GWAC fees raise concern

"Interagency Contract Program Fees Need More Oversight"

Federal agencies are using governmentwide contracts more than ever, but agencies, Congress and the Office of Management and Budget have little information about what is happening to the fees paid to use those contracts, the General Accounting Office said in a report released Aug. 26.

In the report, conducted for the Senate Governmental Affairs Committee and dated July 25, GAO stated that the agencies administering the contracts are not providing full proof to OMB that the fees they collect accurately reflect their operating costs.

OMB guidance on governmentwide acquisition contracts (GWACs) directs agencies to collect fees only to recoup their operating costs. Those agencies also are supposed to provide annual reports to OMB on their financial results.

However, the reports do not include many of the indirect costs, and many agencies that operate their GWACs under revolving funds have used extra funds from collected fees to support other programs instead of transferring those fees to the Treasury, the report states.

"OMB needs better information so that it can more easily identify management weaknesses when they arise and work with GWAC agencies to overcome them," the report states.

The primary example of the latter problem, according to GAO, is the General Services Administration Federal Supply Service's schedules program and its industrial funding fee. The schedules generate large earnings — particularly the information technology schedule. From 1999 to 2001, revenue from the fees exceeded the program's cost by almost 54 percent, or more than $151 million.

But rather than reduce the fee to better reflect the cost of operating the schedules program, GSA has been using the earnings to support the agency's stock and fleet program, GAO found.

GAO made several recommendations to OMB to improve the administration's oversight of GWACs, including requiring compliance with guidance and working with agencies for better understanding of the appropriate handling of earnings from fees.

GAO also recommended that GSA lower the fees on the schedules program. GSA pointed out the complexity of the process for changing the fee across all of the schedules, citing how the fees are included as part of the base price for vendors' products and services.

"However, given that the program has consistently reported earnings well in excess of costs for several years, we believe steps need to be taken now to begin the process of adjusting the fee," the report states.

GSA is now working with OMB to consider options for adjusting the fee as part of the White House's fiscal 2004 budget, according to the report.