Contracting bazaar draws Hill scrutiny

A growing number of federal agencies have discovered they can generate revenue by serving as middlemen who provide contract administration and even technical representatives on contracts for other agencies.

What started out in the early 1990s as a way for agencies to pool their buying power has turned into a veritable procurement bazaar. Now a Senate committee is asking whether too much of the business of government has become business.

"We are concerned that there may be substantial variations in the fees being charged for similar services," wrote Sens. Fred Thompson (R-Tenn.) and Joe Lieberman (D-Conn.) to the General Accounting Office April 25. "We are also concerned that the fees being generated may substantially exceed the actual costs and circumvent congressional oversight and control."

Thompson, chairman of the Senate Governmental Affairs Committee, and Lieberman, ranking Democrat on the committee, want GAO to "evaluate" the situation.

They are not calling for an "investigation" because they are not certain that anything improper is occurring, a committee staff member said. But "we're talking about a lot of money," and the senators think it is time for the committee to exercise its oversight responsibility, she said.

Much of the contracting comes from information technology.

For example, the Federal Technology Service, a division of the General Services Administration, has a fund of nearly $6 billion that it uses to buy IT products and services for agencies. Agencies must reimburse the fund and pay fees for FTS' services.

GSA's Federal Supply Service supplies federal agencies with more than $20 billion annually in goods and services. FSS charges contractors fees of 1 percent quarterly.

Companies have been wary as the number of agencies offering governmentwide acquisition contracts — including the Defense Department, the Transportation Department, NASA and the National Institutes of Health — has increased, an IT trade association official said.

IT firms are concerned because they must spend a lot of money just to "win a fishing license" that entitles them to go after sales, the official said.