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76–477 2012

SCHEDULING SUCCESS? ISSUES AND OPPORTUNITIES FOR SMALL BUSINESSES ON THE GSA 

SCHEDULES 

HEARING 

BEFORE THE

SUBCOMMITTEE ON CONTRACTING AND 

WORKFORCE 

OF THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

HEARING HELD 

JUNE 7, 2012 

Small Business Committee Document Number 112–071 

Available via the GPO Website: www.fdsys.gov 

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E:\Seals\Congress.#13
(II) 

HOUSE COMMITTEE ON SMALL BUSINESS 

SAM GRAVES, Missouri, Chairman 

ROSCOE BARTLETT, Maryland 

STEVE CHABOT, Ohio 

STEVE KING, Iowa 

MIKE COFFMAN, Colorado 

MICK MULVANEY, South Carolina 

SCOTT TIPTON, Colorado 

CHUCK FLEISCHMANN, Tennessee 

JEFF LANDRY, Louisiana 

JAIME HERRERA BEUTLER, Washington 

ALLEN WEST, Florida 

RENEE ELLMERS, North Carolina 

JOE WALSH, Illinois 

LOU BARLETTA, Pennsylvania 

RICHARD HANNA, New York 

NYDIA VELA ́ ZQUEZ, New York, Ranking Member 

KURT SCHRADER, Oregon 

MARK CRITZ, Pennsylvania 

JASON ALTMIRE, Pennsylvania 

YVETTE CLARKE, New York 

JUDY CHU, California 

DAVID CICILLINE, Rhode Island 

CEDRIC RICHMOND, Louisiana 

GARY PETERS, Michigan 

BILL OWENS, New York 

BILL KEATING, Massachusetts 

LORI SALLEY, Staff Director 

PAUL SASS, Deputy, Staff Director 

BARRY PINELES, General Counsel 

MICHAEL DAY, Minority Staff Director 

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(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Mulvaney, Hon. Mick .............................................................................................. 00 

Chu, Hon. Judy ........................................................................................................ 00 

WITNESSES 

Thomas Jacobs, Principal, Krueck Sexton Architects, Chicago, IL ..................... 00 

Larry Allen, President, Allen Federal Business Partners, McLean, VA ............. 00 

Charles Forman, Executive Vice President, Independent Stationers, Indianapolis, IN ................................................................................................................... 00 

Mike Tucker, Owner, George W. Allen Company, Beltsville, MD ....................... 00 

William T. Woods, Director, Acquisition and Sourcing Management, Government Accountability Office, Washington, DC .................................................... 00 

Steven J. Kempf, Commissioner, Federal Acquisition Services, General Services Administration, Washington, DC ................................................................ 00 

APPENDIX 

Prepared Statements: 

Thomas Jacobs, Principal, Krueck Sexton Architects, Chicago, IL .............. 00 

Larry Allen, President, Allen Federal Business Partners, McLean, VA ...... 00 

Charles Forman, Executive Vice President, Independent Stationers, Indianapolis, IN ................................................................................................... 00 

Mike Tucker, Owner, George W. Allen Company, Beltsville, MD ................ 00 

William T. Woods, Director, Acquisition and Sourcing Management, Government Accountability Office, Washington, DC ........................................ 00 

Steven J. Kempf, Commissioner, Federal Acquisition Services, General 

Services Administration, Washington, DC ................................................. 00 

Questions for the Record: 

Committee on Small Business Questions for Larry Allen ............................ 00 

Committee on Small Business Questions for Bill Woods .............................. 00 

Committee on Small Business Questions for Charles Forman ..................... 00 

Answers for the Record: 

Larry Allen Answers for the Record ............................................................... 00 

William T. Woods Answers for the Record ..................................................... 00 

Charles Forman Answers for the Record ....................................................... 00 

Additional Materials for the Record: 

Veterans’ Entrepreneurship Task Force Written Testimony of Mr. Robert 

Guy Hesser .................................................................................................... 00 

National Association of Government Contractors Written Testimony of 

J.R. Claeys ..................................................................................................... 00 

American Institute of Architects Letter for the Record ................................ 00 

Adams Marketing Associates, Inc. Letter for the Record .............................. 00 

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(1) 

SCHEDULING SUCCESS? ISSUES AND OPPORTUNITIES FOR SMALL BUSINESSES ON THE 

GSA SCHEDULES 

THURSDAY, JUNE 7, 2012 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

SUBCOMMITTEE ON CONTRACTING AND WORKFORCE, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 2:35 p.m., in room 

2360, Rayburn House Office Building. Hon. Mick Mulvaney (chairman of the subcommittee) presiding. 

Present: Representatives Mulvaney, King, Coffman, Landry, 

West, Ellmers, Barletta, Chu, Schrader, Critz, and Richmond. 

Chairman MULVANEY. All right. We will go ahead and call this 

meeting to order. I apologize in advance for the brief delay in getting started. We had a couple of votes. We should not be interrupted, I think, again. This time we should be great. So with that, 

I have an opening statement. Thanks everybody for coming very 

much. 

Over the past few months, the Public Building Service of the 

General Services Administration has received a great deal of attention for its outrageous use of taxpayer dollars. However, in those 

discussions, it was easy to forget about the other side of the GSA. 

The Federal Acquisition Service serves as the core buying agency 

for the federal government. This division oversees the distinctive 

area of Multiple Award Schedules, or what we call Schedules, 

which is a program that poses unique challenges and opportunities 

for small businesses. 

As we are all aware, the federal government spends half a trillion dollars every single year through federal contracting. What 

most people do not realize is that one out of every 10 of those dollars is spent using these Schedules, and that amounts to roughly 

$50 billion per year. About 80 percent of the 19,000 Schedule contractors are small businesses, and they receive about 35 percent of 

the money. This is no meager feat. GSA requires detailed records 

from a small business before awarding a Schedule. Many small 

businesses are forced to hire expensive outside proposal preparation services and invest in new record keeping systems in order to 

compete for Schedule contracts. 

Despite the expense associated with receiving an initial GSA 

award, many small businesses still feel it necessary to enter the 

federal procurement process. However, recent changes in law, 

budget challenges, and new initiatives are now changing how small 

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businesses relate to the Schedules. This Subcommittee seeks to ensure that small companies who invested in GSA Schedules are not 

forgotten, and that those small businesses who may wish to participate in the future are not unfairly prejudiced. Today, we will examine four primary issues paramount to this discussion, including: 

The Brooks Act, strategic sourcing, voluntary set-asides, and the 

demand based efficiency model. Our questions will focus on ensuring that as the GSA advances in these areas, small business opportunities are preserved. 

In order to have an accurate understanding of these issues, our 

first panel is composed of small businesses, and our second panel 

will feature two government witnesses. We will hear testimony 

from small business owners who have felt both the benefits and the 

burdens of the GSA’s change in contract awards under the Federal 

Strategic Sourcing Initiative (FSSI). We will also have industry experts testify on the effects of altering the Schedules to demand 

based efficiency and learn whether the GSA is truly complying with 

small business set-asides and the Brooks Act. 

I would like to thank everybody in advance for being here. We 

will get a chance to do that again before you leave, but I do appreciate your time. We look forward to everybody’s testimony. And 

with that I will turn over to Mrs. Chu for her opening comments. 

Ms. CHU. Thank you, Chairman Mulvaney. 

I would like to thank you for calling this hearing today, and 

thank our two panels of witnesses for joining us to offer their insight, experience, and expertise on small business federal contracting and the GSA Schedules. 

As we noted, federal contracting is an important source of opportunities for small businesses and can often be a first step toward 

growth for many small businesses. When entrepreneurs are hired 

by the federal government, they bring on new employees, create opportunities in their industries and in their communities. For our 

economic recovery to continue, small businesses must continue getting customers through their doors, and that is why it is this Committee’s responsibility and my personal priority to ensure that we 

do all that we can to help small businesses thrive. And that is why 

we are here today, to ensure that the General Service Administration’s Multiple Award Schedule Program is in place for small businesses to succeed and grow. 

After all, according to SBA, getting a GSA Schedule contract is 

the lowest cost entry into government contracting and a great way 

for small businesses to achieve credibility in the federal contracting 

marketplace. Reforming and modernizing the Schedule is necessary 

to keep pace with changes in the economy, as well as the evolving 

needs of agencies and the GSA must lead by example. Initiatives 

that promote small business participation, increase efficiency and 

reduce waste are indeed critical, but we are here to examine some 

of the more recent and proposed changes to the GSA Schedules program just to ensure that they meet those vital goals. 

In particular, we need to review proposals that may reduce the 

participation of small firms on the GSA Schedule. Such an outcome 

would not only shortchange entrepreneurs but also government 

agencies who could benefit from more and not less competition for 

their businesses. 

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GSA Schedules have been highly effective for small businesses, 

and they are growing rapidly. However, since the GSA Schedules 

are the only procurement program that does not require set-asides, 

it is critical that we ensure that small businesses are not at a disadvantage, especially as contract award vehicles are added or 

changed. We have seen over and over again that the federal government’s commitment to small business has at times been disappointing. It fails to meet statutory benchmarks year after year, 

not just for small firms but also disadvantaged entrepreneurs like 

veterans, women, and minorities. 

As the GSA Schedule evolves, it is critical that small businesses 

are consulted and prioritized. Improving the GSA Schedule and 

empowering more small firms to grow with the government is vital 

to our economic recovery. Ultimately, the questions are simple. Are 

small businesses benefiting from the changes at the GSA? Is government maximizing small business participation even while 

streamlining processes and transitioning to a more cost-effective 

system? Does GSA need to make small business participation in 

the Schedule more of a priority? 

Well, the answers, of course, are not so simple, but I am eager 

to hear from our panelists and work with my colleagues to make 

sure that we tackle these challenges before us responsibly. 

Chairman MULVANEY. Thank you, Ms. Chu. 

STATEMENTS OF THOMAS JACOBS, PRINCIPAL, KRUECK SEXTON ARCHITECTS, CHICAGO, IL, ON BEHALF OF AMERICAN 

INSTITUTE OF ARCHITECTS; LARRY ALLEN, PRESIDENT, 

ALLEN FEDERAL BUSINESS PARTNERS, MCLEAN, VA; 

CHARLES FORMAN, EXECUTIVE VICE PRESIDENT, INDEPENDENT STATIONERS, INDIANAPOLIS, IN; MIKE TUCKER, 

OWNER, GEORGE W. ALLEN COMPANY, BELTSVILLE, MD, ON 

BEHALF OF THE NATIONAL OFFICE PRODUCTS ALLIANCE 

Chairman MULVANEY. Now, the witnesses today, the first panel 

is usually our businesses. The first witness will be Mr. Thomas Jacobs, a principal with Krueck Sexton Architects, a small firm in 

Chicago. He is testifying on behalf of the American Institute of Architects, who last month awarded Mr. Jacobs their 2012 Young Architect award. Thank you, Mr. Jacobs, for being here. 

Next to him is Mr. Larry Allen. He started Microsoft? No, president of Allen Federal Business Partners, a small business in 

McLean, Virginia, that helps small and large businesses navigate 

the GSA Schedules. Mr. Allen has authored or co-authored three 

books on the Schedules. 

The third witness is Mr. Charles Forman, executive vice president of Independent Stationers in Indianapolis, Indiana. His company holds a GSA office supply blanket purchase agreement or 

BPA that allows approximately 117 small businesses to participate 

in the Federal Strategic Sourcing Initiative. Welcome, Mr. Forman. 

And Ms. Chu will introduce our final witness. 

Ms. CHU. Yes. It is my pleasure to introduce Mr. Mike Tucker. 

Mr. Tucker serves as a chairman of the Independent Office Products and Furniture Dealers Association, which is a division of the 

National Office Products Alliance. And this represents over 900 

businesses in the office products industry. He is also the owner of 

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a small business, George W. Allen Company, located in Beltsville, 

Maryland. Welcome, Mr. Tucker. 

Chairman MULVANEY. Gentlemen, thank you. Here is how the 

housekeeping works. We have asked you to limit your statements 

to five minutes, although typically in the Subcommittee we will not 

enforce that rule very strictly. If you decide to go a few minutes 

over, that is fine. If you start hearing me tap very quietly on the 

desk that means make some effort to please wrap it up. But please 

do not feel constrained by the five minutes. We are here. Many of 

you have traveled a good ways to be here. We would rather hear 

what you have to say than arbitrarily enforce a five-minute rule. 

Secondly, what we will do is we will start with Mr. Jacobs, go 

down, and let all of you give your testimony first. Then, Ms. Chu 

will have an opportunity to ask questions. I will go last. And finally, and this is a little bit different in this Subcommittee. We 

usually do the businesses first and then the government witnesses 

second. But we welcome your questions of them. So if you have 

things that you want us to ask those folks, please let us know. And 

for the government witnesses, and I do not recognize their faces, 

please be aware that we may very well ask you questions based 

upon the opening testimony. So that is an opportunity that we afford you folks. 

Mr. Jacobs, please fire away and we will go to Mr. Allen when 

you have completed. 

STATEMENT OF THOMAS JACOBS 

Mr. JACOBS. Chairman Mulvaney, Ranking Member Chu, and 

members of the Subcommittee, I am Thomas Jacobs, AIA, principal 

at Krueck Sexton Architects, an 11-person architectural firm based 

in Chicago. Illinois. I would like to thank you for the opportunity 

to testify today on behalf of my firm and the American Institute 

of Architects. 

The current economic crisis has affected every American, but it 

has hit small businesses particularly hard. Architects are, by and 

large, small business people. Ninety-five percent of U.S. architecture firms employ 50 or fewer staff. In fact, the vast majority practice in one or two person firms. Because of a lack of financing in 

the private market, public sector work has literally been a lifeline 

for many small design firms. However, working with GSA and 

other agencies can be challenging for small firms. 

Federal agencies are required to procure architectural services 

through qualifications-based selection under the Brooks Act. The 

Brooks Act does not mean that price is not a component of the negotiation. The price must be negotiated with the firm that best 

meets the qualifications for the project. This is similar to how private sector clients select architects for their projects. 

However, some agencies avoid using rooks Act by obtaining architects through the Federal Supply Service. To participate in the 

Federal Supply Service, the contractor provider must post a price 

list for agency use. The agency then determines the best value by 

reviewing prices and other optional criteria. This ‘‘best value’’ process is in direct conflict with the Brooks Act because it focuses almost entirely on price and not the qualifications needed to protect 

the health, safety, and welfare of the people who use the buildings. 

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Moreover, in some states, architects are prohibited from competing 

on price. This puts architects in an untenable position of either violating ethical obligations or being locked out of the federal marketplace. GSA must cease to use the Federal Supply Service program 

for architecture as it violates the Brooks Act. 

Another issue small design firms face is in how GSA selects architects for design build projects. The rewards are high, but cost to 

compete is increasingly prohibitive for small firms. To prepare for 

a design build competition, an architecture firm spends an average 

$260,000 by creating plans, models, and other materials. In almost 

87 percent of federal design build competitions, there are no stipends for the firm. Instead, the firm must hope that they win to 

make up the lost costs. 

Agencies have taken advantage of their purchasing power during 

the recession and have expanded the number of short-listed teams. 

In the past, three finalists were typical, but now there may be as 

many as 8 to 10 teams on the final list. The odds of being selected 

have dropped significantly. Small firms also face competition from 

larger firms who can more easily absorb the cost. We ask the Committee to look at reducing the number of finalists on these types 

of projects so that all firms participate in this market. 

Finally, I ask, the Committee to urge GSA and other agencies to 

expand the participation of small firms in the GSA Design Excellence Program. My firm has been a successful participant in this 

program, which streamlines the selection process while stressing 

creativity in designing buildings which represent the dignity, vigor, 

strength, and enterprise of the U.S. government. 

When we were shortlisted for our project, we were the only small 

firm competing against five large architectural firms. Because we 

had the talent, the design, and we were a small business, we won. 

Once under contract, we designed a 475,000 square foot new federal office building in record time with construction bids coming in 

below budget. Small firms are competitive. 

At a time when federal government is facing unprecedented deficits, we need to ensure that every taxpayer dollar is spent wisely. 

Ensuring that the most qualified designers are selected at the outset of the project reaps financial benefits and true value for years 

to come. 

In conclusion, I would like to thank the members of the Subcommittee for giving me the opportunity to testify today and for 

your dedication helping small business drive the recovery. I am 

happy to take any questions that the Subcommittee may have. 

Thank you. 

Chairman MULVANEY. Thank you, Mr. Jacobs. Again, we will do 

questions all together at the end. So, Mr. Allen. 

STATEMENT OF LARRY ALLEN 

Mr. ALLEN. Thank you, Mr. Chairman, and good afternoon to you 

Madam Ranking Member and other members of the Subcommittee. 

It is an honor to have this opportunity to testify today before you 

on the GSA Schedules program. This is a program I have worked 

in for nearly 23 years. For 20 years I led the Coalition for Government Procurement, an association principally made up of small 

business GSA Schedule contract holders, as well as businesses of 

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other sizes. I served on the Multiple Award Schedule Advisory 

Panel and continue to teach and advise companies on government 

business matters. 

The Multiple Award Schedule Program, in my view, is the single 

best avenue for small businesses to compete for and win government business in today’s environment. Having a Scheduled contract allows small firms to win and compete against larger businesses every day. The thousands of successful small firms that hold 

GSA Scheduled contracts are a testament to the creativity, nimble 

solutions, and dedication to service that are emblematic of small 

businesses everywhere. For over 20 years, small businesses have 

received between 30 and 33 percent of Schedule task orders. It is 

clear that small businesses have succeeded as the Schedules program has succeeded. No procurement program open to businesses 

of all sizes can match this consistent successful rate of small business success. 

Yet, even this percentage of direct contracting tells only part of 

the story. Thousands more small firms participate in the program 

as dealers or subcontractors. Whether a small firm holds its own 

contract or participates in a contract held by another, the Schedules program supports thousands of small businesses across the 

country and hundreds of thousands of jobs. 

Today, the Schedules program has new capabilities to further enhance the ability of small firms. New rules allow agencies to specifically set aside procurement for small business. Although this 

rule is only seven months old, I believe the data collected at the 

end of the fiscal year will show that small businesses have already 

realized a steady portion of Schedules-based work even at a time 

when Schedule sales overall may have declined. 

The current wording of this regulation, which may set aside procurements for small businesses, I believe is more beneficial than a 

must standard. Mandating set-asides on the Schedules program is 

not, I believe, in the best interest of the Schedules program or the 

small businesses that succeed on it. New mandates that make the 

Schedules program more difficult to use will drive buyers to other 

programs, many of which do not have anywhere near the successful 

small business track record of the Schedules program. Any mandate that hurts the Schedules program therefore will have a proportional, if not greater, negative impact on small firms. 

It is imperative that the Small Business Administration therefore more cautiously during its current round of rulemaking. It is 

always appropriate to look for ways to maximize small business 

participation but care is needed to ensure that there are not any 

unintended consequences from new rules. I recommend that the 

SBA examine other government contracts that did not already exceed the government’s small business contracting goal by 10 percent. 

Today’s hearing also covers the topic of GSA’s Federal Strategic 

Sourcing Initiative for Office Supplies. I am well acquainted with 

this procurement and the varying opinions surrounding it. I believe 

that an entire hearing could be held to discuss this program. The 

harmonization of positive political and acquisition outcomes is often 

something difficult to achieve. My hope is that GSA FSSI managers 

will exercise sound business judgment when setting the future 

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course for this program, and like many of my colleagues, I await 

eagerly what happened next with this acquisition. 

GSA’s Schedule managers have recently proposed demand based 

changes that could affect small business Schedule contract holders. 

One is a proposal to shut down Schedule contracts or parts of 

Schedules. The other is to move more swiftly to remove companies 

from the program that have not recorded any sales. For a period 

of nearly 20 years, GSA consistently accepted new offers and created new special item numbers and never had to close the program. 

Over the last several years, however, they have elected to look at 

closing the Schedules program. And although unintended, there 

may be some opportunities here that GSA does not realize when it 

closes the program. These closures may assist GSA in managing its 

workload, but previously, when contracts were only one to maybe 

three years in duration, they could be justified as the closure time 

was typically short. 

Today, however, Schedule contracts are awarded for a five-year 

base period with three five-year options, and the Schedules program finds itself in a highly competitive contracting arena. Hundreds of smaller IQ contracts exist, and some agencies openly talk 

about plans to set up their own strategic sourcing initiatives, and 

at least one agency has developed plans to create its own Schedules 

program. GSA should be looking for ways to make its Schedules 

program as competitive as possible and remain open to new offers 

in innovations. 

The issues surrounding GSA’s desire to close part of its Schedules are real. The staffing issues are, in fact, acute and must be 

addressed by the agency. In the meantime, GSA leaders should 

have the flexibility to bring resources in from other parts of the 

agency. Periodic closings of your marquis procurement program 

should be a last option, not the first proposal out of the gate. 

GSA leaders estimate that many of their 18,000 Schedule contract holders record no Schedule sales. Schedule rules state that a 

contractor must have 25,000 in sales within the first two years to 

maintain that contract. While GSA is also technically liable to pay 

each contractor that records zero sales $2,500, I have never seen 

that happen in my 23 years in the business. GSA does have the 

right to cancel contracts that realize zero federal sales, and companies are told in writing that they have to achieve minimums. However, many companies obtained a Schedule contract because an executive with a state or local government asked them to obtain a 

Schedule contract to get it easier for them to do business with that 

state or local government, and this provides a benefit to the small 

businesses, at the same time posing a challenge to GSA. 

GSA must now deal with the reality of being the auxiliary arm 

of state government acquisition organizations. Businesses were told 

by an important customer of theirs to obtain a Schedule contract. 

GSA at the same time, however, must be allowed to recover the 

cost for performing this service. GSA should examine and Congress 

support if necessary the right of the agency to collect Schedule industrial funding fees from states that use local like contracts. Giving GSA the ability to reach out to states that already rely on its 

work will allow GSA to recover costs it is already incurring, and 

this approach would also allow the agency to hire and train addipwalker on DSK7TPTVN1PROD with HEARING

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tional contracting professionals and it will save hundreds, if not 

thousands of small business Schedule contracts and the related 

jobs tied to them. 

Mr. Chairman, Madam Ranking Member, members of the Subcommittee, I am a strong supporter of GSA and its Schedules program. I believe the program fulfills an important need in the acquisition system. While we may differ on specifics, I believe that today’s management team wants to move the Schedules forward. 

With a little tweaking, the program’s success and that of its small 

business partners will only get better. I appreciate this opportunity 

again to testify and look forward to your questions. 

Chairman MULVANEY. Mr. Allen, thank you very much. 

Mr. Forman. 

STATEMENT OF CHARLES FORMAN 

Mr. FORMAN. Thank you, Chairman Mulvaney, Ranking Member 

Chu, and members of the Subcommittee. I am pleased to be testifying before you today about the Multiple Award Schedule Program 

specific to Schedule 75 and the Federal Strategic Sourcing Initiative Generation 2 Blanket Purchase Agreement. 

My name is Charles Forman and I am the executive vice president of Independent Stationers, and I have been in the office products industry for 23 years. Independent Stationers is structured as 

a dealer-owned cooperative headquartered in Indianapolis, Indiana, 

and has been in the office supplies and related industries since 

1977. Our small business dealer-owners have varied tenure in the 

office products industry with some dating back to the early 1900s. 

Independent Stationers was certified as a small business by the 

SBA in 2003, and is comprised of 351 members and affiliates. Our 

dealer owners are small businesses and many hold other socioeconomic designations. Today, 117 of our members are certified and 

approved by GSA as participants of our federal sales program and 

as such can utilize our MAS Schedule 75 contract and related FSSI 

OS2 BPA. 

Our model is similar to other successful cooperative business 

models such as Ace Hardware, credit unions, and many of the 

other nearly 30,000 cooperatives in the United States. There are 

many different types of cooperatives, including agricultural, financial institution, health care, housing. However, some are formed for 

purchasing, which applies to Independent Stationers. The reason 

Independent Stationers is in existence is to give our small business 

dealer owners the tools and resources they need to level the playing field with their big box competitors. Like the federal government leverages its purchasing power, we aggregate volume from 

our small business dealer owners giving them lower cost of goods. 

The net result is Independent Stationers dealer owners have the 

most efficient re-supply operations model in the industry today allowing them to deliver the highest value to federal government customers. The independent dealer channel is the high-service, hightouch customer care solution for the federal government. 

In 2002, Independent Stationers was awarded a MAS 75 for office supplies. Independent Stationers, together with GSA, paved 

the way for federal government acceptance of GSA contracts 

awarded to industry consortiums. To our knowledge, this model 

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was the first in the office products industry and has resulted in significant savings to federal government consumers and enabled 

more small businesses to sell in the federal government marketplace. 

In 2007, Independent Stationers was awarded under the first 

generation of strategic sourcing for office supplies in the categories 

of general office supplies and paper. Although the first generation 

BPA did not meet expectations, Independent Stationers took GSA 

at their word pertaining to the support that would be given for the 

second generation of the FSSI OS2 BPA. In 2010, Independent 

Stationers submitted a proposal based upon our proven cooperative 

business model that had brought us and our small business dealer 

owners success over the previous eight years. Not only did Independent Stationers’ proposal answer the desire for focus on socioeconomic factors, it was deemed competitive and valuable to the 

federal government as evidenced with the FSSI OS2 BPA award in 

Pool 1. In essence, the award to Independent Stationers was made 

to more than 100 small businesses that would ultimately benefit, 

not just a single corporation. 

Since the FSSI OS2 BPA began in June 2010, Independent 

Stationers has enabled GSA and the commodity team members to 

meet their goals of achieving savings; capturing data; enabling 

achievement of socioeconomic goals; driving compliance with mandates, acts, and orders; conforming with agency business practice; 

and been easy to use. 

Independent Stationers’ dealer owners have seen significant 

sales growth. In Calendar Year 2011, our participating small business members experienced a 302 percent increase in sales over Calendar Year 2010 in selling to the federal government. It is our estimate, through the Federal Strategic Sourcing Initiative OS2 BPA, 

that those sales represent a 36 percent savings as compared to our 

MAS 75 pricing. 

In summary, participation in a cooperative business model is 

beneficial to small business and the federal government through 

cost savings and through small business participation. We applaud 

GSA for recognizing the benefits our cooperative business model afford small businesses with their award to Independent Stationers. 

We understand and acknowledge the common complaints expressed 

by those small businesses not possessing an FSSI OS2 BPA, and 

we believe we are a solution for those small businesses that fit our 

dealer-owned cooperative model, to sell to the federal government 

agencies through the FSSI OS2 BPA purchasing vehicle. 

Thank you for the opportunity to testify. 

Chairman MULVANEY. Thank you for the testimony, Mr. Forman. 

We will come back to the questions in just a second after Mr. Tucker is finished. 

STATEMENT OF MIKE TUCKER 

Mr. TUCKER. Chairman Mulvaney, Ranking Member Chu, members of the Subcommittee, I am Mike Tucker, chairman of the Independent Office Products and Furniture Dealers Association, and an 

owner of the George W. Allen Company located in Beltsville, Maryland. I am here today representing one of the IOP FDA’s two memberships, the National Office Products Alliance. 

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The Independent Office Products and Furniture Dealers Association is a not-for-profit trade association established in 1904 that 

represents and serves more than 1,000 small, independent commercial dealers throughout the United States along with their key suppliers. 

I appreciate the opportunity to speak to the Subcommittee today 

about the need to ensure small businesses in our industry have 

fair, ongoing access to opportunities in the federal market. There 

have been a number of developments since 2010 with respect to 

management of the GSA Schedule 75 program in general, and implementation of the second generation Federal Strategic Sourcing 

Initiative for office supplies in particular, that have broadly impacted our members. I will highlight these developments in my testimony today. 

First and foremost, NOPA is greatly concerned about the abrupt 

and widespread impact on small businesses in our industry due to 

the General Services Administration’s implementation of the current FSSI program for office supplies. We acknowledge that the 

FSSI program has generated new opportunities for small businesses in our industry, including some of our very capable members. At the same time, there have been many other members who 

have invested with government encouragement in obtaining their 

own Schedule 75 contracts, only to see their current opportunity 

dramatically reduced as a result of the near-mandatory, government-wide implementation of this program. 

Given the government-wide scope of this FSSI and the large 

number of small businesses that were participating in this market 

in Fiscal Year 2010, NOPA was surprised that GSA did not undertake a small business impact study before launching its second 

generation FSSI for office supplies. It then went a step further and 

without any such study as required under the Regulatory Flexibility Act, published a proposed rule in June 2010 that called for 

creation of a special reference for Federal Strategic Sourcing Initiatives within the FAR. 

As an association, we have worked to find the middle ground 

within our membership on this issue. We do not wish to impair the 

new opportunities of members who competed for and were awarded 

FSSI blanket purchase agreements. At the same time, we would be 

remiss if we did not highlight our concerns about FSSI has been 

implemented. 

After monitoring FSSI implementation for six to nine months, 

and seeing its far-reaching impacts, we agreed within the NOPA 

Board to urge GSA and the administration as a whole to issue a 

Statement of Administration Policy to clarify to federal agencies 

what our industry had been told by GSA and the administration 

just prior to the bid process: that FSSI would be implemented on 

a non-mandatory basis, allowing non-awarded GSA Schedule 75 

holders to continue to compete for federal business. Since that 

time, it has become clear that FSSI volume and its share of total 

federal spending on office supplies would continue to grow as more 

and more major agencies issued guidance to buyers that FSSI use 

was mandatory except in unusual situations. 

NOPA has maintained a dialogue with GSA and the Office of 

Federal Procurement Policy on FSSI implementation since 2010 

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and I am here today to urge this Committee, the full Congress, and 

the administration acknowledge and address the impact of strategic sourcing on our industry in a forthright way. The solution is 

simple and relies on allowing more competition and flexibility in 

purchasing as ways to achieve FSSI’s goals and reduce job loss 

pressures in our industry. 

First, the administration needs to issue a very clear Statement 

of Administrative Policy that restores full competition within the 

federal market for our industry’s products. This approach, if communicated and implemented broadly, will ensure genuine ongoing 

choice of procurement vehicles for agencies and will help the administration achieve the overall budgetary savings it hopes to 

achieve through the FSSI program. Mandatory implementation of 

FSSI on a government-wide basis represents a massive form of contract bundling, which has and will continue to reduce the opportunities and the ultimate level of small business participation and 

healthy, long-term competition in federal markets. 

Second, there needs to be more flexibility to allow individual 

dealers with their own GSA Schedules to participate in FSSI as authorized participating dealers with dealers who have received 

awards. Authorized dealers should be subject to reasonable ground 

rules, but this should not mean they must give up their rights to 

compete for non-FSSI federal business opportunities using their 

regular GSA Schedule contracts. This is essential since APDs will 

need to bear significant administrative fees from GSA and their 

chosen FSSI BPA partner, as well as normal costs associated with 

properly servicing federal accounts. NOPA is in dialogue with GSA 

regarding the APD option, and we ask this Committee to strongly 

encourage them to work toward an expeditious and balanced conclusion. 

We hope that this Committee will reflect on the history of FSSI 

implementation in our industry and consider how the small business impacts can be mitigated in the future. At the end of Fiscal 

Year 2010 there were 550 mostly small companies and a few dealer-based organizations competing for federal business with one or 

more departments and agencies under the regular GSA Schedule 

75 contract program who were using individual blanket purchase 

agreements. However, with the rapid and orchestrated push by 

GSA and OFPP for use of FSSI on a government-wide basis using 

just 2 large and 13 small vendors, the economic fallout has been 

swift and dramatic for most of the remaining Schedule 75 contract 

holders. 

The office products industry is one where small businesses owned 

and operated by women, minorities, service disabled veterans and 

second and third generation entrepreneurial families have been 

well represented and highly successful against much larger national competitors. It is hard to understand how an FSSI program 

was implemented that did significantly more harm than good to 

this already fragile community of businesses. 

We do not believe that this result, a new economic loss for small 

business, is what Congress or the administration intended or is 

what our nation needs as our economy is showing uneven signs of 

recovery. 

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More competition, not less, is the solution and can readily be restored in the federal market for office products by making the FSSI 

program truly one option, rather than a mandatory or quasi-mandatory option among those that have been in place and work ineffectively for some time. 

I ask that my testimony be made part of the official record of this 

hearing and thank you for inviting me to testify on behalf of 

NOPA. 

Chairman MULVANEY. Thank you, Mr. Tucker. And just a point 

to all of you, your testimony that you have prepared in advance is 

part of the record. As will the questions and answers. So as is my 

custom, I will defer to my ranking member and give her as much 

time as she wishes. 

Ms. CHU. Thank you, Mr. Chair. 

I would like to follow up with you, Mr. Tucker, in terms of the 

problems you talked about with regard to the Federal Strategic 

Sourcing Initiative. You mention in your testimony that despite 

GSA’s assurance that FSSI would not be mandatory, that in reality 

it has become that, and that agency’s issue guidance to buyers is 

that FSSI use is mandatory. I want you to talk about how it is 

communicated to the buyers that it is mandatory. And also, can 

you explain how mandatory FSSI has prejudiced buyers away from 

regular Schedule 75 vendors and to what degree this has impacted 

non-awarded small business? 

Mr. TUCKER. It is varied by agency, but basically they put out 

an agency directive that you are required to use this program and 

these 13 small businesses and two large businesses for your office 

supplies. And if a cardholder wants to veer away from that they 

either have a very, you know, strenuous group of hurdles they have 

to go through to make that happen and with official language are 

threatened with losing their card because they are not following 

the guidelines of the agency. But it was a very strong-arm push. 

There was nothing non-mandatory about it. It was very strongly 

worded. I have samples of those letters from all the agencies if you 

would like to see copies of them. 

Ms. CHU. I am assuming then there was a dramatic drop in business for the other ones, for the other Schedule 75 vendors. 

Mr. TUCKER. Well, we are Schedule holders, so our sales reps 

would show up at agencies that we had been doing business with 

for years and we would just be flat-out told, ‘‘Sorry, we love you. 

Your pricing is good and your service is great, but we cannot do 

business with you anymore.’’ And it had a dramatic impact on our 

business very quickly. Our sales are off 60 percent from what they 

used to be and we have lost nine employees as a result of it. 

Ms. CHU. I have also heard that the award application process 

for the blanket purchase agreements is confusing and there are 

many restrictive requirements. And as a result, many of these 

small businesses were not able to apply for Schedule 75 BPAs and 

that this drastically limited the pool of small businesses that could 

benefit from the opportunity. What would you say about this application process? And was it transparent? Why or why not? 

Mr. TUCKER. I have done a lot of proposals and I have won a lot 

of BPAs over the years. This one was very different. I think I heard 

that somewhere in the neighborhood of maybe 50 companies out of 

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the 550 actually put proposals in. To Mr. Forman’s point, there 

were consortiums that also put proposals in. His was the only one 

that was able to win it this time, but it was very price-based where 

in the past a lot of these solicitations have had a lot more technical 

requirements in terms of past performance and ability to deliver on 

a national basis and meet other technical requirements for reporting and computer systems. Those were very much minimized in the 

new bid. And it was primarily about price and then they also had 

a calculator at the end of the bid that was based on volume discounts that you would offer the government if you hit benchmarks 

of $25, $50, $75, or $100 million. And you could put a number in 

there. And most people, a responsible number might have been a 

1, 2, or 3 percent. There were people that put 6, 12, 18, 22 percent 

in those figures which made their bid package come in ridiculously 

low compared to a more responsible bid. But there was no accountability as to how you would get to those discounts if you ever did 

reach those sales but it did very much affect the award pool that 

came out of the solicitation. 

Ms. CHU. And let me ask also about the voluntary set-aside because GSA is one of the few agencies that does not have a mandatory set-aside for small business. And therefore, that would seem 

to also lessen the opportunities for small business. Have you participated in government contracting out of GSA where there is the 

mandatory set-aside? And do you see a difference here? 

Mr. TUCKER. Only on the furniture side for me. We also have a 

furniture Schedule and we work with 8(a) partners or partners 

with other minority designations when primarily the military 

would have some kind of a set-aside where they had to spend a certain amount of dollars with those and we were able to work with 

a contracting partner on that. I really have not seen much of that 

on the supply side and because so much of the procurements are 

under the micro purchase threshold and its credit card transactions, I do not think it lends itself to a set-aside program. I know 

at some point they used to have set-asides for under $25,000 if 

things were competed, but I think the business has gone to more 

of a credit card base with smaller pockets of business as opposed 

to supply rooms and large procurements for full agencies or departments. 

Ms. CHU. Mr. Allen, you talked about the $25,000 sales minimum threshold and the effect that canceling contracts with no 

sales will have on state governments that rely on GSA Schedules 

for selecting vendors for their state programs. There is this $25,000 

minimum but canceling those particular contracts right now could 

have, of course, a very difficult effect. And in fact, in my own state 

of California, having a federal Schedule contract makes it easier for 

a business to get onto the state’s own Schedule. But, you know, of 

course, being canceled would really have a deleterious effect. So 

what effect will GSA’s enforcement of this contracting provision 

have on the ability of businesses to compete in federal and state 

markets? 

Mr. ALLEN. Well, Madam Ranking Member, I think that the 

process is GSA needs to look and see what businesses that record 

zero federal sales are actually doing on some of these state contracts and the example that you mention, the CMAS program is 

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certainly one of the most visible state contracts that is based heavily on the federal program. And being able to see that there are 

businesses that are doing robust state government business and 

may very well have the intent but because they are small, lack the 

bandwidth to sell federally right now, is an important factor that 

needs to be considered before those contracts are canceled. Unlike 

somebody who may have gotten a Schedule contract four years ago 

to transaction one specific piece of business and has never done 

anything since, the types of contracts that are awarded that are essentially the backbone of a state government contract do have a 

purpose and I think that purpose needs to be investigated and realized before there are any cancelations that take place. 

Ms. CHU. And for anybody on the panel, the whole panel on this 

$25,000 minimum, have you experienced this or know small businesses that have had trouble meeting this annual minimum? 

Would it be particularly difficult for a small business to meet this 

threshold? 

Mr. ALLEN. Well, in my experience, Madam Ranking Member, I 

have seen small businesses that have struggled over a couple years 

to achieve $25,000 in sales. Usually the ones that have a dedicated 

or halfway dedicated federal program can achieve that level in a 

couple of years, maybe three years, and if they are showing good 

progress, historically GSA has been willing to allow that contract 

to continue in anticipation that they will build a base of business. GSA’s enforcement of the $25,000 limit has not always been consistent over time. Now, I am speaking as somebody who has 23 

years of experience with the program. More recently, they have become a little bit more consistent about looking at companies that 

have no sales, but again, no sales really should mean no public sector sales and not just no sales to the federal government. 

Ms. CHU. Well, thank you. And I yield back. 

Chairman MULVANEY. Thank you, Ms. Chu. We now recognize 

the gentlelady from North Carolina, Ms. Ellmers. 

Ms. ELLMERS. Thank you, Mr. Chairman. And thank you to our 

panel for being here today on this issue. 

Mr. Allen, my questions are for you. I have a couple of situations 

that I have run into with constituents, small businesses back in 

North Carolina, on basically the GSA scheduling issues. I would 

like to ask you about some of the or what the process is sometimes 

if there is the possibility of some of the abuses that could happen. 

One directly would be if a small business is deemed to be not a 

small business and something other than or larger than a small 

business but has received funding, what is the process that would 

happen if they have already received some funding? What is the 

process that should take place? How prevalent is this? And how are 

abuses like that monitored? 

Mr. ALLEN. Well, some of it is dependent upon the basis upon 

which the initial contract award was made. So if the initial contract award was made based on small business size standard and 

the business in question is no longer small, proper notifications 

should be given by the business to the government agency that it 

is no longer small and then it is up to the agency to decide whether 

they need to actually keep this as a set-aside piece of business, in 

which case they would at some point in the not too distant future 

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after receiving that information, cancel the current contract and 

then go out and recompete among eligible small businesses. Contracting officers in the government as well have the ability to ask 

businesses of any size to recertify their size status at the time of 

any task order being issued against that contract, and small businesses have to answer. 

Your question, however, is a very good one because that is what 

is supposed to happen. In reality, there is not always the communication that should take place between the contractor and the 

buying agency, and the buying agency sometimes does not ask the 

questions that perhaps it should ask about a company’s small business status. Typically, it is usually up to a competitor company to 

call attention to change in size status or some other issue with an 

existing contract and then again, it is up to the agency usually to 

decide, well, do we want to maintain this as a small business setaside or are there other opportunities that we can do as small business set-asides and still continue to do business with a company 

that is no longer small but is meeting our needs? 

Ms. CHU. Just as a follow-up question to that, and this is a very 

specific situation, if the Small Business Administration had been 

the one to basically point out that that business was no longer considered small on more than one occasion, would you not feel that 

that was more than justification for that process to end? 

Mr. ALLEN. Yes, ma’am. There is no question. If the SBA says 

formally or even semi-formally that this business is no longer 

small, that should be the last word. 

Ms. ELLMERS. Okay. Well, thank you so much, Mr. Allen. And I 

yield back the remainder of my time. 

Chairman MULVANEY. Thank you, Ms. Ellmers. 

Mr. Jacobs, a couple of questions for you. We talked—because I 

have not had a chance to talk much about the Brooks Act—you 

talked about the qualification-based selection system where supposedly you are not competing on price, you compete on qualifications and then the government will negotiate with the most qualified provider. And I think you compared it to what we call the best 

value process. Did I get that right? Is that what they—— 

Mr. JACOBS. I think in my testimony, best value was used in conjunction with the Federal Supply Service. But I think the definition 

of value has inherently to do with what I think we are trying to 

communicate. 

Chairman MULVANEY. My understanding of the Brooks Act, 

which is fairly limited, is that if we did that that would be in violation of the Brooks Act. Would it not? 

Mr. JACOBS. Correct. If Architectural Services are awarded based 

on the Federal Supply Schedule, that would be in violation of the 

Brooks Act because—and I think this has everything to do with the 

nature of architectural services as opposed to a physical commodity 

which I believe is the intent to be covered by the Federal Supply 

Service. So the professional services that we sell consist of time, experience, ingenuity, and we are, you know, we spend time with our 

clients, with agencies very early on in a process that frequently 

takes a number of years. And so I may be able to give you one example how I think we can affect cost control specifically much more 

accurately at the very upfront end of a job as opposed to, and even 

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if you might have built your own house, the worst thing that can 

happen is two weeks before you want to move in something does 

not work and now you have to make changes. It is very cost prohibitive to do this because everybody is already onsite and now you 

have to order materials and so forth. 

If you compare that with the ability that we, as planners and 

problem solvers, have at the beginning of a multi-year process that 

it takes to design and engineer a building, we can run various scenarios that upfront can show which design or which approach can 

yield long-term savings. And so this is think fundamentally how 

the architectural profession sees its values or its value with regards to providing accurate information for decision makers. So if 

we do our job right, it puts the government in a position to make 

informed and the most accurate decisions, and those are the ones 

upfront that can actually save real dollars long term. 

Chairman MULVANEY. You also mentioned something, and I have 

done some work with architects in my previous life, but you mentioned something that I was not familiar with. Did I hear you say 

correctly that architects are prohibited in some states from competing on price? 

Mr. JACOBS. That is correct. 

Chairman MULVANEY. Give me an example. What states would 

that be? 

Mr. JACOBS. I would actually have to look that up. I am generally 

informed that out of the 50 states I think two, and I cannot point 

you to which ones they are, but two of those, that the statutes of 

the profession in those state prohibit people from just competing on 

price. 

Chairman MULVANEY. All right. Let us assume for the sake of 

this discussion that is correct. I have no reason to think that it is 

not. If the government is actually employing this best value process 

in either intentional or unintentional violation of the Brooks Act, 

would that not automatically disqualify every single architect in 

those two states from competing? 

Mr. JACOBS. I think based on professional ethics standards, yes, 

it would. But I think this is somewhat of a gray area in that it puts 

architects in this difficult position. As you know, the economic climate is such that I think firms in a case like that may have to— 

may be forced to make a decision in interpreting their professional 

ethics standards or basically still applying for federal work. 

Chairman MULVANEY. In your last comment, and I am going to 

ask each of you this before it is finished, in your last comment you 

urged the GSA to do something regarding expanding participation. 

I could not write as fast as you were speaking. Say that for me 

again because I am going to have the GSA come up in a second. 

I will be happy to pursue that topic with them. 

Mr. JACOBS. Yes. We would like the Committee to consider urging the GSA to expand the Design Excellent program. And this is 

the exact program that we were involved in in this federal office 

building that I described. And I think this is for probably three primary reasons. This Design Excellence program explicitly meets the 

intent of the Brooks Act in our opinion because it is a two-stage 

selection process. And actually, before you get to that process, all 

of these opportunities are posted on Fed Biz Ops, completely open 

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and transparent and easily accessible to all. And then this twostage selection process is first a broad qualification of experience 

and expertise. And based on that, the government then creates a 

short list. And typically, members of that short list get to an interview or in a competition mode where they literally are pitted 

against each other in terms of who is more experienced, innovative, 

and actually might have some real ideas with design. 

So because that process is literally set out to give the government sort of the benefits of the competitive environment we are in, 

we believe, and our experience is that that yields a very good result. 

Chairman MULVANEY. Thank you, Mr. Jacobs. 

Mr. Forman, a couple of questions for you. Walk me through the 

process. I ran a small business. I had some encounters with the 

SBA but I never did what you all are testifying about today. Walk 

me through the process by which you all won the OS2 BPA, and 

tell me if you participated in any of the GSA outreach programs 

as they developed the requirements for that contract. 

Mr. FORMAN. Chairman Mulvaney, I will answer the second 

question first if that is all right. We did participate in some of the 

outreach meetings that GSA had, and we provided input and we 

worked many times with NOPA on providing that input and trying 

to affect change on those types of solicitations. In terms of responding to the bid, as I indicated in my testimony, we have been a 

Schedule 75 holder since 2002. We meet the requirements, and so 

when it came to responding to the technical requirements of the 

bid and the competitiveness of the bid in bidding on the market 

basket items and how that filters down to other items outside of 

just the market basket, I would state we were the third, I believe, 

lowest bidder on the market basket. So we competed both on a 

technical—from a technical standpoint met the requirements of reporting and whatnot and the socioeconomic, being a small business, 

and also price. 

Chairman MULVANEY. You mentioned in your testimony that the 

GSA had pledged to be more helpful to small business through this 

OS2 BPA process. How did they do, in fairness? Again, I am going 

to ask them the same question in a few minutes. 

Mr. FORMAN. Sure. I think to some degree numbers speak for 

themselves, and there is a higher degree of the overall spend going 

through small business today than there was in the past. But I 

think that it is a higher dollar—is a higher percentage of the spend 

to a fewer number of small businesses. So I would say that you 

would have to look at it both ways. Fewer number dealers are getting a bigger piece of the pie. And in the case of us, we are a, 

again, cooperative, viewed as a consortium of dealers by the federal 

government, and we have a number of dealers who never had any 

piece of that business in the past and have been able to participate 

in our program and share in some of the sales to the federal government. 

Chairman MULVANEY. Thank you, Mr. Forman. 

Mr. Allen, I have some questions for you, very similar to what 

Ms. Ellmers asked you, and in consideration of time I am instructed we are going to have votes in about 45 minutes, I am 

going to skip you now and go to Mr. Tucker. 

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Mr. Tucker, very briefly, I take it you oppose the OS2 BPA process? 

Mr. TUCKER. Not so much that I oppose the process as much as 

the way it was implemented and the way it limited the participation of eligible dealers who were qualified to perform under the 

program. And there were two other teaming agreements that were 

in place before the second FSSI that did not get awards. The group 

that I was running with had over 100 members. There was another 

group called AOPD with 50 or 60 members. Those two groups basically got washed out of the process and other GSA contract holders, 

either that did not participate or wanted to participate in the program, were given the restrictions of having to limit the products 

that they offered on their GSA Schedule as a condition of participation as a dealer in another program. So a company like mine, we 

would have had to basically wipe out the last 40 percent of our 

business with agencies that we had other agreements that we were 

still fulfilling in order to try and jump over and be a participating 

dealer with an awarded company. 

Chairman MULVANEY. And is the circumstance that you just described which you were referring to when you said that the FSSI 

process was sort of a de factor or in essence a form of contract bundling. Is that what you are talking about when you use those 

words? 

Mr. TUCKER. That is how it appears to me that it came. Because 

you had 400, well, about 400 dealers competitively participating for 

the business. And especially in pocket markets. So you have small 

companies with a contract that maybe were outside a military base 

or next to a veterans hospital or something where getting a Schedule, you know, they had a great opportunity to do business. But 

they did not have the wherewithal to compete for a national contract or a national BPA like this, and as a result they got swept 

away by the wave when this came through. And even us being in 

the Washington, D.C. area and a veteran company by most measures, you know, we did not have a way to effectively get in the 

game even though we were right on the cusp of being qualified for 

an award. 

Chairman MULVANEY. All right. I am going to press you on something that actually was not in your presentation today but it is in 

your written testimony, which deals with the Statement of Administrative Policy, the SAP, because I think you are encouraging the 

GSA apply that instead of the traditional rulemaking. As a lawmaker, did I mischaracterize that? 

Mr. TUCKER. No, I think, I mean, we represent a lot of companies 

and some got awards and some did not. We saw that as a compromise vehicle that could allow other companies to get in. If the 

guy outside the veterans hospital or the military base had something in writing from the administration that says FSSI is not 

mandatory, he may be able to use that to counter the written 

guidelines that that agency put in place that made FSSI mandatory. 

Chairman MULVANEY. And I will just ask you, Mr. Tucker, as a 

lawmaker, SAP does not appeal to me very much. You recognize, 

of course, number one, it does not have the force of law, so it may 

not be as powerful a tool as you think that it is. And perhaps more 

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importantly, it does not provide for comment period input from the 

business community. It is sort of a fete accompli. It is a done deal 

once the administration issues it. So I guess I do not have a question for you but I just tell you there will be folks who will press 

you on that simply because we would like to participate in the 

process. 

Mr. TUCKER. That was a compromise solution to try and come up 

with something that could help our members. 

Chairman MULVANEY. Thank you. Gentlemen, again, I am not 

trying to rush anybody through but they do tell me that we are operating under some loose time constraints. A quick question to each 

of you. Mr. Jacobs, I think I know the answer to what your question is, so I will start with Mr. Allen. Mr. Allen, in a few minutes 

here the GSA is going to come up and other folks from the government. Any questions you want me to put to them? 

Mr. ALLEN. I think the biggest question for GSA, Mr. Chairman, 

is what they are going to do in terms of these discussions that we 

talked about, the demand based changes. I think that on some 

level, an administrative level, I understand what they are trying to 

achieve but I do not know that the process that they are going to 

propose to go through is the best way. What other processes, what 

other alternatives are there that would allow them to manage their 

administrative challenges without causing this type of disruption to 

their overall business? 

Chairman MULVANEY. Thank you. That is one of the questions 

we had as well. 

Mr. Forman. 

Mr. FORMAN. If I were to ask a question it would be would there 

be additional consideration of the cooperative business model as a 

means to help GSA achieve some of its goal in terms of reducing 

administrative burden in terms of managing hundreds of contracts 

when it can utilize a cooperative and in essence support small business, numbers of small businesses through one contract? 

Chairman MULVANEY. Mr. Tucker. 

Mr. TUCKER. Just that they would continue the dialogue with us 

and with a short-term solution in mind of trying to get more participation from companies that have held GSA contracts in the past 

and without any burdensome requirements. 

Chairman MULVANEY. Thank you, gentlemen. I thank all of you 

for your time, for your effort, for your input. I especially thank 

those of you who traveled today for this. And I will tell you what 

I tell everybody who comes to these things, because some folks 

come in and they say, Mr. Mulvaney, no one showed up for this. 

Was this a complete waste of time? I can assure you that it is not. 

I can assure you that this is where the dialogue starts on policymaking, on rulemaking, on everything. 

You might have made a comment today, Mr. Jacobs, regarding 

the Design Excellence Program that someone sitting in the back 

will pick up and write about in one of the local trades and it will 

end up being a discussion item at your next symposium and a year 

from now it will end up being a piece of legislation. We see that 

every single time. And so please do not be discouraged by the fact 

that there was not a lot of media, a lot of press. This is an extraordinarily helpful part of the process, and you gentlemen have conpwalker on DSK7TPTVN1PROD with HEARING

20 

tributed greatly to the dialogue today and I really appreciate your 

time. So thank you for coming in. With that we will excuse you and 

ask the next folks to come up. 

Chairman MULVANEY. Gentlemen, thank you. We will introduce 

you very briefly and go right to the testimony. 

STEVEN J. KEMPF, COMMISSIONER, FEDERAL ACQUISITIONS 

SERVICES, GENERAL SERVICES ADMINISTRATION, WASHINGTON, D.C.; WILLIAM T. WOODS, DIRECTOR, ACQUISITION 

AND SOURCING MANAGEMENT, GOVERNMENT ACCOUNTABILITY OFFICE, WASHINGTON, D.C. 

Chairman MULVANEY. So for the record we know who you are, 

the first witness is Commissioner Kempf, Steve Kempf. He is the 

commissioner of GSA’s Federal Acquisition Services, which manages and oversees the Schedules. While Mr. Kempf has been commissioner for about two years now, he has been with GSA since he 

started there as an intern in 1947. Is that what it says here? 1992. 

So am confident he will be able to answer the questions. 

Our second witness is Bill Woods, the director of Acquisition and 

Sourcing Management. That team is at the U.S. Government Accountability Office. He is responsible for providing overall direction 

for the GAO review of contracting activities at defense and civilian 

agencies. Last fall, under his direction, GAO issued a report on 

GSA’s Federal Strategic Sourcing Initiative for office supplies. 

Gentlemen, thank you as always for being here. Commissioner 

Kempf, I think you are first. 

STATEMENT OF STEVEN J. KEMPF 

Mr. KEMPF. Good afternoon, Chairman Mulvaney, Ranking Member Chu, and members of the Committee staff. 

My name is Steven Kempf, and I am the commissioner of the 

United States General Services Administration’s Federal Acquisition Service. I want to thank you for providing me the opportunity 

to discuss GSA’s accomplishments and continued efforts to improve 

the efficiency and effectiveness of the Multiple Award Schedule’s 

program (MAS). Over time, the Schedules have proven to be the 

most effective contracting vehicle for small business in the government marketplace. 

I would like to discuss three specific initiatives and have I addressed several related programs in my written testimony that operate to ensure the success of MAS and maximize the use of taxpayer dollars. These three things are: implementing the Small 

Business Jobs Act of 2010; the Federal Strategic Sourcing Initiative; and finally, the MAS Demand Based Model. 

The MAS is the most successful government contracting program 

in terms of creating opportunities for small businesses. The MAS 

program routinely exceeds the government-wide business contracting goal of 23 percent. Specifically, more than 70 percent of all 

MAS vendors are small businesses, and approximately 34 percent 

of all dollars spent in the MAS go to small businesses. This success 

is not accidental; it is the result of robust programs and a commitment to the success of small businesses across our agency. 

Our expectation is that the full implementation of Section 1331 

of the Small Business Jobs Act of 2010 will drive even more market 

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share to small businesses. Since promulgation of the FAR Rule in 

November of 2011, GSA has trained approximately 1,700 members 

of the federal acquisition workforce. 

While we are pleased with our progress, we continue to identify 

additional ways to ensure that the authority continues to be a success. For example, in partnership with the Federal Acquisition Institute and Defense Acquisition University (DAU), FAS has 

launched a four-hour course on how to use the new authority, and 

we are in the process of working with the Office of Federal Procurement Policy (FAI) and DAU to make the case that MAS training, 

and as a consequence, training on Section 1331, should be a required component of the federal acquisition certification. We look 

forward to continuing to work with you to ensure success of this 

program. 

Over the last few years, we have placed renewed effort in GSA 

on data collection, analysis, and enhanced competition. These are 

the things that allow us to make the best purchases at the best 

prices. Such leveraging of government spending is at the heart of 

the Federal Strategic Sourcing Initiative. FSSI is governed by the 

Office of Management and Budget in concert with the Chief Acquisition Officer Council’s Strategic Sourcing Working Group. It is important to understand that price is only one of FSSI’s key priorities. Socioeconomic goals, including small businesses, understanding the government’s spending patterns, ease of use, and removing government cost drivers are other key goals. To accomplish 

these goals on each specific initiative, we work closely with other 

agencies to develop features and requirements, as well as obtain industry feedback and expertise. This thoughtful process has resulted 

in significant savings and smarter acquisitions in all of the initiatives we have undertaken. 

The MAS is a great acquisition tool. However, fundamental MAS 

business models have not changed since 1992, despite significant 

market changes since that time. The MAS model needs to change 

to address new realities, and we must ensure that our vendors are 

able to respond effectively and efficiently to market demands. This 

is why GSA is committed to implementing a new business model 

we call Demand Based Model. The MAS program, with limited exceptions, is perpetually open to qualified new offers. And while vibrant markets exist in some of our Schedules, we have reached the 

point of saturation in others. In some instances, well over 60 percent of the contract holders receive little or no business. Furthermore, competition that takes place in an oversaturated environment is often not effective. 

These concerns form the basis behind our Demand Based Model. 

This model allows us to focus our limited resources and capacity on 

the most critical areas. 

Over the last several years, the volume of MAS offers received 

has roughly doubled, and the number of modifications has nearly 

tripled. Much of this increase is the result of numerous contractors 

offering the same items at different price points. GSA projects that 

well over 50 percent of the MAS contracts awarded in 2011 will not 

have significant sales, and the government will spend over $20 million to support and manage low or no sales contracts. The current 

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tion professionals on helping agencies use the MAS program more 

effectively by bringing new solutions to the market faster, improving pricing and simplifying the buying process. 

Small businesses will only succeed if GSA is positioned and able 

to provide opportunities, respond quickly, and offer the technical 

assistance needed to navigate the procurement process. The Demand Based Model will increase our agility, provide agencies with 

faster and better access to emerging solutions, send clear signals 

to the marketplace so contractors can identify where the demand 

lies, and respond accordingly. 

On behalf of GSA’s Federal Acquisition Service, I again thank 

you for this opportunity, and I would be happy to answer your 

questions. 

Chairman MULVANEY. Thank you, Commissioner. 

Director Woods. 

STATEMENT OF WILLIAM T. WOODS 

Mr. WOODS. Thank you, Mr. Chairman, Ranking Member Chu. 

I would like to cover three areas this afternoon. One is a GSA 

study on office products that they completed on behalf of the Appropriations Committee. Secondly, our observations on the conclusions in that study. And then thirdly, to talk about the Office Supplies II contract that we have heard about already this afternoon. 

The Appropriations Committee has heard, as have many others, 

that the prices on GSA Schedule contracts were not nearly as good 

as some agencies could obtain on the open market, and they asked 

GSA to conduct a study to either confirm or deny that. GSA spent 

about a year performing that study, and their conclusion was that 

about 58 percent of office supply purchases were made outside the 

Schedule. And when those purchases were made, the agencies were 

paying price premiums, a higher price buying off the Schedule than 

they would buying under the Schedule. Those price premiums were 

significant. Seventy-five percent higher prices paid off Schedule 

than they would have paid purchasing under the Schedule, and 

some 86 percent higher making purchases off Schedule than they 

would under the OSII program. 

We spent time looking at the data that GSA had collected, as 

well as their methodologies, and we had some concerns about their 

findings. The finding on the amount of the price premium we 

thought was too high. And the reason is that they did not properly 

account for variations in quantities. Let me give you just one example. They used part numbers in order to be able to determine 

whether a purchase that was listed as a pen was a single item, a 

box of three items, or a box of a dozen or more. That simply was 

not a sound methodology to allow them to come to the conclusion 

that they did. We questioned the magnitude of the finding. We did 

not question the direction because we still believe that agencies can 

do better under the Schedule than they can do on an open market 

basis. 

Other studies confirmed our view and GSA’s view that agencies 

could do better under the Schedule and through leveraged purchasing. We talked to the Air Force. We talked to the Department 

of Homeland Security. They had conducted their own studies and 

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came to the same conclusion. But we were concerned about the 

magnitude of the cost savings that the GSA study found. 

The other thing I would like to mention in the time we have 

available is the Office Supplies II initiative that we have heard so 

much about this afternoon. That has tremendous benefits, and let 

me just list a few. Saving money is number one. GSA estimates 

that buyers save about eight percent when agencies use OSII 

versus using the Schedules program. They estimate that agencies 

in total have saved some $39 million so far just in the last couple 

of years by using OSII. Further savings are possible. This is a big 

market of about $1.8 billion, so we can see that further savings are 

indeed possible. But there are other advantages as well. This is 

part of a Strategic Sourcing Initiative, and the essence of strategic 

sourcing is that entities, whether they are government agencies or 

private businesses, need to know where their money is going, how 

much they are spending, what they are spending it on, and who 

they are spending it with. And the Strategic Sourcing Initiative, by 

collecting data from vendors and doing that kind of market analysis, allows agencies to make very informed decisions. 

It also allows them to better manage their vendors. They can 

spot more quickly when vendors are failing to comply with their 

contractual requirements and they can take specific action. And we 

found, in fact, a number of instances where the General Services 

Administration had issued notices or, known as cure notices, to 

vendors that were not measuring up and demanding that they improve their performance. 

And then lastly, another advantage that we identified and the 

GSA is rightly very proud of is that when agencies make purchases 

using the purchase card, they do not have to identify themselves 

as making a purchase under OSII. That is automatic. If they use 

the purchase card, if the card gets swiped, they get the OSII price. 

They also get relief from state sales taxes, which is important. That 

in itself is an enormous saving. 

So we have concluded that there are benefits from the OSII initiative. It is not without problems. There are certainly some growing pains, but fundamentally, the government is better off using 

OSII than otherwise. Thank you. 

Chairman MULVANEY. Thank you, Director Woods. 

Ms. Chu. 

Ms. CHU. Commissioner, the Small Business Jobs Act allows 

agencies to voluntarily apply set-asides to Schedule orders. However, the GSA Schedule is the only procurement program that does 

not mandate set-asides. Why should the Schedule be exempt from 

these mandatory small business set-asides? 

Mr. KEMPF. Well, I would focus on the results that we have 

shown thus far. I think that the program has exceeded almost any 

other measure that you might have in terms of results. And when 

we are talking about 34 percent results over to small businesses 

across the program, that is substantial. It is well above the targets 

that many, many agencies and programs do not meet. 

But I really want to focus in on what we have seen since we have 

implemented the discretionary set-asides. That happened last November. We were ready right out of the gate to help the agencies 

understand how to use it. We provided the training to them. We 

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have, as one of the tools we offer as part of this Schedules program, 

something called eBuy, which is an electronic marketplace for ordering and doing RFQs. And in the last two months we have been 

able to track the number of procurements in eBuy where they have 

actually used the discretionary authority. And in the last two 

months, we saw 1,776 actual set-asides being done by the agencies. 

So when you look at the uptake, and that is out of 12,000 actual 

procurements that were actually put into eBuy, and that is not the 

entirety of what happens on the Schedules program. So when you 

look at the amount of uptake and as quickly as it occurred. 

Additionally, when we have been out to train, I have a couple of 

anecdotal responses that we saw at the agencies. At the Air Force 

we saw them move a full and open procurement to the Schedules 

and use as a set-aside a $40 million procurement. Additionally, 

when training the Energy department, we saw them move or setaside, expect a set-aside a $200 million and a $50 million procurement. These are not small procurements. They are having the opportunity to actually really impact their numbers, and those are 

two agencies that have struggled. And it is tough for them because 

of what they buy to actually meet their small business goals. So I 

think, you know, as we are seeing the voluntary or discretionary 

set-aside, we are seeing real impact on the program. And what we 

expect and hope is that it drives that number up from 30, 33, 34 

into the higher 30s. 

Ms. CHU. I just wanted to have some idea of how long this program has been in effect and the kind of data that you have, like 

how many agencies are participating and how many orders have 

gone through the voluntary set-aside system versus the regular 

GSA Schedule system. So how long has this program been in effect? And also, how many orders have been placed through the voluntary set-asides? 

Mr. KEMPF. Again, the discretionary authority was granted in I 

think it was November of last year. So we are talking from November through now. We have only actually been able to identify in the 

eBuy system the last two months. It took a while for us to change 

the system so that we could track those orders that were actually 

set-asides. It takes us a while. We have got some old systems that 

need help. So when we change things, it takes us a while to get 

them running. But again, over the last two months we have been 

able to track. Again, I do not know exactly what the percentage is, 

but 1,776 out of roughly 12,000. So you are seeing about 14 percent 

of the orders actually being set aside through the electronic system. 

Now, agencies, like I said, they do not all use eBuy when they 

do the purchases. But it is one indices that we are looking at where 

we are tracking and seeing that the agencies are actually picking 

up that discretionary and using it. Plus, you know, the number 

that we have been able to—the number of people we have been 

able to train, 1,700 across the federal government, and then again, 

we have seen about 7,000 hits on the webinars and the information 

that we have on our websites looking for the information on how 

to use. 

Ms. CHU. And how many small businesses are receiving orders 

through voluntary set-asides versus the regular Schedules? And 

what are the relative volumes of sales? 

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Mr. KEMPF. That I do not know that we can even track, at least 

at the moment. So I would have to defer on that. I just really do 

not know that. 

What I would really like to look and watch for is do we see a 

market increase in the amount of business actually going to small 

business by the end of the year? If we see that number moving and 

nothing else has really substantially changed, I think we can, you 

know, we will have a better indication of what kind of real impact 

it had to small businesses. And like I said, we are really expecting 

to see some of the impact coming by the end of the year. So I think 

we will know by the end of the year—expect to see some substantial impact. 

Ms. CHU. So, well, apparently you are putting the system in 

place to track the effect of the voluntary set-aside program, but can 

we get that data? 

Mr. KEMPF. We would be able to see actually if the actual—sometimes people use the eBuy system to do part of the procurement 

and then they finish it up in their own agency acquisition system. 

Sometimes they actually use the system to actually make the procurement. We would probably be able to tell the set-asides that 

were actually done in eBuy because we would be able to track that. 

So that data we would be able to tell. So those that use the eBuy 

system, we would be able to see which ones were actual set-asides. 

On the agencies, I do not know if we would be able to see that data 

in FPDS on set-asides and FPDS NG. I just do not know enough 

to answer that. 

Ms. CHU. I am asking if you can look into that. 

Mr. KEMPF. We will look into that and provide more information 

to you. 

Ms. CHU. On the Blanket Purchase Agreements, the BPAs have 

not raised complaints from small businesses in four out of the five 

GSA Schedules when they were introduced. But in the Office Supply Schedule, the Schedule 75, there were complaints as what you 

have heard today. So what is different about Schedule 75 that 

caused the sales volume and opportunities to climb for small businesses that were not awarded the BPAs? 

Mr. KEMPF. Well, most of the other areas where we have done 

the FSSI initiatives were generally large businesses, were players. 

So for instance, ground domestic delivery, as you can imagine, you 

are talking about the FedEx and UPSs of the world. So it has 

caused some concern for us. Whenever there are winners and losers 

there is always people who are disappointed and upset with the 

process when they do not win. And we have, of course, heard from 

that. And in all of the procurements that we have had, that is normal. 

But I think the problem here in the strategic sourcing around the 

office products is that this is an area that has been under a lot of 

intense market pressures generally. So this has been a very tough 

business to be in. I have a lot of empathy for those who are in this 

business, but we have—this is our second generation. We learned 

a lot from the first generation. I think Director Woods points to 

some of the lessons we applied that brought us some good results. 

I wish we were further along than we are. When I look at we are 

about 120 million this year in a marketplace where the government 

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will be spending well over a billion. So we are not capturing everything. The government is still spending more than they need to by 

not using FSSI OSII. So we are not even capturing a majority of 

the market. 

And there are agencies that are doing a great job. A lot of them 

are with us in Office Supplies I, so for them they had already instituted the discipline within their purchasing community to actually 

use this. So when we changed over to OSII, they moved over very 

quickly. Their people were already disciplined in doing that as part 

of their agency trying to save money. Others are just getting along. 

When you look at the way the government buys office supplies, 

it is probably one of the most distributed purchasing patterns in 

the entire federal government. So it is really hard to change buyer 

behavior when you have literally hundreds of thousands of people 

buying and with authority to buy. 

Ms. CHU. So is it true that you are mandating that the federal 

agencies purchase all goods within the BPA awarded vendors even 

if the goods and services are not part of the basket of goods covered 

by the BPA? Is this a mandate? 

Mr. KEMPF. GSA is a non-mandatory source, so we provide the 

services, among them OSII. What agencies do within their own 

agencies and their authorities and how they direct their purchases 

to be made within their own agencies is up to them. Now, I know 

some agencies have done—they have said we are going to use this 

so if you are not going to use this you need an exception. Other 

agencies have said here it is, use it. Other agencies have tried 

something in between. So you have a lot of agencies doing different 

things. And for some of them it is about getting small business 

credits. For some of them it is about saving money. For some of 

them it is about getting the data that we provide so they know 

what they are spending and where it is going to. 

Ms. CHU. So you are saying that it is not a mandate? 

Mr. KEMPF. Not from GSA. 

Ms. CHU. Because you heard the gentleman, Mr. Tucker? 

Mr. KEMPF. Well, I think what he is responding to is agency 

mandates. So individual agencies have set up their own policies 

about how they buy, what they buy, what discretion the people in 

their agencies have. And like I said, some of them, for legitimate 

business reasons, have chosen to set up constraints around the 

buying within their agencies. 

Ms. CHU. Well, let me ask about the $25,000 annual sales minimum that small businesses have a hard time meeting. And you 

have heard Mr. Allen talk about that. While you are having success 

with this voluntary set-aside program, there are small businesses 

that will have a hard time meeting this $25,000 minimum. Can you 

respond to what Mr. Allen said? 

Mr. KEMPF. Sure. We have had, as part of the Schedules program for many, many years, a minimum sales clause as part of the 

agreement that we enter into with industry. And we have had over 

the years differing approaches to actually following through with 

enforcing that agreement. And what we have been looking at and 

what we have been seeing in some of our Schedules is just the 

enormous number of Schedule contractors. We are right now up to 

well over 19,000 contractors on the Schedules program just in the 

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GSA portion of it. And we are seeing some things that cause us 

concern in terms of the numbers, not the least of which is what it 

is costing us to operate it. And then also what we are seeing with 

what is happening within the specific agencies. 

So at some level we have become a little bit more aggressive in 

enforcing the provisions of the agreement that we have with the 

vendors. We have never raised the $25,000 minimum sales guarantee. It has been the same for probably 20, 25 years. When you 

consider that the average Schedule order is about 67,000, what we 

are asking them to do is get less than half of an average order in 

two years and then to continue that for the next three years. 

I understand that navigating the federal marketplace is very difficult, but we have done some things, too, that I think are helpful 

to industry. We have had a mentorship prote ́ge ́ program. We have 

developed a business breakthrough program. There is online support to help industry understand how to market to the federal government. And one of the things we are trying to do is help industry 

understand upfront before they actually get into the program, that 

it is the right time for them to come. And what we have seen is 

that a lot of industry has been jumping into the program probably 

at the urging of folk who get paid for helping them into the program because it is a must do for them. And for some of them it 

is just not the right time to be in. 

At a recent GSA expo, I went to a session with our mentor 

prote ́ge ́s, and one of the prote ́ge ́s was there telling the story about 

he had his Schedule contract RFP in hand and his mentor said, 

‘‘Hang onto that. Hang onto that till you are ready.’’ So he waited 

two years and he said it was the smartest thing he ever told me. 

I was not ready. I would not have sold anything. And it was not 

the right time. 

And so what we are asking industry to do before they get in is 

really look at where you are. Are you ready to come into the program? Are you going to be successful? We have a Pathways to Success course that we ask small businesses to take, I think we actually require at this point, before they come in. We want the right 

kind of people in, but we also want people who are going to be successful. We do not want people coming in having a bad experience 

and then leaving frustrated that they spent all this money to get 

in and then it just did not go anywhere for them. 

The other thing that I would like to say is that we use a lot of 

discretion. Typically, when people are at that point where we have 

to make a decision, oftentimes the industry comes to us and says, 

‘‘I am getting there. I have got three procurements that I am waiting to hear from.’’ We extend for them. But on the other hand, we 

have a lot of people who have just turned off to GSA. They are just 

not even participating anymore. And I think it is time to sort of 

cull the numbers down. They are not really participating and they 

are costing the government money. The users do not really need 

them around so they will send them an RFQ and nothing comes 

back. 

Ms. CHU. Well, I am wondering about this discretion. So you are 

saying that a business could intervene before their contract is 

ended? Because in my state of California, a GSA Schedule contract 

is a prerequisite for state level contracting. 

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Mr. KEMPF. We reached out to both California and Texas and we 

talked to them. I think their discussion with us was that they use 

our Schedule as a marketing tool, a market research tool. So they 

use it to find price, but it was not actually a prerequisite for joining. And we reached out to both Texas and California because that 

is also what we understood, too, was you get on GSA’s Schedule, 

then you get on California. And actually, when we reached out to 

both of them, they were both experiencing some of the same problems we had. They had a lot of vendors who had no sales and they 

had a lot more and the increase of the number of offers and modifications that they were doing was beginning to cause them problems as well. 

Ms. CHU. I see. Okay, thank you. I yield back. 

Chairman MULVANEY. Gentlemen, I have got some questions all 

over the place. I am going to go in no particular order, although 

I want to try to start with you, Director Woods. You heard Commissioner Kempf talk about his frustration at the participation 

rates as far as agencies using OS2. I hope I stated that correctly. 

And then you mentioned something that caught my attention regarding about 58 percent of purchases are made off the Schedules, 

which I assume in this circumstance means not using the Schedules. 

Mr. WOODS. That is correct. At retail stores. 

Chairman MULVANEY. That number surprises me. Did it surprise 

you that it was that high? 

Mr. WOODS. I personally was surprised it was that high. Yes. Because GSA goes to a lot of effort to make the Schedules available 

and they publicize the availability of Schedules and companies do 

a lot to sharpen their pencils to make sure that their prices are 

good. So that number did surprise me. 

Chairman MULVANEY. That is the whole concept here behind the 

Schedules, is that you all negotiate on behalf of the federal government as a whole, try to get the best possible price for our agencies, 

and our agencies take advantage of that work that you performed 

in order to buy products at the lowest possible price. That is the 

basic summation of the system. Right? 

Mr. WOODS. That is exactly right. 

Chairman MULVANEY. And if we have 58 percent of purchases of 

office products—I guess that is office products. Is that what you are 

talking about? 

Mr. WOODS. That is right. Just for office products. 

Chairman MULVANEY. So they are going down the corner to Office Depot? Not that I have anything against Office Depot, but it 

sort of defeats the purpose, does it not? 

Mr. WOODS. That is right. 

Chairman MULVANEY. How can we fix that? I read the rule, by 

the way, and it is exactly, not surprisingly, as Commissioner 

Kempf said, that they are encouraged to use it but there is no requirement. How do we help fix this? 

Mr. WOODS. We need to make it as easy as possible for the consumer, government agencies to be able to make purchases using 

the GSA Schedule. 

Chairman MULVANEY. Did you ask any of the folks why they 

were not using the Schedules? 

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Mr. WOODS. Convenience, I think, is probably a fair characterization of the reason. And that is why GSA needs to make every effort 

to make it as simple and easy as possible for agency users to use 

either the Schedule program or OSII. 

Chairman MULVANEY. And when you say convenience, give me a 

practical example. What does that mean? If I am the Air Force and 

I want to go out and buy pens, why do they say—and again, this 

is hypothetical—why would they say that it is not convenient to 

use the Schedules? Whereas, it is more convenient to go down the 

street? 

Mr. WOODS. Well, delivery time is probably the best example. If 

a user just goes down the street they get it today. If they order off 

the Schedule, it is unlikely they are going to get same day delivery. 

Chairman MULVANEY. Could pressure on them to keep their inventories down because of costs contribute to this circumstance? 

Mr. WOODS. That is possible. Agencies sometimes will inventory 

quantities of office supplies to make them available, and I know 

many organizations, both public and private are cutting back on inventories in order to streamline operations. 

Chairman MULVANEY. Thank you, Director Woods. 

Commissioner Kempf, a couple different questions for you. We 

have got some numbers about some of the set-asides which six 

months ago were at zero and in the last two months have actually 

picked up considerably, looking like 14.8 percent. Are you concerned that implementing DBEM right now may negatively impact 

that positive trend? 

Mr. KEMPF. DBEM? 

Chairman MULVANEY. The Demand Based Efficiency. 

Mr. KEMPF. Oh, Demand Based. 

Chairman MULVANEY. Did I get that wrong? DBEM. I am sorry. 

Just ask me an alphabet soup question. 

Mr. KEMPF. It is now. I did not even recognize my own acronym. 

Here is what we are actually looking to do. We know that there 

are some Schedules that we manage that have enormous numbers 

of people who are not getting any business. Some of them upwards 

of 60 percent. We also know on some of them that the demand is 

going south. And in some cases substantially, like shipping and 

packing Schedule, photographic equipment, the people that sell 

typewriters. There is nothing that we are going to be able to do 

that is going to change that demand curve. However—— 

Chairman MULVANEY. What is the harm in just leaving them 

there? 

Mr. KEMPF [continuing]. Well, the harm in leaving them there is 

it costs us money to just leave them there. Well, actually, let us 

separate people who are not meeting their minimum sales guarantees and the Demand Based Efficiency Model. They are two different things. 

Chairman MULVANEY. Okay. 

Mr. KEMPF. So Demand Based Efficiency Model, we have looked 

at some Schedules where we know we really do not need any more 

competitions. And when we looked at that, we have looked at areas 

where we know there is substantially no innovation going on. We 

have looked at areas—in many of these cases we have 400 or 500 

contractors on the Schedule already. One of the things we are hoppwalker on DSK7TPTVN1PROD with HEARING

30 

ing to do is just at least preserve the market for those that are already on. So people who have invested in getting on the Schedule, 

let us not divide that market up by adding 50 more people and divide the pie up just a little bit more. 

And we have talked to our customers. And our customers have 

told us if I have got 500 choices and I am not really buying that 

much, why are you wasting your time adding more people when 

you could be dropping the time it takes to get on the Schedules 

where I do have demand, where there is innovation, where I do 

need people? Also, they are saying to us can you go out and do 

some more of this Federal Strategic Sourcing Initiative? Or can you 

help us understand how to do Strategic Sourcing Initiative? Or for 

our industry partners, can you go out and train people how to use 

the Schedule better? Help them write difficult statements of work 

so that we can actually use GSA’s Schedule better, much to what 

Director Woods is saying. Can you make yourself easier to do business with or help us understand how to do business? So you drive 

up the pie that is actually being spent under the Schedules program. 

We only have limited resources in the Federal Acquisition Service, and what we are looking to do is shift some of those resources, 

some to help industry and drive higher sales, some to work with 

our agency customers and develop secondary uses of the Schedule 

or help them understand how to use it. But in any case, what we 

have done is we have actually looked at—we expect that if we implement this as we are planning right now, we would only be impacting about 25 percent of the Schedule sales. So for 75 percent 

of the Schedules and 75 percent of the sales—and by the way, the 

growing part of those sales, it will be open and it will continue to 

be open. 

And one other benefit to industry, it identifies the dead-ends. 

And it also identifies the opportunities. And I think this has some 

value for industry, which is basically this. Helping them understand where the government is not going to be buying, where it 

would be a waste of their time and money to come into the program. And we are not doing that right now. So we are just saying 

we are taking all comers. So in many ways, diluting some of the 

potential partners that once they get in—and I get these calls from 

vendors. I just got in. I am so excited. And some of these areas I 

just know there is no business coming. So it is helpful to them. 

Chairman MULVANEY. And I cannot argue with the logic, although in this sea of paper I have on my desk now, staff just handed me something that said that the special item numbers that you 

all are proposing closing as part of DBEM, they represent over $8 

billion in sales, or about 16 percent of all the GSA Schedule sales. 

Is that not a fairly—it does not sound to me like it is typewriters. 

Does it buy that many typewriters? 

Mr. KEMPF. It is a lot of things. It is two whole Schedules and 

parts of, I think, 14 others. But again, we selected those special 

item numbers or SINs based on where the government—where we 

have seen sales go down, where we know there is no innovation, 

and where we have, you know, in many of these areas we have 

looked and seen what the number of Schedule holders with low or 

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no volume sales are. And in most of these areas it is upwards of 

40 percent, and in many of them, upwards of 60 or 80 percent. 

Chairman MULVANEY. Before we leave DBEM, one more question. The written testimony that you submitted claims that the 

GSA will save roughly $20 million using DBEM, but prior written 

materials provided by your office say that the savings have been 

scaled back to about $6 million. Is that apples to apples? Did something change? Tell me about the discrepancy between those two 

numbers. 

Mr. KEMPF. I think the discrepancy between the two numbers 

had to do with when we first started this we were looking at actually closing a lot more SINs than we ended up. So after talking 

with stakeholders with OFPP and others, we pulled that number 

back to a smaller number of SINs being closed. Additionally, some 

of the numbers actually take into account both the savings from 

folks being—their Schedules being ended due to low or no volume 

sales, in addition to the DBEM model. 

Chairman MULVANEY. Let us transition now to the issue that 

Ranking Member Chu mentioned to you briefly and that I think 

Mr. Allen raised during the first panel discussion regarding the use 

in various states of these Schedules. And all I can tell you is that 

in our preparation for the research for this hearing, we reached out 

to Texas and talked to the Texas controller’s office. That may have 

been the wrong person with whom to speak, but they said they 

never talked to anybody about GSA. So clearly there may be a misunderstanding at some point, and I would encourage you to reach 

out to both Texas and I suppose California, although you said you 

spoke with them as well because they are telling us that they anticipate if the vendors in year 3 or later of a contract that are not 

meeting the threshold and if removed it would affect nearly $25 

million in state purchases or about 15 percent of the Texas Multiple Award Schedule purchases, almost all of whom are small 

businesses. I think Texas thinks there may be a problem. Texas 

may think there may be a negative effect, a pejorative effect on 

small business in that state because of what is going through. So 

I encourage you to reach out to them if you get a chance. 

But it raises a question for me which is coming back to the point 

about why not just leave these folks on the list? I think if I can 

sell my $25,000 worth of stuff every single year, I think I pay you 

$187, $200. Why not just charge me $250 to stay on the list? 

Mr. KEMPF. Well, we looked at a lot of different things that we 

could do. We looked at closing them for a while. Right now we normally just look at the end of the five-year period and if they have 

not had any sales in five years we do not renew their option. We 

have looked at a lot of things but it does cost us money. And actually, oftentimes the nonparticipating Schedule holders are the ones 

that cause us the most cost because they are not really playing. So 

when we have mass mods—when I say mass mods, mods that everybody needs to do—we have a process for doing that. They do not 

respond, so we have to hunt them down and follow through with 

them. So oftentimes, they tend to be the ones that cause us the 

most. We also have contract administration duties that we have to 

do with all of our contract holders, whether they are making sales 

or not. So it is a costly thing for us. 

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Chairman MULVANEY. I just encourage you as you go forward to 

consider the fact, as you know, because you know more about this 

than probably anybody, and certainly than I do, that there are 

folks that are using this, not for the purpose of selling to you folks 

or to us, but to selling to their various states. So maybe to figure 

out a way to allow them to continue to do that without prejudicing 

their ability to deal with the states. 

Mr. KEMPF. Two things about that. We did talk to Texas. I believe we talked to the people that actually run the Texas Schedule, 

so there may be some perception. We will probably go back to them 

and make sure we have that right. 

The other thing is that state and local authorities do have the 

authority on some of our Schedules to actually buy directly from 

us. So on the IT Schedule, Schedule 84, the Security Schedule, and 

during times of emergency, most of them have the authority, or actually, all of them have the authority, at least from our perspective, 

to buy from us directly. And they do. 

Chairman MULVANEY. All right. And as I promised the first panelists I would, I will pass on their questions to the best of my ability. Mr. Jacobs raised the issue about the Design Excellence Program. I do not know to whom to address this, but tell me your 

thoughts about the program and whether or not you are exploring 

the possibility of expanding it. 

Mr. KEMPF. Well, I do not think you have either of the people 

here who should be. That is actually part of the Public Building 

Service side of GSA. 

Chairman MULVANEY. Thank you. 

Mr. KEMPF. So that would probably be directed best to them. I 

understand vaguely what it is but I am not competent to comment. 

Chairman MULVANEY. Now, the Brooks Act. You? Somebody else? 

Mr. Kempf? 

Mr. KEMPF. I can tell you what we do with respect to the Brooks 

Act. 

Chairman MULVANEY. An allegation is not the right word but 

you heard what the concern was, which is that in some circumstances the GSA might not be following the Brooks Act to the 

letter and they may be looking at price instead of just qualifications. How would you respond to that? 

Mr. KEMPF. We have for years highlighted on training, on our 

websites, in our direction to contracting officers who use the Schedule that work under the Brooks Act should not be purchased and 

cannot be purchased under the Schedules. It is outside the scope 

of the Schedules. And we have done some things in the last years 

to actually validate and verify that. 

Chairman MULVANEY. How do you do that? How do you enforce 

this? 

Mr. KEMPF. We have industrial operations analysts, people who 

actually go out and sit with the contractors and say show me your 

files. What is going on? What are you selling? They do some scope 

reviews. In particular, they look for this once in a while. We have 

asked. There is a group called Cup Face that we have had discussions with over 13 years, and we have said if you see violations of 

this would you send them to us and we will follow them. In fact, 

one of them sent me one two weeks ago and we are running it 

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down to see, in fact, if it really is or if it is an interpretation issue. 

We also have addressed this with Public Building Service, our sister service, who actually buys these kinds of things. And we have 

had their chief architect and others actually go through the files of 

the task orders that they have written under the Schedules to look 

to see if they feel that they have purchased anything that was really irrelevant under the Brooks Act, and they have come back 

empty-handed with that. And in fact, one of the individuals who 

looked at that to me said, ‘‘I am surprised at what I found.’’ And 

what he was saying to me was he was surprised at some of the 

work that the architectural engineering firms had done, which he 

indicated seemed to be an indication of the tough times that they 

had fallen on, that they were taking work well outside the typical 

architecture and engineering work and actually taking work that 

normally an architectural firm would not be doing if they could get 

architectural work. It just is not around. 

Chairman MULVANEY. Before I move on, I suppose if I have a 

question about the design build process and possible ways to make 

that more accessible to small business, that would be for the Public 

Building folks as well? 

Mr. KEMPF. Certainly. 

Chairman MULVANEY. Okay. Mr. Forman asked a question about 

additional consideration of the Cooperative Business Model. Talk to 

me about that for a second. 

Mr. KEMPF. I believe he is talking about—we have been in discussion with NOPA for quite some time about ways that people 

who are not or contractors that are not part of the OSII could actually be part of the program much like the other witness had spoken 

about where they have a consortium and there is a way that they 

could partner a team with the existing vendors. And we are actually working with them on that. I think he alluded to that fact that 

we are actually working with them and looking into that. We have 

not come to a conclusion yet; we are still in discussions with them. 

Chairman MULVANEY. Go back to the Brooks Act for just a second. If someone like Mr. Jacobs believed that he was prejudiced by 

a violation of that act, what would be the best steps for him to 

take? 

Mr. KEMPF. If he would just send me something, we would look 

at it and see, in fact, if we felt there was an actual violation. We 

would work with the agency who had written the order to look at, 

you know. 

Chairman MULVANEY. Can you do that anonymously? Can you do 

it anonymously? 

Mr. KEMPF. Well, one of the ways people have done that in the 

past, and not necessarily about the Brooks Act violation, but to a 

hotline complaint, to our IG. I have actually even gotten letters in 

the mail, unsigned, saying I think this is wrong. This happened. So 

sometimes it is not even the IG that gets it. We usually follow 

those up and see. As long as they seem reasonable. 

Chairman MULVANEY. I get my letters in the mail all the time. 

It is usually very interesting. 

Mr. WOODS. Mr. Chairman. 

Chairman MULVANEY. Yes, sir. 

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Mr. WOODS. On the Brooks Act point, a couple of areas where the 

Government Accountability Office might be of assistance to Mr. 

Jacobson. One is that we have a bid protest function so that if any 

offeror or an interested party feels that the process was not followed properly, they have the option to file a bid protest with the 

Government Accountability Office and we will review that. 

Secondly, we are starting some work at the Department of Veterans Affairs looking at their construction procurement operation. 

And of course, that will involve A&E Services. And we can be on 

the lookout for instance where there might be possible misuse of 

the Schedules. 

Chairman MULVANEY. Thank you. Gentlemen, I appreciate your 

candor. I appreciate your participation. I especially appreciate your 

forthrightness. I think Ms. Chu and I both try and give the impression that we are not here to beat up anybody; we are actually pulling in the same direction on this. All we are interested in is making sure that small businesses are having every opportunity that 

we can give them. So I appreciate you doing that. 

That said, I understand that we are getting ready to vote very 

shortly on a fairly significant item that we will need to step out 

and prepare for. And I have a couple extra questions and what I 

would like to do is simply send them to you in writing. And if you 

could get back to us that would be greatly appreciated. 

Mr. WOODS. Absolutely. We will be happy to receive those. 

Mr. KEMPF. Absolutely. 

Chairman MULVANEY. With that, unless you have anything else? 

Ms. CHU. No. 

Chairman MULVANEY. Thank you all very much for coming. And 

thanks again everybody for participating. That will adjourn the 

meeting. 

[Whereupon, at 4:27 p.m., the Subcommittee was adjourned.] 

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