Telecommunications: GSA Needs to Improve Process for Awarding Task Orders for Local Service
Released: 2003-05-05T00:00:00

Letter

Background

The MAA program comprises contracts offering local voice and certain data telecommunications services to federal agencies in selected metropolitan areas across the country. GSA began planning this program just a few months after the passage of the Telecommunications Act of 1996, which was intended to increase competition and reduce regulations in the telecommunications industry, particularly for local services. Recognizing that this competition would create an opportunity for the government to gain an immediate price reduction in local telecommunications services, GSA developed and launched the MAA program to take advantage of this emerging competition. Further, it envisioned the MAA contracts as a complement to existing local service contracts in metropolitan areas, as well as a solution for contracts that were expiring. As of January 2003, GSA had awarded MAA contracts in 25 cities, with a total maximum value of $5.1 billion.

Each MAA contract is a fixed-price, indefinite-delivery, indefinite-quantity contract with a base term of 4 years (48 months) from date of award, with four successive 1-year options. In 15 of the 25 MAA cities, GSA awarded these contracts to two or more telecommunications providers; such contracts are referred to as multiple-award contracts. The Federal Acquisition Streamlining Act (FASA) of 1994 established a preference for awarding contracts for indefinite quantities to multiple firms rather than to a single company. This approach was intended to provide agencies a means to procure goods and services quickly, using streamlined acquisition procedures, while obtaining the advantage of competition.

Under multiple-award contracts, the Federal Acquisition Regulation (FAR) requires that contractors be afforded “a fair opportunity to be considered” in the subsequent award of task orders issued to meet specific agency needs under these contracts. The process used to ensure this opportunity is referred to as the fair consideration process. In administering this process, contracting officers are given broad latitude by the FAR.

The MAA contracts give a broad outline of the procedure to be followed by the government in conducting its fair consideration process. The government- or agency-designated representative is to consult the latest information about the contractors, including published contract prices, related analyses that aid decisionmaking, information from contractors such as price quotes or technical analyses, and other relevant information. Using available information, the representative selects a contractor by one of two methods: basing the decision solely on relative prices without further consideration of other factors, or basing the decision on a combination of price, technical, and past performance considerations appropriate to the particular decision. After completing this decision process, the representative then places a task order with the selected contractor for the required telecommunications services.

GSA contracting officers making task order decisions can obtain price information from published contracts, or they can choose to issue a Request for Quotations (RFQ) as an additional mechanism for lowering prices. Using an RFQ process to support fair consideration decision- making can offer additional competitive benefits by allowing contractors to lower prices beyond their contract offers and to reduce or waive service initiation and other charges. However, while the RFQ process is being pursued, agencies must continue to pay pre-MAA prices for telecommunications services, rather than the lower MAA contract prices.

When making fair consideration decisions under the MAA contracts, in addition to comparing monthly recurring charges for providing telecommunications services, GSA may consider additional costs associated with these services, such as the one-time termination charges that may be associated with a pre-MAA telecommunications service contract. GSA may also consider contractors’ service initiation charges for implementing service. When a contractor is also the incumbent, pre- MAA telecommunications provider in a city, it does not generally include a service initiation charge in its price quotes for existing lines and services to be transitioned to an MAA contract, because it does not incur new expenses to provide these lines and services. Where volume or types of services differ from existing services, incumbents may include service initiation charges in their pricing. All contractors can choose to waive these charges.

Including these charges in fair consideration price comparisons may give an advantage to an incumbent contractor (since the incumbent’s price would generally not include such charges), but this advantage is permissible. That is, acquisition case law has established that a contractor may have unique advantages and capabilities (because of its prior experience, for example), and the government is not required to equalize competition or compensate for these advantages, unless there is evidence of preferential treatment or other improper action.

GSA’s FTS headquarters in Fairfax, Virginia, and its regional offices in the various metropolitan areas share responsibility for administering the MAA contracts. According to testimony by the FTS Commissioner in June 2001, FTS headquarters is responsible for developing solicitations, evaluating offers, awarding contracts, and supporting implementation activities, and the FTS regional offices are responsible for developing city-specific requirements and for contract implementation activities, including managing the process used to select among MAA contract awardees for placing task orders (that is, the fair consideration process).

In calendar year 2001, fair consideration processes were conducted in 11 of the 15 MAA cities with multiple-award contracts. Table 1 lists these 11 cities, their MAA contractors, and the number of fair consideration decisions reached in 2001.

GSA Has Not Established a Consistent Process or Provided Adequate Oversight

GSA management has stated its desire to ensure consistency throughout the nationwide MAA program, but it has not established a common process for fair consideration decisions. Because GSA headquarters has not developed or implemented a uniform method to be followed by its regional offices in conducting the fair consideration process, approaches vary among cities and, in some cases, within cities. Variations occurred in the periods of time over which contractor prices were compared and in the inclusion of reconfiguration costs in price comparisons, which affected the choice of contractors. Further, because GSA did not oversee the application of this process, in some instances regional offices violated the FAR by incorrectly using agency preference as a basis, in part or as a whole, for selecting a higher priced contractor for an MAA task order.

Although the FAR gives contracting officers broad latitude in administering the fair consideration process, GSA recognizes that the MAA program and its contracts should be consistently managed and administered. In her June 2001 testimony, the FTS Commissioner stated that because MAA is a national program, communications and coordination among GSA staff with MAA program responsibilities (FTS headquarters, its regional offices, and MAA program management staff) were essential to ensure program continuity and consistency. Thus, GSA views consistency as an important attribute within the nationwide MAA program.

The principal variation we identified in the fair consideration process concerned the period of time selected by regional staff over which to compare contractor prices. The different time periods that GSA regional offices used for comparing contractor prices ranged from as short as 1 month to as long as the entire period remaining in the life of the contract (GSA documentation referred to the latter as a life-cycle analysis). In three cities—Cleveland, Indianapolis, and Minneapolis—GSA considered contract life as the evaluation period. GSA’s Denver staff usually used a 1-month evaluation period, but it used a life-cycle analysis to justify 17 percent of its decisions. In four other cities, this price comparison varied from decision to decision: specifically, the Dallas regional office alternated between use of contract life and a 1-year period in its analyses; the New York regional office used 1-year and 3-year periods; the Philadelphia staff used a 1-month period and a 4-year period; and the Boston regional office used a 1-month period in some cases, and in others considered savings for both 1-year and 4-year periods. The reason for the specific comparison period used was not recorded in decision documentation. Table 2 summarizes the different price comparison periods used.

Although the MAA contracts state that contract price will always be a factor in GSA’s fair consideration procedure, they do not specify the time period over which price comparisons should be made. However, a consistent time period is important, because analyses over different time periods may lead to different results. For example, one-time costs such as service initiation charges have a less direct influence on decisions that compare prices over a longer period of time, because those additional one- time costs may be offset by lower prices over the life of the contract. Conversely, when prices are compared over a shorter period of time, such additional charges form a relatively greater portion of total costs compared; thus, their inclusion can favor the incumbent service provider (whose price does not generally include these charges).

The effect of using different time frames in price comparisons is illustrated in table 3. This table summarizes the decisions reached in Dallas, where Southwestern Bell was the incumbent telecommunications provider. If GSA had used a contract life-cycle time frame in its price comparisons, then the decisions reached might have been different in half of those cases. Further, if it had consistently made these MAA task order awards to the contractors offering lower life-cycle prices, GSA could have realized an additional estimated $459,000 in savings for customer agencies in Dallas over the life of the contracts.

A secondary inconsistency within fair consideration processes concerned the use of reconfiguration costs (costs to move, add, or change telephone lines, services, or features) in contractor price comparisons. Although these charges are a part of all MAA contracts, only the Dallas regional office included estimates of these costs in the MAA price comparisons supporting its fair consideration decisions. Further, Dallas did not use these charges consistently: they appeared in only half the price comparisons completed, and they were calculated in two different ways. (In most cases, GSA staff based estimates on the assumption that 10 percent of the telecommunications lines ordered would move locations, add services, or change features during the course of a year; in two cases, GSA staff assumed that services or features associated with 25 percent of lines ordered would change annually.) The reason for the variations in the use of these charges and in their estimates was not recorded in decision documentation.

Table 4 shows that in 5 of 10 decisions made in Dallas, a different contractor might have been awarded the task orders if reconfiguration charges had not been included in price comparisons. (Three of these five decisions were based on price alone. Two of these decisions were based on both price and technical considerations, and so we cannot predict the effect of excluding reconfiguration charges.)

These variations exist because GSA has not established a common process for making fair consideration decisions. GSA did provide guidance on the fair consideration process to be followed in MAA cities following each contract award. This guidance provided general background, including the basis of the requirement in the Federal Acquisition Streamlining Act of 1994; the exceptions to this requirement; and the procedure to be followed for issuing an MAA task order. However, it did not outline a common process or identify common costs to be considered other than contract prices. Rather, according to a GSA official, GSA permitted its regional offices to define and follow their own fair consideration processes in order to encourage innovation and to learn which process yields the best results. However, GSA headquarters has taken no action that would permit it to learn from any such experiences in order to address inconsistencies and determine the most suitable process. As a result, variations occur in the application of the fair consideration process, contrary to GSA’s stated interest in ensuring the consistency of the MAA program.

Further, these variations led to a lack of transparency that could hinder GSA’s ability to obtain full value from the fair consideration process. Specifically, although the MAA contracts outline the fair consideration procedure in broad terms, they do not outline specific aspects of the process that vary across MAA cities, such as costs that may be considered by the government in addition to the price of services, or the length of time that may be used to compare contractor prices. Because these aspects of the process are not disclosed, the contractors may find it difficult to determine their most competitive offers.

GSA’s lack of oversight also hampered its ability to ensure that its fair consideration processes always complied with appropriate federal acquisition guidelines. Specifically, in six instances GSA violated the FAR by incorrectly using agency preference as a basis, in part or as a whole, for selecting a contractor for an MAA task order. According to this regulation, designating preferred awardees is not permissible in the award of task orders valued at more than $2,500. For orders that exceed that threshold, all contractors in a multiple-award contract must be given a fair opportunity to be considered. However, we identified six cases in Boston, Dallas, Denver, and Indianapolis where decisions explicitly cited agency preference as a factor for choosing a contractor for task orders above the $2,500 threshold. These violations of the FAR were allowed to occur because GSA did not provide adequate oversight to ensure that staff were correctly applying regulations when conducting fair consideration processes. As a result, the integrity of the fair consideration process could not be ensured, and potential savings were lost. In all six cases the incumbent provider was selected, which was also the higher priced service provider; selecting the lowest priced contractor in these cases would have yielded $76,000 in additional estimated cost savings to those agencies over the life of the contracts.

Numerous Fair Consideration Decisions Were Not Adequately Documented

About one-fifth of GSA’s fair consideration decisions were not adequately documented. According to the FAR, documentation of all contractual actions must be maintained in a manner sufficient to provide a basis for decisions reached in the acquisition process, and to provide information for subsequent reviews of those decisions. Out of 483 fair consideration decisions from regional GSA offices in the 11 cities that we assessed, the documentation furnished for 91 (19 percent) did not adequately support the task order award that was made.

One or more of the following four weaknesses were present in documentation for these 91 decisions: An explanation of how the fair consideration decision was made was absent. Although contracting offices are required by the FAR to maintain documentation sufficient to constitute a complete history of contracting actions, this documentation was not available in 66 of the 483 decisions assessed. Specifically, the documentation of decisions reached during calendar year 2001 in Boston, Denver, Indianapolis, Los Angeles, New York, and St. Louis did not include a stated rationale for the decisions reached. As a result, in these cases it is not possible to determine whether or not the fair consideration decisions reached by GSA were justified. A GSA program officer stated that a decision rationale was not prepared for 53 decisions in Los Angeles and St. Louis that were based on price alone because of a lack of clarity pertaining to documentation requirements for those cases. She also stated that 5 decisions in New York were not documented because of urgency, as those decisions were made shortly after the September 11th terrorist attacks in that city. Further, the GSA program officer stated that a decision rationale was not prepared for the balance of decisions because of administrative oversight.

The price analysis did not support the decision reached. As part of fair consideration decisionmaking, GSA usually included in each task order file an analysis that compared the service prices offered by each contractor over some defined period of time. In Dallas, Denver, and Indianapolis, eight task order awards were justified by price comparisons that did not support the decisions reached. Although price was the sole factor considered in these cases, the lowest priced contractors, as revealed by the price comparisons, were not awarded task orders. GSA’s decision documentation does not explain why these awards were made to higher priced contractors.

Technical factors were cited but not supported. According to the procedure defined in the MAA contracts, fair consideration decisions may be based on price or on a combination of price, technical factors, and past performance. How these technical factors are weighted depends on the particular circumstances of each decision. Technical factors were cited as the reason for fair consideration decisions, either as a whole or in part, in four MAA cities: Boston, Dallas, Indianapolis, and New York. For three of these cities, Boston, Dallas, and Indianapolis, we were not able to determine how these technical factors were applied to support a total of 20 decisions. Contract documentation for these 20 decisions included a statement that both price and technical factors were considered. However, in one case, the specific factor considered was not identified. In the other 19 cases, the specific technical factor was identified, but the documentation did not specify how it supported the decision reached.

Other documentation weaknesses were identified in Boston.

Documentation prepared to support fair consideration decisions in Boston contained two additional weaknesses. In three cases, the decision documentation suggests that not all MAA contractors were included in those fair consideration evaluations, but it does not indicate why not all contractors were considered. Further, the documentation in three other decisions indicates that price was not considered in these cases, although price must be considered in all fair consideration decisions.

In three regional offices, GSA has taken some action to improve its fair consideration documentation. Specifically, in response to concerns that we initially raised during our prior review of early MAA contract implementation efforts, GSA improved its decision documentation in Cleveland and Indianapolis by including additional analyses and clarifying memorandums in those contract files. In addition, Denver staff have also taken action to correct their files.

Nevertheless, GSA has yet to take nationwide action to improve its fair consideration documentation. Currently, weak documentation of fair consideration decisions makes it difficult to determine the basis upon which a contractor was selected for a task order. These problems were permitted to occur because GSA did not establish uniform guidelines to ensure that all regional offices were documenting fair consideration decisions in a manner consistent with the FAR. As a result, in 19 percent of the cases we reviewed, GSA, customer agencies, MAA contractors, and the Congress do not have assurance that the procedure followed by GSA to award MAA task orders was properly applied.

Use of Requests for Quotations Produced Mixed Results, but Limited Data Preclude a Thorough Evaluation

In MAA multiple-award cities, GSA attempted to reduce the cost of telecommunications services by asking contractors to submit price quotations to compete for task orders. However, the process had mixed results in the only MAA city in which we could do a partial evaluation. (We could not do a comprehensive evaluation because of limitations in documentation.) For acquiring some types of services, substantial savings were realized by the use of Requests for Quotations (RFQ), but for others, the savings were not sufficient to offset the cost of paying pre-MAA prices during the time taken to complete the process.

GSA’s most common approach to selecting contractors for task orders was to issue an RFQ, rather than basing decisions on published contract prices alone: specifically, GSA followed this process in 347 out of the 394 decisions reached in the 11 MAA cities in which fair consideration processes were conducted. Of the 11 cities, GSA issued RFQs to support fair consideration in 8. (In the 3 other cities—Boston, Los Angeles, and St. Louis—the documentation was not sufficient to determine whether GSA issued RFQs.) Denver was the only city, of the 11 reviewed, where GSA staff documented their actions while reaching most fair consideration decisions. As a result, Denver was the only city where we could make an assessment (although still partial) of the cost-effectiveness of the RFQ process. We were not able to comprehensively evaluate the cost- effectiveness of the RFQ process across all 11 MAA cities, or to partly assess processes in any other city, because the documentation maintained was not sufficient for that purpose.

Despite their limitations, data available on the RFQ process in Denver indicate substantial differences in savings realized, depending on the types of local telecommunications services acquired; therefore, this process may not be cost-effective for acquiring all types of local telecommunications services. GSA used its MAA contracts in Denver to acquire two types of services: one type is a large telephone line, known as a trunk, which is used to interconnect a customer-owned switch, called a private branch exchange (PBX), to the contractor’s network; the second type is a voice telephone line served by a switch that is owned and operated by the contractor. According to our evaluation of Denver’s records for 119 fair consideration decisions that preceded award of task orders for these two types of services, the benefit of the RFQ process (over the life of the contracts) varied between the two. Specifically, in five of the eight cases where GSA sought to buy PBX trunks, the MAA contractor waived or reduced service initiation charges, reduced its monthly recurring cost, or both (no additional benefits were derived by this process in the three other cases). For PBX services, the net savings were substantial—an estimated $790,000.

In contrast, for switched voice services, the benefits of using the RFQ process were less substantial, and the available data suggest that they were not sufficient to offset the savings deferred while the process was completed. In 23 of 111 cases, additional cost or price reductions were obtained in the form of waived or reduced service initiation charges that did offset the value of savings deferred. However, in 88 cases, the benefit realized did not offset the deferred savings. Thus, using the RFQ process to acquire all switched voice services instead of taking immediate advantage of low MAA contract prices was not cost-effective.

GSA was not able to maximize the value of the RFQ process for the benefit of its customers, however, because it did not institute performance measures that would allow it to gauge cost-effectiveness and determine where the RFQ process would be most suitable for acquiring local telecommunications services, or that would aid in identifying where its processes could be improved. Furthermore, because adequate documentation of fair consideration decisions was not maintained throughout this program, GSA does not have the data it would need to evaluate its processes throughout its MAA cities and to make improvements. As a result, GSA is unable to direct the most suitable and cost-effective use of the RFQ process in the administration of its MAA contracts.

Conclusions

Inconsistencies in GSA’s process and practices for determining how it awards MAA task orders to its contractors are hampering its ability to appropriately administer these contracts; because these inconsistent processes are not transparent, contractors may not be able to compete most effectively. In addition, weaknesses in documenting fair consideration decisions and inadequate oversight of the process undermine GSA’s ability to assure customer agencies, MAA contractors, and the Congress that the procedures it followed to award MAA task orders were always appropriately and fairly applied. Further, because it did not establish measures that would enable it to learn from the fair consideration experiences in its regional offices, GSA was unable to gauge the cost-effectiveness of RFQ processes so that it could make the most suitable and effective use of RFQs to acquire local telecommunications services. As a result, GSA cannot provide assurance that its MAA fair consideration processes are sound, and that they provide the government the maximum benefit from the MAA contracts.

Recommendations for Executive Action

We recommend that the Administrator of General Services establish a common process for GSA to consistently follow in reaching its fair consideration decisions under the MAA contracts, and that he direct the FTS Commissioner to oversee the proper application of this process. This common process should include a uniform time frame for comparing MAA contractor prices, and it should specify the cost elements (such as reconfiguration costs) to be considered in those comparisons. Should local conditions warrant deviation from this common process, we recommend that GSA document these deviations and communicate them to GSA’s MAA contractors, so that all MAA stakeholders have a clear and consistent understanding of the process being followed. This process should include the management oversight necessary to ensure adherence to the FAR prohibition against the use of agency preference in decisions on task orders valued at more than $2,500.

We also recommend that the Administrator of General Services direct the FTS Commissioner to establish and apply uniform guidelines for documenting fair consideration decisions that are sufficient to ensure that GSA appropriately reaches its decisions to award task orders. For each fair consideration decision, this documentation should include the rationale for the decision; the supporting contractor price comparison; and support for other factors considered in reaching the decision, such as technical and past performance considerations, as appropriate.

We further recommend that the Administrator of General Services direct the FTS Commissioner to develop performance measures to determine when the RFQ process best achieves program goals. Once GSA has outcomes for these measures, it should evaluate the results of its RFQ process to identify potential improvements and to determine its most suitable and cost-effective use.

Agency Comments and Our Evaluation

In written comments on a draft of this report, the Administrator of General Services agreed with our recommendations and indicated that GSA was acting to implement them. Specifically, GSA has created draft guidance on its fair consideration process under MAA procurements, and it plans to disseminate this guidance to all its FTS regional offices by April 11, 2003. According to the Administrator, this guidance addresses all our recommendations and will ensure consistency in the fair consideration process and supporting documentation. GSA also provided technical comments that we have incorporated into this report as appropriate. GSA’s written comments are presented in appendix III.

As agreed with your office, unless you publicly announce the contents of this report earlier, we will not distribute it until 30 days from its issue date. At that time, we will send copies of this report to the Ranking Minority Member, Committee on Government Reform, and interested congressional committees. We will also send copies to the Director of the Office of Management and Budget and the Administrator of the General Services Administration. Copies will be made available to others on request. In addition, this report will be available at no charge on our Web site, at http://www.gao.gov.

Should you or your staff have any questions on matters discussed in this report, please contact me at (202) 512-6240. I can also be reached by E- mail at koontzl@gao.gov. Other key contributors to this report are Scott Binder, Harold Brumm, Barbara Collier, Kevin E. Conway, Frank Maguire, Mary Marshall, Charles Roney, and Michael Stiltner.

Appendix I: Termination Charges and Service Initiation Charges

At your request, we evaluated the effect of contract termination charges and contract service initiation charges (SIC) on the results of fair consideration decisions for awarding task orders in cities with multiple- award Metropolitan Area Acquisition (MAA) contracts. Under acquisition contract law, agencies are permitted to consider termination charges and SICs in contract award decisions.

Our analysis of termination charges showed that they had minimal impact on fair consideration decisions. The General Services Administration (GSA) included these charges in 16 contract price comparisons in Dallas, the only city in which they were relevant. Termination charges had a direct effect on 5 of 16 fair consideration decisions; in other words, those 5 decisions might have resulted in an award to another contractor if Dallas had not included the termination charges as part of its contract price comparisons.

Our analysis of SICs showed that they were included as a cost factor in GSA’s fair consideration price comparisons in 7 of 11 MAA cities: Boston, Cleveland, Dallas, Indianapolis, Minneapolis, New York, and Philadelphia. In these 7 cities there were 272 fair consideration decisions that included SICs in price comparisons, and SICs were a deciding factor in 61 of these decisions. That is, if SICs had not been part of GSA’s analyses, the award decision would have been issued to another contractor in 22 percent of those decisions. SICs did not affect more decisions primarily because of the period of time used in comparing contractor prices. In 90 percent of fair consideration decisions where SICs were identified as a cost factor, GSA used the contract life-cycle period as the evaluation time frame. When SICs were amortized over the life of the contract, these charges were usually not large enough to influence fair consideration decisions.

For the balance of the decisions, SICs were not included in price comparisons, the treatment of SICs could not be determined, or cost comparisons were not completed: In all 44 decisions in Los Angeles and in 9 decisions in Boston, no SICs were included in fair consideration price comparisons.

Contract price comparisons were not completed to support four fair consideration decisions in Boston, one in Philadelphia, and one in Atlanta, because only one MAA contractor was responsive to their RFQs. A contractor price comparison was also not completed to support one fair consideration decision in New York City, where the award was based on the urgency of the requirement.

In all nine decisions in St. Louis, seven decisions in Boston, five decisions in New York City, and two decisions in Indianapolis, we could not determine whether SICs were used in making fair consideration decisions because the documentation was not sufficient to permit us to make that determination.

In the remaining MAA city, Denver, SICs were not included in comparisons of contractor prices; only monthly recurring charges were included for comparison purposes. However, in 22 of its 128 price comparisons in Denver, GSA did cite the value of SICs in recommending that task order awards be made to contractors with a higher monthly recurring cost for services, because the agency could save more money over the contract life; we verified the accuracy of those analyses. To show the total cost of the MAA service in those cases where the recommended contractor charged SICs, GSA staff in Denver disclosed these charges as a separate item in the decision results presented to customer agencies. This disclosure was an amortization analysis indicating the time that it would take for monthly MAA contract savings to amortize that one-time cost.

Appendix II: Objectives, Scope, and Methodology

In our review of the Metropolitan Area Acquisition (MAA) contracts managed by the General Services Administration (GSA), our objectives were to determine (1) whether GSA’s fair consideration process varies within or among cities, and if so, whether or not variations affect the process results; (2) whether GSA’s documentation properly and appropriately supports its fair consideration decisions; and (3) whether the use of Requests for Quotations in the fair consideration processes followed by GSA is cost-effective. We also determined whether contract termination charges and service initiation charges affected GSA’s fair consideration decisions.

We reviewed all fair consideration decisions made by GSA during calendar year 2001 as part of the MAA contracts’ service ordering process. To determine whether there were variations in the fair consideration process, we reviewed the fair consideration procedure outlined in the MAA contracts, applicable acquisition guidelines, and GSA Federal Technology Service guidance and direction on the fair consideration procedure. Using the decision documentation maintained by the GSA regional offices, we then reviewed the steps taken by those offices in conducting their fair consideration processes. We gathered and assessed documentary and testimonial explanations for variations within or among MAA regional offices in their fair consideration processes.

To determine whether GSA’s documentation properly and appropriately supports its fair consideration decisions, we reviewed appropriate federal contract administration guidelines including the Federal Acquisition Regulation (sections 4.801 and 16.505) and Office of Federal Procurement Policy guidance (May 4, 1999, Memorandum for Agency Senior Procurement Executives regarding “Competition and Multiple Award Task and Delivery Order Contracts”), as well as MAA contract language outlining the fair consideration procedure. We then reviewed the documentation maintained by GSA’s regional offices to support fair consideration decisions. This documentation included, where available, contractor price information, GSA’s analyses that compared contractor prices, and other memorandums supporting and documenting the decision process. We also reviewed the task order documentation prepared by GSA following its fair consideration decision, in order to match the service ordered with the decision reached.

To determine whether the use of Requests for Quotations (RFQ) in the fair consideration processes followed by GSA is cost-effective, we reviewed regional offices’ documentation to determine whether data were available that would permit the evaluation of time taken to complete the fair consideration process. Following our review of the documentation, we selected Denver as a multiple-award MAA city where the documentation available was sufficient to permit evaluation of key aspects of that process, such as determining the approximate time taken to complete the RFQ process and the benefits derived from that additional competition. Specifically, we used data regarding the RFQ issue date and the date when Denver completed its analysis to determine the time taken to complete that process in the 79 decisions where those data were available. In the 40 other decisions where data were not available regarding the complete process (3 cases pertaining to PBX service and 37 cases pertaining to switched voice services), we assumed that the process was completed at the same time that GSA received the final contractor RFQ response. We also examined documentation to determine, for each decision, any additional benefit realized as a result of the RFQ process, such as lowered monthly prices or waived or reduced service initiation charges. Where data were available to determine whether the value of benefits derived from the RFQ process justified the time required to complete that process, we compared pre-MAA prices for services with MAA prices, in order to calculate a baseline savings provided by the MAA contracts. We then evaluated the cost of the RFQ process exclusively in terms of the monthly savings that were deferred until the fair consideration process was completed. We did not include the labor cost expended by GSA or its MAA contractors in completing this process.

To determine the effect of contract termination charges and service initiation charges on fair consideration decision results, we reviewed the price comparisons that were prepared by GSA regional offices. Where applicable, we calculated prices for services with and without these additional charges to determine whether the decision supported was influenced by these charges.

We conducted our review from May 2002 through February 2003, in accordance with generally accepted government auditing standards.

Appendix III: Comments from the General Services Administration