GSA pledges lower fees

The General Services Administration last week cemented its pledge to lower the Industrial Funding Fee (IFF) that is built into the prices of items on its schedule system, but most buyers will probably not even notice a difference.

GSA's Federal Supply Service (FSS) published a final rule allowing it to unilaterally change the fee's percentage rate and promised to lower it from 1 percent to 0.75 percent effective Jan. 1, 2004.

FSS generates most of its revenue through the fees, which are supposed to cover the program's costs. However, a General Accounting Office study last year found that from 1999 to 2001, revenue from the fees exceeded the program's cost by almost 54 percent, or more than $151 million.

Typically, companies add the fee to their GSA schedule prices and then pay it back to the agency like a tax, said Larry Allen, executive vice president of the Coalition for Government Procurement.

The numbers can seem staggering.

On Schedule 70 purchases, which cover information technology and services, agencies overall will save about $39 million this fiscal year, said consultant Richard Mackey, president of IT market analysis firm CapITal Reps LLC.

"They're putting almost $25 billion through the GSA schedules," added Alan Chvotkin, senior vice president and counsel of the Professional Services Council. "One percent of that is $250 million. A quarter of that is $62.5 million. That's real money over the course of a year."

However, it's not much real money when spread among all schedule purchases, said Hope Lane, director of GSA schedule services at Aronson and Co., a consulting firm in Rockville, Md.

"Even on a significant order of $1 million, it equals a $2,500 reduction," she said. "The IFF is being reduced to appease the government auditors who found that GSA was spending the IFF elsewhere in GSA."