STRATEGIC 

SOURCING

Office Supplies 

Pricing Study Had 

Limitations, but New 

Initiative Shows 

Potential for Savings

Report to Congressional Committees

December 2011

GAO-12-178

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-178, a report to 

congressional committees 

December 2011 

STRATEGIC SOURCING

Office Supplies Pricing Study Had Limitations, but 

New Initiative Shows Potential for Savings

Why GAO Did This Study

Concerned that federal agencies may 

not be getting the best prices available, 

Congress directed the General 

Services Administration (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 Office Supplies II (OS II). 

Under this initiative, GSA entered into 

agreements with vendors based on 

discounted prices to be offered to all 

federal agencies.

Congress directed GAO to assess the 

GSA study, with particular attention to 

the potential for savings. Accordingly, 

GAO assessed (1) the support for the 

findings and conclusions in GSA’s 

report and (2) how GSA's new office 

supply contracts support the goal of 

leveraging the government’s buying 

power to achieve savings.

To conduct this work, GAO analyzed 

the data GSA used for its study; met 

with and obtained documentation from 

officials at GSA and the Departments 

of Homeland Security (DHS), Air 

Force, Navy, and Army, which were 

among the 10 agencies in GSA’s 

study; and reviewed contract 

documentation associated with GSA’s 

new office supplies initiative.

GSA and DHS commented on a draft 

of this report. GSA said it appreciated 

our recognition that leveraged 

purchasing can produce savings and 

also provided technical comments, 

which we incorporated as appropriate. 

DHS provided additional information on 

its strategic sourcing initiatives.

What GAO Found

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

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

concluded that agency buyers paid higher prices when they bought office 

supplies outside GSA’s Multiple Award Schedule program than they would have 

using the schedules or OS II. According to GSA, the price premiums averaged 

75 percent compared to the schedule prices and 86 percent compared to OS II. 

GAO identified data and other limitations in GSA’s study, such as not always 

controlling for variation in quantities of identical items when comparing prices. 

GAO was not able to fully quantify the impact of these limitations. Officials from 

other agencies—Air Force, Army, Navy, and DHS—also questioned the study’s 

specific findings on price premiums, believing them to be overstated, but their 

own studies support GSA’s general conclusion that better prices can be obtained 

through consolidated, leveraged purchasing. The GSA study also concluded that 

buyers compared prices before making purchases, but this conclusion was 

based on interviews with senior-level acquisition officials and not on information 

obtained from any of the approximately 270,000 government purchase 

cardholders who made the purchasing decisions.

Top 10 Purchasers of Office Supplies for Fiscal Year 2009 

According to available data, GSA’s new office supplies sourcing initiative, OS II, 

has produced savings. GSA estimated that the government saved $16 million 

from June 2010 through August 2011 through this initiative. According to GSA, 

the OS II initiative is demonstrating that leveraged buying can produce savings 

and has provided improvements for managing ongoing and future strategic 

sourcing initiatives. GSA reports that OS II allowed it to negotiate discounts with 

vendors who were selected for the initiative, and has spurred price competition 

among schedule vendors that were not selected as they react to the OS II 

pricing, resulting in decreased schedule prices. The initiative is also expected to 

lower government-wide office 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, the OS II initiative offers lessons learned for other 

strategic sourcing initiatives, including the importance of identifying agencies’ 

goals and needs and ensuring buying agency participation. 

View GAO-12-178. For more information, 

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

woodsw@gao.gov. 
Page i GAO-12-178 Strategic Sourcing

Letter 1 

Background 2

GSA Report Had Data and Other Limitations 5

New Strategic Sourcing Initiative for Office Supplies Shows 

Potential for Generating Savings 9

Concluding Observations 14

Agency Comments and Our Evaluation 14

Appendix I Comments from the General Services Administration 16

Appendix II Comments from the Department of Homeland Security 19

Appendix III GAO Contact and Staff Acknowledgments 21

Tables

Table 1: Retail Price Premiums for Office Supplies by Category, as 

Reported by GSA 5

Table 2: Goals for Office Supplies II 11

Figure

Figure 1: Top 10 Purchasers of Office Supplies for Fiscal Year 2009 4

Contents
Page ii GAO-12-178 Strategic Sourcing

Abbreviations

BPA blanket purchase agreement

DDS2 Domestic Delivery Services II

DHS Department of Homeland Security

DOD Department of Defense

eMall DOD Electronic Mall

FPDS-NG Federal Procurement Data System – Next Generation

FSSI Federal Strategic Sourcing Initiative

GSA General Services Administration

MAS Multiple Award Schedules 

OS II Office Supplies II

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.
Page 1 GAO-12-178 Strategic Sourcing

United States Government Accountability Office 

Washington, DC 20548

December 20, 2011

The Honorable Richard Durbin

Chairman

The Honorable Jerry Moran

Ranking Member

Subcommittee on Financial Services and General Government 

Committee on Appropriations

United States Senate

The Honorable Jo Ann Emerson

Chairwoman

The Honorable José E. Seranno

Ranking Member

Subcommittee on Financial Services and General Government

Committee on Appropriations

House of Representatives

The General Services Administration (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 when making these 

purchases, the conferees on the Consolidated Appropriation Act, 2010, 

directed GSA to conduct a study of office supply purchases by the 10 

largest federal agencies.1 GSA provided the results of its study to the 

House and Senate Committees on Appropriations in a November 2010 

report.2

The conferees also directed us to assess the GSA study, with particular 

attention to the potential for savings. Accordingly, we assessed the 

support for the key findings and conclusions in GSA’s report. To address 

The report also discussed a GSA initiative to realize savings and 

other benefits when buying office supplies. Under this initiative, known as

Office Supplies II, GSA entered into agreements with 15 vendors offering 

discounted prices that will be available to agencies across the 

government.

 

1

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

2

U.S. General Services Administration, Government-wide Office Supplies Pricing Inquiry 

Report, Congressional Requested Study on Pricing of Office Supplies (Nov. 29, 2010).

 
 

Page 2 GAO-12-178 Strategic Sourcing

the potential for savings, we also assessed how GSA’s new initiative for 

buying office supplies supports the goal of leveraging the government’s 

buying power.

To assess the findings and conclusions of GSA’s study, we reviewed the 

definitions, assumptions, data sources, and methods GSA used to 

conduct the study and discussed the report with GSA officials. We did not 

independently verify the data GSA used in conducting its study, but did 

use the data to analyze price premiums on selected office supply items. 

We met with and obtained documentation from officials at the 

Departments of Homeland Security (DHS), Air Force, Navy, and, Army, 

which were among the top 10 buyers of office supplies in terms of dollars 

spent in fiscal year 2009. Additionally, we met with a Department of 

Defense (DOD) Defense Procurement and Acquisition Policy official to 

obtain an overall DOD perspective on the study. We also contacted a 

national organization representing manufacturers to obtain an 

understanding of how manufacturers use part numbers. To assess GSA’s 

new approach to buying office supplies, we met with GSA officials 

responsible for implementing this approach and reviewed the contract 

documentation for 6 of the 15 vendors associated with the initiative.

We conducted this performance audit from December 2010 to November 

2011 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.

Federal agencies can use a variety of different approaches to purchase 

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

authorized users can use their government purchase cards. For larger 

purchases, agencies may use other procedures under the Federal 

Acquisition Regulation, such as awarding a contract. Alternatively, GSA 

provides federal agencies with a simplified method for procuring office 

supplies through its Federal Supply Schedule program, also known as the 

Multiple Award Schedules (MAS) or schedules program. Under the 

schedules program, the federal government’s largest interagency 

Background
 

Page 3 GAO-12-178 Strategic Sourcing

contracting program,3 GSA awards contracts to multiple vendors for a 

wide range of commercially available goods and services.4 The schedules 

program can leverage the government’s significant aggregate buying 

power. Also, under the schedules program, to ensure the government is 

getting the most value for the taxpayer’s dollar, GSA seeks to obtain price 

discounts equal to those that vendors offer their “most favored 

customers.”5

In November 2007, GSA initiated another approach for buying office 

supplies by creating blanket purchase agreements (BPA) under the 

schedules program. BPAs are a simplified method of fulfilling repetitive 

needs for supplies and services6 that also provide an opportunity to seek 

reduced pricing from vendors’ schedule prices.7

The GSA study on office supply purchases reviewed 14 categories of 

mostly consumable office supplies, ranging from paper and writing 

instruments to calendars and filing supplies.

The approach was part of 

the government’s Federal Strategic Sourcing Initiative (FSSI). GSA 

officials acknowledged they could have done a better job promoting this 

initiative. Ultimately, GSA determined that the initiative did not meet its 

expectations and initiated a second strategic sourcing initiative known as 

FSSI Office Supplies II (OS II) in 2010. By July 2010, GSA competitively 

awarded 15 BPAs to 13 small businesses and 2 other businesses to 

support the OS II initiative.

8

 

3

Interagency contracts leverage the government’s buying power and provide a simplified 

and expedited method for procuring commonly used goods and services. They allow 

agencies to use the contracts of other agencies. Agencies that operate interagency 

contracts or provide acquisition assistance to other agencies recover their costs by 

charging a fee to their customer agencies. 

The report did not include 

4

GSA has delegated authority to the Department of Veterans Affairs to operate schedules 

for medical supplies.

5

Most favored customer pricing is the prices the vendors offer their best commercial 

customers. 48 C.F.R. § 538.270.

6

See FAR 13.303-1(a).

7

See GAO, Contract Management: Agencies Are Not Maximizing Opportunities for 

Competition or Savings under Blanket Purchase Agreements Despite Significant Increase 

in Usage, GAO-09-792 (Washington, D.C.: Sept. 9, 2009), for more information about 

BPAs. 

8

These categories of items are all offered by vendors on MAS schedule 75, but the study 

did not include all items on schedule 75. 
 

Page 4 GAO-12-178 Strategic Sourcing

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 the 10 agencies with the highest spending 

on office supplies accounted for about $1.3 billion, about 81 percent of 

the total $1.6 billion spent governmentwide on the 14 categories of office

supplies during fiscal year 2009. The amounts spent by the top 10 

agencies are shown in figure 1.

Figure 1: Top 10 Purchasers of Office Supplies for Fiscal Year 2009

The report found that about 58 percent of office supply purchases were 

made outside of the GSA schedules program, mostly at retail stores. The 

report also found that agencies often paid more—a price premium—than 

they would have by using the GSA schedules program or OS II. On 

average, GSA found that agencies paid 75 percent more than schedule 

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

Table 1 shows the 14 categories of office supplies, the number of 

different items in each of the categories, and the retail price premiums 

that GSA calculated for each category when compared to schedule 

prices.
 

Page 5 GAO-12-178 Strategic Sourcing

Table 1: Retail Price Premiums for Office Supplies by Category, as Reported by 

GSA 

Category

Number of items 

in category

Percentage price 

premium paid in 

comparison with GSA 

schedule prices

Paper 54 78.2

Toner 32 12.2

Adding Machines & Calculators 2 -8.0

Binding & Filing Supplies 25 210.6

Calendars, Personal Organizers 1 80.6

Cases & Portfolios 2 -7.9

Computer Accessories 1 51.3

Drawing & Graphic Arts 

Supplies

6 278.8

Mailing & Shipping Supplies 8 203.7 

Miscellaneous Office Supplies 22 175.1

Office Furnishings 1 52.0

Shredders 3 -11.2

Visual Communication Aids 4 122.3

Writing Instruments 58 407.6

Total 219

Source: GAO representation of GSA data. Items listed in the order they appeared in GSA’s report.

Note: Negative price premium percentages indicate that retail prices were lower than GSA schedule 

prices. 

The report also concluded that buyers engaged in at least some level of 

price comparisons before making purchasing decisions. More specifically, 

the report stated that buyers may compare prices across different 

vendors when ordering through an electronic medium, or across available 

items when purchasing directly through a vendor’s online or retail store.

GSA used several sources of data to analyze and compare the prices 

paid for 219 items across 14 categories of office supplies through various 

purchasing options. The GSA report acknowledged some limitations with 

the data, but 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. Other 

agencies also questioned the study’s specific findings related to price 

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

GSA Report Had Data 

and Other Limitations
 

Page 6 GAO-12-178 Strategic Sourcing

conclusion that better prices can be obtained through consolidated, 

leveraged purchasing. The GSA study also concluded that buyers 

compared prices before making purchases, but this conclusion was not 

based on information from actual purchase card holders.

Purchasing of office supplies is highly decentralized with about 270,000 

purchase cardholders and others across the government making 

purchases in fiscal year 2009. Because of this, GSA obtained data for its 

study from multiple government sources,9

 and purchase card information 

provided by the commercial banks that issue the government purchase 

cards. To determine the funds spent on office supplies and to conduct 

related analyses, GSA sorted through data from these various sources, 

which included about 7 million purchase transactions involving over 

12 million items. GSA took a number of steps to clean the data prior to 

using them. For example, because a single purchase might have been 

reported in more than one data source, GSA removed duplicate 

purchases prior to its analysis. The data were further cleaned to remove 

items and their related costs that did not meet GSA’s definition of office 

supplies.

To determine retail price premiums, GSA focused its analyses on 219 

office supply items that were purchased in 2009 from retailers and the 

GSA schedules. In its report, GSA acknowledged that the data used to 

analyze governmentwide purchases of office supplies in 2009 had 

limitations, in part due to the decentralized data sources for office supply 

purchases and the limited time GSA had to conduct its study. A significant 

issue GSA faced was attempting to control for variation in quantities; in 

other words, GSA tried to ensure that when comparing prices, it was

using transactions that involved identical quantities. A purchase of pens, 

for example, could involve a single pen, a package of three pens, a box of 

a dozen, or any other quantity. GSA officials told us that the primary 

means they used to control for quantities was the use of the 

manufacturer’s part number. They explained that they searched available 

databases to identify items with identical part numbers. They told us that 

 

9

Government data sources include the Federal Procurement Data System-Next 

Generation (FPDS-NG), DOD electronic mall (eMall), GSA Advantage, and GSA’s Global 

Supply.

Numerous Data Sources 

Used to Develop GSA 

Report

GSA’s Retail Price 

Premium Analyses Faced 

Data and Other Limitations
 

Page 7 GAO-12-178 Strategic Sourcing

when they found large variations in retail prices for apparently identical 

items, they excluded transactions they considered to be outliers.10

This approach, however, may not have been adequate to account for 

variations in quantity. When we contacted a national organization 

representing manufacturers, a senior staff director told us that there is no 

consistent approach among manufacturers for assigning part numbers.

Some manufacturers may assign one part number to individual items and 

different part numbers to packages of those same items containing 

different quantities, while other manufacturers may assign the same part 

number both to individual items and to packages of items. In addition, 

when we reviewed some of the individual transaction data GSA obtained 

for retail purchases, we identified substantial price variations for a number 

of drawing and graphic arts supplies and writing instruments that carried 

the same manufacturer’s part number.

Specifically, when we reviewed GSA’s retail transaction 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. For instance, for one item 

involving black Rollerball pens, GSA’s retail transaction data showed 

prices ranging from $9.96 to $44.96 for items listed with the same part 

number. These transactions were all with the same nationwide retailer.

When asked about such substantial price differences for items with the 

same part number, GSA officials acknowledged that the purchase card 

data they used for retail prices did not always accurately identify the 

quantity of items involved in each transaction. The existence of 

substantial price differences for a number of items indicates that GSA’s 

attempts to compare prices may not have adequately controlled for 

variations in quantities.

We also identified a weakness with the clarity of the GSA report with 

regard to how price premium estimates were calculated. Specifically, 

GSA’s study described a specific formula that was used to calculate the 

price premiums, but our review of the study’s supporting documents 

found that the GSA actually used a different formula to calculate price 

premiums for 10 of the 14 office supply categories. In a discussion with 

GSA officials, they agreed that the study did involve the use of two 

 

10Specifically, they said they excluded prices that were beyond a threshold they set at plus 

or minus three standard deviations from the average price.
 

Page 8 GAO-12-178 Strategic Sourcing

different formulas. When we used the formula described in the study to 

recalculate the retail price premiums for those 10 categories of office 

supplies, we found the price premiums would have changed from what 

GSA reported by less than 5 percentage points for all categories except 

drawing and graphic arts supplies. For that category, the recalculated 

price premium was 68 percent, as compared to the 278 percent reported 

in the study. The use of this 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.

On the basis of their own studies, Air Force, Army, Navy, and DHS 

officials also questioned the specific price premiums and savings reported 

by GSA. Officials from these agencies told us they believed that the price 

premiums reported by GSA when buying outside the GSA schedule were 

overstated. However, the agencies agreed with GSA’s overall conclusion 

that better prices can be obtained through leveraged buys.

In addition, all four agencies in our review found that the prices available 

through the new OS II BPAs were better than the prices available from 

their existing agency BPAs. For example, a DHS study found savings of 

about 20 percent when analyzing the prices associated with a mix of 348 

items. The Air Force determined that the OS II BPAs could save about 

7 percent in a study of the 125 most commonly purchased items. On the 

basis of this analysis, the Air Force decided to let its existing office supply 

contracts expire. Similarly, the Navy’s comparison of 71 items found that 

using the OS II BPAs could save about 6 percent, which led Navy officials 

to move purchasing to the OS II BPAs. Army officials did not provide 

study results, but they told us their analysis found lower price premiums 

than reported by GSA. An Army official said they plan to continue using 

existing BPA's while they transition to OS II.

GSA interviewed senior-level acquisition officials to determine how office 

supply purchasing decisions were made within their respective agencies 

and concluded that purchase cardholders compared costs at some level 

prior to making a purchase. While these officials may have had a broad 

understanding of agency procurement policies and practices based on 

their positions in their respective agencies, they were not representative 

of the approximately 270,000 credit cardholders making the purchasing 

decisions. The GSA report did not identify or collect any data about price 

Data from Other Agencies 

Show Savings of Smaller 

Magnitude

GSA Conclusion on Buyer 

Price Comparisons Not 

Supported by Information 

from Actual Buyers
 

Page 9 GAO-12-178 Strategic Sourcing

comparisons conducted by the cardholders. Collecting information from 

buyers, even through interviews or a survey of government purchase 

cardholders who actually made the purchases, could have provided 

another perspective on buyer behavior, including the extent to which price 

comparisons were made. GSA officials said that, given the reporting 

timeframe for the study, they did not have the resources or time that 

would have been needed to conduct a study that would have included a 

representative sample of the 270,000 purchase card holders. 

According to initial available data, GSA’s new OS II BPAs 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. For example, a 

key aspect of the initiative is that participating vendors provide sales and 

other information to GSA to help monitor prices, savings, and vendor 

performance.

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

the federal government saved $16 million from June 2010 through August 

2011 by using these BPAs. These savings were estimated by comparing 

the lowest prices of a set of over 400 items available on GSA’s schedules 

program contracts before OS II with prices and discounts being offered 

for the same items on the OS II BPAs. Importantly, and unlike GSA’s 

report, GSA’s conclusions about savings realized under OS II are based 

on data from vendors—which they are 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 BPA vendors’ prices found that the BPA vendors offered prices 

that were an average of 8 percent lower, and the average savings is 

expected to fluctuate somewhat as the OS II initiative continues to be 

implemented. The expected fluctuation is based on anticipated changes 

in the mix of vendors, products, and agencies. For example, GSA found 

the 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 

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 10 GAO-12-178 Strategic Sourcing

as agencies without strong office supplies management programs 

increase their use. In addition to the savings from the BPAs, 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 by reducing their schedule prices.

After the first year the OS II BPAs were in use, GSA extended the BPAs 

for an additional year after negotiating additional price discounts. As a 

result of these discussions, 13 of the 15 BPA vendors decreased their 

prices by an additional 3.9 percent on average. Additionally, the BPAs 

included tiered discounts, which apply when specific sales volume 

thresholds are met.11

GSA expects that OS II will result in lower government-wide costs for 

office supplies as more agencies move from their agency-specific BPAs 

for office supplies to the OS II BPAs. Many agencies that had their own 

BPAs for office supplies did not renew their BPAs and have opted to use 

the OS II instead. As these agencies move to OS II, their contract 

management costs should decrease. For example, according to Air Force 

officials, instead of having personnel in every agency administer their own 

BPAs for office supplies, personnel at GSA will administer the OS II 

program on behalf of other agencies. While this may create some 

additional burden for GSA, officials believe the overall government costs 

to administer office supply purchases should decrease.

Sales realized by one of the BPA vendors reached 

the first tier discount level in September 2011, and the vendor has since 

adjusted its prices to provide the corresponding price discounts. GSA 

anticipates additional vendor sales to exceed the first tier discount 

threshold in the first option year, which will trigger additional discounts.

 

11As part of the OS II competition, GSA requested each vendor to provide discounts 

based upon government-wide sales volume. The tiers are set at $25 million, $50 million, 

and $75 million per vendor. Each of the vendors provided some level of discounts for each 

of the tiers.
 

Page 11 GAO-12-178 Strategic Sourcing

GSA has incorporated a range of activities representative of a strategic 

procurement approach12

As part of the overall strategy, in addition to savings, GSA through its 

commodity council also identified five overarching goals for the OS II 

initiative, to facilitate overall management, as shown in table 2.

into the OS II initiative, including aspects of 

managing the suppliers. These activities range from obtaining a better 

picture of spending on services, to taking an enterprisewide approach, to 

developing new ways of doing business. All of these activities involve 

some level of centralized oversight and management. In addition, this 

approach involves activities associated with the management of the 

supply chain, which includes planning and managing all activities involved 

in sourcing and procurement decisions, as well as logistics management 

activities. These include coordination and collaboration with stakeholders, 

such as suppliers or vendors, intermediaries sometimes referred to as 

resellers, third party service providers, and customers or buying agencies. 

As part of the planning process for OS II, GSA assessed its schedules 

program office supply vendor pool and determined a sufficient number of 

vendors could meet its critical requirements.

Table 2: Goals for Office Supplies II

Goal Description of goal Methods to address the goal

Capture Data Provide data necessary for 

analysis to make informed 

decisions

Vendors are required to provide monthly sales data including at the lineitem 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 

Socio-Economic Goals

Achieve governmentwide socioeconomic goals set by 

Congress

GSA awarded 13 of the 15 BPAs to small businesses to assist agencies 

in meeting the congressional 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 

Acts and Mandates

Comply with statutes, such as 

the Trade Agreements Act, and 

executive orders

Vendors are required to be in compliance with statutes and executive 

orders.

 

12See 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 to 

Enhance Oversight and 

Manage Suppliers 
 

Page 12 GAO-12-178 Strategic Sourcing

Goal Description of goal Methods to address the goal

Conform with Agency 

Business Practices 

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 Be easy to 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 BPA prices are automatically 

charged and tax exempted whenever a government purchase card is 

used for all items covered by the BPA; and apply BPA prices unless the 

ordering agency specifically opts not to use OS II.

Source: GAO analysis of GSA data.

As part of preparing for the competition for OS II, GSA obtained input 

from the interested vendors before issuing the request for quotations by 

holding an industry day. For example, based on vendor input that 

identified shipping as a key cost driver, a $100 minimum order level was 

included as part of the BPA. A reverse auction process was used to carry 

out the competition for the BPAs, which GSA anticipated would result in 

more pricing discounts offered by vendors. As part of the reverse auction 

process, the vendors submitted an initial quote. After GSA evaluated the 

quotes, the vendors were notified of the lowest quotes and provided at 

least one opportunity to revise their quotes, resulting in price reductions.

GSA obtained commitments from agencies and help set goals for 

additional discounts to let businesses know that the agencies were 

serious in their commitment to the BPAs. This also helped GSA 

determine the number of BPAs that would be awarded. Because 

government purchase cards were the most common way to purchase 

office supplies, OS II includes a point of sale discount, under which BPA 

prices are automatically charged whenever a government purchase card 

is used for an item covered by the BPA 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 address concerns about vendor oversight and management, OS II has 

attempted to clearly define program implementation responsibilities, 

including laying out GSA, vendor, and buying agency responsibilities. A 

key aspect of a successful acquisition program is managing the vendors 

or suppliers to ensure that they are meeting terms and conditions of the 

contract or BPA and that the program or initiative is meeting its overall 

Capturing Better Data Has 

Enhanced Oversight of 

Vendors and OS II 

Management
 

Page 13 GAO-12-178 Strategic Sourcing

goals. This includes defining performance metrics, capturing or collecting 

data, preparing analysis and related reports, communicating the results of 

the analysis, and initiating corrective actions. GSA is capturing data on 

purchases and vendor performance that is 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 and is 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 example, GSA has issued Letters of Concern to four 

vendors and has issued one Cure Notice13

To support the OS II management responsibilities, GSA charges a 

2 percent management fee, which is incorporated into the vendor prices. 

This fee, which is higher than the .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 BPAs, 

as well as their contractor support.

to a vendor. These letters and 

notices are used to inform vendors that the agency has identified a 

problem with the vendor’s compliance with the terms and conditions of 

the BPA.

GSA is learning lessons from OS II, its first of the second generation of 

strategic sourcing initiatives, and is attempting to incorporate these 

lessons into other strategic sourcing initiatives. While some of the lessons 

learned as OS II has progressed are not directly transferable to other 

initiatives, there are some aspects of it that can be applied to any 

strategic sourcing initiative. To this end, GSA established an office 

supplies commodity council to identify agencies’ goals and needs. The 

input provided by the commodity team was incorporated into all aspects 

of the program from the vendor requirements to the selection criteria. This 

 

13A 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. 

OS II Initiative Offers 

Lessons for Other Strategic 

Sourcing Initiatives
 

Page 14 GAO-12-178 Strategic Sourcing

experience is being applied to other strategic sourcing initiatives. For 

example, GSA took a more collaborative approach as it moved to Federal 

Strategic Sourcing Initiative Second Generation Domestic Delivery 

Services II (DDS2). More specifically, GSA set up a commodity council 

that helped identify the program requirements and provide input on how 

the program operates. Vendor input was also sought and incorporated 

into the requirements.

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 

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.

We provided a draft of this report to GSA, DHS, and DOD. We received 

written comments from GSA and DHS, which are included as appendices 

I and II, respectively. DOD had no comments.

In its comments, GSA said it was pleased that our report affirmed that 

savings can be achieved through leveraged purchasing and better 

understanding of spend data. GSA also provided additional information 

on its strategic sourcing initiatives. GSA noted that it would have been 

very resource intensive for the agency to obtain information from a 

representative sample of the 270,000 purchase card holders for little 

added benefit. We revised our report to reflect GSA’s comment. GSA 

provided some suggested language and technical changes to help clarify 

the report, which we incorporated as appropriate. We did not use GSA's 

suggested language concerning the limitations we identified in its study 

because we believe the language in our report accurately reflects our 

finding on this issue.

DHS stated that it appreciated our work and provided additional 

information on its respective strategic sourcing initiatives. DHS also 

Concluding 

Observations

Agency Comments 

and Our Evaluation
 

Page 15 GAO-12-178 Strategic Sourcing

stated that it has realized savings from the OS II initiative and expects to 

continue to do so.

We are sending copies of this report to the Administrator of General 

Services, the Secretaries of the Department of Homeland Security and 

Defense as well as the Air Force, Army, and Navy. In addition, the report 

is also available at no charge on the GAO website at http://www.gao.gov. 

If you or your staff members have any questions about this report, please 

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 report. GAO staff members who made key 

contributions to this report are listed in appendix III.

William T. Woods

Director, Acquisition and Sourcing Management
Appendix I: Comments from the General 

Services Administration

Page 16 GAO-12-178 Strategic Sourcing

Appendix I: Comments from the General 

Services Administration 
Appendix I: Comments from the General 

Services Administration

Page 17 GAO-12-178 Strategic Sourcing
Appendix I: Comments from the General 

Services Administration

Page 18 GAO-12-178 Strategic Sourcing
Appendix II: Comments from the Department 

of Homeland Security

Page 19 GAO-12-178 Strategic Sourcing

Appendix II: Comments from the Department 

of Homeland Security 
Appendix II: Comments from the Department 

of Homeland Security

Page 20 GAO-12-178 Strategic Sourcing
Appendix III: GAO Contact and Staff 

Acknowledgments

Page 21 GAO-12-178 Strategic Sourcing

William T. Woods, (202) 512-4841 or woodsw@gao.gov

In addition to the contact named above, James Fuquay, Assistant 

Director; Marie Ahearn; Morgan Delaney Ramaker; Joseph Fread; Jean 

Lee; Jean McSween; Kenneth Patton; Carol Petersen; Raffaele Roffo; 

William Russell; Roxanna Sun; Jeff Tessin; and Ann Marie Udale made 

significant contributions to this report.

Appendix III: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments

(120937)
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

Ralph Dawn, Managing Director, dawnr@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