Hearing Committee on Government Reform: Service Oriented Streamlining - Rethinking the Way GSA Does Business

HEARING COMMITTEE ON GOVERNMENT REFORM: SERVICE ORIENTED STREAMLINING: RETHINKING THE WAY GSA DOES BUSINESS

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Chairman Tom Davis. The committee will come to order. Good morning, and welcome to the Government Reform Committee's oversight hearing on restructuring the General Services Administration's operations, particularly its Federal Supply Service [FSS], and the Federal Technology Service [FTS], in order to meet the demands of the modern government market and to address GSA's management challenges.

GSA each year buys products and services from the private sector worth well over $30 billion and resells them to Federal agencies using the FTS and the FSS revolving funds. Under FSS, Federal agencies, and in some cases State and local governments, can deal directly with private sector vendors who make their products available on the FSS Schedule, which is managed by GSA. Under FTS, GSA plays a more active role by acting as a third party advisor for the Federal agency in acquiring telecommunications and information technology goods and services. Fees collected from customer agencies are the main source of funds for both programs.

While the bifurcated system may have made sense two decades ago when IT investments were a relatively new phenomena, technologies such as laptop computers, cell phones, and e-mails are now as ubiquitous with office supplies as are desks and phones. Two separate buying organizations operating out of different funds has become a barrier to coordinate acquisition of services and the technology needed to support the total solutions agency customers demand. As a result, GSA's leadership, the Office of Management and Budget, and I have been looking into legislative and administrative options to consolidate FSS and FTS into a single entity operating out of a unified fund, providing Federal agencies with a one-stop shop to acquire all of their goods and services.

Today's hearing will build on evidence developed in prior hearings held by the committee on structural and management changes facing GSA operations in today's market. Also key are recent revelations of contract management challenges in FTS exposed by GSA's Inspector General reports. Those reports reveal weaknesses in the GSA's management control over its far-flung regional offices.

As the Government entity charged with providing best value solutions for customer agencies and taxpayers, I expect GSA to be compliant with applicable law, fiscally responsible, and responsive to concerns from both the private and public sectors. We expect GSA to lead the Government in the acquisition of solutions that capture the most current technology available in today's market. Along those lines, I want to commend GSA's recent efforts to generate in-house discussion about the most effective way to streamline its operations. I also want to commend GSA for proactively getting in front of some of the challenges facing the agencies that are identified in IG reports.

I hope that through this hearing we will be able to get a clearer picture of how GSA is addressing its management challenges in the evolving technology marketplace. I intend to use the information we gather today along with some ideas of my own to craft a bill that will ensure that the structural reforms that we create are memorialized in GSA's organic legislation. I envision legislation that will amend title 40 of the U.S. Code to: meld the current General Supply and Information Technology Funds into a single Acquisition Services Fund that will combine the positive attributes of both of the current funds; create within GSA a single Federal Acquisition Service; provide for appointment and direct control by the Administrator of Regional Administrators; and establish Government-wide policies aimed at recruiting and retaining experienced acquisition staff in all Federal agencies whose mission will be to ensure that Federal acquisitions are as cost-effective as possible.

In addition to our GSA witnesses, we will be hearing from Ms. Deidre Lee, representing the Department of Defense, GSA's largest agency customer. GSA's IG is also with us today to provide an update on their work in the regions. We will hear from a union representative. Finally, we will hear from private sector witnesses who work with GSA's FTS and FSS on a regular basis. We also invited Professor Steve Kelman of Harvard's Kennedy School of Government to appear, but he is unable to attend because of teaching obligations, but we have his statement available at the table.

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Chairman Tom Davis. Thank you very much.

Let me start the questioning.

Ms. Lee, let me just ask. I know that there is growing pressure, not from DOD, but particularly from the Senate, that DOD avoid using GSA contract vehicles in favor of internally awarded managed contracts. That policy not only I think could be harmful to GSA, but also to the Department, in that the contracts would have fewer vehicles on hand to meet their best needs. A, does that pressure also apply to like NASA SOUP, NIH, Interior, or is it aimed at just GSA? How much does the Department currently rely on GSA contract vehicles? And B, could the Department handle its critical mission without GSA's help?

I don't want to put you on the spot, but----

Ms. Lee. Mr. Davis, as you know, we are the largest customer and GSA does provide us good support. I do not think we could execute the Department's mission sharply without them.

Now, it is not that we haven't had our issues. One of the things we are doing at the ``Get It Right'' campaign is making sure that our people, as DOD people--and that is technical folks as well as our contracting people, because some of the money goes directly to GSA--that we make sure they understand the proper use of these vehicles; and GSA has been a wonderful partner in making sure that they help us reinforce those requirements.

At the same time, it is not only GSA that DOD spends money--we call them assisting agencies. So I do have a program in place where DOD representatives will be going around and visiting the other assisting agencies. That does include NASA SOUP, it includes the Department of Interior and some other agencies that provide assistance to Department of Defense. And we will be asking for the same staunch support that we have gotten from GSA in making sure we use these vehicles properly.
But we will continue to use them.

Chairman Tom Davis. And as you take a look at all of these different Schedules that are out there, is there any concern there may be a proliferation of Schedules and that maybe some of the agencies involved don't have the kind of background and oversight that GSA does in administering them? Have you run into that?

Ms. Lee. There are a good number of Schedules. My biggest concern is that our people know what is out there, what is available, and how to use them properly. And I do think that in many cases obviously the best structured business arrangements or the ones that people are aware of are the ones that are getting a lot of use. So we are going to go around and visit with these assisting agencies and try to make sure we rationalize those and have a good understanding of what is available.

Chairman Tom Davis. OK.

Mr. Perry, your statement I think sets forth in some detail GSA's plans to accomplish the operational and structural changes needed to transform GSA's FTS and FSS, but I didn't hear anything about the regional structure. Now, as I understand it, GSA has 11 regional offices today. The acquisition management exercise by the various regional offices was what was really called into question in the IG reports. Are you considering any changes in the number of regional offices or their functions or their control exercised by the headquarters at this point? Is that part of your thinking?

Mr. Perry. Well, obviously in a comprehensive study of this type everything is on the table. At the same time, I think it is important to remember that one of the functions that GSA carries out, separate from its technology and supply acquisition, is the management of facilities, some 8,300 facilities around the country, either Government-owned buildings or leased facilities. The physical facilities in the field really require GSA to have a presence at those locations where our customers are, and I would say primarily to provide them with physical workspace and lease those spaces, as well as maintain them. As an adjunct to that, in some instances it makes it convenient, if you will, to be able to place FTS or FSS people at those same locations.

I would also point out that while we have 11 regional offices, and we do have 11 client support centers that service technology acquisitions, in some of our FSS areas we provide those customer services in a zone, and that is we don't have an FSS operation in every single region. So as we look at this, we will view that with a particular eye toward how we can best
deliver the services that customers need.

Chairman Tom Davis. As you know, you have almost 4,000 GSA associates working both FTS and FSS. Are you involving them in your thoughts and in the process?

Mr. Perry. Yes. At this stage, we are at an early stage, but we have established a steering team of GSA managers and subject matter experts. We are in the process of establishing a number of special task forces which will involve many, many more GSA associates; and we will continue to involve GSA associates. Our outreach will also extend outside of GSA to customer agencies and industry contractors. But all of those entities will be involved in the discussions.

Chairman Tom Davis. I have additional questions, but my 5 minutes are up. I am going to recognize Mr. Waxman.

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Chairman Tom Davis. Thank you.

Mr. Perry, the trend in government acquisition is toward more complex services and fewer products. How will the new combined Acquisition Services Fund help GSA better manage this trend?

Mr. Perry. Well, let me just emphasize that this consolidation, reorganization, merger, whatever term we apply to it, is not a homogenization; it is not taking all of the acquisition activities we do today and spreading them paper thin in a homogenization sort of way so that we are not specialized to any extent. We will continue to have our business lines; we will continue to have areas of specialization. There will be part of the GSA organization with people who have the skills and competencies to particularly address very complex information technology or telecom acquisitions. Other areas will address the less complicated areas such as the acquisition of general supplies.

But while those business lines would be separate so that there would be a proper focus on the customers and on the products and services involved, the overall management of it could be the same. That is the difference that we are making here.

The other area of difference is that the support services that are provided to these business lines--today, for example, we have accounting happening in each of the services separately. We have the administration of the computer systems happening separately in two different organizations. Oftentimes, they come up with similar proposals. For example, some years ago both FSS and FTS had invested in developing a customer relationship management software. They were actually purchased from the same company, but they were two separate systems that did not work together.

Now, one would argue that shouldn't happen, whether you are a separate organization or a combined organization. But in this case of having a combined management, we will be able to do a much better job of taking those kinds of opportunities and addressing them GSA-wide, as opposed to each service having to do its own. With the consolidation of the two funds, there will be even more opportunities for the financial operations and the systems operations to be combined or operated in a more
efficient way.

Chairman Tom Davis. Thank you.

Let me just ask Mr. Waszily do you think that the reorganization efforts will impact ongoing GSA operations like Networx?

Mr. Waszily. Networx I really don't know that much about, sir, so I can't comment on that.

Chairman Tom Davis. OK.

Mr. Waszily. As I was talking earlier, our particular concern going forward, as Mr. Perry was highlighting, our concern is the key functions and the key capabilities of GSA be retained. The structure, our sense of it the structure should be driven by the customer requirements. Certain activities need to be very close to the customer and there is constant contact; there are other activities that I think, once they are looked at, could probably be consolidated and perhaps be operated out of one specific point to cover worldwide. I think that customer requirements formulate the strategy and then the structure should fall from those two elements.

Chairman Tom Davis. You note that you strongly favor the merger of the technology and supply funds.

Mr. Waszily. Certainly the funds itself. We ran into, when we were conducting our audits, a lot of these issues; was this an IT purchase or wasn't it, and we started calling it the hanging chad issue. And we don't think that is really a good debate. The debate is whether or not we are making a sound procurement and it is getting to satisfy the mission in the most cost-effective and timely manner.

Chairman Tom Davis. Now, you also indicate that it is important for the GSA to have a regional structure because you need to be close to the customers, the same thing that Mr. Perry said. Audit reports from your office showed acquisition mismanagement in most of these regions. What do you attribute that to and how do we solve that?

Mr. Waszily. Yes, sir. That is a very good point. I think the one thing we are talking about here as far as structure and design of the agency, we are really talking the strategic. Most of the issues that we were reporting on regarding the deficiencies in procurement I would label as the tactical. To use sort of the football coach's vernacular, we need to go back to the basics, and we really need to do solid procurements. There were some lapses. A lot of the buildup, particularly in the FTS service programs, began in the 1998-1999 period. I think a little bit of that fever of the ``new economy'' sort of spilled into the program, and in many ways the program was so successful that it got ahead of itself. And I think it grew so large that it just didn't have the chance to catch up with the controls.

As I mentioned, we have been doing a review of the program about every 6 months, and each successive review is showing
continuing improvement.

Chairman Tom Davis. Thank you very much.

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Chairman Tom Davis. Thank you all very much.

Let me start, Mr. Hewitt, with you.

I am sorry I wasn't here for everybody's testimony--I had to go back for a couple minutes--but I have read it prior to being here.

Do you think that the proposed merger of FTS and FSS is going to make it easier for you to do business? Will that be easier for you to do business if they merge these two?

Mr. Hewitt. The question is do you think it will be easier to do business? Yes, sir. I think there is some uncertainty today, some duplication which is confusing, and ITAA does support the merger.

Chairman Tom Davis. Has GSA solicited any comments from your organization in terms of what a merger might entail?

Mr. Hewitt. No, Mr. Chairman, they haven't, and we would love to be involved at ITAA.

Chairman Tom Davis. How would you recommend GSA include industry and customer representatives as part of the process? It wouldn't have to be formal, just informally?

Mr. Hewitt. Any way they want to do it is fine with us. We would prefer to be involved earlier rather than later, and we do have that Government Advisory Board now that is retired executives around town--Dan Young, Ken Johnson, Mel Cooper, Bill Deronchec and others--that are prepared to help, and they are not working with any particular company right now, so they
should be able to provide experience in an unbiased fashion.

Chairman Tom Davis. Do you have any thoughts on the regional offices?

Mr. Hewitt. Have I talked to the regional?

Chairman Tom Davis. Have you thought through that? Does your organization have any thoughts on consolidation of regional offices, or a different role at this point? Do you find it helpful to keep them or----

Mr. Hewitt. I haven't discussed that.

Chairman Tom Davis. You don't want to go off script on that.

Mr. Hewitt. I don't know the answer to that.

Chairman Tom Davis. OK. Thanks.

Vic, let me ask you. I think in your testimony you note that before GSA goes forward with plans to reorganize, it should get input and insight from both its customer agencies and industry partners. Do you think that reorganization plans provide for that as you see it right now?

Mr. Avetissian. I didn't hear that.

Chairman Tom Davis. Do you think that the GSA is providing for input from its customer agencies and its industry partners
right now?

Mr. Avetissian. It has been done informally. We have been in a couple of meetings that this issue was discussed, most recently with them last week. But I think it should be more formal, because there are other people that should be involved in providing guidance, that have experience in different areas. We provided some guidance. We think that they are on the right
track, but more information will be helpful.

Chairman Tom Davis. You state that the current management of the GSA regional office is broken. Do you favor the elimination of any of the regional offices? You said you don't favor the elimination of them, but you suggest that the management and reporting relationships between the GSA headquarters and the regions should probably be changed. Do you
think it would be helpful to have GSA's management authority over the regional offices in the statute? Have you thought
about how that should be done?

Mr. Avetissian. No, I don't think it should be statute. I think that the management headquarters, working with the regional offices, could develop appropriate reporting requirements that will make sure that they follow the same guidance and same policies in performing the contracts and awarding contracts and managing the contracts. I think that is where the differences are. There will be some areas, because the culture will be different, and they should follow that culture. But again, major policies should be the same.

Chairman Tom Davis. Are you concerned that the reorganization efforts at GSA will adversely impact GSA's ongoing operations?

Mr. Avetissian. No, I don't believe so. I think that the people in GSA are very well familiar with what they are doing. I think this reorganization will enhance their capability to provide their services to all the agencies. And I think that with this reorganization the committee should consider merging other civilian agencies schedule under GSA so there won't be schedules that are used by DOD through Interior schedule, that it will be managed in a formal manner under the same authority as GSA.

Chairman Tom Davis. Now, you advised that GSA should consider cultural diversity among its various offices and its customers and its plans to merge the services. Could you elaborate on that a little bit?

Mr. Avetissian. As an experienced industry, and I had that opportunity during our numerous mergers and acquisitions that Northrop Grumman had done, and the most difficult part was trying to get the cultures to merge. You can always get the offices to merge and things like that, and benefits merge and all that, but the culture----

Chairman Tom Davis. But agencies have their own cultures is what you are trying to say.

Mr. Avetissian. Yes, they sure do. And what I would suggest, and what we have done, and other companies have done, you don't impose--whoever the parent is going to be--their processes as the best; you go around and take a look at and pick the best processes and best policies. And by incorporating all that in one single policy, I think then the buy-in will be much easier from other agencies, and also regional offices, that they do have some good practices that can be adopted by the headquarters.

Chairman Tom Davis. Thank you.

Mr. Davison, you state that GSA needs to change its regional managerial organization so that control of acquisition associates in the regions come from GSA headquarters. Are you concerned that the regional management issues don't appear to be addressed in GSA's reorganization plan? Is that a concern of yours?

Mr. Davison. Am I concerned that the reorganization would have an adverse effect?

Chairman Tom Davis. No. Right now, in GSA's reorganization plans, they don't appear to be addressing the regional management issues.

Mr. Davison. Our representation of that is that there seems to be a different--you spoke about cultures. There is a different standard associated with each of the regions, and it seems like it would be improved to have a central responsibility for all policies and standards.

Chairman Tom Davis. Now, you recommend that creating the position of an associate administrator for acquisition to oversee the integrated operations of a combined FSS-FTS. Do you think that position ought to be in statute? Do you have any strong feelings about that?

Mr. Davison. I don't. I am not familiar enough about what the difference in the statutory regulation would be.

Chairman Tom Davis. Statute means that this is bound on the next GSA and the next and the next. If you do it from regulatory scheme, the next group can come in and decide to do it differently. It gives them more flexibility, but it also lets them slip back if you think that this should be a permanent position.

You don't have to address that, I am just trying to give you----

Mr. Davison. Thank you.

Chairman Tom Davis. I liked your suggestion that GSA consider using a portion of its Multiple Award Schedule Industrial Funding Fee to hire and train badly needed schedule contracting officers. It is a little similar to the training fund that we put into the Services Acquisition Reform Act. Have you suggested this to GSA?

Mr. Davison. Yes, we have.

Chairman Tom Davis. Have they had any response to it at this point?

Mr. Davison. Their response is not clear to me, it is clear to the Association. There has been some hesitation. At the last decrease we had suggested that they don't decrease it, but use those funds to improve the agency's response.

Chairman Tom Davis. OK, thanks.

Ms. Dauphin, do you think GSA has been forthcoming with industry stakeholders on the direction of its reorganization?

Ms. Dauphin. No, I think that there has been limited interaction. The PSC has had some meetings with Mr. Perry's office. We are meeting with the IG next week, where we will have additional discussions, but not to the level that we are recommending. We really believe that industry should be more engaged right now, prior to their even coming out with their draft reorganization, as well as other Government agencies end users.

Chairman Tom Davis. And I gather, Mr. Brown, that you don't think the GSA has been very forthcoming in dealing with the employees and the unions in this as well, sir? Mr. Brown. That would be correct, Mr. Chairman. And I think you would have to agree when you don't have information before you, when you have no business plan, when you have no ``who is it going to affect,'' you are forced to speculate; and certainly speculation is not something that the union wants to do. We are getting questioned by various employees in different office buildings, etc., how is that going to affect them, what are their collective bargaining rights. You know, we are not here to manage GSA; that is not our position. But as you are elected by your constituency, so are we.

Chairman Tom Davis. Well, it is not your position to manage, but, on the other hand, a lot of the knowledge in any organization is at the guy who is right there at the window.

Mr. Brown. Who knows better what is going on than the man and woman doing the job?

Chairman Tom Davis. Even if you may not know the big picture in every case, they have a story to tell that is important.

To go back to you, Ms. Dauphin, you note that the DOD has considered bypassing GSA contract vehicles for internally awarded managed contracts. How would that action affect businesses that routinely use these vehicles to sell to the Government? Do you have to change your marketing plans? Would they be less efficient?

Ms. Dauphin. It has already been impacting us in that we have had existing task orders that were in the middle of a period of performance under GSA vehicles that have been terminated and then re-competed on a DOD vehicle. It happens that we are on the DOD vehicle, but we are still spending money to re-compete. The Government is spending money to reacquire these same services and, as a taxpayer, that is offensive.

Chairman Tom Davis. It is just a waste, right?

Ms. Dauphin. It is.

Chairman Tom Davis. You also note that the fees that are charged by GSA for the different Government-wide contracting vehicles--and I will ask you and I will ask anybody else. Do you think the melding of the Technology and Supply Funds and the increased accountability will result in lower and more targeted fees from GSA? Is there that expectation?

Ms. Dauphin. Yes, I really do.

Chairman Tom Davis. Do you all agree with that?

Mr. Avetissian. Yes, I agree with that.

Chairman Tom Davis. Mr. Hewitt? That is certainly the hope, isn't it? OK.

Mr. Brown, I have a couple more questions.

Mr. Brown. Sure.

Chairman Tom Davis. You are nervous that the melding of the FSS and the FTS will result in widespread erosion of essential in-house expertise at FTS.

Mr. Brown. Yes.

Chairman Tom Davis. But the Administrator and the GSA IG, and most of the witnesses here, seem to think the merger would be beneficial in terms of overall productivity. Why do you think that?

Mr. Brown. Let me just state--and part of it goes back, again, to information that has been handed out. And I would even go back to some of the comments that Mr. Perry had made. It didn't seem--where this was really driven from. I didn't really hear today very specific problems that would cause this or drive this merger. Whether there is or not I do not know, as an employee representative. And what impact that will have is going to have various impacts.

What I was saying, getting back to just to paraphrase what I just said, it is going to have different impacts on different employees. And what that impact is going to be we are duty bound and certainly legally bound to advise the folks that we represent. How that is all going to shake out, we have been unable to either reassure or say, OK, you are going to get affected this way, this is going to affect more people in FTS than FSS, like I said in part of my testimony.

Again, I will give the fact that some of it is speculation, but also been advised through my council president and our other employees, which many of them are here today sitting in these chambers from the Greater D.C. area and Virginia and so forth, that these are going to affect. And I would have to say that I have yet to hear and I did not see that there was any documentation to that effect. Mr. Perry said there has been some discussion amongst managers and a few key individuals, but
that was primarily it.

And would this merger be better? I don't really see, based on the testimony here. There are some people that say that it would, and everyone is entitled to their opinion, and I am not being disrespectful, but at least from the elected representatives side of the House, that the people in the trenches are going to be affected, I can't see where this would be good or bad. I would believe at this juncture it would be more bad because there is not enough information, there is no business plan, there is no long-range goal, there has been nothing documented.

Chairman Tom Davis. Right. Well, look, at the end of the day, everybody here plays a different role. I mean, your role is to protect your employees, make sure they are treated fairly; and the efficiency of the department, although it is not unimportant to you, at the end of the day that doesn't drive you if you are losing employees and those kind of issues. From the people that are selling to the Government, they have their own bent; they can give suggestions into what works most efficiently for them in being able to sell to the Government. I know there is a great frustration on the part of contractors sometimes of doing work and the Government not telling exactly what they want, not being able to articulate; a lot of waste goes in some of these areas. And I think all of you need to be a part of the reorganization process so that everybody is heard.

But at the end of the day, GSA's job, from my perspective, is to make sure that when they go off and buy something, they are getting the best deal for the American taxpayer. That may not be exactly what the contractors want or the employees want, but I think that is what the taxpayers expect. But they can't do it without talking to you and without consulting with you.

I think each of you have an important role to play in that, so we want to do everything we can to make sure that, as this moves forward you are at the table and that all of your views are considered in this. And for that, I appreciate everybody being here, sharing those concerns. We want to continue to work with GSA to make sure that even though it may be a contracted period that these decisions are made, that you are made full partners in terms of your input into this thing; and we want to hear from you if that is not the case.

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