The ups and downs of Schedule 70

Despite competition and recent limitations, FSS' IT schedule is still a top choice for hardware, software

When any of the 12 bureaus that make up the Commerce Department need to order PCs or services such as programming, chances are their procurement officers will use the General Services Administration's Federal Supply Service's IT Schedule 70.

'A large portion of what we buy is IT, and we certainly rely on schedules for a lot of the routine stuff like IT support services and equipment,' said Michael Sade, director for acquisition management and procurement executive of Commerce's Office of Acquisition Management.

Sade is just one of Schedule 70's thousands of customers, who range from major federal agencies such as Commerce to state government agencies and even local municipalities that order off of the schedule through cooperative purchasing.
Schedule 70, which offers millions of pieces of general-purpose IT equipment, software and professional services to other agencies through more than 5,000 vendors, has been around since the mid-1970s.

Roger Waldron, acting senior procurement executive and acting deputy chief acquisition officer for GSA, said this group of contracts is analogous to a commercial catalog.

'We award basic contracts and negotiate fair and reasonable prices based on information vendors provide us on pricing and policies. The ordering process allows customers to order directly from vendors.'

Working the schedule

Waldron explained that there are two sets of ordering procedures. Federal Acquisition Regulation 8.44 sets up procedures for civilian agencies, while the Department of Defense has its own set of ordering procedures through Section 803. For orders of basic products and services below $2,500, agencies can go to any vendor on the schedule and place an order. Over that, they must survey GSA Advantage, GSA's electronic catalog; look at the offerings of at least three vendors for pricing, product description, warranty and other relevant issues; and only then place an order. Waldron added that if the order is above the maximum threshold, the agency must also ask the vendor for a price reduction.

'Contractors can offer a price reduction or not,' said Waldron. 'Agencies can still place the order, but we're looking to get the best value out of the program. In fact, they can ask for a discount even if their order is below the maximum order threshold. It's part of the flexibility of the program.'

Because, under FAR 8.44, orders that need a statement of work must be sent to at least three contractors for a quote if the project is over $2,500, using Schedule 70 streamlines the process. Indeed, it's one of its values, along with competitive pricing.

'We've already done the basic work with negotiating prices. We've done the vetting of companies and products,' said Waldron. 'So at the time of order, customers can just focus on the scope of work, the best value and the ability of the contractor to meet their needs. It prevents reinventing the wheel for agencies. We do all the prerequisites.'

DOD, however, must address Section 803, which requires contracting officers to create a statement of work and an opportunity for at least three contractors to bid on service orders over $100,000.

GSA addressed this challenge through e-Buy, an electronic request for quote application launched four years ago.

E-Buy essentially lets a contracting officer at any agency, including DOD, post a statement of work by selecting a category and vendors to be notified, entering the requirements and the amount of time the RFQ is to remain open. The contractors receive e-mail notification of the requirements and can submit quotes.

'E-Buy provides notice to all GSA multiple-award schedule contractors when agencies post their requirements on it,' Waldron said. 'In the case of DOD, the [Defense Federal Acquisition Regulations] specifically mention e-Buy as one method to provide notice to all the contractors.'

If a contracting officer receives fewer than three offers, an award still can be made as long as a notice was sent to all qualified companies, Waldron said.

He noted that the first year e-Buy was established, about 12,000 RFQs were submitted through the tool. Last year, there were 45,000, and he is expecting 10 percent more this year.

Whether civilian or DOD, any agency that orders off of Schedule 70 will pay a fee of 0.75 percent. The fee is embedded in the order, and contractors remit quarterly to GSA. Customers who need the help of a GSA contracting officer pay an additional 2 to 4 percent for commodity purchases and 3 to 5 percent for services acquisitions.

A changing market

Schedule 70 is the largest of the 43 schedules GSA runs and makes up more than one-third of federal IT spending. In fiscal 2005, Schedule 70 had $16.5 billion in sales, according to market research firm Input of Reston, Va., a 2 percent decrease from $16.8 billion in 2004.

According to Neal Fox, a consultant and former FSS assistant commissioner for acquisition, DOD always has been the largest customer, 'to the tune of 55 to 60 percent of sales,' he said.

The slip in sales comes after years of double-digit leaps. In 1995, sales were $1.8 billion. By 2000, they had grown to $9.2 billion and in 2003 reached $14.7 billion, according to GSA. Input noted that the decline came after five years of annual increases that averaged more than 15 percent.

What accounts for the slowdown, experts say, are new customer behaviors and rising competition from governmentwide acquisition contracts and other multiple-award contracts, along with the contracting problems GSA faced a couple of years ago and the transition from a mostly commodities-based schedule to one more heavily weighted toward services.
Adding to the changing environment is a reorganization GSA is currently undergoing, which includes consolidating FSS and the Federal Technology Service into the Federal Acquisition Service. Congress recently signed off on the reorganization, and the Senate Homeland Security and Governmental Affairs committees also last month passed legislation to create OneFund, which will merge the IT and General Supply funds.

'There are many factors at play in Schedule 70 sales,' said Ray Bjorklund, senior vice president and chief knowledge officer at market research firm FedSources of McLean, Va. 'Certainly, the procurement policies of the leading customer, DOD, have dampened the interest in using the schedules. Even though DOD policy has continuously supported the use of schedules under the principles of the Economy Act, the additional levels of oversight applied in decisions to use the schedules have caused DOD customers to seek paths of lesser resistance in the procurement process.

The contract problems go back to an audit released in 2004 by GSA's inspector general that cited repeated problems across the 11 regional offices of GSA's Federal Technology Service.

GSA's Get It Right campaign was established to correct these problems by improving the acquisition process with more oversight, education and training. Some experts haven't seen it as being very helpful, but rather a hindrance to timely acquisitions.

'They turned it into a get-it-perfect program, which never works,' Fox said. 'They brought in all these checkers checking the checkers, so it takes forever to take an assisted-services contract through. Any time you convince your customers you can't do your job, that's foolishness.'

Larry Allen, executive vice president of the Coalition for Government Procurement, an industry association in Washington, said Get It Right is too substantive. 'They kept their foot on the Get It Right pedal, creating an outsized impact. A little Get It Right goes a long way. A lot of Get It Right creates a scorched-earth policy. Both GSA staff and customers feel that way. You have to jump through more and more successive hoops.'

'GSA is a bit in the cross hairs now,' said Stan Soloway, president of the Professional Services Council, another industry association in Arlington, Va. 'What they did with Get It Right in terms of management controls should have always been there. A lot of us in industry have created the One GSA Coalition to give one voice as they go through their reorganization. The physical reorganization is not unimportant, but we're more interested in the agency reflecting modern business practices and consistent policies. They're still working through that.

'What GSA should be thinking about now as they go through their reorganization is a wholesale review of their business model. Do we have the right schedules? Is it the right mix? The world has changed.'

Soloway pointed out that there are now more than 20 enterprise multiple-award contracts that compete with Schedule 70.

'They offer very similar scopes of work and complexity like GWACs, but are intended just for that agency,' he said. 'So, we're going from a world of one-off single contracts to GWACs to pulling back to internal contracts like the Enterprise Acquisition Gateway for Leading Edge (Eagle) solutions for the Department of Homeland Security and SeaPort-e for the Navy. It has to have an effect.'

In fact, Commerce's Sade said agencies in his organization use a lot of other contracts.

The National Oceanic and Atmospheric Administration, for example, orders workstations from NASA's Scientific and Engineering Workstation Procurement program. And Commerce has its own GWAC, COMMITS NexGen, which offers IT services through a pool of small-business partners.

'It's part of our mission, which is to support small business,' Sade said. 'It's been quite successful in helping small businesses grow.'

Another challenge GSA faces is represented by the general philosophy about schedules held by Commerce.

Sade said department officials believe schedules are more for commodity-type acquisitions. For more specialized purchases, they don't use schedules.

'We're trying to push performance-based contracting,' he said. 'We're looking for innovative solutions. When you're using a schedule and using it right, you're tied to their products and solutions.'

Fox added that another problem GSA has seen emerge is that customers are having difficulty keeping Schedule 70 separate from the Mission Oriented Business Integrated Services schedule.

'Customers many times like to mix and match the scope, especially if you're buying complex services,' he said. 'When I was assistant commissioner, I tried to solve the problem with a one-schedule program so you wouldn't have divisions. I think that's something GSA needs to do'merge the schedules to where they're no longer separated.'

Through the vendors' eyes

It's no surprise that government contracts are irresistible to most IT vendors. Schedule 70 has a broad spectrum of contractors that include large and small businesses, 8(a), small disadvantaged businesses, women-, veteran- and service-disabled veteran-owned businesses, and HUBZone businesses.

Schedule 70 contracts have a base period of five years with the possibility of up to three five-year options for a total of 20 years. There's no closing date for the schedule, and solicitations are updated and refreshed as needed.

Aside from profit, what motivates companies to seek a place on Schedule 70 is that once an item is awarded, the schedule ordering procedures are far easier than dealing with RFPs and other contracting methods, said Steve Charles, co-founder and executive vice president of immixGroup Inc. of McLean, Va.

However, the experience of applying for the award can vary, depending on which contracting officer is assigned and how complicated the contracting process is, he added.

The most straightforward method is to use eOffer, a Web-based application that allows vendors to prepare and submit their schedule offers and contract modification requests electronically.

'It's a cookbook approach for putting together a contract with simple disclosure and a simple offer,' said Charles. 'But I wouldn't recommend it for more complex offers for a company that sells in different ways to different customers in the commercial marketplace.'

Sally Cook, program manager of GTSI Corp. of Chantilly, Va., an IT product and solutions provider that focuses exclusively on federal, state and local government customers, is enthusiastic about eOffer.

'Anyone wanting to get on a new schedule now will find it daunting,' she said. 'GSA tells you it will take 90 days, but it will take from 90 days to a year, depending on how well you're doing it and how good the contracting officer is. Schedule 70 eOffer is much easier. It gives you more direction and tells you immediately if you haven't done something. You get step-by-step help along the way.
'People are very helpful,' she said, 'depending on what they know. But I think they work them too hard and give them too many schedules. My current officer has 80 schedules and we send him at least six modifications a week.'

ITS Corp. of Oxnard, Calif., provides IT and engineering solutions to federal government agencies and has been selling to that market for over 30 years. It was awarded the Schedule 70 contract in 1998.

'It was our first experience with GSA,' recalled Rosanne Satterfield, ITS' senior vice president for GSA relations. 'Our first customer through the schedule was the Customs Service, and it was a very small piece of business. Today, the schedule is about $100 million, or 20 percent of our business.'

Satterfield found the process very comprehensive and self-explanatory.

But Charles pointed out that multiple contracts can be an expensive proposition for contractors.
'Contractors spend a fortune chasing these vehicles. It can cost a couple of hundred thousand dollars to get into a vehicle, what with the cost of bids and proposals and putting the infrastructure in place. Then they have to maintain the program and market it. It's a risk.'

A Schedule 70 wish list
While GSA is reorganizing, no one anticipates that Schedule 70 vendors or customers will feel an impact, although Fox has stated openly that creating a new FAS built around assisted services is a mistake, since he believes they're in a decline.

But with the reorganization and external pressures from Congress, GSA has already implemented some changes that include new Schedule 70 offerings. To meet Homeland Security Presidential Directive-12, for example, Schedule 70 has introduced security products and services for public-key infrastructure, digital certificates and personal-identity verification.

Looking ahead, there are those who do have a wish list for GSA where Schedule 70 is concerned.

'If there's any one area that Schedule 70 could benefit from, it's training,' Satterfield said. 'With the changes in organization, training, education and outreach are necessary so that the personnel responsible for contracts have a sound and fundamental knowledge of how to use the vehicles and a definition of IT, because we've found that has changed over the years.'

Satterfield also would like to see intensified industry collaboration. 'GSA does a good job in partnering with industry, and that needs to continue.'
Cook is interested in other matters. 'Let the market, let the competition set the price,' she said. 'Cut back on the contracting officer load and get more people in there.'
Waldron has his own set of priorities. 'GSA plans to improve the timeliness of acquisition support to help customers satisfy their mission requirements, and we're planning easy-to-use contract vehicles.'

While there have been challenges in the recent past, those who are involved with Schedule 70 by and large find very few disadvantages to using it and are optimistic about its future.

'It's hard to find any lower fees for federal contract vehicles,' said Fox.
Indeed, Coalition for Government Procurement's Allen said he believes sales will be up again by year-end. 'It means that the IT schedule has to reinvent itself a bit. It has to be proactively marketed to customers. GSA also has to educate customers about buying direct through scheduled contracts and buying through assisted services.'

He noted that even with stagnant sales, all GWAC sales combined don't approach Schedule 70 sales.

And, immixGroup's Charles, too, is optimistic that reorganization will get GSA focused and have a positive impact on Schedule 70.

'I think everyone will benefit if GSA gets stronger and more consistent about messaging and its value proposition to agencies,' he said.

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