GSA, Defense reach agreement on acquisition policies

GSA will not hold Pentagon funds over from one fiscal year to another, in keeping with Defense legal interpretations.

The General Services Administration announced Tuesday that it has agreed to honor the Defense Department's interpretation of appropriations law when placing orders for Defense buyers.

In an agreement signed Dec. 4 by Shay Assad, director of defense procurement and acquisition policy, and Dec. 6 by GSA Chief Acquisition Officer Emily Murphy, GSA officials outlined a series of steps the agency will take to placate long-standing Defense concerns about interagency contracting.

The two agencies have disagreed about when federal law requires the clock to start counting the time remaining on contracts for services purchased on an annual basis, also known as "severable services" contracts.

GSA's position continues to be that it has about 90 days after a fiscal year ends to obligate money from an agency to vendors. Defense says no money can be held over from one year to the next, and GSA has promised to abide by that rule for all Defense purchases made through it.

"What we're doing here is complying with what the customer is asking us to do," said David Bibb, GSA deputy administrator, speaking to reporters Tuesday.

In the course of removing money held over from previous fiscal years from its books, GSA returned about $600 million to Defense during fiscal 2006, Bibb said. Money also was returned during fiscal 2005, but Bibb said he did not recall the exact amount.

The result of GSA's decision to acquiesce to Defense's interpretation will be that Defense must place its GSA orders earlier in the year than it might have previously, said David Drabkin, GSA's deputy chief acquisition officer. He added that GSA revenue should not necessarily suffer as a result.

Federal agencies oftentimes have yet to spend more than a quarter of their budget by the fourth quarter, but the Defense restrictions on holding funds over between fiscal years pertain to purchases made both inside the Pentagon and through outside agencies, Drabkin said, adding, "They'll have that challenge whether they spend it on themselves or spend it with us."

"There's no question that this is going to make it all a little tougher, but there also are tools that you could use to mitigate some of its effects," said Stan Soloway, president of the Professional Services Council, an Arlington, Va.-based contractor association. Rather than send over a purchasing request to GSA all at once, he said, Defense could send the money in phases to accomplish preliminary tasks earlier in the year.

Nonetheless, he praised the agreement, saying it clarifies a point of contention.

The memo outlining the agreement also detailed 22 acquisition areas on which GSA and Defense will work together. Among them are ensuring consistent purchasing practices across all 11 GSA regions.

Observers long have noted that GSA headquarters does not have direct authority over the regional administrators, but Bibb said standardization will occur. "GSA has operated as a matrix of operation for a long time," he said. "The central office issues the policies, controls the funding [and] controls the award pots. And not only that … [it] establishes the collaborative relationship that causes all this to work."