More OMB oversight needed for governmentwide contracts

The Office of Management and Budget must step up its oversight of governmentwide acquisition contracts to make sure agencies are not paying too much for those services, according to the General Accounting Office.

The 1996 Clinger-Cohen Act allowed five agencies to create governmentwide acquisition contracts (GWACs) for information technology on a fee-for-service basis. Under GWACs, agencies can take advantage of prenegotiated, multiple-award deals from more than a dozen agencies including the General Services Administration's Federal Supply Service (FSS); the Departments of Commerce, Interior and Transportation; NASA; and the National Institutes of Health.

GWACs allow agencies to "streamline the acquisition process, operate more like businesses and offer increasing types of services to other agencies," according to GAO's report, "Contract Management: Interagency Contract Program Fees Need More Oversight" (02-734).

OMB requires agencies that operate the fee-for-service contracts to account for money spent and earned through GWACs. It also requires them to charge fees based on costs associated with running the programs, such as labor, materials, rent and administrative support. For example, GSA charges agencies a 1 percent user's fee.

But GAO found that agencies don't consistently report revenues and costs because OMB has never asked them for financial summaries and did not know that agencies weren't compiling the required information. As a result, there is no way to verify if fees are in line with costs, GAO said.

GAO also questioned the 1 percent fee charged by GSA for its services. "Despite consistently high earnings in the [FSS] program, GSA has not adjusted the 1 percent contract service fee it charges customers," the report said. "Program customers are, in effect, being consistently overcharged for the contract services they are buying, while GSA is using excess earnings to support other programs," the report said.

OMB guidance instructs agencies to send revenue in excess of costs to the Treasury Department's general fund, but GSA and other agencies are using the proceeds from GWAC fees to support other programs.

GAO recommended that OMB Director Mitch Daniels ensure that GWAC agencies align costs with revenues and compile annual financial reports. OMB should also address how agencies use the revenues from GWAC programs, GAO said. At GSA, for example, Administrator Stephen Perry should adjust the 1 percent fee to more closely reflect the program's cost, the report concluded.

In written responses to the report, the Interior Department and NIH said GAO's report would help them better manage their programs. However, NASA took issue with GAO's contention that the agency had not prepared financial statements, and GSA criticized GAO's characterization of the agency's revenues as exceptionally high.