Cooperative Contracts Sell IT the GSA Way
At any level of government, public purchasers search for good buys. By comparing prices, product quality, delivery terms, added services, and other determining factors, purchasers can be assured that they’re spending taxpayer dollars wisely.
To help state and local agencies enjoy cost savings and streamlined procedures for procuring information technology (IT), the U.S. Congress passed legislation to allow cooperative purchasing from federal IT contracts.
Under Section 211 of the E-Government Act of 2002, authorized state and local government entities can use IT contracts established by the U.S. General Services Administration (GSA). As of May 2003, a wealth of commercially available IT products and services, listed under the GSA’s Federal Supply Service (FSS) Schedule 70, can be procured at state and local levels. By negotiating large, multi-user contracts with vendors, the GSA leverages the volume of the federal market to drive down prices for products and services. Agencies authorized to buy off of Schedule 70 include states, counties, municipalities, townships, school districts, public housing authorities, and Indian tribal governments throughout the United States.
Categories covered under Schedule 70 cooperative contracts include:
- Equipment purchases such as computers (desktop, laptop, or mainframe), digital cameras, fax machines, modems, navigation aids, pagers, printers, projectors, scanners, servers, two-way radios, and workstations;
- Software licenses for programs ranging from database management, electronic commerce, or Internet access to virus detection, mapping, or multimedia design;
- Firmware, whereby software is burned onto or into memory and cannot be deleted;
- Professional Services for IT management, computer programming, data conversion, electronic commerce, wireless installations, and related areas;
- Classroom training for using IT equipment;
- Maintenance of IT equipment or software;
- Leasing or rental of IT equipment.
Participation in the cooperative purchasing program is voluntary for both buyers and sellers. Any transaction for IT products or services is conducted entirely between the contractor and the state or local agency, without the federal government’s intervention.
“The decision of whether any state or local government entity may purchase through cooperative purchasing is made on a case-bycase basis by the state or local entity,” says Roger Waldron, Director of the Acquisition Management Center for GSA’s Federal Supply Service in Arlington, VA.
“The federal government has no control over those state or local government decisions to use, or not use, the program,” Waldron adds. “These entities must follow their own local laws, regulations, rules, and guidance, which vary on a case-by-case basis.”
Not every contract listed under the GSA’s Schedule 70 is offered for state or local use. If vendors choose to open a specific IT contract to state and local entities, they sign an online modification that expands the contract’s scope.
Buying into Bargains
The best way for state and local users to access IT cooperative contracts is through an e-library on the GSA Advantage! Web site, www.gsaadvantage.gov. This Web site serves as the main purchasing portal for all federal GSA contracts, including IT categories. An on-screen icon identifies which Schedule 70 IT contracts are offered under cooperative purchasing.
State and local agencies can access the online contract information to conduct price comparisons and market research, as well as place orders directly with vendors (using their own ordering procedures or those recommended by the GSA).
“The strength of the program is quite simple and straightforward,” Waldron says. “If state and local [purchasers] want to use the program right now, they can go to GSA Advantage!, survey the product list, identify what they think is the best value, and place an order. Or, they can go to the company, ask for a price reduction, and then place the order.”
Waldron explains that a vendor can offer a lower price on products or services at any time, for any size order. However, if a vendor reduces prices from the GSA contracted price, and sales are bought off of this contract, the GSA can assess an overall price reduction against the contractor.
Nevertheless, negotiating with vendors is a prime way for public purchasers to reduce prices and assure the best value for products or services procured.
“From my experience, more and more purchasing people are negotiating with vendors to get more favorable pricing, because we bring a lot of money to the table,” says Mike Kuckenmeister, Chief of the Materials Management Section for the State of Nevada’s Purchasing Division.
“Typically, vendors aren’t going to offer you anything unless you ask for it,” Kuckenmeister continues. “It’s amazing sometimes, if you just ask for things, what you will get.”
For instance, when the State of Nevada purchased 40 Crown Victoria police vehicles, state purchasers asked several Ford dealers in the state to submit their best prices, even though price agreements for purchasing one Crown Victoria were already in place. Vendors complained about resubmitting prices, but the State of Nevada saved $10,000 on the total purchase.
State and local agencies can add specific modifications to a GSA cooperative contract, as long as the modifications do not conflict with the basic GSA contract conditions. Two permitted modifications include special security clearances or shorter delivery times.
“GSA contract buying is very powerful in its ability to be extremely flexible in meeting people’s requirements,” Waldron notes. “We’ve done all of the contracting work for our customers, in terms of setting up the basic contracts, negotiating a fair and reasonable price, vetting the contractors through responsibility determinations, and doing size determinations. Because we’ve taken care of all that, when [public purchasers] come to use that contract, they can focus on what really is fundamentally important—like what do I need, what is the price for it, and how am I getting good value for the taxpayer?”
Status of Sales
Since the cooperative purchasing program was launched last May, results are impressive. Out of about 4,500 contractors currently listed on the GSA’s IT schedule, 1,450 have signed a modification to allow state or local purchasing. Because up to 80 percent of contractors on the IT schedule are small businesses, agencies can use the contracts to meet socio-economic goals.
To date, 30 states have authorized cooperative purchasing from federal GSA contracts, according to recent statistics issued by the National Association of State Procurement Officials (NASPO). In many cases, states need to add a statute to their laws, authorizing participation in cooperative purchasing programs.
During the 2004 fiscal year, vendors have received more than $32 million in sales from state and local agencies using the IT cooperative contracts. Of this amount, professional services topped the list, accounting for more than $16 million of the total. Other major categories were equipment purchases (close to $8 million) and software licenses (about $4.5 million).
How does the GSA recoup its costs of setting up contracts? An Industrial Funding Fee, currently set at 0.75 percent of the purchase, is built into the contract price. Each vendor supplies the GSA with a quarterly report that documents all sales under the contract. The vendor then remits a check to the GSA for 0.75 percent of the total.
To promote the use and understanding of federal IT contracts for cooperative purchasing, the GSA is embarking on a three-pronged approach: online training (via www.fsstraining.gsa.gov); an informational brochure on cooperative purchasing (see Pro Pathways box in next column for ordering details); and classroom training, in partnership with NASPO and the National Institute of Governmental Purchasing (NIGP).
So far, cooperative purchasing by the GSA is limited to IT contracts, and the GSA has no immediate plans to expand cooperative purchasing to other product areas.
During the early 1990s, legislation opened up all federal GSA contracts to state and local agencies, but the legislation was quickly repealed. Opponents included lobbying groups and some manufacturers who did not want to offer their discounted federal prices to all state and local agencies. Another reason cited was that the federal government sought to expand its purchasing scope too far and too fast.
Kuckenmeister, for example, would like to see GSA contract prices for vehicles extended to state and local governments. Whereas states and cities buy vehicles from dealers at the local level, federal agencies can buy directly from vehicle manufacturers to ensure the lowest cost. He also believes that cooperative contracts for pharmaceutical products, such as prescription drugs, would help states and cities enjoy the deep discounts negotiated by the GSA.
Although price is a prime concern, Kuckenmeister emphasizes that “regardless of what you pay, the bottom line is whether customers get what they want, when they want it, and at a reasonable price.”
Click-by-Click Navigation to Contract Information
“In the past 1 1/2 years, we have purchased both software and hardware from GSA vendors under Schedule 70,” Wilson says. Products include notebook computers, printers, personal digital assistants (PDAs) for law enforcement, and forensic software.
To help government users in her state navigate easily through the Web site, Wilson is in the process of printing a procedures manual, complete with written instructions and screen shots for using GSA Advantage! to locate cooperative IT contracts.
She offers the following steps to access the contracts:
Wilson notes that she particularly uses the “Search/Browse” and “e-library” functions on the Advantage! Web site to access products and vendors, as well as the “Additional Sources” hyperlink to obtain comparison information.
“I can guarantee that I will continue to consult the federal GSA contracts and GSA vendors again for IT products,” Wilson concludes.