GSA schedule sales up 30 percent

The summer of '96 is shaping up to be a hot one for vendors on the General Services Administration schedule. Scores for the first half of the fiscal year are in, and the verdict is that sales are running 33 percent ahead of last year's pace.

According to International Data Corp. analyst Jan Morgan, the main reason for the increase is the elimination of the previous maximum order limit of $500,000 for hardware and $50,000 for software. "Now the schedule is actually competing with the [indefinite-delivery, indefinite-quantity] contracts," she said.

Schedule sales also grew because buyers exercised the convenience of government credit cards and because customers who used the open market in the past have converted many of those purchases to the schedule.

"There are definitely GSA schedule sales this year that would have been on the open market last year," said John Campbell, vice president of sales and customer operations at Government Technology Services Inc.

This trend is fueled by a new ability to mix schedule and open-market purchases on a single order, he said.

That would add some small buys to the schedule, but the real difference may be in large orders, Morgan said. Until this year, vendors could not give agencies a discount below the schedule price, even for very large orders, so many buyers negotiated open-market prices that undercut the schedule, she said. Now GSA permits volume discounts on the schedule without requiring prices for all customers to hit the same level.

IDC found GTSI retained its spot as the No. 1 vendor on the GSA schedule, followed by Gateway 2000 Inc., the leading direct PC vendor. AmeriData Federal Systems is the second-leading reseller and is third on the list overall, while Dell Computer Corp. is the second-place direct vendor and is fourth overall. Pulsar Data Systems grabbed fifth place, thanks to spectacular sales growth.

That sales growth was in spite of federal shutdowns during the period, according to Gary Brown, director of sales for BTG Inc. "The government slowdown did impact GSA schedule sales," he said. BTG is sixth on IDC's list.

"Changes in government procurement policies and the elimination of the maximum order limit have had a dramatic impact on GSA sales for us," Brown said. "We have seen a significant increase over the same period last year, both in the size of orders and the number."

"We are definitely seeing an increase of 30 percent to 40 percent on GSA, year over year," Campbell said. That number is in line with IDC's estimate of the market's growth but is higher than IDC credits GTSI. Sales growth may accelerate as the summer buying season hits full speed. "[The growth] is going to be a higher percentage here in the next two months," he said. "It is going to be a wide-open and crazy busy season on the GSA schedule."

Toshiba America Information Systems Inc.'s sales grew 50 percent, according to IDC, and the company is pleased to be ranked seventh, said Jan O'HARA, the area manager for government sales. The company is especially happy because in addition to its own direct sales, four of its letter-of-supply holders are also in the top 10, O'HARA said.

"GSA has made [the schedule] much more attractive to use and easier to use," said Jim Connal, managing director of federal sales for Gateway 2000. That is because schedule reforms eliminated past limits on the size of orders and allowed greater flexibility in letting vendors add products and change prices.

"We can offer the falling prices much more quickly than in the past," Connal said. "Now we can stay right with the marketplace" instead of lagging behind commercial market trends, he said. "The whole approach from GSA is more conducive to doing business."

"The biggest reason is that there is no maximum order limit," Campbell said. "We have had 15 to 20 orders over a million dollars this year. It can add up real quickly."

"We have had orders in the multimillion-dollar range," Brown said. "It only takes a couple of those to make a big difference."

Some of the sales on the schedule have replaced purchases that would have been on the open market, some would have been on IDIQ contracts and some of the increase is the result of a growing market, Campbell said.

"There are definitely GSA schedule sales this year that would have been on the open market last year," he said. With the on-again, off-again availability of the Air Force's Desktop IV contract and the Desktop V contract only recently taking off, many Air Force customers have turned to the GSA schedule too. "We have got some Air Force customers using the GSA schedule that would have used Desktop IV last summer," Campbell said.

The overall market for PCs is growing at 4 to 8 percent this year, and that is also contributing to the increase in GSA sales, he said.

Part of the reason the GSA schedule is gaining momentum now is that it took a while for procurement officers to become familiar and comfortable with the new rules, Brown said. "The Federal Supply Service and GSA have done a better job training procurement officials," he said. "Some of the buyers were reluctant to place large orders."

"There have been several recent, significant changes in the policies and procedures for use of the multiple-award federal supply schedule program for information technology which make doing business with the government simpler, faster and more businesslike," the Federal Supply Service said in a written response to questions.

Those changes include:

* Removal of a requirement for buyers to list planned orders of more than $50,000 in the Commerce Business Daily before issuing the order.

* Simplified ordering, by comparing three schedule price lists on electronic ordering systems and placing orders directly with the vendor without reporting to GSA.

* The elimination of the maximum order limit.

* Permitting special price reductions for large orders without automatically requiring that the contract price be lowered.

* Blanket purchase agreements, which let agencies set up accounts with vendors to fill recurring needs at discounted prices.

* The GSA Advantage electronic ordering system, which lets customers browse for products and place orders.

* The Government Commercial Credit Card, which lets agencies make purchases directly through GSA Advantage from the 75 percent of vendors who accept the card.