GAO blasts agencies for profiting on interagency contracts

GAO blasts agencies for profiting on interagency contracts

Agencies using governmentwide acquisition contracts'especially those that buy goods or services through the General Services Administration's schedule contracts'often get taken to the cleaners on fees, the General Accounting Office reported yesterday.

The report, Interagency Contract Program Fees Need More Oversight, reviewed nine governmentwide programs and found at least five made a profit one or more times between 1999 and 2001. GSA's Federal Supply Service earned the most revenues, taking in between $39 million and $56 million over the three-year period.

FSS charges a 1 percent fee on all buys. Most of GSA's profit comes from the IT Schedule, where revenue grew 287 percent between 1997 and 2001 and comprises almost 66 percent of all schedule buys, GAO said.

GAO also looked at eight other programs:
  • Commerce Department's Commerce IT Solutions GWAC

  • GSA's Federal Technology Service contracts

  • Interior Department's GovWorks GWAC

  • NASA's Scientific and Engineering Workstation Procurement

  • National Institutes of Health's Chief Information Officer's Solutions and Partners 2, Image World 2 and the Electronic Computer Store 2 GWACs

  • Transportation Department's Information Technology Omnibus Procurement.


  • Only the GSA and NIH contracts made money from 1999 to 2001, but the earnings of FTS and NIH were well below those of FSS. FTS earned between $182,000 and $3.6 million a year, and NIH's contracts realized profits between $268,000 and $2.3 million a year. Commerce and Transportation lost money all three years.

    The Office of Management and Budget issued guidance directing agencies to charge fees that cover only the operating costs of their programs. Any extra money is supposed to go into the Treasury Department's miscellaneous receipts account, GAO said. Agencies managing GWACs, however, generally use a revolving fund or standalone accounts and apply the profits to offset losses from other programs, auditors found.

    OMB also requires managing agencies to submit semiannual financial summaries, including a description of their cost allocation methodologies, which few have done regularly, GAO said.

    GAO recommended GSA lower its FSS fees to reflect costs more closely and called for OMB to apply tighter oversight of the governmentwide contracts.

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