Senate measure targets FTS, other procurement services

A provision in the Senate's Defense Authorization Bill could have dire consequences for providers of assisted procurement services, such as the General Services Administration's Federal Technology Service.

The measure would forbid defense agencies from paying more than a 1 percent service fee for such a procurement. FTS offers fee-for-service acquisition services, in which it buys goods and services on behalf of agencies and charges them cost plus a percentage.

The government offers other services on a similar model, including the Interior Department's GovWorks program and the Department of Veterans Affairs' BuyIT.gov. Fees vary from 2 percent to 4 percent or more.

"The net effect for GSA's Federal Technology Service is [that] it would put everything they do outside of the telecom business out of business," warned Larry Allen, executive director of the Coalition for Government Procurement. "It's pretty significant for FTS."

GovWorks and similar services "are in the same boat," he added. "They'd either have to find a way to survive on 1 percent or they'd have to find something else to do."

Allen said he believes the provision was added in the wake of the scandal involving some of FTS's Client Support Centers around the country, in which agency officials were found to have misused funds and broken procurement rules. Investigations are still ongoing into many of the centers.

"I think this is a message to FTS: Clean up your act," he said.

Jonathan Aronie, a lawyer who specializes in government contract work, disagreed with Allen about the motivation.

"This has to have been a long time in the making," said Aronie, a regular columnist for Federal Computer Week. "I think agencies get frustrated with the administrative fees and start to say, 'Why don't we just do this ourselves?' Even if in the big picture they're saving money, the fees still gnaw at them."

Apparently there is not a similar provision in the House version of the bill, but Aronie predicted it will pass the Senate.

"It's one of those things that's kind of hard to object to," he said. "The fees seem to add cost to the taxpayers. You have to dig deeper than that to determine whether the economies of scale pay for themselves, [but on the surface] they look like they cost money and that's why you're not going to have many people object to this."

The degree to which it would affect FTS or other procurement programs depends on how much of their revenue comes from Defense, Aronie said. FTS officials could not be reached for comment.

The measure allows Defense officials to waive the requirement when national security is at risk.