Mergers and acquisitions

The proposed reorganization of the General Services Administration took a step toward reality last week when Rep. Tom Davis (R-Va.) introduced legislation that would merge the agency's two acquisition arms, the Federal Supply Service and Federal Technology Service.

The bill would combine the organizations' funds and encourage experienced federal employees to take new jobs in acquisition roles.

The House Government Reform Committee late last week passed the General Services Administration Modernization Act with unanimous support and no debate. Davis, chairman of the committee, sponsored the bill. Rep. Duncan Hunter (R-Calif.), chairman of the House Armed Services Committee, co-sponsored the bill.

During a markup session of the bill last week, Rep. Henry Waxman (D-Calif.), the committee's senior minority member, said he would have preferred to have had more time to analyze GSA's problems, but he said that he supported the legislation.

If Congress passes it, the bill would provide a statutory framework for the agency's internal reorganization efforts so that changes will be reflected in federal law.

The bill proposes to abolish FSS and FTS, two of GSA's three major divisions, and replace them with a single Federal Acquisition Service. It also would merge the agency's General Supply Fund and Information Technology Fund into a single Acquisition Services Fund.

The Public Buildings Service, the agency's third major component, would not be affected by the bill.

Agency officials are already working on a reorganization plan based on criteria that Davis has outlined in the bill. That decision came in response to a series of events, including revelations that some FTS employees misused the two funds, for example, by paying for services such as building construction out of the IT fund. It is also part of a trend in government to consolidate services and reduce redundancies.

The funds and the organizations were made separate originally because IT purchases used to be easy to define and separate from other sorts of products and services, according to proponents of the reforms. Now, because IT often mixes with other products and services, such as network cabling laid during a building's construction, the lines are much less distinct.

Davis said the bill would allow GSA to offer goods, services and IT together in one acquisition, rather than forcing GSA employees to judge what qualifies as an IT purchase.

"This bill begins to remove the old structures that inhibit efficient federal purchases," he said. "The federal marketplace should reflect the best of the commercial marketplace, both in the products and services we buy and the way we buy" them.

The bill would also allow agencies to create incentives to keep experienced government employees on the payroll in acquisition positions, including a provision to allow some retirees to return to the government without losing their pensions.

At the brief markup session, Rep. Carolyn Maloney (D-N.Y.) successfully introduced an amendment that allows the GSA administrator to appoint the best-qualified candidate for commissioner of the Federal Acquisition Service. The original bill required the commissioner to be a political appointee, not a career government employee.

Much of the bill's impact, should it pass, will depend on just how GSA officials make the changes, said Olga Grkavac, executive vice president of the Enterprise Solutions Division of the IT Association of America.

"I think that the bill accurately reflects Chairman Davis' public statements and does not contain any surprises," she said. "The key test will be how FSS and FTS are actually combined, and that level of detail is not, and should not be, in legislation."

Susan Marshall, assistant administrator of GSA's Office of Performance Improvement, said the bill is not different in any significant way from proposed legislation that GSA officials drafted and submitted for consideration.

GSA Administrator Stephen Perry formed a steering committee earlier this year, instructing them to deliver a draft reorganization plan by the end of May and a final plan by July. Marshall said the committee's work is on track to meet those targets.

The impact of the FSS/FTS merger is impossible to predict at this point, said Steve Kelman, professor of public management at Harvard University and former administrator of the Office of Federal Procurement Policy.

"It's hard to say," he said. "I think that Davis is trying to do the right thing in encouraging GSA to look for ways to be more effective and work better. My personal view is that the major thing the merger has the chance to accomplish is it gives GSA the occasion to re-examine the way those two organizations do business."

GSA officials recently have "done a pretty good job" of creating value for customers, Kelman said. But they have not done as well in some specific ways. For instance, they have not always negotiated automatic governmentwide discounts at retail businesses for government purchase card users.

"If the merger is going to have an impact, it's going to come indirectly" by prompting reflection on such lapses, he said. "The past track record is that sometimes [more direct] benefits appear, and sometimes they don't. I wouldn't bet the farm on the merger at the end of the day making much of a difference one way or another."

Merging the funds, however, is an important move, Kelman added. Many of the "so-called scandals" that erupted with some FTS employees last year revolved around confusion about the funds. FTS employees, who make purchases on behalf of their customers and bill the agencies for the cost plus a service fee, have run afoul of rules as it becomes harder to determine which category a given acquisition falls into, Kelman said.

Kelman said OFPP Administrator David Safavian is more progressive and open to innovation than his predecessor, Angela Styles. Apart from OFPP, though, Kelman believes the government's attitude toward procurement has darkened during the past few years.

"It's become much more cautious and oriented toward finding and combating scandals of various sorts," he said. "It's an environment that unfortunately is less conducive to the kinds of innovation-oriented, mission-oriented initiatives that Davis is trying to take."