GSA to lower fees

The General Services Administration is cutting fees by a quarter-percent for vendors selling products through Federal Supply Service schedule contracts, which should translate to lower prices for agencies starting in 2004.

GSA decided to lower the 1 percent industrial funding fee to 0.75 percent, effective Jan. 31, 2004, at the urging of industry and the advice of an independent consultant. Pressure to lower the fee increased after a General Accounting Office report revealed that GSA was reaping millions in profits because of escalating schedule sales.

The lower fees will reduce the profits FSS is making on schedule sales, and because the fee is figured into every vendor's schedule prices, it should be reflected in lower prices for agencies, said Patricia Mead, deputy assistant commissioner of the FSS Office of Acquisition.

GSA plans to issue a proposed rule within the next 30 days announcing the new fee structure.

Like other agencies that oversee governmentwide contracts, GSA charges fees that are intended to bring in enough money for the agency to recover the costs it incurs in awarding and managing contracts.

But, according to a September GAO report, FSS is making millions of dollars in profit from the fees due primarily to the increasing revenues of the information technology and other professional services schedules.

This is an issue for vendors, who would like to know where those profits are going, said Patrick Neven, president and chief executive officer of reseller iGov.com.

Mead and Neven were speaking Dec. 3 at a conference sponsored by the Computing Technology Industry Association.

GSA has never lowered the fee before because of concerns that the price changes would be too burdensome for GSA, vendors and agencies, Mead said.

Because vendors build the fees into their prices, GSA and the vendors must renegotiate schedule contracts and make sure those changes are reflected in GSA and vendor systems. That is why the agency set a January 2004 deadline, Mead said.

Industry groups are praising this long lead-in time and the open process, but they are also worried that they will not get as much leeway in the future should GSA decide to adjust the fees again.

"The concern here stems from the fact that it's the first time," said Larry Allen, executive director of the Coalition for Government Procurement. "Next time, GSA wants the process to go faster."

Indeed, during the comment period on the proposed rule, GSA is looking for ideas on how to put in place a standard process for changing the fee so that it will be easier to do so in the future as revenues from the fee go up and down, Mead said.

Officials also want to develop a review process, because the GSA inspector general will likely "be following right behind us to make sure the change in price is passed on to the customer," Mead said.

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Millions in surplus

The General Services Administration's Federal Supply Service schedule contracts earned significant profits in fiscal 2001, according to the General Accounting Office numbers below. Reducing the fee from 1 percent to 0.75 percent should correct this problem and result in slightly lower prices for agencies.

Fiscal 2001 schedule results:

IT schedule orders -- $10.85 billion

Total schedule orders -- $16.48 billion

Fee revenues -- $168 million

Earnings (surplus fees) -- $56 million