News Feature | August 20, 2014

What Do The New GSA IT Vendor Cuts Really Mean For VARs?

Christine Kern

By Christine Kern, contributing writer

GSA IT Vendor Cuts

The General Services Administration (GSA) has trimmed the Schedule 70 contracts of about 1,000 vendors over the last year. According to Kay Ely, GSA’s director of IT schedule programs in the Federal Acquisition Service, the decision to eliminate underperforming vendors is saving the agency about $3.2 million a year in administrative costs. The performance target is $25,000. 

“This is really about meeting our customer needs, meeting mission needs. If we have that many contracts that are not producing sales then somehow we are missing the mark,” Ely said after speaking at the National Contract Management Association’s 2014 World Congress conference in National Harbor, MD.

The idea of culling the schedules was first introduced by the GSA the schedules in 2012. “The multiple award schedule program is perpetually open to qualified new offers, and while vibrant markets exist in some of the schedules, we have reached the point of saturation in others,” Kempf said during a hearing of the House Small Business subcommittee on Contracting and Workforce in 2012.

The idea of culling was raised, he explained, because “in some instances, over 60 percent of the contract holders receive little to no business. In these cases, the sheer volume of contract holders prevents agencies from sifting the wheat from the chaff to find the right offer at the right price ...”

The schedules remain one of the most popular ways to buy goods and services in the government. In 2013, GSA said schedules sales accounted for about $34.8 billion, down $5 billion from its high in 2010.

The culling could prove to be quite fruitful to vendors who remain on the schedules, or to new vendors who enter the system. With clearer competition among remaining vendors, sales should increase, and truer figures should emerge.

Some critics, however, challenge the culling as unnecessary and ineffective.  Professor Samuel Bornstein,  of Bornstein & Song FSSI Research, wrote: “While GSA states that there is an annual ‘savings’ of $3.2 million in Administrative Costs, THEY ARE NOT LOOKING AT THE WHOLE STORY. GSA is not considering the Impact on the Local Economy where these 1,000 vendors will now lose the ability to sell to the Government, and not spend these proceeds in their local communities. Now compare this $3.2 million in ‘savings’ to the economic loss of nearly $11.25 million in the local economy. WAS IT WORTH IT? The ‘unintended consequences’ will reverberate for years to come.”

Meanwhile, Ely said the IT schedule still has about 5,000 vendors that she hopes are now meeting customer needs in a more consistent and effective way.

“We talk a lot at GSA about skating where the puck is going to be and that’s really what we are trying to do — have those contracts in place so our customers have what they need down the road,” Ely said. “The other benefit and something for us to work through is Schedule 70, like the other schedules, is continuously open. So for every one we cancel, we have new that are coming on. We have 30 to 40 new offers a month.”

Alan Chvotkin, senior vice president and general counsel for the Professional Services Council, supported the GSA’s decision to examine sales performance on the schedule.

“For many companies, the GSA’s schedule program isn't only for sales through the schedules, but it’s used for other purposes. Without really investigating why, our members are concerned we will see companies dropped off the schedule when it’s really a vehicle into the federal marketplace, not necessarily sales against the schedules,” he said. “I think GSA is clearly aware of that and there has to be some balance.”

“It may be a worthwhile effort to cull from the current Schedule 70, but at the same time that schedule program is going through a revision,” he said. “All of those evolutions need to be taken into account before you take a singular action such as dropping people from the current schedules.”