of strategic sourcing. 

23

I can’t say that, and I say this just so that none of us on the acquisition side use this as an excuse, because some would say, well, 

until 2008 when that Federal Procurement Data System is up and 

running and providing all of the information, then we will just stay 

in place. My view is that there is some strategic sourcing we can 

do in the interim and we should be focusing on getting that done 

even as we work on enhancing the Procurement Data System. 

Senator CARPER. OK. Mr. Chairman, could I ask maybe just one 

more question? 

Senator COBURN. Sure. 

Senator CARPER. While I am looking for my question, I will just 

say I went to my other hearing with Senator Voinovich, and I 

walked in mindful of the fact that you had been a member of his 

cabinet and I said, I just came from a meeting with Steve Perry 

and he said to tell you hi. 

Mr. PERRY. Great. 

Senator CARPER. And he said, ‘‘Steve Perry?’’ He said, ‘‘I love 

Journey.’’ [Laughter.] 

No, I am just kidding. He said to tell you hello, give you his best. 

I understand that the amount of business contracted through 

GSA has increased, and I am told dramatically. The size of the 

GSA staff has pretty much stayed the same——

Mr. PERRY. Gone down. 

Senator CARPER. Has it? OK. And I would just ask, do you think 

you have the resources and staff that you need to conduct more audits or even to effectively negotiate a large number of contracts? 

Mr. PERRY. Well, I was going to answer that question in one way 

before you said more audits. We probably—we are using the Inspector General and we are using some of our people who are most 

highly skilled on Federal Acquisition Regulations to conduct the 

audits. That is a precious resource. We don’t have enough people 

to do that. 

But the other point I was going to make is, and it is really one 

of the underlying reasons that we want to do the FAS, the FTS and 

FSS reorganization, we believe that it is always going to be difficult 

for us to expand measurably the size of our organization, although 

in a moment I can make an argument that maybe that is exactly 

the right thing we ought to do. 

So anyhow, part of our reason for the organizational design is to, 

with the same number of people, expand our organizational capability, just to do things better, faster, smarter with the resources 

that we have. That is the plan that we are on. 

But to help make the argument that we must at least do that, 

and maybe we should do more, you are all aware that, as you were 

just pointing out, our acquisitions of information technology products and services for government agencies has really grown. It 

went from $1 or $2 billion just a few years ago to about $9 or $10 

billion now. 

Senator CARPER. Say those numbers again. 

Mr. PERRY. One or two billion dollars probably 6 or 8 years ago 

to $9, close to $10 billion now. 

Senator CARPER. OK. 

24

Mr. PERRY. The same could be said for the growth of our Multiple Award Schedule. I don’t know what it was 5 or 6 years ago, 

but it probably wasn’t more than $20 million. It is $40 billion now. 

So what that means is that GSA is making more and more acquisitions on behalf of other agencies. We think that is a statement 

that says that they find value in using our service. But it also is 

the case that, one, we have fewer people doing it today than we 

had 4 or 5 years ago, many fewer people. Two, you read reports 

that use that same statement as it relates to government-wide. The 

government as a whole now is purchasing over $300 billion a year 

with far fewer people in its acquisition workforce than we had a 

few years ago. 

Some people contend that the solution to that problem is for each 

agency to add to its acquisition staff. I think that is a big mistake. 

I think this would be the opportunity to say, OK, GSA or maybe 

it is three or four agencies. It may be not just one. We are going 

to rely upon you as the government’s central entity to really bring 

about productive acquisitions, and if we did that, we would say, instead of expanding the acquisition workforce in each agency, we 

are going to expand it in GSA and diminish it elsewhere. 

That might address the issue of the franchise funds. As we were 

talking, there are a number of other agencies who are involved in 

the acquisition of information technology, although it is not their 

core mission, and they, in fact, use the revenue in excess of expenses from those activities to fund the basic program, which is another issue. 

And then one last point related to that, I use this statistic with 

our folks all the time when we are trying to make the point that 

our up-sight potential at GSA in terms of making us a more and 

more viable part of our Nation’s Federal Government is this. I 

mentioned that today, GSA is involved in the acquisition of maybe 

$10 billion of the IT, but the government as a whole spends $65 

billion. So that says there are a lot of agencies out there doing their 

own thing. 

With respect to telecommunications, we know that the unit price 

that we have negotiated for long-distance and local telephone service, voice and data, is better than the best commercial prices that 

those providers offer to their largest commercial customers, and yet 

in some parts of our country, only 10 percent of the Federal agencies in those locations use the GSA contracts. 

So there is a lot more value that we could be providing if we 

could focus on GSA as the agency who has the responsibility, and 

there is some amount of work that has to be done to get the other 

agencies to, even though it is voluntary, recognize that if there is 

a better value here, in those cases where we can demonstrate it, 

as we can in the instance of telecommunication services, they 

should do it. 

Senator CARPER. Thanks, Mr. Chairman. 

Senator COBURN. Let me just make one point. If you had the 

kind of information I wanted you to have, you would never have 

to do a post-award audit, right? 

Mr. PERRY. Well, if you were still trying to——

Senator COBURN. If you knew by price, by vendor, by purchasing 

segment in the Federal Government, if you had that data, you 

25

would know what they were charging and you would know whether 

or not you can go to the government agency, if they have got the 

quality and service, and they can tell you that, and then you can 

measure price and you can measure quantity if you had the kind 

of data that I am talking about, the information system. 

Mr. PERRY. Right. 

Senator COBURN. So you would agree with that? 

Mr. PERRY. I would agree with that. 

Senator COBURN. OK. I will tell you, the House has passed the 

legislation. It is stuck in our Committee. You have my commitment 

in terms of combining——

Mr. PERRY. Funds? Thank you. 

Senator COBURN. You have my commitment——

Mr. PERRY. Thank you. 

Senator COBURN [continuing]. To have the support to try to get 

that through. I will talk with Senator Collins on it tomorrow. My 

staff will talk with Senator Collins and see if we can’t get that 

through to help you on that. 

If you don’t have anything else, Senator Carper, I think the one 

thing that I look at is we don’t know what we are buying, what we 

are paying for it, the satisfaction levels. We do in certain areas, 

and I think in terms of the IT and things like the specialized areas 

that you do, but on this area outside IT and outside buildings, the 

other things, especially catalog, we don’t really know. 

My belief is, as a former businessman, without that knowledge, 

we are not going to ever do as good as we could do. Now, that 

doesn’t mean that we are not doing a good job, and I am not accusing anybody of that. 

I think that there is a vacuum of data, and I know the new system and the fact that the Pentagon isn’t on it and they should be 

on it. I am going to be looking at that, too. why aren’t you on it? 

But I want it to go further. Everybody here that is computer literate knows that if you have got something in front of you and you 

are going to punch it in and put it in a file, it can all go into the 

file or you can take some out. But the point is, is it in there, and 

if it is something that is already there, it is collectable, and that 

is what the wonderful part of computers are, is they can make data 

available in an array that you never would have been and to give 

you an analysis that you never would have gotten with clerks trying to run this down. 

So I would first of all tell you how much I enjoyed your testimony. Thank you. I think your leadership style is great. I think we 

still have some real procedural difficulties in the Federal Government. The fact that we have 10 or 13 different groups purchasing 

and not using, like you were talking about, voice and data rates, 

that they are not getting the best thing. If that was designed to get 

competition, how do we measure that we are getting a better price? 

We don’t know that. 

If anybody ought to be able to develop the capability to measure 

our purchasing value, it ought to be us, and I want to work with 

you to try to do that. 

Mr. PERRY. Thank you. 

Senator COBURN. We are going to look forward to working with 

you on some of these other areas, too. Thank you, Mr. Perry. 

26

Mr. PERRY. Thank you, Dr. Coburn. Thanks, Senator. 

Senator COBURN. The hearing is adjourned. 

[Whereupon, at 4:13 p.m., the Subcommittee was adjourned.] 

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