Pursuant to the Federal Property and Administrative Services Act of 1949, the General Services Administration (GSA) was created to manage and acquire federal government space and administrative and operating supplies in order to eliminate duplicative functions within government and to establish a professional resource that would maximize the government’s effectiveness in obtaining supplies and services. Today, GSA’s Federal Supply Service is responsible for supplying and procuring goods and services through three major programs—the special order, stock, and schedules programs. In the special order program, agencies order items from GSA; GSA places the agencies’ orders with vendors; and the vendors deliver the items to the agencies. In the stock program, GSA orders items from vendors who deliver the items to GSA’s warehouses. Agencies order the items from GSA and receive the items from the warehouses. In the schedules program, agencies place orders directly with vendors holding GSA contracts, who deliver the items directly to the agencies. The Federal Acquisition Streamlining Act of 1994 (FASA) revised and streamlined the procurement laws of the federal government. Section 1555 of FASA (40 U.S.C. 481 (b) (2)) gives GSA the authority to establish a cooperative purchasing program through which state, local, Indian tribal, and the Puerto Rican governments could use GSA’s federal supply schedules program to purchase needed goods and services. Under section 1555, eligible governments, upon their request, could purchase items directly from supply schedule vendors under the same terms and conditions that GSA has established for federal agency purchases. The conference report on FASA indicated that individual supply schedule vendors would not have to make the products or services on the supply schedules available to nonfederal users, such as state and local governments, unless the terms of the schedule contract would so provide. FASA explicitly precludes GSA from authorizing any state, local, Indian tribal, or the Puerto Rican government to order existing stock or inventory from federally owned and operated, or federally owned and contractor operated, supply depots, warehouses, or similar facilities. Thus, FASA excludes these governments from purchasing goods and services from GSA’s federal stock program. The federal supply schedules program is one of GSA’s largest programs for providing goods and services to federal agencies. In fiscal year 1996, GSA’s sales through the schedules program accounted for about 72 percent, or about $4.8 billion, of the approximately $6.6 billion in agency purchases through GSA’s schedules, stock, and special order programs. As shown in figure 1.1, fiscal year 1996 stock program sales of about $579 million accounted for only about 9 percent of GSA’s sales, while fiscal year 1996 special order program sales of about $1.3 billion accounted for only about 19 percent of GSA’s sales. Products from the supply schedules program are available on single-award schedules, multiple-award schedules, and new introductory product schedules, depending on the commodity. Single-award schedules consist of contracts with one vendor for the delivery of a particular product or service to a specified geographic area. Prospective vendors compete for the GSA contract to provide the product or service to government agencies, normally at the lowest price. Multiple-award schedules consist of contracts awarded to more than one vendor for comparable (but not necessarily identical) commercial supplies or services for delivery within the same geographic area. New introductory product schedules provide the means for new or improved products to enter the federal supply system. Once a vendor’s product is accepted for inclusion on a new introductory product schedule, if sufficient demand for that item is generated after a 3-year period, the item is to be transferred to one of GSA’s other supply programs. GSA’s Federal Supply Service negotiates and awards contracts for products and services available through the majority of federal supply schedules. The Service issues solicitations, receives offers from prospective vendors, negotiates with them on product and service prices as well as terms and conditions of sale, and awards the contracts. The contracts are indefinite-delivery contracts that give vendors the right to sell goods and services to the government during the period of time that the contract is in effect. Contracts commonly are in effect for more than a 1-year period. Federal agencies order products and services directly from a vendor and pay the vendor directly. In fiscal year 1996, there were 146 schedules. GSA has responsibility for managing 133 schedules, and it has given the Department of Veterans Affairs (VA) responsibility for managing 13 schedules, including the schedule for pharmaceuticals and 12 schedules for medical equipment, devices, and supplies and certain food items, such as cookies and cereals. Fiscal year 1996 sales through VA’s schedules totaled about $1.9 billion. A large number of vendors negotiate contracts with the Federal Supply Service or VA in order to provide products to federal agencies. Vendors include businesses that manufacture products as well as dealers or distributors that sell and service products. In fiscal year 1996, GSA had about 5,300 contracts with vendors that supply goods or services either through its single-award or multiple-award schedules, while VA had about 1,257 contracts. About 74 percent of these contracts were with small businesses. (See app. I for a listing of the 146 schedules as well as sales made through the schedules to large and small vendors.) The supply schedules program provides several advantages to both federal agencies and vendors. For example, agencies have the option of ordering small quantities of commonly used goods and services without using the traditional procurement process. Also, agencies know that GSA is responsible for ensuring that all procurement regulations have been followed in awarding the schedules contracts and making items available. For example, multiple-award schedules conform to the requirements of the Competition in Contracting Act and are competitive in that participation has been open to all responsible sources. In addition, prices negotiated by the Federal Supply Service and the vendors are to be based on each vendor’s best discounts within certain categories of customers and sales information on top-selling items within product or service groups. Vendors also benefit because their commercial products are exposed to a large number of potential customers. Also, the vendors expend less effort to sell products to federal agencies if their items are available through the schedules program because of the reduced paperwork. For example, a business would not have to prepare a separate offer in response to agency solicitations for every federal agency it wants to supply. Since 1994, GSA has taken several actions that were intended to make it easier for federal agencies to obtain commercial goods and services through its supply schedules program. For example, GSA has simplified ordering procedures to reduce the amount of paperwork involved. In addition, agencies have the option of placing orders of $2,500 or less with any schedule vendor of their choice. Also, when placing orders of more than $2,500, agencies are no longer required to fully justify when an item is not purchased at the lowest price. Instead, agencies are to review at least three price lists or consider other alternatives on the schedules. To further simplify ordering through the schedules program, GSA is in the process of deploying an electronic ordering system for customer access to the full range of GSA supplies and services. GSA plans to have this system, which is to be available through the Internet, fully operational by the end of fiscal year 1997. GSA is also making the use of the supply schedules program optional on the part of all executive branch agencies and is eliminating mandatory use provisions in its contracts. In addition, GSA is requesting that vendors be as expeditious as possible and identify items that can be delivered faster than both normal and expedited delivery times. Vendors are also requested to identify items that can be delivered overnight or within 2 days. Maximum order limitations are also being removed, and GSA has developed new procedures allowing vendors to accept “any size” order. In addition, customers are encouraged to request price decreases from vendors before placing orders exceeding a certain size. Also, vendors are allowed to offer individual agencies price reductions without passing these reductions on to all other federal agencies. The federal supply programs were initially for use primarily by federal agencies and the District of Columbia. However, since 1949, Congress has authorized a variety of other entities to use GSA’s procurement services, including the federal supply schedules. For example, the Foreign Assistance Act of 1961 provides that the president may authorize certain countries, international organizations, the American Red Cross, and voluntary nonprofit relief agencies to use GSA’s sources of supply. Many Indian tribal governments also have been authorized to make purchases from GSA under the Indian Self-Determination and Education Assistance Act of 1975. In 1978, Gallaudet College, Howard University, and certain other charitable institutions or nonprofit organizations; as well as fire fighting organizations cooperating with the Forest Service, were authorized to make purchases through GSA. In 1992, Congress provided the governments of American Samoa, Guam, the Northern Mariana Islands, the Trust Territory of the Pacific Islands, and the Virgin Islands the authority to make purchases through GSA. In 1993, Congress authorized law enforcement agencies involved in counter-drug activities to make purchases through GSA. The 1993 report of the National Performance Review (NPR) recommended that state and local governments, grantees, and certain nonprofit agencies be allowed to use federal supply sources. In addition, NPR recommended that federal agencies be allowed to enter into cooperative agreements to share state and local government supply sources. The basis for the recommendation was the belief that consolidated government procurement actions tend to maximize the economic advantage of volume buying with lower costs to the taxpayer. The concept of cooperative purchasing was not unique to NPR. Cooperative purchasing has existed in varying forms since at least the 1930s when various governments started joining forces for the purposes of making intergovernmental cooperative purchases. In addition to the tangible benefit associated with cost savings, other benefits cited by members of such cooperative purchasing groups include the exchange of procurement information.