PROCUREMENT

REFORM

How Selected

Countries Perform

Certain GSA Activities

United States General Accounting Office

GAO Report to Congressional Requesters

July 1999

GAO/GGD-99-109

United States

General Accounting Office

Washington, D.C. 20548

General Government Division

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GAO

July 15, 1999

The Honorable Stephen Horn

Chairman, Subcommittee on Government Management,

 Information and Technology

Committee on Government Reform

House of Representatives

The Honorable Tom Davis

House of Representatives

This report responds to your July 30, 1998, request for information on how

foreign governments perform procurement activities that in the United

States fall under the responsibility of the General Services Administration’s

(GSA) Federal Supply Service (FSS) and Federal Technology Service

(FTS). FSS and FTS act on behalf of federal agencies as central buying

agents for a wide range of goods and services. FSS has four “business

lines”: supply and procurement, vehicle acquisition and leasing, travel and

transportation, and personal property management. FTS has two business

lines: network services, for telecommunications, and IT solutions, for IT

(information technology) systems and related services. Your offices

wanted us to focus on the supply and procurement and vehicle acquisition

and leasing business lines in FSS and the two FTS business lines.

As you know, FSS and FTS have undergone reforms in recent years aimed

at incorporating commercial practices to improve the level of service they

provide to federal customers. In addition, with the exception of vehicle

acquisitions through FSS, FSS and FTS are now nonmandatory sources,

meaning that agencies are not required to use them. Despite these reforms,

you were concerned that because of current government rules and

regulations, FSS and FTS face several barriers—such as the inability to

recruit top-level staff and various financial management requirements—

that can impede the effectiveness of their operations.

To aid the Subcommittee in its discussions about future FSS and FTS

reforms, you wanted to know whether other countries had organizations

similar to FSS and FTS and how they performed similar activities. As

agreed with your offices, we selected Canada, the United Kingdom (UK),

Australia, and New Zealand because our preliminary work showed they

had made a major commitment to procurement reform, and some of the

reforms were in activities similar to those carried out by FSS and FTS. Our

objective was to identify the organizations, policies, and programs that
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these countries had in place to assist agencies with the procurement of

supplies, vehicles, telecommunications, and IT.

None of the countries had organizations that completely mirrored FSS and

FTS. Canada and the UK had the closest models in that they had

organizations available to assist agencies in the procurement of supplies,

vehicles, telecommunications, and IT. However, these organizations had

different features from those of FSS and FTS. For example, in Canada, the

organization that performed many activities similar to those of FSS also

had a large role in assisting agencies with the acquisition of IT systems and

related services, a function performed by FTS in the United States. The

two organizations in the UK differed from FSS and FTS because they were

given more flexibility than traditional government departments in the

personnel and financial areas. Australia and New Zealand had very

different models from the United States. Australia had only an organization

that performed activities similar to those of FTS, and its role in assisting

agencies with the acquisition of IT systems and related services was minor.

New Zealand had no government organizations that performed activities

similar to those of FSS and FTS because it sold its central procurement

agency to the private sector several years ago. This private sector business

assisted government agencies with the procurement of supplies, vehicles,

telecommunications, and IT and did business only with the government.

Our analysis also showed that there were similarities and differences in the

programs and policies these countries used in the procurement of supplies,

vehicles, telecommunications, and IT compared to those of FSS and FTS.

In supply, the procurement organizations in Canada and the UK had

prenegotiated contract arrangements, as does FSS, under which agencies

deal directly with vendors, to procure goods and services. Australia and

New Zealand did not have such arrangements. Also, none of the countries

had distribution centers or government stores, like FSS does, that stocked

common-use supplies for resale to agencies.1

 In the vehicle area, only

Canada had a requirement that vehicles be purchased through its central

procurement organization, like the U.S. requirement for FSS. The other

three countries allowed their agencies to acquire vehicles directly from the

private sector. None of the countries had a central vehicles fleet, like FSS

does. Australia recently sold its fleet to the private sector.

In telecommunications, agencies in Canada and the UK—like in the United

States—had the option to either use contract arrangements with private

 

1

 On July 8, 1999, as this report was being prepared for printing, GSA announced that it was phasing out

its distribution centers.

Results in Brief
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carriers offered by their organizations with activities similar to those of

FTS or to go directly to the private sector, which was the only option in

New Zealand. In Australia, officials told us that agencies were required to

use service providers that had agreed to certain terms and conditions with

the organization like FTS. For IT systems and related services, agencies in

the UK, like agencies in the United States, could either use the

organization like FTS or go directly to the private sector to meet their

needs. However, Canada was unique because major IT projects had to be

procured through the central procurement organization if they exceeded

certain dollar thresholds. In Australia, there was no major, central

government effort to assist agencies in acquiring IT systems and related

services because of a new government initiative to phase out IT systems

ownership and instead have the private sector own and maintain the

systems and the government contract for IT services. In New Zealand, a

government committee was to review and monitor high-dollar, high-risk IT

system acquisitions. Appendix I identifies the key organizations in these

countries and summarizes their activities.

According to officials in these countries, procurement reform evolved over

a number of years and was primarily influenced by a desire to rely more on

the private sector to perform activities of a business nature so that

government could operate more efficiently, improve its services, and focus

on its core mission. As part of their broad reform efforts, Canada and the

UK were using techniques aimed at transforming the way major

procurements are designed and managed. Canada’s benefits-drivenprocurement approach asks the private sector to deliver certain agreedupon results instead of following what Canadian officials viewed as the

traditional approach in which a government blueprint with detailed

specifications was used. The UK’s private finance initiative (PFI) is

designed to meet major capital investment needs by having the private

sector finance capital assets and having the government or users pay for

the services.

Information on the various approaches used by these countries provides

insight into how they performed activities similar to those of FSS and FTS.

However, it is important to recognize that such factors as differences in

political and economic environments, the role of social objectives in the

procurement process, and the volume of contracting activity would have to

be considered in a discussion of whether these approaches had

applicability to FSS and FTS operations in the United States. Furthermore,

some reforms were very recent, and performance data on the effectiveness

of the various reforms were generally unavailable or were in the early

stages of development. Consequently, we could not, from an overall
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perspective, gauge how well these reforms were working. Nonetheless,

officials we interviewed who were end-users of the procurement

organizations and policies we observed said they were generally satisfied

with the reforms and believed their governments were operating more

efficiently than under old policies.

GSA was established by the Federal Property and Administrative Services

Act of 1949 to serve as a central procurement and property management

agency for the federal government. GSA’s diverse activities and programs

have governmentwide implications that, according to GSA, affect over $52

billion, which is more than one-fourth of the federal government’s total

procurement dollars. Through various revolving funds, GSA buys goods

and services from private vendors and resells them to agencies. GSA has

four major components—the Public Buildings Service, FSS, FTS, and its

Office of Governmentwide Policy (OGP)—to carry out its various

programs and activities.

FSS provides contract arrangements for commercial products and services

worth over $17 billion per year through its four business lines: supply and

procurement, vehicle acquisition and leasing, travel and transportation,

and personal property management. As previously indicated, we did not

focus on the travel and transportation and personal property management

business lines. FTS provides reimbursable services for local and longdistance telecommunications. It also assists agencies with acquiring,

managing, and using IT systems. FTS accomplishes this through two

business lines: network services, for its telecommunications activities; and

IT solutions, for its IT systems-related activities.

In carrying out their duties, FSS and FTS are to follow the Federal

Acquisition Regulation (FAR), which is the uniform set of policies and

procedures executive agencies2

 are required to follow in procuring goods

and services. The FAR implements various statutory requirements

intended to advance national social and economic goals, such as giving

preferential treatment in awarding contracts to certain groups, such as the

blind and severely handicapped, small and disadvantaged businesses, and

the federal prison work program. Governmentwide procurement policy is

overseen by the Office of Federal Procurement Policy (OFPP) within the

Office of Management and Budget (OMB). OFPP is responsible for

prescribing policy and coordinating the development of governmentwide

 2

 In the United States, an executive agency is a civilian or military department, or an independent

establishment within the meaning of 5 U.S.C 101, 102, and 104(1) respectively, and any wholly owned

government corporation within the meaning of 31 U.S.C. 9101.

Background
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procurement standards. OGP within GSA has a supporting role by creating

networks of agency procurement representatives and by providing

guidance and policy related to specific areas, such as vehicles, aircraft, and

electronic commerce. Each year, the U.S. government spends

approximately $200 billion in acquiring goods and services.

FSS finances its supply and vehicle activities though the General Supply

Fund, which is a revolving fund that is sustained by revenues received

from customer agencies for goods and services. Through its supply and

procurement business line, FSS offers federal agencies a choice of more

than 4 million commercial products and a range of technology-oriented,

financial, environmental, management, and administrative services. FSS’

three methods of supply are (1) the stock program, (2) special order sales

and (3) federal supply schedules. In the stock program, FSS stores

approximately 19,000 common-use items for resale to agencies in 4 major

distribution centers, 3 smaller centers, and 19 government stores located

throughout the country and overseas. This program had sales of $817

million in fiscal year 1998. The special order program, which had sales of

$477 million in fiscal year 1998, provides products for special needs or

when stocking is not desirable, such as office furniture and appliances.

The federal supply schedules program is similar to a commercial catalog

business and provides agencies with access to over 6,800 contracts to

obtain various goods and services. In addition to covering a vast range of

commercial items, the schedules cover IT products and services. FSS

prenegotiates terms, conditions, and ceilings on price with vendors;

agencies deal directly with the vendors to negotiate final prices and

establish deliveries. Supply schedule sales were about $8 billion in fiscal

year 1998.

The vehicle acquisition and leasing business line in FSS provides agencies

with one-stop shopping for purchasing vehicles or leasing them from the

FSS-managed interagency fleet. FSS is the federal government’s mandatory

source for the purchase of new, nontactical vehicles.3

 Although leasing

vehicles through the interagency fleet is not mandatory, agencies that

choose this option get scheduled replacement, full-service management,

and a fleet services card for fuel and repairs, for a fixed monthly fee, as

well as a cost per mile charged by vehicle type. In fiscal year 1998, the

vehicle acquisition and leasing business line purchased about 56,800

vehicles worth about $1 billion; one-half of the vehicles were for the

 3

 Nontactical vehicles, which are referred to throughout this report, are motor vehicles primarily of

commercial design that are used in support of general transportation services and facility maintenance

functions not directly connected with combat or tactical operations.

FSS Supply and Vehicle

Activities
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interagency fleet, with the rest reflecting vehicle purchases for agencies.

The interagency fleet comprised over 160,000 automobiles, passenger vans,

trucks, buses, ambulances, and special-purpose equipment in fiscal year

1998. FSS relies on the private sector for vehicle delivery, fuel,

maintenance and repair, and vehicle auctions.

FTS finances its telecommunications and IT activities through the

Information Technology Fund, which is a revolving fund sustained by

revenues received from customer agencies for goods and services. In fiscal

year 1998, FTS had revenues of $3.4 billion. The network services business

line in FTS provides customer agencies with telecommunication services,

including global voice, data, and video services, supporting both the local

and long-distance needs of the federal government. According to FTS

officials, the network services business line had revenues of about $1

billion in fiscal year 1998. Until the end of 1998, FTS long-distance

services—under its FTS2000 arrangements with AT&T and Sprint—were a

mandatory source for federal agencies. Under the FTS2001 arrangements

with MCI and Sprint that were recently awarded, agencies are able to

select their own service provider. According to FTS officials, these are the

largest non-Defense government contracts, valued at between $5 and $8

billion over 8 years. FTS local telecommunications services also used to be

mandatory; however, FTS now offers a range of nonmandatory services in

this area, where revenue totaled $266 million in 1998.

The IT solutions business line in FTS provides agencies with a range of

assistance related to acquiring, managing, and using IT. In fiscal year 1998,

the IT solutions business line had revenues of about $2.4 billion. FTS

prides itself in this area on being an objective and trusted third party that

can provide independent assistance to agencies. For a fee, FTS acts as a

consulting agent for agencies in the acquisition of large IT systems and

related services, systems integration, software definition and design, and

office systems development. It also supports federal systems through risk

analysis and information security support. Its Federal Acquisition Services

for Technology (FAST) program is intended to provide quick procurement

assistance for IT products and services. The FAST program had revenues

of $973 million in fiscal year 1998. According to FTS officials, FTS services

differ from the IT products and services offered by FSS under the supply

schedules in that FTS is involved as a third party. Agencies deal directly

with vendors under the FSS schedules. An FTS official added that FTS

views its role as that of a value-added reseller of telecommunications and

IT. In addition, this official said that FTS recognizes the significance of the

evolving integration of telecommunications and IT in meeting customer

agency needs, now and in the future.

FTS Telecommunications

and IT Activities
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The federal government has undergone reform and downsizing in response

to efforts like the National Performance Review and congressional

initiatives to promote efficiency and economy in contracting, such as the

Federal Acquisition Streamlining Act of 1994. More recently, the Federal

Activities Inventory Reform Act of 1998 (FAIR) required executive

agencies to identify functions they perform that are not inherently

governmental and could be performed by the private sector.

This environment of reform has affected FSS and FTS. GSA, as a whole,

has gone from 39,000 employees in 1971 to fewer than 14,000 employees in

1999. It also realigned itself organizationally to mirror the private sector

and incorporated commercial practices to improve the level of service

provided to agencies and to enhance its relationships with the private

sector. These changes were evident in FSS and FTS with the establishment

of the aforementioned business lines. The changes also manifested

themselves in the shift from being a mandatory to nonmandatory source

for agencies in such areas as supply procurement, vehicle leasing through

the interagency fleet, telecommunications services, and IT acquisition.

Also, the Government Performance and Results Act of 1993 increased FSS’

and FTS’ focus on performance measurement as a vital component of

operating in a more business-oriented environment.

Despite the changes that occurred, FSS and FTS believe that several

barriers still exist that impede their ability to compete in this new

environment and operate in a businesslike manner. Barriers cited by FSS

were the inability to recruit and train top-level staff because of various

federal personnel requirements, prohibitions on its ability to enter into

cooperative purchasing arrangements, the extensive bid protest processes

available to federal contractors, and its inability to deal effectively with

poor-performing vendors. FTS also cited personnel-related barriers but

had more concerns about financial-related barriers, such as the inability to

consider accounts receivable the same as cash in managing the

Information Technology Fund. An FTS official said this limits FTS’ ability

to commit to new business opportunities because payments to FTS from

some agencies can take up to 90 days. Another barrier FTS cited was that

federal rules related to disposal of property can make agencies less

efficient because they cannot exchange the equipment they own for like

services. FTS also cited being prohibited from using the standard of

“adequate” competition as an alternative to “full and open” competition,

which is required by law, in certain multiple award contracting situations

as another barrier to operating effectively.

Government Reform Has

Affected FSS and FTS
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In the past, Congress has amended laws to allow agencies to overcome

various barriers when they were shown to impede effective performance.

For example, government corporations, including the Tennessee Valley

Authority (TVA), and dozens of others, serve public functions of a business

nature and were given some flexibility related to the applicability of

federal statutes to overcome barriers caused by the laws and implementing

regulations. Congress authorized TVA, a government corporation, as well

as federal agencies such as the Department of Veterans Affairs (VA) and

the Federal Aviation Administration (FAA), to adopt alternative personnel

systems. Congress also gave FAA authority to implement a streamlined

procurement system so FAA could more easily deploy new technologies.

Agencies have also outsourced4

 a wide range of functions that typically

were done in-house. For example, the Office of Personnel Management

(OPM) now contracts for investigative services, which were formerly done

in-house until OPM privatized5

 its investigative unit.

The United States is not alone in its efforts to make its agencies more

businesslike and to address barriers to efficient and streamlined

government. Governments around the globe have reassessed the role of

government and have made organizational and operational changes to

improve the level of service to citizens. Changes that have taken place

have included greater reliance on the private sector through such methods

as outsourcing, empowering civil servants to make business decisions,

adopting a more results-oriented focus, and developing and monitoring

data on performance.

To meet our objective, we obtained information on FSS’ and FTS’

procurement activities and federal procurement in general. We primarily

relied on interviews with, and documents obtained from, officials from

FSS, FTS, GSA’s OGP, and OFPP within OMB. We conducted research,

primarily using the Internet, to select countries for the review. We

identified countries where the government had made a commitment to

procurement reform and where preliminary work showed reforms were

made in activities similar to those carried out by FSS and FTS. On the basis

of this work, we selected Canada, the UK, Australia, and New Zealand. We

confirmed our selections primarily through discussions with our

 

4

Under outsourcing, the government remains fully responsible for a service or function and retains

control over management decisions, while another entity, usually the private sector, performs the

function or operates the service.

5

 The terms privatize and privatization have generally been defined as any process aimed at shifting

functions and responsibilities, in whole or in part, from the government to the private sector.

Scope and

Methodology
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counterpart organizations—the Auditor General offices—in each of the

countries.

To collect information on the organizations, programs, and policies in

these countries, we visited the countries, interviewed key officials about

their operations, and obtained a wide range of material. After collecting

the information, we compared these countries’ operations to the way FSS

and FTS assist agencies with the procurement of supplies, vehicles,

telecommunications, and IT.

We performed our work between July 1998 and May 1999 in accordance

with generally accepted government auditing standards. We requested

comments on a draft of this report from the Director of OMB,

Administrator of GSA, and responsible officials in the countries we visited.

On June 4, 1999, OFPP’s Associate Administrator for Procurement Law

and Legislation told us that OMB had no comments. In response to our

request for comments from the Administrator of GSA, FSS and FTS

officials provided comments. Our FSS liaison orally provided the

comments of various FSS components on June 11, 1999, and FTS’ Chief of

Staff provided oral comments on June 16, 1999. Various officials from the

four countries provided comments via e-mail, facsimile, or letter during

June 1999. These comments are discussed near the end of this letter.

Appendix II contains a more detailed description of our objective, scope,

and methodology and identifies the organizations discussed in this report

and their Internet addresses.

Canada, with a population of about 31 million, is a federation of 10

provinces and 3 territories and has a central government that operates as a

parliamentary democracy. Canada’s central procurement department—

Public Works and Government Services Canada (PWGSC)—had two

organizations—the Supply Operations Service (SOS) and the Government

Telecommunications and Informatics Services branch (GTIS)—with

activities similar to those carried out by FSS and FTS. Procurement in the

Canadian government centered on purchase authority thresholds, which

were delegated by the Treasury Board.6

 That is, agencies had authority to

automatically buy goods and services up to certain amounts. For goods

purchases above a $5,000 Canadian threshold ($3,425 U.S., assuming that

$1 U.S. = $1.46 Canadian), agencies generally were required to use PWGSC

as a central purchasing agency.

 

6

 The Treasury Board is a committee of the Cabinet that sets procurement policy.

Canada: Central

Procurement Agency

Has Functions Similar

To FSS and FTS With

Some Differences
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SOS arranged governmentwide contracts for supplies, including IT

products and services, similar to FSS’ function. However, it no longer

operated a stock program with distribution centers or government stores.

As with FSS in the United States, agencies were required to use SOS for

vehicle acquisitions, although unlike FSS, it did not manage a central

vehicle fleet. SOS differed from FSS in the IT area in that it had a unit that

provided IT systems acquisition services, similar to FTS’ role. GTIS also

provided some services in the IT area, where it assisted mostly smaller

agencies in defining their needs, but it was primarily involved in the

procurement of telecommunications services, like FTS. In the IT area, the

government of Canada was starting to use benefits-driven-procurement

(BDP), under which the government asks the private sector to deliver

certain agreed-upon results, instead of a more traditional approach under

which the private sector is asked to follow a government blueprint with

detailed specifications. Greater use of BDP was part of a broad vision for

reform being developed by the Treasury Board Secretariat (TBS).7

Appendix I identifies the key organizations in Canada and summarizes

their activities.

The central government of Canada meets its procurement needs through a

combination of central purchasing and delegated authority to agencies.

PWGSC is the central purchasing agent for the government of Canada.

PWGSC’s activities covered both civilian and defense purchasing for

approximately 100 departments and agencies of the central government

and other jurisdictions. Employing about 11,800 people, PWGSC, among

other things, managed approximately 63,000 contracts and was responsible

for purchasing some 17,000 categories of goods, services, and

construction, with a total annual value in excess of $8 billion Canadian

(about $5.5 billion U.S.). This amount is more than one-half of the total

amount of all federal government contracting in Canada. In addition,

PWGSC had several other governmentwide responsibilities, including

those related to real property, personnel, consulting and audit, public

information, and translation services. It also banked and dispersed

government funds and maintained the government’s accounts.

The Treasury Board sets contracting authority levels for departments in

the Canadian government. As a central procurement agency, PWGSC had

much higher authority than other departments. In addition, the Public

Works and Government Services Act of 1996 gave PWGSC exclusive

responsibility to purchase goods on behalf of the Canadian government

 

7

 The Treasury Board Secretariat (TBS) is the central agency that advises the Treasury Board and

communicates its decisions.

Central Purchasing and

Delegations of Authority
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and also for delegating purchase authority for goods to other departments.

PWGSC’s standard delegation of authority for goods to other departments

was $5,000 Canadian ($3,425 U.S.) and according to an official with TBS,

some departments had authority of $25,000 Canadian ($17,123 U.S.). Each

department could procure services within its own authority, although the

departments could ask PWGSC to do the procurement for them.

Departments had authority to purchase services up to $2 million Canadian

(about $1.4 million U.S.) if they used the government’s electronic tendering

service.8

 Purchases above contracting authorities set by the Treasury

Board required approval by the Treasury Board.

Government policy in Canada requires that contracting be conducted in a

manner that will, among other things, ensure competition and the

preeminence of operational requirements. According to TBS officials,

government policy also seeks to advance certain national objectives,

including regional development and award of some contracts to aboriginal

populations. Canada did not, however, appear to use its procurement

system to advance social objectives to the extent this is done in the United

States.

SOS—a major component of PWGSC—arranged governmentwide

agreements with suppliers through its standing offers and supply

arrangements. Standing offers provide goods and services to departments

at prearranged prices, under set terms and conditions, without specifying

delivery schedules or quantities required up front. Standing offers are

employed when one or more purchasers repetitively order the same good

or service. Common products offered under the standing offers are food,

fuel, plumbing supplies, tires, stationery, and office equipment. Services

include repair and overhaul of equipment and temporary help services.

Supply arrangements are nonbinding agreements between SOS and

suppliers to provide a range of goods or services on an as-required basis.

With supply arrangements, departments solicit bids from a pool of

prescreened vendors based on their specific scope of work; in this way

supply arrangements differ from standing offers, under which departments

accept a portion of a requirement already defined and priced. Many supply

arrangements include ceilings on prices, which allow departments to

negotiate the price downward on the basis of the actual requirement or

scope of work.

 8

 Known as MERX, this service lists contract opportunities at all levels of government in Canada and

includes hundreds of hospitals, universities, and school boards.

SOS Supply, Fleet, and IT

Activities
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Although we did not do a comprehensive comparison of the supply

activities of SOS and FSS, they were similar in that they aim to simplify the

buying process for the government purchaser by prenegotiating terms,

conditions, and sometimes prices with suppliers. We also noted that like

FSS, SOS had on-line catalogues that purchasers could use to find

products and services. There was, however, a difference in SOS and FSS

supply operations in that SOS no longer operates a stock program with

distribution centers or government stores as FSS does. According to SOS

officials, the government had operated distribution centers at one time, but

they were considered inefficient and the government stopped operating

them several years ago. SOS’ current supply activities rely primarily on

direct delivery from the vendor. According to these officials, the

government also used to operate government stores that at one time were

found in most of the major federal buildings. However, for ideological

reasons, the government decided that it should not be in competition with

the private sector and privatized the stores several years ago. Another

difference we noted was that SOS can be a mandatory source of supply if

the purchase amount exceeds the buyer’s threshold. FSS, in contrast, is a

nonmandatory source of supply, regardless of the purchase amount.

In the vehicle area, SOS’ activities were similar to FSS’ activities in that

departments were required to use SOS for nontactical vehicle acquisition.

According to TBS officials, the Canadian government purchases over 2,250

vehicles each year. The most common method of supply for vehicles is

standing offers, whereby manufacturers provide prices for different

models with different option combinations. For urgent requirements,

departments could access SOS’ inventory of vehicles that were already

purchased by SOS through standing offers and were being held by

manufacturers until needed. The least common method, which required

special approval by the Treasury Board because it was the most expensive,

was direct purchase from dealer stock. Departments could also lease

vehicles from the private sector through SOS.

According to SOS officials, departments generally managed their own

fleets and had arrangements with dealerships and private garages for

vehicle servicing. Under this framework, SOS differed from FSS in that it

did not manage a central fleet like FSS’ interagency fleet. As with most

other goods and services in which PWGSC was involved, SOS acted as the

contract authority on behalf of the buyer and was not involved in delivery

of the goods and services.

Like FSS’ schedules, SOS contracts also covered IT goods and services.

However, SOS had a role in the IT area that went beyond what FSS offers
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through its IT schedules and more closely resembled what FTS offers in

assisting agencies with the acquisition of IT systems and related services.

SOS had a branch called the Science, Informatics, and Professional

Services Sector (SIPSS) that managed the IT goods and services contracts

mentioned earlier. These contracts included consulting services for IT

systems design, research and development, and training as well as goods,

such as IT systems infrastructure, electronic data processing systems,

hardware, and software. In addition to managing these contracts, which

was similar to what FSS does through its IT schedules, SIPSS provided

direct assistance to departments with major IT systems acquisitions,

similar to what FTS does. A difference between SIPSS and FSS/FTS

activities in this area, however, was that SIPSS was often a mandatory

source for departments because of the purchasing thresholds. FSS and

FTS, on the other hand, are always nonmandatory sources in the IT area.

Like FTS, GTIS managed governmentwide telecommunications contracts

and sought to aggregate government requirements to save costs. In fiscal

year 1997/1998, GTIS spent about $275 million Canadian (about $188

million U.S.) on telecommunications services. According to GTIS officials,

the telecommunications industry in Canada has undergone a great deal of

change since the mid-1990s. In 1995, the Canadian Radio-Television and

Telecommunications Commission deregulated large segments of the

telecommunications industry. According to these officials, prior to this

time, the Stentor alliance of regional carriers was the dominant service

provider; Bell Canada was the largest provider of services in the provinces

of Ontario and Quebec. The deregulation resulted in a more competitive

environment and required GTIS to develop a competitive

telecommunications supply arrangement.

In general, most departments procured local and long distance service

through GTIS, although its services were not mandatory. GTIS officials

said it was more convenient and less expensive for departments to use

GTIS. At the time of our review, however, GTIS officials were evaluating

the ongoing impact of deregulation on their optional status and

governmentwide bargaining position as departments began procuring

services directly from the private sector.

GTIS also provided services related to IT systems acquisition that were

similar to services offered by FTS. Small agencies or agencies that did not

have IT expertise could get assistance from GTIS in defining their needs

and procurement objectives. GTIS then interfaced with SIPSS on behalf of

these agencies and could bundle their requirements to get a better price.

GTIS also was involved in several governmentwide IT initiatives, which

GTIS Telecommunications

and IT Activities
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included fostering electronic data interchange and electronic transactions

within government.

We noted during our review that in the IT procurement area, the

government of Canada was starting to use an approach called benefitsdriven procurement (BDP). BDP stresses the results and benefits that the

government and suppliers mutually seek to gain from each acquisition.

Although we did not do a detailed comparison, BDP has concepts similar

to performance based service contracting (PBSC) in the United States in

that contractors are given more freedom to determine how to meet the

government’s performance objectives. Arising from recognition by the

Canadian government that one of the major reasons IT projects fail is that

the procurement process is too inflexible, BDP is an alternative to

traditional approaches. According to Canadian procurement officials,

under traditional procurement approaches, departments could spend

months, even years, developing a detailed requirement that, when

completed, is often outdated and did not reflect changes that have taken

place in the organization. Instead, the BDP approach is to ask the private

sector to deliver certain agreed-upon results rather than follow a blueprint

with detailed specifications. The private sector is also invited to submit

ideas on what sort of project should be undertaken before a formal request

for proposals is issued.

Another key feature of BDP is up-front planning to remove or mitigate

potential problems in the procurement process. Both the front-end

planning and the management of the entire acquisition are based on four

elements: (1) a solid business case, (2) risk analysis, (3) clear delineation

of accountabilities, and (4) a compensation structure tied closely to the

contractor’s performance. Appendix III provides a more detailed

description of these elements and the BDP approach.

At the time of our review, TBS was in the midst of developing a broad

agenda for procurement reform. TBS officials said that the main problem

with Canada’s procurement system was that it was still too focused on

rules and process and not streamlined and results-oriented. The officials

said that although key departments had made a good start at modifying

and streamlining their processes and focusing on their core missions, more

could be done. TBS was planning to take a leadership role in reforming

procurement processes and was aiming to create a system in which central

policy focused on principles instead of on developing prescriptive rules. In

addition, TBS officials said they would support applying BDP principles to

other types of acquisitions and would attempt to coordinate the other

reforms under way in PWGSC and other departments. TBS and PWGSC

Benefits-Driven

Procurement

Future Reforms Are

Planned
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officials said that the government was in the early stages of applying

performance measurement principles in assessing the reforms that have

taken place and therefore did not have much data available to gauge

results.

A top procurement official with the Department of National Defence

(DND) whom we interviewed agreed that there had been some positive

gains as a result of recent procurement reforms. This official cited

examples where DND had privatized support functions so it could focus

more on its core mission. These included maintenance of vehicles and

some weapons systems and pilot training. DND had also used the BDP

process for a new information system for its supply network. Also, this

official said that DND and PWGSC had a good working relationship. He

added that skilled procurement staffs were crucial as departments focused

more on their core missions and increasingly relied on the private sector

for activities that were traditionally done in-house.

The UK, with a population of about 59 million, encompasses England,

Wales, Scotland, Northern Ireland, and several dependent areas, and has a

central parliamentary government that operates under a constitutional

monarchy. The central government had two organizations—The Buying

Agency (TBA) and the Central Computer and Telecommunications Agency

(CCTA)—with activities similar to those of FSS and FTS. However, these

agencies had more flexibility in how they managed their financial and

personnel affairs than if they were traditional government departments.

Known as executive or “next steps” agencies because they represented the

next steps in reforming government management, they were structured

like private businesses and were one part of a broad government reform

effort being led by Her Majesty’s Treasury (HM Treasury), which sets

procurement policy.

Like FSS, TBA had contract arrangements for supplies that departments

and agencies could use on a nonmandatory basis. However, TBA did not

operate a stock program with distribution centers or government stores as

FSS does. Also, the UK did not have a central vehicle fleet like FSS;

however, TBA could assist agencies in obtaining fleet management

services or with vehicle acquisition. Agencies also could use vehicle

acquisition arrangements held by the Ministry of Defence (MOD) or go

directly to the private sector. Like FTS, CCTA arranged

telecommunications contracts for governmentwide use and provided

services in IT systems acquisition on a nonmandatory basis. Across the

government, HM Treasury was leading a public-private partnering initiative

known as the private finance initiative (PFI) and had other efforts under

United Kingdom:

Agencies Like FSS and

FTS Have More

Flexibility Than

Traditional

Government Agencies
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way to encourage knowledge sharing and performance measurement in

procurement. Appendix I identifies the key organizations in the United

Kingdom and summarizes their activities.

In recent years, the central government of the United Kingdom has

undergone a continued program of government reform, where, according

to UK government officials, the emphasis has been on cost consciousness,

value for money, downsizing, and greater concentration on the core

businesses of government. With these reforms, the government has

decentralized procurement authority to its agencies and ministries, which

spend over 20 billion each year for goods and services (about $32.3

billion, assuming that $1 U.S. = 0.62).

According to officials with HM Treasury, most procurement prior to the

reforms went through several central procurement departments, which

supplied everything from pencils to large computer systems. Now,

agencies and departments are, for the most part, responsible for their own

procurement, although they are expected to adhere to standards that are

part of HM Treasury’s broad strategy for procurement. These standards

include achieving value for money; emphasizing fair competition;

incorporating best practices; and carefully assessing and managing

business cases, risks, and contracts. HM Treasury officials told us that

their procurement system was generally not used to advance any social

objectives. However, UK officials pointed out that in the procurement area,

the UK cannot act unilaterally and is required to implement laws

compatible with directives promulgated by the European Community, such

as ensuring that relevant contracts are awarded objectively.

As part of the trend toward decentralization and getting government to run

more like business, the government separated its service delivery and

policy formulation functions. In February 1988, the government launched

the “Next Steps” initiative, referring to the next steps in improving

government management. Under the initiative, the government identified

areas of departmental work that could be grouped together into

operational units under single officials who would be accountable directly

to their ministers9

 for delivering specific objectives, services, and results.

The government looked critically at its service delivery functions and

determined whether each should be retained, reengineered, privatized,

contracted out, or abolished. As a result of this process, several next steps

agencies were established.

 

9

 In parliamentary systems, ministers are high level officers in the government and usually are charged

with managing a department or major segment of government activities.

Decentralization of

Procurement and the

Evolution of “Next Steps”

Agencies
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Next steps agencies operate within a framework with targets set by

ministers for the task to be done, the results to be achieved, and the

resources to be provided. The day-to-day responsibility for running the

organization is delegated by ministers to a chief executive, who is to have

the management tools and freedoms needed to do the job. Each next steps

agency has a public framework document, so that everyone can know the

framework within which the agency operates. It includes the aims and

objectives of the agency, its financial and accounting processes, and its

approaches to pay and personnel issues. The frameworks for each agency

vary; however, they generally are intended to provide the chief executive

with much greater flexibility than if the units were operating within a

traditional government department. As of October 1997, there were about

120 next steps agencies with staff numbering about 362,000, or about 77

percent of the civil service.

TBA was established in 1991 as a next steps agency and is part of the

Cabinet Office, which is the UK’s central department for policy

formulation, government management, and the civil service. TBA was

similar to FSS in that it offers departments and agencies nonmandatory

supply arrangements for common-use goods and services. TBA sought to

provide a center of procurement excellence within the public sector and to

help customers secure better value for money than they could otherwise

achieve. TBA’s framework document included objectives to provide

procurement services so that agencies could receive better value for

money than they would otherwise and to bring about improvements in cost

effectiveness and the quality that agencies receive from suppliers.

TBA offered a range of procurement services that were similar to FSS’

supply activities. These included pretendered “direct call-off” contracts

covering over 50,000 products and services; the “Pathfinder” service for

larger or more complex procurements; and direct sales and spot buying,

where TBA coordinates volume purchases or assists with complex items

or items that are difficult to source. TBA had a catalogue of goods and

services for its direct call-off contracts. TBA was to be self-sufficient

financially and derived its income from commissions paid by departments

and agencies related to the direct call-off arrangements and direct charges

for services. In 1997, TBA had sales of 272 million (about $439 million).

A difference between TBA and FSS was that TBA appeared to have more

managerial and financial flexibilities because of its status as a next steps

agency. Although we did not do a comprehensive analysis of TBA’s status

as a next steps agency and FSS’ status within the U.S. government, next

steps agencies generally have greater flexibility with regard to how they

The Buying Agency Is a

Supply Procurement Source
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manage their finances and human resources than traditional government

departments in the UK that operate within a government structure.

In the case of TBA, its framework document specifies that the chief

executive has the authority to seek flexibility in the personnel area, subject

to approval by HM Treasury. According to TBA’s Procurement Director,

some specific personnel flexibility that TBA had included the ability to

seek its own staffing levels by taking on or releasing staff as the business

need arose. TBA also could set its own pay scale. According to this official,

if TBA needed to increase the pay of procurement specialists to compete

with a tight labor market, it could obtain approval to do so rather quickly.

Like FSS, TBA operated on what is called a “trading fund basis” in the area

of financial management, which means it was self-supporting and received

no revenue from the central government. Unlike FSS, however, TBA could

retain its revenue after covering operating costs and other financial

obligations. In contrast, FSS generally had to return excess revenue to the

U.S. Treasury after recovering its costs. TBA also had the authority to

commit to capital expenditures or asset disposals up to 250,000

($403,226). Another difference between FSS and TBA was that TBA did not

operate distribution centers or government stores. Also, unlike FSS, TBA

provided its services to local government.

In addition to TBA, we noted that for some types of office supplies,

departments and agencies could use a former government agency that was

privatized. In 1996, the government privatized Her Majesty’s Stationery

Office (HMSO), now referred to as The Stationery Office (TSO). In addition

to being the official publisher of government documents, similar to the

Government Printing Office in the United States, HMSO provided

letterhead stationary and other office supplies to departments and

agencies. Today, TSO is a nonmandatory source in the private sector that

departments can also use to meet some of their office supply needs, a

function similar to that of FSS.

In the UK, departments and agencies purchased and maintained their own

vehicles and could go directly to the private sector. According to a TBA

official we interviewed, TBA could assist agencies with vehicle purchases,

if requested. However, these services were not required like they are with

FSS. TBA also did not operate, nor does the government have, a central

fleet that is similar to the FSS interagency fleet. It is important to note that

according to HM Treasury and MOD officials, MOD had the majority of the

nontactical vehicles and had purchasing arrangements with vehicle

suppliers. These officials said that other departments and agencies often

Vehicle Procurement and

Fleet Management Are

Decentralized
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“piggyback” these contracts to take advantage of the favorable prices MOD

gets. We also noted that the government had a small fleet of 160 cars

within the Cabinet Office known as the Government Car and Despatch

Agency; however, these cars were to be used for courier services and to

transport top officials only.

In the vehicle area, MOD was in the midst of developing an arrangement

that was like a public-private partnership10 for its entire “white fleet”

vehicles that were used for nontactical, administrative, and support

functions. This project was being done as part of a major UK procurement

reform effort, known as the private finance initiative (PFI). PFI is designed

to meet major capital investment needs by having the private sector

finance capital assets and having the government or users pay for the

service. HM Treasury had established a special task force to improve the

PFI procurement process and to assist departments and agencies with

implementing PFI projects. The PFI project for the entire white fleet was

under development at the time of our review, and test projects for two

portions of the white fleet were among 115 PFI projects that were in

progress. According to MOD officials, preliminary data on these test

projects showed reductions in cost of 15 and 27 percent for these two

portions compared to in-house alternatives. Under the planned PFI

arrangement for the entire white fleet, the private sector was to invest in,

manage, and operate the vehicles necessary to deliver an agreed-upon level

of service to MOD under a long-term contract. MOD officials said that they

were pleased the government has given them tools such as PFI and had

moved to a decentralized purchasing environment. Appendix IV provides

an overview of the PFI initiative and a more detailed description of MOD’s

white fleet PFI efforts.

CCTA, which is also part of the Cabinet Office and became a next steps

agency in 1996, was similar to FTS in that it assisted departments and

agencies in acquiring telecommunications services and IT systems and

related services on a nonmandatory, cost recovery basis. CCTA’s main

objective in its framework document was “to develop, maintain, and make

available, expertise about IT which public sector organizations will draw

on in order to operate more effectively and efficiently.” According to a

CCTA official, its new mission statement emphasized “championing

electronic government.” CCTA managed contracts to operate about 80

percent of the government’s telephone lines, involving almost 45,000

 10 Under a public-private partnership, a contractual arrangement is formed between public and private

sector partners that can include a variety of activities that involve the private sector in the

development, financing, ownership, and operation of a public facility or service.

CCTA Offers

Telecommunications and IT

Services
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extensions. Similar to the FTS telecommunications contracts, CCTA was

to charge government users a flat fee for each line. According to the chief

executive of CCTA, departments and agencies, especially the smaller ones,

liked the simplicity of dealing with CCTA. Some larger agencies, such as

MOD, have chosen to procure their own telecommunications services. The

telecommunications industry in the UK is dominated by British Telecom,

which is a major supplier to CCTA. We noted that unlike FTS, CCTA could

provide its services to local government.

In the IT area, CCTA was similar to FTS in that for a fee, it advised

departments and agencies on, and identified vendors that could assist with

IT management, systems analysis and design, and procurement. CCTA’s

work also involved full Internet service, including Internet site provision,

development, maintenance, and consulting; and advice on electronic

commerce. It also had written many publications to help departments and

agencies on such topics as IT systems strategy, benchmarking, and

business process reengineering. According to an FTS official, GSA’s Office

of Governmentwide Policy has activities similar to these. CCTA also had a

catalogue of IT products and services, like FSS. We noted that TBA also

had contract arrangements for IT products and services; however, a CCTA

official told us that CCTA and TBA see the goods and services they offer in

the IT area as complementary, with little overlap.

Despite the similarities between CCTA and FTS in the telecommunications

and IT areas—and FSS in the case of the catalogue of IT products and

services—there was a difference related to CCTA’s status as a next steps

agency. That is, like TBA, CCTA appeared to have greater managerial and

financial flexibility because of its status as a next steps agency. For

example, like TBA, responsibility for personnel management, including

developing its own pay and grading system, was delegated to CCTA’s chief

executive. The chief executive was given the freedom to manage CCTA on

a quasi-commercial basis within the framework of government accounting

rules. According to a CCTA official, CCTA was, for the most part, left alone

to run its own affairs so long as its operations ran smoothly and in

accordance with its business plan. Because it was a government

organization, however, there were some requirements CCTA had to meet.

For example, the business case for its pay and grading system had to be

approved by HM Treasury.

According to HM Treasury officials, the government of the UK views

performance measurement as crucial to any core business activity,

including procurement. However, HM Treasury and the Cabinet Office

recognized that, in the past, developing performance measures for

Procurement Performance

Measurement Is Viewed as

Important
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procurement was difficult. Difficulties arose over defining universally

applicable measures and questions were raised about whether the effort

was worth it. In July 1998, HM Treasury and the Cabinet Office jointly

reported that changes in the procurement environment, such as the shift to

purchasing services instead of investing in capital assets, had opened the

door of opportunity for refining and improving procurement performance

measurement. This report, entitled Efficiency in Civil Government

Procurement, noted that although most departments and agencies

measured procurement performance, their practices varied. The majority

were using measures that were not very sophisticated, although some

progress had been made in the prior 12 to 18 months.

As a result, HM Treasury and the Cabinet Office were planning to develop

a performance measurement system for procurement that would allow

benchmarking across government and would increase the sophistication of

the measures used by modeling the government’s efforts after the private

sector. The report contained several other recommendations aimed at

setting a new agenda for improving the efficiency of government

procurement. Also, at the time of our review, HM Treasury was starting an

effort to determine how, in a decentralized environment, departments and

agencies could share knowledge, capitalize on lessons learned, and ensure

that efficiencies gained in one area are utilized in other areas.

Although HM Treasury’s report did not address the adequacy of specific

performance measures, we noted that TBA and CCTA had some key

performance measures that they used to compare performance from year

to year. TBA had performance measures that included total sales volume,

customer satisfaction, and cost per 1 of savings achieved. For example,

TBA reported it cost 4.38 pence for every 1 saved (100 pence is equal to

1), exceeding its 1997 target of 4.40 pence. CCTA had performance

measures that included the reduction in cost of support services per 1 of

salary of project staff and percentage of assignments or services delivered

to customers’ satisfaction. CCTA reported a 97 percent customer

satisfaction rating for 1998, although it noted that more feedback from

customers was needed to make the results statistically significant.

Australia, with a population of about 18 million, has a federal-state system

with a central government that operates as a parliamentary democracy.

The central government, which has devolved purchasing responsibilities

for goods and services to its agencies, did not have an organization with

activities like those of FSS, but did have an agency that performed some

activities similar to those of FTS. In purchasing goods and services,

agencies in Australia were encouraged to follow broad principles—such as

Australia: No Agency

Like FSS but Has Some

Central Efforts in FTSRelated Areas
B-281162

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achieving value for money—that were set by the Department of Finance

and Administration (DOFA). DOFA also administered a vendor

certification program for certain goods and services. However, unlike FSS,

it did not enter into governmentwide supply contracts with vendors,

administer supply schedules, or run a stock program with distribution

centers or government stores. Also unlike FSS, Australia did not own and

operate a central vehicle fleet, because it had been privatized.

In the telecommunications and IT areas, however, Australia did have an

agency with activities similar to those of FTS. In telecommunications,

officials with the Office for Government Online (OGO) said that OGO had

agreements with service providers on certain terms and conditions;

however, unlike with FTS in the United States, agencies were required to

use these providers. Like FTS, OGO also assisted agencies, on a

nonmandatory basis, with IT projects; however, this role was relatively

minor. In fact, agencies were moving away from operating and maintaining

their own IT infrastructures. The government had undertaken a major

initiative to phase out IT systems acquisition and ownership—except for

some systems related to national security—-and instead have agencies

purchase IT services from the private sector. This outsourcing effort was

being done through a multiyear, phased process being administered by the

Office of Asset Sales and IT Outsourcing (OASITO). To assess the

outcomes of these and other procurement reforms, a committee of the

Australian parliament had begun a review of government purchasing

policies and practices. Appendix I identifies the key organizations in

Australia and summarizes their activities.

The government of Australia has devolved purchasing responsibilities to

its agencies, which spent about $9 billion Australian for goods and services

in fiscal year 1997-1998 (about $6 billion U.S., assuming that $1 U.S. = $1.51

Australian). With enactment of the Financial Management and

Accountability Act of 1997, the government gave agencies the

responsibility to handle their affairs and to ensure that the government’s

procurement policies were observed. DOFA’s Competitive Tendering and

Contracting branch had a key role in Australia’s procurement reform

agenda. This branch, among other things, provided assistance to agencies

in implementing reforms, surveyed and reported on agencies’

implementation efforts, and developed and maintained the government’s

purchasing policy framework.

The government’s procurement policies were set by DOFA in its March

1998 guidance entitled Commonwealth Procurement Guidelines: Core

Devolution of Purchasing

Responsibilities
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Policies and Principles.11 The guidelines stated that the fundamental

objective of procurement in the Australian government was to provide the

means to efficiently and effectively deliver the government’s programs.

This objective, according to the guidance, was supported through several

core principles: value for money, open and effective competition, ethics

and fair dealing, accountability and reporting, national competitiveness

and industry development, and support for other government policies. The

guidance also encouraged agencies to provide opportunities for Australian

and New Zealand industry. However, DOFA officials said that their

procurement system was not used to advance other social objectives.

When developing instructions for procurement within their agencies,

agency executives were expected to take these core policies and principles

into account. According to DOFA officials, the government decided that its

agencies should be involved only in core, mission-related activities and

should not be performing functions that could be performed by the private

sector. DOFA officials said that most agencies were pleased with the

devolution that had occurred. An official from a large agency we

interviewed, the Department of Family and Community Services, said that

they liked having more control over purchasing decisions and were very

satisfied with the reforms.

As a result of the devolution of purchasing responsibilities to agencies,

Australia did not have an organization like FSS to assist agencies with the

procurement of supplies. In the supply area, DOFA administered a vendor

certification process for IT, office machines, office furniture, and auction

services known as the Endorsed Supplier Arrangement (ESA). The ESA

was to rely on a good faith, self-assessment approach where vendors

submitted information about key factors, such as delivery performance

and financial viability. According to DOFA officials, DOFA was to assess

vendors’ applications in terms of financial capability and compliance with

industry standards. These officials told us that DOFA also did random and

targeted vendor reviews. A key difference between the ESA and FSS’

schedule programs was that DOFA did not establish governmentwide

supply contracts with the vendors, as does FSS. Another difference was

that unlike FSS’ schedule programs, agencies were required to buy IT from

ESA vendors.

 

11 These guidelines apply to the procurement of “property and services,” which cover all goods and

services, including consulting/professional services, real property activities, construction, equipment

and real property leases, training services, public utility services, and outsourcing or contracting-out

services.

No Centrally Administered

Supply Program
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According to DOFA officials, DOFA and one of its predecessor

departments, the Department of Administrative Services (DAS),12 used to

administer “common use arrangements” that were replaced with the ESA.

The common-use arrangements more closely resembled FSS supply

activities in that they were governmentwide contractual agreements

administered centrally. The non-IT arrangements were ended in June 1998,

and IT and major office machine arrangements were ended in September

1998. The officials said that the primary reason for eliminating these

arrangements was the government’s ideological decision to devolve

financial accountability to agencies. In addition, they said that the

arrangements generally were not achieving a level of savings that would

justify continuing them. Also, the officials added that the government did

not administer a stock program, like FSS does, with supply distribution

centers or government stores.

In the vehicle area, DAS used to manage the government’s vehicle fleet,

known as DASFLEET, up until its privatization in 1997. DASFLEET was

established in the 1920s and was expanded to become the sole supplier of

passenger and commercial vehicles for the Australian government.

DASFLEET operated three main business areas: long-term vehicle leasing,

short-term vehicle rental, and fleet management and maintenance services.

Prior to its sale, agencies were free to use private sector operators for their

short-term rentals and fleet management and maintenance requirements.

In practice, however, these customers used DASFLEET for much of these

needs. In early 1997, DASFLEET’s total fleet was valued at $376 million

Australian (about $249 million U.S.) and comprised over 17,000 vehicles.

DASFLEET owned these vehicles, except for about 700 that were privately

financed or managed by DASFLEET for other parties. DASFLEET’s

workforce totaled 376 people, and its yearly profits were about $23 million

Australian (about $15.2 million U.S.).

In 1996, the Department of Finance reviewed DASFLEET’s finances and

operations and determined that the government should either refinance

the fleet or privatize the business. The privatization option would include a

tied contract commitment by the government whereby agencies would be

required, for 5 years, to use the new entity for their long-term leasing

needs. The short-term vehicle rental business would not be included in the

tie. The government ultimately determined that the privatization option

provided the best option and assigned responsibility for the sale to the

Office of Asset Sales (OAS). In September 1997, DASFLEET was sold to

 

12 In 1997, the Department of Finance and Department of Administrative Services merged, creating

DOFA.

Government Fleet Was

Privatized
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Macquarie Fleet Leasing Pty. Limited, a wholly owned subsidiary of

Macquarie Bank.13 The sale produced proceeds of about $407 million

Australian (about $270 million U.S.). At the time of our review, DOFA had

responsibility for monitoring the tied contract.

As with other goods and services, agencies in Australia were responsible

for acquiring their own telecommunications services. However, officials

told us that agencies were required to use service providers that had

agreed to certain terms and conditions with the Office for Government

Online (OGO), formerly known as the Office of Government Information

Technology (OGIT). Each year, government agencies spend about $365

million Australian (about $242 million U.S.) to meet their

telecommunications needs, including voice, data, and mobile services.

Telstra is the major service provider, accounting for just over 75 percent of

government expenditures on telecommunications services, although a

number of other smaller companies also compete for the government’s

business.

OGO sought to aggregate the government’s buying power to achieve a

better price for the government as a whole, like FTS does. According to

OGO officials, OGO managed centrally administered “whole-ofgovernment” telecommunications arrangements where service providers

agreed to certain terms and conditions in “head agreements” negotiated by

OGO. The officials said that agencies were to purchase services directly

from the service providers under the umbrella of the head agreements and

the latest prices negotiated in those agreements. The officials added that

for agency-specific requirements, agencies could seek the assistance of

OGO in negotiating favorable terms and conditions that became part of the

whole-of-government arrangements and were available to other agencies,

as appropriate. In this way, the officials said that the government used its

aggregated purchasing power to achieve lower prices, competition, and

economies of scale. According to the OGO officials, the government has

saved in excess of $30 million Australian (about $20 million U.S.) in the

last 3 years through the leverage of these arrangements.

OGO was also a central agency for IT. OGO’s primary objectives in the IT

area related to bringing a governmentwide perspective to IT management.

The agency’s main focus was to promote efficient access to government

information and services, help agencies avert problems related to the year

2000 crisis, and provide policy advice to the government related to online

 

13 According to an Australian official, the government retained a fleet of limousines for members of

Parliament.

Whole-of-Government

Telecommunications

Arrangements Centrally

Managed

All IT Systems to Be

Outsourced
B-281162

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services. Like FTS, OGO officials said that OGO also acted as a third party

in providing agencies with advice on the development and implementation

of their IT projects, although this role was relatively minor.

A major development in the IT area was that agencies were moving away

from in-house implementation and management of IT systems. In April

1997, the government announced a major initiative to outsource all of its IT

systems infrastructure, with the exception of some systems related to

national security. The initiative was to be accomplished through a

multiyear, phased process currently being administered by the Office of

Asset Sales and IT Outsourcing (OASITO).14 Appendix V provides a more

detailed description of Australia’s IT outsourcing initiative.

In December 1998, the Australian parliament’s Joint Committee for Public

Accounts and Audit announced that it would conduct an inquiry into

Australian government purchasing policies and practices. The inquiry was

to have two general purposes. First, the Committee was interested in

whether government entities had achieved effective outcomes, such as

value for money, through the new purchasing policies. Second, the

Committee was interested in whether the Australian business community

had achieved more equitable outcomes as a result of these policies. To

determine how government entities had performed, the Committee

planned to collect and analyze statistical and performance information

showing trends in purchasing opportunities and outcomes and planned to

hold a series of hearings.

According to DOFA officials, the extent to which agencies maintained this

type of information, including information on performance goals and

measures, likely varied across government, with some agencies having

better data than others. There has, according to these officials, been no

central effort to collect and report this type of information. Separate from

the parliamentary inquiry, DOFA officials said they had begun surveying

agencies on the types of performance data they collected.

 

14 In November 1997, information technology outsourcing functions formerly managed by OGIT were

transferred to OAS, which was renamed OASITO.

Parliamentary Review of

Purchasing Policies and

Practices
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New Zealand, with a population of about 3.6 million, has a local

government structure with counties and districts and a central government

that operates as a parliamentary democracy. The central government has

decentralized purchasing authority for goods and services, and did not

have any government organizations similar to FSS or FTS because it

privatized its central procurement agency in 1992. With the exception of

some central monitoring for major IT projects, agencies were given

complete discretion over how they acquire goods and services while still

being expected to follow some general principles, such as ensuring that

domestic suppliers were treated fairly. In meeting their needs for goods

and services, agencies could go directly to the private sector and had the

option of using the private sector business that was created when the

central procurement agency was privatized. This business, called GSB

Supply Corporation Ltd. (Supplycorp), acted as a purchasing agent for the

government by assisting agencies with their procurement needs and did

business only with government organizations. Supplycorp was similar to

FSS and FTS in that it negotiated contracts on behalf of the government

for supply, fleet, telecommunications, and IT products and services, yet it

operated completely outside the government sector.

One exception to New Zealand’s highly decentralized approach to

procurement was in the IT area, where the Treasury and the State Services

Commission (SSC) were responsible for examining and monitoring IT

projects. SSC was also responsible for assessing overall agency

performance with a focus on measuring outputs rather than inputs.

Because procurement was viewed as an input, performance data were not

readily available to measure progress or gauge the results of the various

procurement reforms. Appendix I identifies the key organizations in New

Zealand and summarizes their activities.

Over the last decade, reform in the central government of New Zealand has

centered on shifting accountability for results to departments and relying

more on the private sector to perform activities of a business nature. The

New Zealand government spends about $3 billion New Zealand for goods

and services each year (about $1.7 billion U.S., assuming that $1 U.S. =

$1.78 New Zealand). With enactment of the State Sector Act of 1988 and

Public Finance Act of 1989, departments were given complete discretion

over how they managed their affairs, including how they acquired goods

and services. The reforms also set up a relationship between each

department and SSC, which is a central management agency that reviews

and reports on agency performance. Departmental chief executives, who

are civil servants who manage the day-to-day affairs of departments, enter

into agreements with SSC to deliver results that are defined as an agreedNew Zealand: No

Central Procurement

Agencies but Uses a

Private Business Like

FSS and FTS

Agency Accountability

Without Centralized

Procurement
B-281162

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upon level of outputs. Generally speaking, outputs are measurable units of

whatever the department produces, whether it is policy advice or direct

services to the public. In return, departments had nearly complete freedom

over how much of their budgets they spent on the different types of

resources—inputs they need to produce the outputs—and from where they

would be purchased.

Although departments had these freedoms, they were still expected to

operate open, fair, and competitive procurement processes. Guidance by

both the Treasury and the Ministry of Commerce outlined the

government’s open purchasing policy and principles and recommended

procedures that are considered to be consistent with sound business

practices. The government’s general purchasing policy was based on the

commercial principle of best value for money through open and effective

competition and full and fair opportunity for New Zealand and Australian

suppliers. According to SSC officials, the policy did not seek to advance

any social objectives, which instead were usually funded directly. New

Zealand and Australian suppliers could register with the New Zealand

Industrial Supplies Office (NZISO), a unit within the Ministry of

Commerce. NZISO provided information to purchasers on domestic

suppliers and their capabilities. Prospective purchasers were urged, but

not required, to contact NZISO, which did not get involved in actual

purchasing negotiations or decisions.

Within this policy framework for procurement, the government of New

Zealand did not have any central procurement agencies. In meeting their

supply, fleet, telecommunications, and IT needs, departmental purchasers

did not have the same options that exist in the United States with FSS and

FTS. That is, within the government, there were no central supply

schedules, stock programs with distribution centers or government stores,

vehicle acquisition and fleet management services, governmentwide

telecommunications arrangements, or IT-related services that were

available for governmentwide use like there are in the United States

through FSS and FTS.

The government of New Zealand once had a central procurement agency,

but it was reorganized as a state-owned enterprise (SOE) in 1989 and

privatized in 1992. Prior to this time, the Government Stores Board (GSB)

acted as a central purchasing agent within the government. Chaired by the

Secretary of the Treasury, it consisted of representatives from other

departments and was administered by a division of the Treasury. The

function of GSB was to act as a central controlling, supervisory, and

coordinating authority for the purchase, custody, distribution, use,

Central Procurement

Function Was Privatized
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interdepartmental transfer, and disposal of public stores. GSB’s main

service was to award contracts for the supply of goods to government

departments. It did not stock goods; rather, it acted as an agent for the

government by arranging bulk purchase contracts under which

departments were required to purchase specific goods from selected

suppliers. GSB also issued binding instructions to departments to regulate

their purchasing activities.

In 1989, the government reorganized GSB from a government agency to an

SOE, renamed it the Government Supply Brokerage Corporation (NZ) Ltd.

(GSBC), and made its services nonmandatory. The Treasury assumed

responsibility for the former GSB’s control functions but did not issue any

purchasing instructions to departments, leaving these matters to each

department to determine. As an SOE, GSBC gained the ability to act as a

private sector firm, but the New Zealand government owned all the shares

of the corporation. The government eventually sold its shares in 1992 and a

new private business—GSB Supply Corporation Ltd. (Supplycorp)—was

established.

At the time of our review, Supplycorp performed activities similar to those

carried out by FSS and FTS in that it assisted agencies with procurement,

yet it was a private sector business that operated completely outside the

government sector. In fact, Supplycorp only did business with government

organizations, defined as those that receive at least 50 percent of their

funding from a government source. Supplycorp also provided its services

to local governments as well, unlike FSS and FTS. Each year, Supplycorp

has sales of about $350 million to $450 million New Zealand (about $197

million to $253 million U.S.). According to Auditor General staff we

interviewed, more than 90 percent of government departments and local

authorities continued to use Supplycorp after it was privatized to meet at

least some of their needs for goods and services. In the supply area, it

managed over 800 contracts with 1,200 suppliers for a wide range of

common-use commodities, including IT products and services. These

included national purchase contracts, as well as local purchase contracts

tailored to individual regions of the country. It did not, however, operate

distribution centers or government stores like FSS does. In the vehicle

area, Supplycorp services covered the purchase, disposal, and

management of new and used motor vehicles, similar to FSS’ services.

Supplycorp arranged for the purchase of about 3,750 vehicles each year.

Unlike FSS, it did not manage a central fleet for the government.

Like FTS, Supplycorp arranged bulk rate telecommunications contracts. It

is important to note that prior to the formation of Supplycorp as a private
B-281162

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sector business, departments did not use GSB for telecommunications

services because the government owned the sole telecommunications

provider in New Zealand, Telecom Corporation. Departments simply went

to Telecom for telecommunications services. In 1990, the government

privatized Telecom and departments began arranging their own

telecommunications contracts. In the IT area, like FTS, Supplycorp had a

technology team that offered advice and consultations to departments and

also had contract arrangements for IT products and services. Supplycorp

also prided itself on being positioned to meet the future technology needs

of the government. Before GSB was privatized, its Computer Services

Division (CSD) was a nonmandatory source that assisted departments with

procurement of large IT systems. In 1994, the government privatized CSD

separately from Supplycorp. CSD was fully absorbed by the buyer and no

longer exists.

One exception to New Zealand’s highly decentralized approach to

procurement was in the IT area, where SSC and the Treasury recently set

up a monitoring team to conduct joint reviews of departments’ major IT

projects. According to SSC officials, the frequency of review was

determined by the monitoring team and depended on the complexity of the

project and the capability of the department. Departments were expected

to submit external quality assurance reports to the IT monitoring team,

which assessed project risks and mitigation strategies, and SSC and

Treasury provided program officials with feedback. In addition to this

monitoring, SSC and the Treasury conducted higher profile reviews of

high-risk projects and reported directly to ministers through what was

called the Ad Hoc Officials IT Committee. According to SSC officials,

projects reviewed by this Committee cost over $5 million New Zealand

(about $2.8 million U.S.), involved strategic and mission-critical

application systems, and generally posed a high risk to the government.

The State Sector Act of 1988 was designed to introduce the government of

New Zealand to many of the positive features of the private sector. The key

principle was that managers, if they were permitted to make all input

decisions—pay, appointments, organizational structures, production

systems, etc.—would respond by accepting personal responsibility for

producing substantially higher quality outputs—the goods and services

provided by the government.15 As mentioned before, SSC played a key role

by entering into performance agreements with departmental executives

 

15 It is interesting to note that in New Zealand, the government made a conscious decision not to focus

on outcomes—what the government is trying to achieve—because it believed that holding departments

accountable for outcomes would be too difficult. That is, there would be endless debate over

measurement and the reasons for outcomes, making accountability enforcement difficult.

Major IT Projects Centrally

Monitored

Performance Measurement

Efforts Focus on Outputs
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and monitoring performance. According to SSC officials, however,

information that would enable an assessment of New Zealand’s approach

to procurement was generally not available. According to these officials,

procurement processes and approaches were viewed as inputs and

accordingly were not routinely measured or assessed.

Officials we contacted who operated in this environment—from the

Ministry of Health, Health Funding Authority, and Ministry of Defence—

were very satisfied with being held accountable for outputs while having

the freedom to control inputs, including how they procured goods and

services. They said that the reforms have made their departments more

efficient and effective. It is important to note that although New Zealand’s

management approach did not focus on regulating procurement practices,

there were other controls over abuse of purchasing freedoms. These

included parliamentary inquiries, audits of procurement practices by the

Auditor General, and obligations set in law for departments to respond to

any requests for information.

Information on the various approaches used by these four countries

provides insight into how they performed activities similar to those of FSS

and FTS. These countries had reassessed the role of their central

procurement agencies and procured goods and services in a variety of

ways. None of the countries had government organizations that completely

mirrored FSS and FTS. For example, in the UK, the government

organizations that performed activities similar to FSS and FTS were

different in that they had more flexibility to manage personnel and

financial matters than traditional government departments. New Zealand

sold its central procurement agency to the private sector, and agencies

now could use the private sector business that was created to help meet

their procurement needs. Also, there were similarities and differences in

the programs and policies these countries used in the procurement of

supplies, vehicles, telecommunications, and IT.

Amending laws and regulations under which agencies operate and

reforming procurement processes are not new concepts in the United

States. For example, Congress authorized TVA, a government corporation,

and some federal agencies such as VA and FAA to adopt alternative

personnel systems. In addition to modifying requirements to help agencies

accomplish their missions, the U.S. government has also reformed its

procurement practices. The Federal Acquisition Streamlining Act of 1994

was enacted in part to promote efficiency and economy in contracting. In

recent years, agencies have outsourced, or contracted for, a wide range of

functions that had been done in-house. For example, the investigative unit

Conclusions
B-281162

Page 32 GAO/GGD-99-109 Procurement Reform

of OPM was privatized and OPM now contracts for investigative services.

To identify future candidates for privatization or outsourcing, the FAIR Act

of 1998 requires agencies to identify functions they perform that are not

inherently governmental. These reforms and streamlining efforts in the

United States, as well as those in the four countries, were designed to

make government operate more efficiently, improve service delivery, and

focus on government’s core mission.

In considering the merits of the approaches used by the countries and their

applicability to FSS and FTS, it is important to recognize that such factors

as differences in political and economic environments, the role of social

objectives in the procurement process, and the volume of contracting

activity would have to be considered. Furthermore, although the officials

we interviewed in the four countries were generally satisfied with the

reforms and believed their governments were better off with them in place,

performance data on the effectiveness of the various reforms were

generally unavailable or were in the early stages of development.

Nonetheless, considering the experiences of these countries in reforming

similar activities can serve as a starting point for examining what, if any,

alternatives there are to the way FSS and FTS are currently organized and

operate.

OFPP’s Associate Administrator for Procurement Law and Legislation told

us that OMB had no comments. Our FSS liaison, FTS’ Chief of Staff, and

several responsible officials from each of the four countries provided

technical comments on a draft of this report to add clarity and context to

how we describe their procurement approaches. We incorporated their

comments into the final report where appropriate.

As agreed with your offices, unless you publicly announce its contents

earlier, we plan no further distribution of this report until 30 days from its

issue date. At that time, we will send copies to the Honorable David J.

Barram, Administrator of GSA; the Honorable Jacob J. Lew, Director of

OMB; the Honorable Deidre A. Lee, Administrator of OFPP; and the key

officials in each of the countries we visited. We will also make copies

available to others on request.

Agency Comments
B-281162

Page 33 GAO/GGD-99-109 Procurement Reform

Major contributors to this report were Gerald Stankosky, David E.

Sausville, and David W. Bennett. We also greatly appreciate the assistance

provided by the Auditor General staffs in each country as well as the

willingness of the other officials to meet with us and provide information.

If you or your staffs have any questions, please contact me on (202) 512-

8387 or at ungarb.ggd@gao.gov.

Bernard L. Ungar

Director, Government Business

 Operations Issues
Page 34 GAO/GGD-99-109 Procurement Reform

Contents

1 Letter

Appendix I 36

Organizations With

Activities Related to

Supply, Vehicle,

Telecommunications,

and IT Procurement

Appendix II 38

Objective, Scope, and

Methodology

Appendix III 43

Canada's Benefits

Driven Procurement

Appendix IV 46

The UK's Private

Finance Initiative

Appendix V 50

Australia's IT

Outsourcing Initiative

Table II.1: United States 41

Table II.2: Canada 41

Table II.3: United Kingdom 41

Table II.4: Australia 41

Table II.5: New Zealand 42

Tables
Contents

Page 35 GAO/GGD-99-109 Procurement Reform

Abbreviations

BDP benefits-driven procurement

CCTA Central Computer and Telecommunications Agency

CSD Computer Services Division

DAS Department of Administrative Services

DND Department of National Defence

DOFA Department of Finance and Administration

ESA Endorsed Supplier Arrangement

FAA Federal Aviation Administration

FAIR Federal Activities Inventory Reform Act of 1998

FAR Federal Acquisition Regulation

FAST Federal Acquisition Services for Technology

FSS Federal Supply Service

FTS Federal Technology Service

GSA General Services Administration

GSB Government Stores Board

GSBC Government Supply Brokerage Corporation (NZ) Ltd.

GTIS Government Telecommunications and Informatics Services

HMSO Her Majesty's Stationery Office

MOD Ministry of Defence

NZISO New Zealand Industrial Supplies Office

OAS Office of Asset Sales

OASITO Office of Asset Sales and IT Outsourcing

OFPP Office of Federal Procurement Policy

OGIT Office of Government Information Technology

OGO Office for Government Online

OGP Office of Governmentwide Policy

OMB Office of Management and Budget

PFI private finance initiative

PWGSC Public Works and Government Services Canada

SIPSS Science, Informatics, and Professional Services Sector

SOE state-owned enterprise

SOS Supply Operations Service

SSC State Services Commission

TBA The Buying Agency

TBS Treasury Board Secretariat

TSO The Stationery Office

TVA Tennessee Valley Authority

VA Department of Veterans Affairs

RAF Royal Air Force

NAO National Audit Office
Appendix I

Organizations With Activities Related to

Supply, Vehicle, Telecommunications, and IT

Procurement

Page 36 GAO/GGD-99-109 Procurement Reform

Country Procurement organizations

Procurement policysetting organizationsSupply activitiesa

United States General Services Administration’s

Federal Supply Service (FSS)

and Federal Technology Service

(FTS)

Office of Management

and Budget’s Office of

Federal Procurement

Policy (OFPP); GSA’s

Office of

Governmentwide Policy

(OGP)

FSS has nonmandatory, prenegotiated contract

arrangements under which agencies deal directly with

vendors to acquire a range of supplies, including IT

goods and services; FSS also stocks supplies for resale

to agencies from its distribution centers and government

stores.

Canada Public Works and Government

Services Canada’s Supply

Operations Service (SOS) and

Government Telecommunications

and Informatics Service (GTIS)

branch.

Treasury Board and its

operational arm, the

Treasury Board

Secretariat

Like FSS, SOS had prenegotiated contract arrangements

under which agencies dealt directly with vendors for

supplies, including IT products and services; however,

unlike FSS, they were mandatory over certain dollar

thresholds; also unlike FSS, SOS had no distribution

centers or government stores.

United

Kingdom The Buying Agency (TBA);b

Central Computer and

Telecommunications Agency

(CCTA)b

Her Majesty’s Treasury

(HM Treasury)

Like FSS, TBA had nonmandatory, prenegotiated

contract arrangements for supplies, under which

agencies dealt directly with vendors for supplies,

including some for IT products and services; unlike FSS,

TBA did not have distribution centers or government

stores.

Australia Office for Government Online

(OGO); Office of Asset Sales

and IT Outsourcing (OASITO)

Department of Finance

and Administration

(DOFA)

Unlike in the United States with FSS, the government did

not have any centrally administered supply contract

arrangements and had no distribution centers or

government stores; DOFA did, however, administer a

vendor certification program that was mandatory for IT.

New Zealand GSB Supply Corporation Ltd.

(Supplycorp)d

Commerce Ministry;

The Treasurye

Unlike in the United States with FSS, the government did

not have any centrally administered supply contract

arrangements and had no distribution centers or

government stores; Supplycorp was a nonmandatory

source in the private sector that, like FSS, had similar

arrangements under which agencies dealt directly with

vendors to acquire a range of supplies, including IT

products and services; Supplycorp also did not have

distribution centers or government stores.
Appendix I

Organizations With Activities Related to Supply, Vehicle, Telecommunications, and IT

Procurement

Page 37 GAO/GGD-99-109 Procurement Reform

Vehicle activities Telecommunications activities IT activitiesa

FSS is the mandatory source for vehicle

purchases and operates a nonmandatory,

interagency fleet for short-term agency

needs.

FTS has nonmandatory, local and

long distance telecommunications

service arrangements with private

carriers that agencies can use.

FTS assists agencies, on a nonmandatory basis,

with acquiring IT systems and related services;

FSS has an IT products and services schedule;

FTS services differ from those of FSS in that FTS

acts as a third party; with the FSS schedule,

agencies deal directly with the IT vendors.

Like FSS, SOS was the mandatory source

for vehicle purchases but did not operate a

central fleet.

Like FTS, GTIS had nonmandatory,

local and long distance

telecommunications service

arrangements with private carriers

that agencies could use.

SOS had a mandatory role in assisting agencies

with IT systems acquisitions if they exceeded

certain dollar thresholds; SOS also had

prenegotiated arrangements for IT products and

services, like FSS; GTIS assisted smaller

agencies and those without IT expertise, on a

nonmandatory basis, with identifying their IT

needs.

Unlike in the United States with FSS,

agencies could go directly to the private

sector to purchase vehicles

and there was no central fleet agencies

could use; TBA could assist agencies with

vehicle acquisition and agencies could use

vehicle purchase arrangements held by the

Ministry of Defence (MOD).c

Like FTS, CCTA had nonmandatory,

local and long distance

telecommunications service

arrangements with private carriers

that agencies could use.

Like FTS, CCTA assisted agencies, on a

nonmandatory basis, with acquiring IT systems

and related services; like FSS and its sister

agency TBA, CCTA also had a schedule of IT

products and services.

Unlike in the United States with FSS,

agencies went directly to the private sector

for vehicles and there was no central fleet;

the government used to have a central fleet,

but it was privatized in 1997; agencies were

required to use the privatized fleet for a 5-

year period to meet their vehicle needs.

Like FTS, OGO sought to aggregate

the government’s buying power

through agreements it had with

telecommunications service providers;

however, unlike with FTS in the United

States, agencies were required to use

those providers.

OGO had a minor role assisting agencies in the

acquisition of IT systems; there was no major

government initiative to assist agencies in

acquiring IT systems because of a new initiative to

phase out IT systems ownership and instead

outsource, or contract for, IT services; this

initiative was being done through a multiyear,

phased process being administered by OASITO.

Unlike in the United States with FSS,

agencies went directly to the private sector

for vehicles and there was no central fleet;

Supplycorp had prenegotiated contract

arrangements for vehicle purchases that

agencies could use, and could assist

agencies in obtaining fleet management

services.

Unlike with FTS in the United States,

agencies went directly to the private

sector for telecommunications services;

Supplycorp had prenegotiated contract

arrangements for telecommunications

services that agencies could use.

Agencies went directly to the private sector for IT

systems and had the option of using Supplycorp

for assistance; Supplycorp had a technology team

that offered advice and consultations, like FTS

has, and a schedule of IT products and services,

like FSS has; major IT projects were to be

examined and monitored by SSC and the

Treasury.

a

“Supply activities” can include commercially available IT products and services; “IT activities” refer

primarily to the acquisition of IT systems and related services.

b

TBA and CCTA are executive or "next steps" agencies, which means they had more flexibility than

traditional government departments in how they managed their finances and personnel.

c

In the vehicle area, MOD was in the midst of implementing a privately financed partnering

arrangement for its nontactical and administrative support fleet. This effort is described in more detail

in appendix IV.

d

Supplycorp is a private sector business that sells only to government agencies.

e

The State Services Commission is also a key central agency that is responsible for reviewing and

reporting on agency performance, but it does not set procurement policy.

Source: GAO analysis of information on organizations with activities related to supply, vehicle,

telecommunications, and IT procurement in the United States and selected countries.
Appendix II

Objective, Scope, and Methodology

Page 38 GAO/GGD-99-109 Procurement Reform

Our objective was to identify the organizations, policies, and programs that

Canada, the United Kingdom (UK), Australia, and New Zealand had in

place to assist agencies with the procurement of supplies, vehicles,

telecommunications, and IT. To meet this objective, we obtained

information on FSS’ and FTS’ procurement activities by interviewing top

FSS and FTS officials as well as program officials in the four business

lines. We also held discussions with GSA’s OGP and OFPP within OMB.

We collected information on federal procurement through research on the

Internet and by reviewing our past work. We also reviewed procurementrelated laws and regulations, such as the Federal Acquisition Streamlining

Act of 1994, the Federal Activities Inventory Reform Act of 1998, and the

Federal Acquisition Regulation.

To select countries for the review, we first determined, on the basis of

available resources and the time frames for the assignment, that we could

collect and analyze information on four countries. We then conducted

research, relying heavily on the Internet, as well as discussions with

officials at the World Bank and Department of State, to identify Western

industrialized countries that had made a commitment to procurement

reform and would be candidates for selection. On the basis of this work,

we selected Canada, the UK, Australia, and New Zealand because they had

made such a commitment, and preliminary work showed they had

reformed activities similar to those carried out by FSS and FTS. Our work

was limited to the activities of the central or federal governments in these

countries.

We confirmed our selections primarily through further discussions with

our counterpart organizations—the Auditor General offices—in each of

the countries as well as the Department of State offices for each of the

countries. We also held discussions with the embassy of New Zealand in

Washington, D.C. and the U.S. embassies in Ottawa, Canada, and London,

UK. It is important to note that the four countries were judgmentally

selected and were not intended to be representative of how countries

around the world were reforming similar activities.

To collect information on the organizations, programs, and policies in

these countries, we visited them and interviewed key officials about their

operations. To identify which officials would provide information that

would help us best meet our objective, we relied heavily on advice from

the Auditor General staffs. The Auditor General staffs then arranged the

interviews, provided us with relevant material, and assisted us with other

logistical matters related to the visits. In Canada, the central procurement

department also played a vital role in identifying key officials and
Appendix II

Objective, Scope, and Methodology

Page 39 GAO/GGD-99-109 Procurement Reform

arranging the interviews. In each country, we interviewed officials in any

central procurement organizations involved in the procurement of

supplies, vehicles, telecommunications, and IT. We also interviewed

knowledgeable officials in organizations that set procurement policy such

as each country’s Treasury department or equivalent; selected agencies

that were the end-users of the procurement organizations, programs, and

policies in place; and the Auditor General offices. In Australia, we held

discussions with staff from a parliamentary committee conducting an

inquiry into procurement practices. We also interviewed the general

manager of a private sector business in New Zealand that assisted the

government with procurement. In doing our work, we also analyzed a wide

range of material on the organizations, programs, and policies in the four

countries. Tables identifying the organizations in each country discussed

in this report and their Internet addresses appear at the end of this

appendix.

After collecting the information, we compared these countries’ operations

to how FSS and FTS assist agencies with the procurement of supplies,

vehicles, telecommunications, and IT. It is important to note that we did

not do a comprehensive comparison. That is, in each of the four FSS and

FTS business lines, we focused on the major activities that FSS and FTS

perform and determined how each country carried out similar activities.

For example, for supply and procurement, we determined whether there

were central supply contracts in the countries that agencies could use that

were similar to those available through the FSS supply schedules and

special order arrangements and whether the countries had operations

similar to the FSS stock program.

For vehicle acquisition and leasing, we focused on whether vehicles were

purchased centrally and whether each country had a central fleet like the

FSS interagency fleet. For network services and IT solutions, we focused

on whether, in general, the countries had central sources from which

agencies could obtain telecommunications services or assistance with the

acquisition of IT systems and related services. In using this approach, we

recognize that we did not focus on all the specific characteristics of the

activities FSS and FTS perform in each of the business lines. Resource and

time constraints prevented us from doing a detailed comparison, nor did

they allow us to assess the applicability of the approaches used by these

countries to FSS and FTS operations.

We also did not analyze or verify the laws cited by the foreign officials or

contained in documents they provided. Although we did ask the countries

for performance data related to their procurement organizations and
Appendix II

Objective, Scope, and Methodology

Page 40 GAO/GGD-99-109 Procurement Reform

activities, we did not independently verify any data we obtained or assess

the effectiveness of the reform initiatives. Finally, we did not verify the

barriers cited by FSS and FTS or assess the effectiveness of reforms

implemented in the United States.

We did our work at FSS and FTS offices in Arlington and Falls Church, VA,

respectively, and OGP and OFPP offices in Washington, D.C. In our visits

to the countries, we did work in the cities of Ottawa and Hull in Canada;

London and Bath in the UK; Canberra, Australia; and Wellington, New

Zealand. In discussing the organizations in the countries, we used terms

such as “agency” and “department” interchangeably. The exchange rates

used throughout the report were as of May 2, 1999; we obtained them from

the Federal Reserve Bank of New York and rounded them to the nearest

cent. We performed our work between July 1998 and May 1999 in

accordance with generally accepted government auditing standards. We

requested comments on a draft of this report from the Director of OMB,

Administrator of GSA, and key officials in the countries we visited. OMB

had no comments. In response to the request for comments from the

Administrator of GSA, FSS and FTS officials provided comments on a draft

of this report, as did responsible officials from the four countries. Tables

II.1 through II.5 identify the organizations in the United States and each of

the four countries discussed in this report and their Internet addresses.
Appendix II

Objective, Scope, and Methodology

Page 41 GAO/GGD-99-109 Procurement Reform

General Services Administration (GSA) http://www.gsa.gov

GSA/Federal Supply Service (FSS) http://www.fss.gsa.gov

GSA/Federal Technology Service (FTS) http://www.fts.gsa.gov

GSA/Office of Governmentwide Policy (OGP) http://www.policyworks.gov

Office of Federal Procurement Policy (OFPP) http://www.whitehouse.gov/OMB/procurement/index.html

Department of National Defence (DND) http://www.dnd.ca/

Department of Public Works and Government Services Canada

(PWGSC)

http://w3.pwgsc.gc.ca/

PWGSC/ Government Telecommunications and Informatics

Services (GTIS)

http://w3.pwgsc.gc.ca/gtis/

PWGSC/ Supply Operations Service (SOS) http://w3.pwgsc.gc.ca/sos/text/sosext-e.htm

Office of the Auditor General of Canada (OAG) http://www.oag-bvg.gc.ca/

Treasury Board Secretariat of Canada (TBS) http://www.tbs-sct.gc.ca/

Central Computer and Telecommunications Agency (CCTA) http://www.ccta.gov.uk/

Her Majesty’s Treasury (HM Treasury) http://www.hm-treasury.gov.uk/

HM Treasury’s task force on PFI http://www.treasury-projects-taskforce.gov.uk/

Ministry of Defence (MOD) http://www.mod.uk/

National Audit Office (NAO) http://www.open.gov.uk/nao/home.htm

The Buying Agency (TBA) http://www.open.gov.uk/tba/menu.htm

The Stationery Office (TSO) http://www.tsonline.co.uk/

Australian National Audit Office (ANAO) http://www.anao.gov.au/

Department of Family and Community Services (DFaCS) http://www.facs.gov.au/

Department of Finance and Administration (DOFA) http://www.dofa.gov.au/

Joint Committee for Public Accounts and Audit (JCPAA) http://www.aph.gov.au/house/committee/jpaa/index.htm

Office of Asset Sales and IT Outsourcing (OASITO) http://www.oasito.gov.au/

Office for Government Online (OGO) http://www.ogo.gov.au/

Table II.1: United States

Table II.2: Canada

Table II.3: United Kingdom

Table II.4: Australia
Appendix II

Objective, Scope, and Methodology

Page 42 GAO/GGD-99-109 Procurement Reform

GSB Supply Corporation Ltd. (Supplycorp) http://www.gsb.co.nz/

Health Funding Authority (HFA) http://www.hfa.govt.nz/

Ministry of Commerce http://www.moc.govt.nz/

Ministry of Defence (MOD) http://www.defence.govt.nz/

Ministry of Health http://www.moh.govt.nz/moh.nsf

Office of the Controller and Auditor-General of New Zealand http://www.netlink.co.nz/~oag

State Services Commission (SSC) http://www.ssc.govt.nz/Welcome.asp

Sources: The sources for tables II.1 through II.5 are the Internet addresses identified, as of the time of

our review.

Table II.5: New Zealand
Appendix III

Canada's Benefits Driven Procurement

Page 43 GAO/GGD-99-109 Procurement Reform

Benefits Driven Procurement (BDP) is a new approach the Canadian

government has started to use to help ensure the success of complex

acquisition projects traditionally characterized as having significant risk.

BDP stresses a focus on results and on the benefits that the government

and its suppliers can gain from each acquisition project. Developed by the

Canadian government in collaboration with Canadian industry, the BDP

approach is designed to avoid the pitfalls that beset many complex

projects—delays, cost overruns, and end results that often fall far short of

expectations. BDP was first developed to solve problems with major IT

acquisitions; but according to Canadian government officials, the concept

has a broad application and is relevant to a wide range of complex, highrisk acquisitions.

According to information on BDP from Public Works and Government

Services Canada (PWGSC),1

 Canada’s central procurement agency, major

IT projects, which are among its most complex procurement projects, have

a history of failure. Research done in the United States and Canada

support this assertion. For example, in 1990, the President’s Council on

Management Improvement cited the “unwieldy procurement process” as a

reason IT projects often failed. Other reasons cited in this report included

lack of top management commitment, inadequate planning, inadequate

user input, and flawed technical approaches. In 1997, KPMG Consulting

conducted a survey of IT projects in Canada and reported that the reasons

for failure among IT projects were poor planning, a weak business case,

and lack of top management involvement. A study by the Standish Group

in the United States showed that 31.1 percent of U.S. IT development

projects were cancelled before completion; about 53 percent of the

projects were likely to cost 189 percent of their original estimates; and

only 16.2 percent of software development projects were completed on

time and within budget.

Concerned about problems with IT acquisition, the Treasury Board of

Canada developed a framework of management policies in 1996 that

comprised best practices, principles, methodologies, and tools and

standards aimed at ensuring a better success rate. Part of this framework

addressed the procurement process, which the Treasury Board described

as “too inflexible” and “not conducive to cooperation.” BDP evolved as a

response to this Treasury Board framework.

 

1

 This appendix draws heavily from a PWGSC paper on BDP presented on June 10, 1998, before the

International Public Procurement Association.
Appendix III

Canada's Benefits Driven Procurement

Page 44 GAO/GGD-99-109 Procurement Reform

BDP focuses on the big picture—the overall desired outcomes—rather

than on detailed project requirements. The traditional approach to

procurement in a complex IT project was for an organization to spend

months, even years, developing a detailed requirement—thousands of

pages of specifications to present to the private sector. However,

according to Canadian officials, the specifications may be outdated before

they are complete, can be out of step with the latest technology, and the

organization’s goals may even have changed during the long, drawn-out

process of developing specifications. Finally, according to these officials,

the private sector may know the project is not feasible, but may present

bids anyway in order to obtain work.

As a result, the traditional approach tends to be too lengthy, rigid,

prescriptive, and costly in terms of time and human resources that have to

be dedicated to each project, according to Canadian officials. BDP

attempts to address this problem by asking the private sector to deliver

certain agreed-upon results rather than follow a government blueprint with

detailed specifications. The private sector is also invited to submit ideas on

what sort of project should be undertaken before a formal request for

proposals is issued. Another feature of BDP is that it is to incorporate

rigorous up-front planning to remove potential problems in the

procurement process.

Both the front end planning and the management of the entire acquisition

life cycle are based on four elements: a business case; risk analysis; clear

delineation of accountabilities; and, a compensation structure closely tied

to the contractor’s performance. Under BDP, a department is to prepare a

business case justifying the project at the highest level and identifying the

outcomes and benefits to be achieved. The business case is also to look at

such issues as how much the project will cost, whether there are cheaper

ways to realize goals, and what the benefits will be to the taxpayer.

According to Canadian officials, under traditional methods, a project was

often launched prematurely without a determination of whether it was

really needed, whether it fit with the organization’s long-term goals, and

without having the support of top management.

Risk analysis is used to identify what could go wrong with the project and

how to deal with the consequences. The goal is essentially to minimize risk

and be prepared with contingencies for containment when problems do

arise. Departments are to conduct risk assessments not just during the

planning phase, but also throughout implementation. This helps ensure

that projects with little chance of success are cancelled or modified as

early as possible. Delineation of accountabilities is used to protect the

The BDP Philosophy

Elements of the BDP

Process
Appendix III

Canada's Benefits Driven Procurement

Page 45 GAO/GGD-99-109 Procurement Reform

client department from service delivery problems by identifying the

specific risks each party assumes. For example, if the contract states that

the supplier is responsible for delivering a certain outcome, or level of

service, by a certain date but fails to do so, the supplier could be required

to bear the cost of the delay. Relatedly, BDP encourages the use of a

compensation structure closely tied to the contractor’s performance. For

example, bonus payments may be made for finishing earlier than expected.

A nonmonetary incentive could be intellectual property rights to a

technology developed under government contract.

Although BDP has been used primarily in the IT area, PWGSC and

Treasury Board Secretariat (TBS) officials told us they anticipated greater

usage of BDP in other areas in the future. BDP is part of a broad

framework for procurement reform that TBS was developing at the time of

our review. These officials said, however, that BDP should not always be

used; in many cases, traditional procurement approaches are quite

appropriate. They said that rigorous up-front planning by departments is

done to help identify the most appropriate method. More information on

BDP can be accessed at the PWGSC and TBS Internet addresses,

http://w3.pwgsc.gc.ca/ and http://www.tbs-sct.gc.ca/, respectively.
Appendix IV

The UK's Private Finance Initiative

Page 46 GAO/GGD-99-109 Procurement Reform

The Private Finance Initiative (PFI) is a procurement reform approach

being used by the United Kingdom to provide services requiring a major

capital investment. Under a PFI project, the private sector finances the

capital assets and the government or users pay for the services. Similar to

what are commonly referred to as public-private partnerships in the United

States, PFI contracts require the private sector to invest in, manage, and

operate a capital asset necessary to deliver a defined level of service. By

way of example, in a PFI project to fill the need for a highway, the

government would pay for the service of having a fully maintained and

functional highway instead of constructing and maintaining the highway

itself. In the IT area, the government would seek an arrangement in which

the private sector would meet a department’s IT needs through services,

instead of having the government own and manage an IT system and

software. An example where the user of the services and not the

government pays for the service would be a privately financed bridge that

is paid for directly by tolls from motorists using the bridge.

The thinking behind PFI includes transfering the risks and rewards of

ownership of an asset to the private sector, along with the need for capital

funding. According to HM Treasury officials, it requires government to

consider not only whether it can afford to pay for the capital asset, but also

to rigorously consider the long-term financial implications of the asset

being properly maintained and operated over a period of, frequently, 25

years or more. PFI also aims to allocate procurement risks more

appropriately between the supplier and the government customer to

ensure that the risks rest with the appropriate party. For example, in a

construction project, the risk of delay or cost overruns would rest with the

private sector supplier. Alternatively, the risk of changes in legislation that

could affect the contract would rest with the government customer, who is

better placed to influence any such changes.

Under PFI projects, the government also believes it can also potentially

benefit from the innovation and skills of the private sector. By

concentrating on the end service required, the government allows the

private sector supplier to determine innovative ways of delivering the

service—the government customer specifies the outputs but leaves the

inputs to the supplier. To ensure value for money under PFI projects, the

government customer is to demonstrate that the PFI method of

procurement is likely to be better value for money than alternative means

of supply—in particular, conventional means of procurement. This

comparison is to be done by comparing the quality and cost of the service

required under the different alternative means of supply.
Appendix IV

The UK's Private Finance Initiative

Page 47 GAO/GGD-99-109 Procurement Reform

At the time of our review, the UK was at various stages of implementing

115 PFI projects for capital assets valued at about 10.9 billion (about

$17.6 billion U.S., assuming that $1 U.S. = 0.62). These projects covered a

wide range of services, including highways, prisons, IT services, and part

of the Ministry of Defence’s (MOD) vehicle fleet. To improve the PFI

procurement process and to assist departments and agencies with

implementing PFI projects, HM Treasury had established a PFI task force.

The task force sought to ensure that departments’ projects were not placed

on the market until it was confident that the service was affordable,

project teams had adequate resources, output specifications had been

developed, and an acceptable risk allocation had been proposed. The task

force issued guidance for carrying out PFI projects and also provided

direct assistance to departments and agencies. At the time of our review,

task force officials told us they had hired several individuals from the

private sector to ensure that the government had high-calibre legal,

financial, and other professional skills available to assist departments. HM

Treasury’s guidance for PFI projects, as well as more detailed information

on the PFI process, can be found at its Internet address that is dedicated to

PFI, http://www.treasury-projects-taskforce.gov.uk.

At the time of our review, MOD was in various stages of implementing 20

PFI projects for capital assets with a total estimated value of about 967

million (about $1.6 billion U.S.). These projects included services involving

IT systems at the Army Logistics Agency and Army Training and

Recruitment Agency, training for the Defence Helicopter Flying School,

water and sewage at certain Royal Air Force (RAF) bases, and housing at

two other MOD bases. Related to the vehicle acquisition and fleet area,

two projects involved MOD’s “white fleet” of nontactical, administrative,

and support vehicles. The two projects were for white fleet vehicles used

by British forces in Germany and a portion of the RAF white fleet vehicles

in the UK. This year, MOD planned to expand this project to include all of

the white fleet vehicles in the British military.

The white fleet PFI project had its origins in 1994, when MOD began a

study to identify methods for encouraging greater commercial involvement

in vehicle funding and management. The study concluded that there were

both the capacity within the private sector and the potential for financial

and operational benefits for MOD to expose the support vehicle fleet to

industry competition. It was recognized that adopting a PFI approach to

the supply of the white fleet would involve the private sector providing

complete vehicle service, not just the funding for a substitution of new

assets. MOD believed that through PFI, it would be exposed to private

MOD’s White Fleet PFI

Project
Appendix IV

The UK's Private Finance Initiative

Page 48 GAO/GGD-99-109 Procurement Reform

sector innovation and management skills and progressively would benefit

from the latest commercial techniques in vehicle management.

MOD selected two portions of the white fleet to test the PFI approach: the

support vehicles for British forces in Germany and a stratified group of

RAF support vehicles in the UK. According to MOD officials, preliminary

data showed that both of these projects were delivering efficiencies in

terms of the number of vehicles operated and the cost of operation. At the

time of our review, MOD officials estimated that in Germany, savings of 27

percent were being realized compared to in-house operation; and in the

UK, savings under PFI were estimated to be about 15 percent. In both

cases, MOD believed it was getting a newer and more reliable fleet, along

with a better information system and commercial fleet management

expertise.

According to MOD officials, they drew on the experience gained from

these two test efforts, did detailed research, and held extensive

discussions with the leading service providers to develop a strategy for

subjecting the rest of the white fleet to competition. Five regional projects

covering approximately 12,000 vehicles were developed inside defined

boundaries to cover all the requirements of all three services (Royal Navy,

Army, and RAF). Each project covered the full range of vehicles in the

white fleet and encompassed short and medium term needs. Under the

PFI arrangements, MOD staff were to assess fluctuating vehicle needs, and

the industry providers are to be under contract to meet all levels of

demand, even on short notice. This was a departure from the traditional

procurement philosophy MOD had in the fleet area, in which vehicle

holdings were to be matched to anticipated maximum usage requirements.

Instead, MOD would be paying for vehicle services as an alternative to

owning and operating them.

As of October 1998, the time of our discussions with MOD officials, the

projects had been advertised and MOD had received expressions of

interest and proposal outlines from a number of leading vehicle suppliers

who were backed by international financial institutions. Binding bids were

to be obtained by the early part of 1999, which would lead to the selection

of a preferred supplier and detailed negotiations before projected contract

signings in September 1999. Implementation of the contracts would then

commence and would be completed in 6 months.

To ensure value for money, MOD has established an in-house cost

benchmark that reflected the best of several other in-house options MOD

has considered for managing the fleet. Should the bids MOD receives be
Appendix IV

The UK's Private Finance Initiative

Page 49 GAO/GGD-99-109 Procurement Reform

above the in-house benchmark, MOD officials said they would instead

implement the in-house alternatives. Also, MOD was planning to provide

the in-house benchmark to industry to prevent providers from submitting

bids if they could not provide the required service at a price below the inhouse benchmark.

The National Audit Office (NAO), our counterpart organization in the UK,

reports to the British parliament on whether individual PFI projects

represent good value for money. NAO supports the PFI concept because it

offers, in appropriate cases, the prospect of improved value for money.

NAO also recognizes that successful implementation will require wellthought innovation and risk-taking by public servants, which it supports.

According to NAO officials, the merits of the PFI initiative will be judged

on the success of individual projects. To date, these officials said that

some projects could have benefited from better up-front planning; as a

result, it was questionable whether some projects were achieving value for

money. On the other hand, other projects have represented clear value for

money and other benefits to the government. Overall, NAO officials said

that as time went by, public servants likely would become more adept at

using the PFI approach, and the overall gains would be positive.

Information on NAO’s findings for individual projects can be accessed at

its Internet address, http://www.open.gov.uk/nao/home.htm.

National Audit Office Role
Appendix V

Australia's IT Outsourcing Initiative

Page 50 GAO/GGD-99-109 Procurement Reform

In April 1997, Australia’s Minister for Finance announced a major initiative

to outsource, or contract for, the government’s IT infrastructure. The

initiative was to cover everything from the large mainframe computers

agencies operated to the equipment for over 140,000 desktop computers

across the government.1

 According to officials with the Office of Asset

Sales and IT Outsourcing, this infrastructure had an estimated value of

between $6 and $7 billion Australian (between about $4 and $4.6 billion

U.S., assuming that $1 U.S. = $1.51 Australian). Under the initiative, the

government committed to achieving best value for money for its

information technology dollar in order to support the delivery of services

at the lowest cost to the taxpayer.

This major announcement had its origins in 1996, when the government

tasked the former Office of Government Information Technology (OGIT)

with studying the potential savings that could accrue through

consolidation of systems and potential outsourcing. The resulting study

indicated that a very strong case for outsourcing existed and led to a

decision that agencies should undertake extensive market testing.

Potential savings of $1 billion Australian (about $662 million U.S.) were

estimated over 7 years if agencies shifted to outsourcing. The April 1997

announcement reflected the government’s commitment to apply the

outsourcing concept for IT across government, with the exception of some

systems related to national security. In November 1997, IT outsourcing

functions managed by OGIT were transferred to the Office of Asset Sales,

which was renamed OASITO.

OASITO was given responsibility for leading and managing the

implementation of the initiative, with the aim of delivering savings,

developing the Australian IT industry, and improving service delivery. The

initiative had clear objectives related to the Australian IT industry. That is,

OASITO was committed to ensuring substantial and sustainable

development of the domestic IT industry, encouraging the industry to

achieve a global focus, and assisting regional development and the

creation of jobs. OASITO’s executive coordinator told us that in addition to

the Australian IT industry, firms from overseas, including the United

States, had been, and would likely continue to be, active participants in the

initiative.

 1

 In March 1999, we reported that several agencies in the United States were studying the outsourcing

option for their information systems (Outsourcing and Privatization: Private Sector Assistance for

Federal Agency Studies (GAO/GGD-99-52R, March 26, 1999).
Appendix V

Australia's IT Outsourcing Initiative

Page 51 GAO/GGD-99-109 Procurement Reform

OASITO was managing the initiative through a multi-year, phased process

where agencies’ IT needs were being grouped together and the

requirements offered to the private sector for bids. The government

originally estimated that the initiative would be completed by mid-1999. At

the time of our review, the schedule for outsourcing had to be adjusted to

accommodate the capacity of agencies to prepare for outsourcing and the

capacity of industry to absorb the requirements. OASITO was responsible

for identifying the groupings and structuring them to maximize the

benefits of outsourcing. It also provided guidance and assistance to

agencies and managed the sequence and timing of the offerings to

maximize competition. In addition, OASITO was the central coordinator

for development of project documentation and was to oversee the

financial evaluation of the offers. After contracts were signed, OASITO

planned to remain involved to ensure that issues affecting the overall

success of the initiative were effectively addressed.

In close consultation with OASITO, each agency was responsible for

defining its business and technical requirements, assisting with the

evaluation of bids, participating in negotiations, and otherwise preparing

the agency for transition to an outsourcing relationship and subsequent

contract management. At each step of the process, agencies were expected

to ensure that sufficient resources were dedicated to the process to enable

the project timetable to be met. Agencies were also expected to implement

strategies for internal matters, such as human resource transition, and to

execute the change to the new operating environment. The government

anticipated that IT professionals within government would transfer to the

private sector, thus enhancing their skills and furthering their career

opportunities.

OASITO’s executive coordinator told us that the government undertook

this initiative because of a belief that agencies should focus on their core

missions and allow the private sector to perform government activities of a

business nature. Further, he said that in meeting their IT needs through

purchasing IT services, agencies, and the government as a whole, would

also benefit from access to the latest technologies and current commercial

expertise in information management.
Page 52 GAO/GGD-99-109 Procurement Reform
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