[Senate Hearing 109-631]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-631
 
              GSA: IS THE TAXPAYER GETTING THE BEST DEAL?

=======================================================================

                                HEARING

                               before the

                FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT
                     INFORMATION, AND INTERNATIONAL
                         SECURITY SUBCOMMITTEE

                                 of the

                              COMMITTEE ON
                         HOMELAND SECURITY AND
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 26, 2005

                               __________


       Printed for the use of the Committee on Homeland Security
                        and Governmental Affairs


                    U.S. GOVERNMENT PRINTING OFFICE
23-165                      WASHINGTON : 2006
_____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512ï¿½091800  
Fax: (202) 512ï¿½092250 Mail: Stop SSOP, Washington, DC 20402ï¿½090001

        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                   SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska                  JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio            CARL LEVIN, Michigan
NORM COLEMAN, Minnesota              DANIEL K. AKAKA, Hawaii
TOM COBURN, Oklahoma                 THOMAS R. CARPER, Delaware
LINCOLN D. CHAFEE, Rhode Island      MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah              FRANK LAUTENBERG, New Jersey
PETE V. DOMENICI, New Mexico         MARK PRYOR, Arkansas
JOHN W. WARNER, Virginia

           Michael D. Bopp, Staff Director and Chief Counsel
   Joyce A. Rechtschaffen, Minority Staff Director and Chief Counsel
                  Trina Driessnack Tyrer, Chief Clerk


FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, AND INTERNATIONAL 
                         SECURITY SUBCOMMITTEE

                     TOM COBURN, Oklahoma, Chairman
TED STEVENS, Alaska                  THOMAS CARPER, Delaware
GEORGE V. VOINOVICH, Ohio            CARL LEVIN, Michigan
LINCOLN D. CHAFEE, Rhode Island      DANIEL K. AKAKA, Hawaii
ROBERT F. BENNETT, Utah              MARK DAYTON, Minnesota
PETE V. DOMENICI, New Mexico         FRANK LAUTENBERG, New Jersey
JOHN W. WARNER, Virginia

                      Katy French, Staff Director
                 Sheila Murphy, Minority Staff Director
            John Kilvington, Minority Deputy Staff Director
                       Liz Scranton, Chief Clerk


                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Coburn...............................................     1
    Senator Carper...............................................    30

                               WITNESSES
                         Tuesday, July 26, 2005

David E. Cooper, Director, Acquisition and Sourcing Management, 
  U.S. Government Accountability Office..........................     4
Emily W. Murphy, Chief Acquisition Officer, U.S. General Services 
  Administration.................................................     5
David H. Safavian, Administrator, Office of Federal Procurement 
  Policy, U.S. Office of Management and Budget...................     7
Kathleen S. Tighe, Counsel to the Inspector General, U.S. General 
  Services Administration........................................    22
John B. Ames, Director, Contract Review and Evaluation Division, 
  Office of Inspector General, U.S. Department of Veterans 
  Affairs........................................................    24
Thomas Graham, Chief Operating Officer, Networld Exchange, 
  Carlsbad, California...........................................    26

                     Alphabetical List of Witnesses

Ames, John B.:
    Testimony....................................................    24
    Prepared statement...........................................    87
    Questions and responses for the Record.......................   150
Cooper, David E.:
    Testimony....................................................     4
    Prepared statement...........................................    37
    Questions and responses for the Record.......................   120
Graham, Thomas:
    Testimony....................................................    26
    Prepared statement...........................................    98
Murphy, Emily W.:
    Testimony....................................................     5
    Prepared statement...........................................    50
    Questions and responses for the Record.......................   128
Safavian, David H.:
    Testimony....................................................     7
    Prepared statement...........................................    65
    Questions and responses for the Record.......................   141
Tighe, Kathleen S.:
    Testimony....................................................    22
    Prepared statement...........................................    77
    Questions and responses for the Record.......................   144

                                APPENDIX

Letter to Ms. Emily W. Murphy, dated June 7, 2005, from Senator 
  Coburn.........................................................    35
Chart entitled ``OMC/GSA Comparison Table'' submitted by Senator 
  Coburn.........................................................   154


              GSA: IS THE TAXPAYER GETTING THE BEST DEAL?

                              ----------                              


                         TUESDAY, JULY 26, 2005

                                       U.S. Senate,
            Subcommittee on Federal Financial Management,  
        Government Information, and International Security,
                            of the Committee on Homeland Security  
                                          and Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:30 p.m., in 
room 562, Dirksen Senate Office Building, Hon. Tom Coburn, 
Chairman of the Subcommittee, presiding.
    Present: Senators Coburn and Carper.

              OPENING STATEMENT OF CHAIRMAN COBURN

    Senator Coburn. Good afternoon. Today's hearing is 
entitled, ``GSA: Is the Taxpayer Getting the Best Deal?''
    It is no secret that the Federal Government spends hundreds 
of billions of dollars on procurement of products and services. 
When an agency wants to purchase a copy machine, office 
furniture, or even paper clips, it generally turns to the 
General Services Administration to do so. One of the most 
widely-used vehicles and schedules is the GSA's Multiple Award 
Schedules, which is supposed to make the process of buying 
goods easier, faster, and, I would emphasize, cheaper.
    Every 31 seconds, the Federal Government makes a credit 
card purchase. Every 77 seconds, it issues a contract worth 
$25,000 or less. Every 14 seconds, it signs a contract worth 
more than $25,000. Statistics make it clear why we must ensure 
that the products being bought by the Federal agencies through 
GSA are being bought at the best prices available.
    GSA's stated mission is to help Federal agencies better 
serve the public by offering at best value superior workplaces, 
expert solutions, acquisition services, and management 
policies. Recent reports issued by the Government 
Accountability Office and the GSA Office of Inspector General 
concerning GSA's contract management point to many existing 
problems that may account for why the taxpayers may not be 
getting the best deal.
    For example, GAO found that the General Services 
Administration's Multiple Award Schedules program cannot be 
effectively managed in its present form. It is intended to make 
a wide variety of commercial products available to Federal 
agencies, but there are too many items on the schedule, there 
are too many suppliers of similar items, and GSA does not have 
the capability to make sure that the government's interests are 
protected.
    In addition, there is little or no price competition in 
negotiations or monitoring of the items ordered by the agencies 
and little or no assurance that suppliers offer items at prices 
that reflect the government's volume purchases.
    In case you are wondering, these findings were released May 
2, 1979, in a report entitled, ``Ineffective Management of 
GSA's Multiple Award Schedules Program,'' a costly, serious, 
and longstanding program. It was first identified as a problem 
in 1971, 34 years ago.
    For at least three decades or more, the GSA has been unable 
to correct these ongoing problems. There are several reasons 
why the cost associated with purchasing commercial goods and 
professional services from GSA have continued to increase over 
the past decade. In that regard, I must tell you, I am very 
puzzled by the reluctance on the part of the GSA to use two of 
the most powerful tools available to them for ensuring that 
taxpayer dollars are being spent judiciously.
    When a contract is being negotiated, it is imperative that 
the buyer, in this case, our government, is obtaining the best 
price. The best way to do that is by looking at the vendor's 
books and other relevant records and documents to verify prices 
and sales being submitted by the seller. One of the major goals 
of GSA during contract negotiations should be to ensure that 
the vendor pricing information is accurate, complete, and up to 
date before the contract is awarded. Prequalifying of vendors 
during contract negotiations has proved to be the most 
effective method for achieving the best prices because it helps 
avoid unnecessary cost by providing the agency with detailed 
information about the vendor's commercial sales and marketing.
    GSA's Office of Inspector General reported that as the 
number of audits performed decreased, so did the amount of 
negotiated savings. Other evidence that points to the use of 
pre-award audits as a tool for cost avoidance comes from the 
Department of Veterans Affairs. When the GAO performed audits 
in 2004 and 2005 on the VA's pre- and post-award audit 
programs, it found using these methods resulted in millions of 
dollars of savings to VA.
    When GSA issued a final rule modifying its policy in 1997, 
the agency eliminated automatic post-award audit rights for 
pre-award pricing information in every Multiple Award Schedules 
contract. GSA's rationale for making this change was its belief 
that a decrease in post-award audits would be offset by an 
increase in the number of pre-award audits. However, GAO 
recently reported there has been, in fact, a decrease in the 
number of pre-award audits.
    Despite resistance on the part of commercial contracts to 
use the post-award contracts, this tool is the most effective 
means available to verify that vendors are not overcharging the 
American taxpayers.
    We know from both the GAO and the GSA's IG that savings due 
to pre- and post-award audits have saved the government 
hundreds of millions of dollars.
    In fact, I would ask at this time that the letter that I 
sent to the GSA in response to their ANP, or Advanced Notice of 
Proposed Rulemaking, on whether post-award audit provisions 
should be included in the GSA's Multiple Award Schedules 
contract and government acquisition contracts be included in 
the record, and I will so order that now.\1\
---------------------------------------------------------------------------
    \1\ The letter from Chairman Coburn appears in the Appendix on page 
35.
---------------------------------------------------------------------------
    When I started looking at what is driving up the costs, 
several things came to mind. First of all, the cost to 
purchase. Last year, the government secured $291 billion. We 
paid GSA $20 billion to do that. That comes out to 6.87 
percent. If you survey industry throughout the country, if you 
survey other large buying groups, what you find is that is 
about 3 percent--three times what it costs to buy anything 
anywhere else.
    And so there are some significant questions that we need to 
ask and be answered. The goal is not to be critical of the GSA. 
The goal is to be critical of not ever getting the best value 
for the American consumers' price.
    We have qualified people, people who care a lot at the GSA. 
What we are looking for is to find the direction so that we 
achieve that goal each and every time and we do it in a way 
that gives the American taxpayer--and since we are in a deficit 
and have been in a deficit since essentially 1973--any dollar 
that we save is $5 or $10 that our children aren't going to 
have to pay back.
    We also have today a company testifying that charges a 
blank 2 percent on everything. We are going to be introducing 
into the record the last series of comparisons to GSA and Open 
Market Quarter and we will be putting in the record they are 
routinely 4 to 5 percent below GSA after paying a 2 percent 
charge to them for purchasing. There has to be something that 
can be learned by GSA from some of these open market and 
competitive free enterprise firms.
    Senator Coburn. I want to welcome our witnesses. I 
understand Senator Carper will be here in a moment.
    I would first like to introduce our first panel. David 
Cooper, Director, Acquisition and Sourcing Management, the U.S. 
Government Accountability Office. Next, Emily Murphy, Chief 
Acquisition Officer, U.S. General Services Administration. And 
next, Hon. David Safavian, Administrator, Office of Federal 
Procurement Policy, Office of Management and Budget.
    Your written statements will be made a part of the record. 
I will make a note to talk to Mr. Safavian again. I have a 
problem with OMB. We got your testimony last night at 8 p.m. 
For me to effectively read what you want me to know, 24 hours 
is required for my staff to clear it and me to actually--I am 
one of those Senators that actually read the testimony. Every 
OMB person that comes before this Subcommittee that does the 
same thing, I need to send a message--the message is, our time 
is just as important as yours and we would appreciate that be 
recognized, and hopefully throughout the rest of the Congress, 
they will come to expect that OMB will put the information 
there on time.
    With that, I would like to recognize Mr. Cooper. You will 
have 5 minutes to summarize your testimony. Your complete 
statement will be made a part of the record.

  TESTIMONY OF DAVID E. COOPER,\1\ DIRECTOR, ACQUISITION AND 
   SOURCING MANAGEMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Cooper. Thank you, Mr. Chairman. I am very pleased to 
be here this afternoon to discuss the results of our work on 
GSA schedules contracts. As you pointed out, GSA plays a very 
important role in Federal acquisition. Many agencies rely on 
GSA to leverage the government's significant buying power to 
negotiate the best possible deal for a wide range of 
commercially available products and services.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Cooper appears in the Appendix on 
page 39.
---------------------------------------------------------------------------
    Last year, Federal agencies purchased more than $32 
billion, and I think this year it is approaching $40 billion, 
through the Schedules program. However, our work and the work 
of the GSA Inspector General's Office shows that GSA is not 
always negotiating the best deal for Federal agencies and, 
ultimately, the American taxpayers.
    In February of this year, in response to a request by 
Chairman Collins of your Committee, we reported serious 
shortcomings in the way GSA negotiates contract prices and 
manages its Schedules program. My testimony today is going to 
focus on one of the key issues in that report, that issue being 
the dramatic reduction in GSA's use of pre-award audits.
    As you pointed out, such audits are crucial to negotiating 
good prices. They tell GSA negotiators whether the information 
provided by vendors is accurate and reliable and whether the 
information forms a sound basis for negotiating fair and 
reasonable prices. When such audits are performed, they have 
saved hundreds of millions of dollars.
    I have a couple of charts that I would like to put up to 
show the decline in the number of pre-award audits and the 
results of that. The chart is also in the first page of my 
testimony for anyone who has that.
    The chart shows that in the early 1990s, GSA conducted, on 
average, about 125 pre-award audits annually, saving nearly 
$496 million between 1992 and 1997, or an average of about $83 
million a year. During that period, purchases from the 
Schedules programs ranged roughly about $5 billion a year, 
significantly less than what we are seeing in today's 
environment.
    Beginning in 1997 and continuing until now, GSA's use of 
pre-award audits has declined dramatically. Since 1997, GSA has 
conducted, on average, only 19 pre-award audits each year. As 
the number of audits declined, so, too, did the savings. 
Savings in recent years have only averaged about $18 million 
per year.
    These trends are troubling for several reasons. First, the 
reduction in pre-award audits has come at a time when agency 
purchases through GSA schedule contracts have sky-rocketed, 
reaching to $32 billion last year.
    Second, in 1997, GSA, as a matter of policy, virtually 
eliminated the use of post-award audits. Such audits are a key 
safeguard against excessive contract prices. They allow the 
government to recover overpricing when it is determined that 
vendors failed to provide accurate, complete, and current 
pricing information during negotiations.
    When GSA eliminated post-award audits, it expected to 
offset that reduction with an increase in pre-award audits. 
Thus, pre-award audits are one of the government's sole 
remaining protections against overpricing. However, the 
anticipated increase clearly, as shown in the charts, has not 
materialized.
    And finally, the failure to use pre-award audits today is 
reminiscent of the problems GAO found throughout the 1970s and 
into the 1980s. It is frustrating to see this longstanding 
problem reappear. We found that GSA negotiators appear to be 
motivated more toward getting contracts awarded quickly rather 
than negotiating the lowest possible prices. Not enough time 
and attention is being given to negotiating the best deal.
    We have recommended that GSA take steps to address the 
decline in audits. GSA agreed with our recommendations and has 
initiated actions to address this longstanding problem. 
However, unless GSA's actions are successfully implemented, the 
risk of pricing problems will continue. If GSA is successful, 
we believe hundreds of millions of dollars can be saved and 
Federal agencies will get a better deal.
    That concludes my statement and I will be glad to answer 
any questions you might have.
    Senator Coburn. Thank you, Mr. Cooper. Ms. Murphy.

  TESTIMONY OF EMILY W. MURPHY,\1\ CHIEF ACQUISITION OFFICER, 
              U.S. GENERAL SERVICES ADMINISTRATION

    Ms. Murphy. Thank you, Mr. Chairman. Thanks for inviting me 
here today to testify on GSA's procurement practices and how we 
at GSA are doing our best to ensure the taxpayer is getting the 
best deal possible in the procurement process.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Murphy appears in the Appendix on 
page 50.
---------------------------------------------------------------------------
    As you already stated, GSA's mission is to help Federal 
agencies better serve the public by offering at best value 
superior workplaces, expert solutions, acquisition services, 
and management policies. Excellence in acquisition is the top 
priority for GSA.
    GSA's mission is important to the efficiency and 
effectiveness of the Federal Government. We make a difference 
in the process of delivering goods and services, good 
government services, and to the well-being of the people of 
this country. The agency is directly involved in the process of 
entering into contracts on behalf of our customer agencies to 
assist them in acquiring the products and services they need.
    Our vehicle acquisition and leasing program are good 
examples of how GSA provides best value. We acquire vehicles 
for 33 percent below commercial pricing, and GSA lease rates 
for vehicles are 32 percent below commercial lease rates.
    Our long-distance telecommunication contracts have saved 
the government $705 million last year alone due to negotiated 
rates being below commercial prices.
    Our schedule contract vehicles provide agencies with a 
streamlined approach to acquisitions. This adds value, and as a 
result, the utilization is increased. At the same time that the 
utilization is increasing, GSA efficiencies have resulted in a 
25 percent reduction in the cost recovery fee for the GSA 
Multiple Awards Schedules program.
    The Federal Technology Service, Federal Supply Service, and 
Federal Building Service currently operate under revolving fund 
authority. As you are aware, this is different than most 
Federal agencies that operate with appropriated funding. GSA is 
authorized to operate revolving funds under specific statutory 
authority requiring that revolving funds fully recover all 
costs for the program and operations in their estimated fees. 
These costs include direct costs, such as labor and materials, 
and indirect costs, such as rent and support services. These 
fee rates are charged to Federal agencies for space, services, 
and commodities. These fee structures are constantly evaluated 
for adjustment.
    Both the General Supply and Information Technology Funds 
recover costs to GSA for the services and supplies that they 
provide the customer through full cost recovery. For the IT 
Fund, rates are established consistent with the costs and 
capital requirements plan as approved by OMB. A capital reserve 
provides financing for one-time capital investments and program 
costs, allowing more stable rates for our services. The General 
Supply Fund also sets appropriate rates based on projections 
with any excess returning to the Treasury.
    The Federal Building Fund finances PBS real property 
management and real property-related activities. The FBF is 
financed in large part by income from rental charges assessed 
to occupants of GSA-controlled space approximate with 
commercial rates, as well as some appropriated funds, typically 
in the case of new construction. The FBF is subject to annual 
enactment of new obligation authority by Congress and any 
balance of the revenue not used in a particular year remains in 
the fund until authorized for future use through future 
appropriations acts.
    Frequently, GSA's fees are compared to costs associated 
with other government-wide procurement vehicles. However, other 
agency GWACs and franchise funds do not include all direct and 
indirect costs because some of the cost is offset by 
appropriated dollars. This difference makes any comparison of 
GSA's fees to other agency fees inequitable.
    One of the issues we have been addressing recently is the 
need to accomplish all of our acquisitions in full compliance 
with the Federal Acquisition Regulations, GSA's policies, and 
best practices. When we found instances of noncompliance, we 
have done the right thing and referred them to the Inspector 
General to conduct their own nationwide review, and we are 
currently conducting through my office program management 
reviews.
    The ``Get it Right'' Plan is a result of that review and 
demonstrates GSA's strong commitment to the proper use of GSA 
contracting vehicles and services. The ``Get it Right'' Plan 
has improved the Federal acquisition process, allowing agencies 
to obtain best value when acquiring products and services 
needed to accomplish their mission.
    There are five components of the ``Get it Right'' Plan, the 
first being to secure the best value for the Federal taxpayer 
and for Federal agencies through efficient and effective 
acquisition, ensuring full and open competition and instilling 
integrity and transparency in the use of our vehicles. Second, 
is to make acquisition policies, regulations, and procedures 
clear and explicit. Third, to improve the education and 
training of our workforce. Fourth, to ensure that we comply 
with all Federal acquisition policies, because simply, 
noncompliance is unacceptable. And fifth, is to communicate 
with the acquisition community, how to use the GSA's 
contracting vehicles and services.
    We are making good progress on this initiative and 
improving our ability to get best value for the taxpayer. To 
ensure that we are getting it right, we are working very 
closely with the Inspector General's Office, developing and 
providing appropriate guidance for contracting officers in the 
field.
    As you are aware, sir, GSA is looking into post-award 
audits of contracts as part of its continuing efforts to obtain 
best value, having issued the Advanced Notice of Proposed 
Rulemaking in April to solicit comments from interested 
parties. Furthermore, we have significantly increased the 
number of pre-award audits in recent years to assist in 
achieving best value.
    Finally, we have made the pre-negotiation panels that GAO 
recommended in February mandatory and we revised our operating 
procedures to require reporting on those pre-negotiation 
clearance panels. Reports of these panels are then being used 
to assess progress in the effectiveness of negotiations and 
will be used as an opportunity to share best practices.
    The acquisition officials at GSA and throughout the 
government take our roles very seriously. We take seriously the 
trust placed in us by Federal agencies that rely on our 
acquisition expertise to obtain best value and adhere to the 
high principles of ethics and integrity. And we also take 
seriously our professionalism and our accountability to our 
customer agencies, OMB, Congress, and most importantly, the 
American taxpayer.
    Thank you very much for the opportunity to testify before 
you here today. I look forward to continuing to work with your 
Subcommittee and would be happy to answer any questions you may 
have.
    Senator Coburn. Thank you, Ms. Murphy. Mr. Safavian.

  TESTIMONY OF DAVID H. SAFAVIAN,\1\ ADMINISTRATOR, OFFICE OF 
   FEDERAL PROCUREMENT POLICY, U.S. OFFICE OF MANAGEMENT AND 
                             BUDGET

    Mr. Safavian. Chairman Coburn, thank you for holding this 
important hearing today, and before I begin, my apologies to 
you and your staff for being late on the testimony. It won't 
happen again.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Safavian appears in the Appendix 
on page 65.
---------------------------------------------------------------------------
    Senator Coburn. Can we get Mr. Bolton to assure us of that 
for all the rest of the committees of Congress?
    Mr. Safavian. Sir, that is above my pay grade.
    Senator Coburn. Well, just so everybody will know, I sent 
him a letter today. This is one of the problems with our 
Federal Government. We are going to work together, and to do 
that, we have got to communicate, and you can't communicate--we 
had several hearings last week in other committees where the 
stuff didn't come until 4 hours before a hearing. For us, for 
the future of this country and the debt service load that we 
have in front of us, we have got to do better. This isn't about 
meanness or anger or anything else. It is just frustration. I 
want to do a good job, and I know you all do. And everybody 
else here got their testimony here on time. Thank you.
    Mr. Safavian. As the Administrator for Federal Procurement 
Policy, Chairman, I view my charge much like yours, to ensure 
that the taxpayers get the best value when we buy services and 
goods. I think we have all seen instances of poor contracting, 
and indeed, criminal behavior, which call into question the 
integrity and functionality of the current system. I can tell 
you that leadership at OMB, GSA, and DOD, as well as other 
acquisition agencies, take this very seriously and are working 
together to cure the issues.
    For example, DOD has been working in partnership with GSA 
on the ``Get it Right'' campaign, and GSA Administrator Perry 
has undertaken a reorganization to better use those agency 
assets, reduce costs, and increase service quality.
    As you consider additional policy recommendations, I would 
also urge you to consider the entire picture, because we buy a 
lot of stuff and we executed, last year, 37 million 
transactions, and the vast majority of those commercial buys 
were successful. It is easy to get caught up. There are very 
specific bad examples, but I would just urge you to look at the 
whole picture.
    As you know, there is this ongoing debate about whether the 
goal should be getting the absolute lowest price on every buy 
or whether we should be seeking the best value overall with the 
acquisition system. It is a nuance, but a critical distinction.
    Some activities, such as the use of post-award audits, 
generate transaction-specific cost savings, but their impact on 
our government market as a whole can have collateral 
consequences that may actually increase the total cost the 
government pays for goods and services.
    We can and do negotiate good prices in the current system. 
In fact, I checked the other day. The GSA performance metric 
for how it buys IT solutions, for example, is that it generally 
buys them at 7 or 7\1/2\ percent less than independent 
government cost estimates.
    But some in the acquisition community argue that we need 
more intrusive mandates and regulations, new types of audits, 
and even legislation in the quest for better pricing, and it is 
a very seductive argument, I will grant you. Some arguing that 
subjecting vendors to these requirements can save taxpayer 
dollars can point to very specific examples. But they fail to 
take into account overhead charges to generate those savings.
    But more importantly, they don't reflect the fact that the 
more red tape we load on our vendors, the higher the prices are 
they are going to charge. Simply stated, the more difficult it 
becomes for companies to do business with us, the fewer vendors 
we see who are willing to work with us. Less competition brings 
higher prices, less innovation, and fewer choices, not to 
mention the disproportionate impact on small businesses.
    I think if we are thinking about the mundane types of 
things we buy--staplers, office products--that type of dynamic 
wouldn't be a big deal. But when you consider the homeland 
security environment or the defense environment, the 
consequences can be much more significant, and I want to just 
give you two very brief examples.
    I was at a trade show a little while back and I talked to a 
guy that had come up with a new tool--he had shrunk down 
magnetometers and he put them in a set of gloves so that people 
could literally wand their hands over somebody to see if they 
were carrying a weapon. When I said, ``Are you on the GSA 
schedules?'' he said, ``No, I don't want to be. Its too 
difficult to deal with the government.''
    A similar example just crossed my desk the other day. There 
is a Fortune 500 company that has technology right now ready to 
go that can cut the weight of the battery packs that our 
soldiers and Marines are carrying in the desert by 20 to 30 
percent. They refuse to market that technology to the 
government right now because of the government-specific 
requirements we lay on them. And as a result, our guys are 
carrying a whole lot more than they have to.
    The issue we have here is a paradox. Increased post-award 
audits and compliance may generate more savings on individual 
contracts, but when you look at their impact as a whole, they 
very well could increase costs when we have fewer companies 
coming in to bid.
    I can't sit here, Chairman Coburn, and defend the status 
quo. We buy more than anyone else in the world. We should be 
the best at buying it, and frankly, we are not. But before we 
turn to these very intrusive alternatives, we should look at 
the tools we have in our toolbox now, quite frankly, that we 
aren't using, and that is something that is my responsibility 
as the OFPP Administrator.
    We are not using things like strategic sourcing, where 
rather than buying a stapler here and a stapler there, we are 
going out and we are saying, OK, how many staplers is the U.S. 
Department of Agriculture going to use in the next year and let 
us negotiate down from that price. We are not using share and 
savings contracts, which is a technical type of contract where 
we load the risk off on the vendor rather than have the 
taxpayer shouldering the risk.
    And frankly, one of the challenges we have, I have got to 
tell you, is we have a human capital crisis coming up in the 
acquisition community. As you can tell by the poster that your 
staff put together, it is a very complicated system we have, 
and we have a whole bunch of folks who know the system and they 
are retirement-eligible. The numbers we have are 70 percent of 
our senior executives, 40 percent of our mid-level managers are 
retirement-eligible, and when those people leave, all the 
experience that the taxpayers paid for is gone out the door.
    And what is really disconcerting, what keeps me up in the 
middle of the night, frankly, is those folks aren't the ones 
that have started to retire now. It is the GS-7s, 9s, 11s, the 
people who should be in journeyman training to step up. Those 
are the people that are leaving. They don't have the golden 
handcuffs of the pension program. They are taking their TSPs, 
walking out the door, and selling out to the highest bidder. 
And so when we see the senior folks that are doing the job now 
leave, I am not sure we have enough folks to backfill.
    I guess, in short, what I would say is that our acquisition 
system is really delicate. Changes in one area have unexpected 
consequences in another. And so when you read that 1977 report, 
it is hard for me to say this, but I would say there are some 
things we have to be careful of. We did reevaluate the 
procurement system in the 1990s. The challenge for you all on 
the Hill, us in the Administration, is to find this right 
balance of rules and regulations and policy and law so that the 
government continues to be the most sought after customer and 
the taxpayers get the benefit from the competition.
    I think I will sum it up there. That is the extent of my 
oral remarks. Thank you again. I think this is an issue that we 
need to explore. I hope I will have an opportunity to come back 
and talk about a few other angles here, but I would be happy to 
take your questions.
    Senator Coburn. I would just note, in 1974, I had a 
contract for the Defense Supply Agency in Philadelphia. I ended 
up giving them the product because the cost that they wanted to 
do it--I gave them $175,000 worth of ophthalmic lenses because 
of the nightmare.
    Now, the point I want to make with you is whose fault is 
that that they won't sell us the magnetometers or the battery 
packs? Is that their fault?
    Mr. Safavian. It is hard for me to assess blame, and I am 
not trying to dodge.
    Senator Coburn. But the point is, how do we get to the 
solution? Obviously, there are a lot of suppliers in this 
country today that don't want to deal with the GSA and the 
Federal Government for very good reasons----
    Mr. Safavian. There is no doubt about it.
    Senator Coburn [continuing]. And that has nothing to do 
with price.
    Mr. Safavian. You are right.
    Senator Coburn. I was willing to take a large loss to just 
get out of the contract because I didn't want to mess with it 
anymore because of the hurdles that you had to jump. That is 
what they are telling you.
    One of the purposes for this hearing is, we are going to 
spend $20 billion this year, right, GSA?
    Mr. Safavian. If not more, a lot more.
    Senator Coburn. OK. No, I am talking about the cost of 
running the GSA, $20 billion. That is what we are going to 
spend. Did anybody step back and say, is there a better way to 
do all this? Does anybody start saying, are we just going to 
tweak this around the edges or can we step back and say, times 
are different. We have tremendous technology in terms of 
electronic technology today. Isn't there a better way? 
Shouldn't we change? Shouldn't we totally reform what we are 
doing? Shouldn't we look at it?
    I don't want a new bill. I don't want to give new 
regulations. We are doing oversight. We are one of the few 
committees in Congress that is going to do oversight. But the 
way we find out how to change things is to talk about it and to 
have you come and testify and to ask the tough questions so 
that maybe we will look at that.
    The entire picture, based on the numbers that you gave, it 
is $600 per purchase based on what you just quoted to me, $600 
for anything that the GSA purchases. That is what the cost is. 
Well, that is pretty steep. If we went to any other large 
purchaser--nobody is as big as the Federal Government, I 
understand that. But in terms of segments, nobody is paying 
$600 when they buy things.
    Mr. Safavian. Let me challenge you if I may, sir. If that 
number, and I don't know how that number came about, but GSA 
doesn't just do acquisitions.
    Senator Coburn. Oh, I understand that, but you all gave us 
that only 4 percent of your cost is in management and billings?
    Ms. Murphy. Management was what the question was. I 
apologize if we were unclear in communicating that to your 
staff.
    Senator Coburn. OK.
    Ms. Murphy. Four percent of our cost is in management. 
Ninety-six percent of it is actually----
    Senator Coburn. In acquisitions?
    Ms. Murphy [continuing]. Spent with contractors or out in 
the field.
    Senator Coburn. So 4 percent is in management. Ninety-six 
percent is outside of it. So the question comes--and it is not 
to be critical of the individuals. This hearing is about two 
generations from now, because as the purchases go up and the 
lack of savings go down, the people that are paying for that 
isn't us.
    Mr. Safavian. It is our kids.
    Senator Coburn. It isn't us. It is grandchildren.
    So my challenge to OMB is to step back from this thing, get 
way away and say, maybe rather than fix things around the 
edges, like this thing has been saying for 30 years, which 
nobody is fixing, maybe we need to say, is there a better way 
for us to do it? That is my challenge.
    Mr. Safavian. And I think we want to take you up on that 
challenge. I think there are two data points here that I would 
add to your point, which is well taken.
    One is we are in the process of looking at the acquisition 
system, particularly for commercial items which we are talking 
about here, the schedules types of buys, and services. Congress 
included in a bill about 3 years ago--2 years ago, the Services 
Acquisition Reform Act, that required us to set up a panel. We 
have 14 members on the panel who are looking at whether there 
is a better way for us to skin this cat. They have been meeting 
since February or so. They are supposed to send up a report to 
you all as well as to me come the end of this year, and I 
expect we are going to see them taking an outside-the-box 
approach--at least I hope they will come back and give us an 
outside-the-box look at how we are buying commercial goods and 
services.
    The other data point that I would give you is this--in the 
President's budget, we directed GSA to begin reorganization to 
do exactly what you are talking about. Let us find a different 
way to do this where we are providing things better, faster, 
and cheaper, where we are taking into account new technology. 
And specifically, we directed that the Federal Technology 
Service and the Federal Supply Service, these two entities that 
have grown up over the last 30 years, be merged. I think in the 
past, it used to be that we bought technology one way and we 
bought commercial items another way and so we needed two full 
organizations.
    And so our hope is that Administrator Perry and his team, 
as they are reorganizing, with a little bit of input, a light 
touch from OMB, I will grant you, is looking at this to try to 
come up with that so that we don't have vendors out there that 
are taking a loss on their goods, but we don't have taxpayers 
that are taking a bath, either.
    Senator Coburn. That is great. They have been authorized 
for 3 years?
    Mr. Safavian. Two years.
    Senator Coburn. And so this year, 2\1/2\ years, almost 3 
years later, we are going to get something. That is the 
problem.
    Mr. Safavian. It is. We went without an Administrator of 
Federal Procurement Policy for 18 months.
    Senator Coburn. Last month, the House of Representatives 
passed H.R. 2066, the GSA Modernization Act. It calls for GSA 
to merge the FTS and the Federal Supply, which you talked 
about. How is this going to impact GSA service fees, 
particularly with respect to alignment with other government-
wide acquisition contracts and multiple award contracts?
    Mr. Safavian. I would defer that to the GSA. I mean, I can 
comment, as well, but I would defer that to the GSA folks.
    Ms. Murphy. The guiding principle in our reorganization has 
been efficiency, and if it is all right with you, we have 
Barbara Shelton, who is the Acting Commissioner for the new 
Federal Acquisition Service, which is going to be that merged 
service, here with us today, so I may defer to her in a moment 
to answer part of your question, as well.
    But as we are looking at the organization and how we can be 
a more efficient organization, how we can provide better value 
for the taxpayer, part of that is going to be looking at our 
normal process of evaluating our fees. At the same time, 
comparing our fees to the fees that our other GWACs around the 
government are charging isn't necessarily a one-on-one 
comparison. Other GWACs and other franchise fund agencies only 
retain about 4 percent of what they collect, and that is to go 
towards additional management structure, putting in financial 
systems. When GSA receives its funding, we--it has to pay 100 
percent of our costs, and anything that we have left over at 
the end goes back to the Treasury. It is not something that is 
enriching us long-term.
    Senator Coburn. How much did you all return to the Treasury 
last year?
    Ms. Murphy. Close to $100 million? Approximately $100 
million, sir.
    Senator Coburn. A $100 million, so 5 percent of your 
budget.
    Ms. Murphy. Only about $200 million of our budget, also, is 
appropriated funding.
    Senator Coburn. Oh, I know that----
    Ms. Murphy. OK.
    Senator Coburn [continuing]. But to me, that doesn't make 
any difference. The fact is, what is the stimulus for GSA, if 
they are a cost-plus organization, to control their costs? 
Within GSA--I am not talking about purchasing, I am talking 
about what is the stimulus--if you are cost-plus, you get a 
percentage of anything you buy, what is the stimulus to control 
your costs?
    Ms. Murphy. Well, I will answer you this way, Senator. A 
year ago, we actually reduced our costs, so it is something 
that we have taken very seriously as a mandate, to be 
performance-based, to only collect the amount that we need 
every year that has to be reviewed by OMB, what fees we are 
going to charge. We reduced the fees that we charge on our 
Multiple Awards Schedules from 1 percent to .75 of a percent, 
which was a savings of millions of dollars to customer 
agencies----
    Senator Coburn. Let me get you to clarify that. Your total 
costs--not your rates but your total costs--went down in 2004 
over 2003? Is that your testimony?
    Ms. Murphy. I would have to get back to you on the record 
for that. I apologize. I have only been with the GSA for about 
5 months, but----
    Senator Coburn. Well, I want you to answer that, because 
that is how I measure costs. What are the total costs? And 
again, with the system that we have set up today, what is the 
incentive within GSA, if they are on a cost-plus basis, to 
reduce costs?
    Mr. Safavian. Let me take that on.
    Senator Coburn. OK.
    Mr. Safavian. You have really hit the nail on the head, at 
least in terms of past practice. In my prior life, and I should 
have disclosed this earlier, I was the Chief of Staff at GSA 
and so I have a particular soft spot for that organization. But 
what we found when I was there was that one of the performance 
metrics driving employee behavior was volume. How many 
contracts could you get in and out of the door? In fact, 
following some IG reviews, what we found in one region was that 
the contracts were coming out the door, I think every 2 
minutes, 24/7, 365, not a constructive way to buy goods and 
services. So first and foremost, that contributed to the 
problem.
    I think if the question you asked is what limits that cost-
plus dynamic, there are two major things. One is OMB has to--
and does--very carefully monitor where the money is going at 
GSA. Particularly, we ride herd and keep a tight rein on head 
count over there. So it is not as though we are inflating the 
numbers of people to do more volume in order to build more 
money.
    But the other part is that we do have a quasi-competitive 
system here. Prior to 1996, GSA was a mandatory source for 
everything. You had to go to GSA and it took you 6 weeks to get 
a box of paper clips--oversimplification, but you can see where 
I am going. Post-1996, what we said was other agencies can 
compete with GSA in certain circumstances. And so you have five 
different agencies, GSA included, that run these big 
contracting vehicles.
    But the other measure that limits poor performance by GSA 
is that if you are an agency and you don't like the fees that 
you are being charged by GSA, unless it is a major commodity 
buy, you are entitled to do it yourself, and most agencies do 
that in one form or another. That is a check and balance in the 
system and it does pose a challenge to GSA. When GSA charges 
too much, business goes out the door to other agencies.
    It is not perfect, and in fact, I can argue that in an 
effort to generate in this theory that let us have competition 
for GSA to keep price reduction down, we have actually gone a 
little bit too far the other way insofar as we have too many 
vehicles out there, too many organizations that are very 
difficult for us to track.
    And what it does is it encourages a strange dynamic. We 
talked about how we encouraged volume at GSA. Well, the dynamic 
you have when you have multiple agencies doing multiple buying 
is you have agencies actually reaching out to see who can do it 
fastest, who can get more volume in, and the result is we see 
bent procurement rules and we don't see the taxpayers seeing 
the best value.
    So again, we have to find this right balance between GSA as 
this mandatory source organization--we don't like that, that 
doesn't work--and GSA, which is competing with a bunch of mini-
GSAs out there--that is not necessarily working, either. The 
key is going to be, A, strong management at GSA, which they 
have; B, strong oversight by you all and by OMB; and C, a 
measure of competition among all of the Federal customers.
    Senator Coburn. Thank you.
    Ms. Murphy, did you go to Chrysler and Ford and GM and do 
post-award audits to see if you got the best price? How do you 
know you bought better than Avis?
    Ms. Murphy. Now, I am not aware of what we did in any 
specific contract. I would be happy to get back to you on that, 
but----
    Senator Coburn. Your testimony was that you bought at 33 
percent better than all commercial buyers, right?
    Ms. Murphy. Yes.
    Senator Coburn. And my question is, how do you know that?
    Ms. Murphy. It is one of the performance metrics by which 
we track our----
    Senator Coburn. I know, but how do we know it? Was there a 
post-contract audit done on those purchases to know that?
    Ms. Murphy. I do not believe so.
    Senator Coburn. OK. So we can't know that.
    Ms. Murphy. The way that we determine our prices going in 
is we do a pre-negotiation panel. When we receive a 
requirement, or a contractor comes to us and wants to do 
business with GSA, for example, using our schedules, they would 
send us an offer. The first thing that our contracting officer 
or specialist does is review that offer and looking at their 
pricing practices and their pricing guides. They then look at 
similar prices that are available on GSA schedule, which are 
available at GSA match, look at what is available commercially 
for pricing. They look at----
    Senator Coburn. That is process. I am wanting to know how 
you know that you got that price.
    Ms. Murphy. That is how we baseline the price. We go in, we 
negotiate with them. What price are you offering Avis? What 
price are you offering a large vendor?
    Senator Coburn. No, but without a post-award notice, how do 
you keep clarity and truth out there in the contracting? If I 
am a supplier and I know you are not coming back to check me, I 
have a wide range of latitude with which to deal with you.
    Ms. Murphy. Well, we do pre-award audits, also. We have 
been increasing those. I realize that there was a dip in the 
late 1990s, but in the past--let me see, in 2003, there were 
14. There will be 70 this year. We are going to see an increase 
again next year. So we are increasing about 500 percent from 
2003.
    Senator Coburn. OK. So why are we increasing? We have 
testimony that it has gone down, the savings have gone down. 
Why all of a sudden this year are we increasing post-award 
audits--I mean, pre-award audits?
    Ms. Murphy. Actually, we began in November 2001. We formed 
an IG working group. It is a very good working relationship 
with the IG to try and address how we could do more pre-award 
audits. In those negotiations, actually, the Federal Supply 
Service has provided $2 million to the IG to hire additional 
auditors so that they can conduct more pre-award audits. We 
negotiate with them at the beginning of the year, or actually 
we are in the process of negotiating for next year how many 
audits they are going to do, what companies, which audits are 
the ones that they need to be looking at. It has been a very 
good and positive relationship. It is only one step, though, of 
our quality control process.
    Senator Coburn. But if a vendor knows that you are doing a 
pre-award audit but you are not going to do a post-award 
audit----
    Ms. Murphy. Well----
    Senator Coburn [continuing]. We will let you see everything 
now, but things may change.
    Ms. Murphy. We do still have the right to do compliance 
audits to make sure that they are maintaining their pricing 
structure, if they are starting to give someone else a better 
price, that we also get that price.
    Senator Coburn. How many compliance audits did you all do 
last year on major purchases?
    Ms. Murphy. I would have to get back to you on that one for 
the record. I don't have that number.
    Senator Coburn. Is it a significant number? Is it more than 
17?
    Ms. Murphy. Honestly, Senator, I apologize. I don't know 
that number.
    Senator Coburn. I think that is important information. I 
mean, if you read their report, it is a pretty tough report on 
the fact that they are saying the savings aren't coming now 
because things--and what you are testifying is that has 
changed. Is that correct?
    Ms. Murphy. We are changing our pre-award audit process. We 
are changing our price negotiation panels. This year alone, we 
have done 57 price negotiation panels that covered over $2 
billion in negotiations. The pre-award audits this year are 
expected to cover another $5 billion in contracts.
    And it is also important to remember that once someone is 
on one of our schedule vehicles, there is additional price 
competition in place. So while we may have established what is 
a fair and reasonable price, we are teaching our customers, we 
are teaching our own associates, and we have put in ordering 
procedures that comply with DOD's rules as well as additional 
rules for the civilian workforce to encourage additional 
competition.
    One tool we created was called e-buy that allows us to take 
a requirement and push that to all the vendors on a schedule 
and get back as many offers as we can and then negotiate to see 
if there are even additional savings to be found.
    Senator Coburn. I am excited that you are doing that. I 
think that is really positive. The question my staff couldn't 
answer and maybe you can is why can they negotiate a better 
price than you have?
    Ms. Murphy. Because when the Federal Government is 
negotiating a schedule price, we are only--there is only a 
guarantee usually of about $2,500 in purchases. If someone can 
come in and say, ``I can guarantee you this is a contract that 
is going to be for 3,000 laptops,'' you can give them a better 
deal than if you are only buying three. If it is the end of the 
model cycle----
    Senator Coburn. Do we know how many laptops we bought 2 
years ago in the Federal Government?
    Ms. Murphy. I think we have some data on it. I couldn't 
tell you comprehensively----
    Senator Coburn. So then why wouldn't we----
    Ms. Murphy. We are working toward strategic sourcing 
those----
    Senator Coburn. Yes, but why wouldn't we say $2,500 is out 
the window on this. Here is what we know we will buy. And the 
price range, if we don't buy that, then it can go up 1 or 2 
percent. Why in the world would we negotiate something less 
than the best price? This is the biggest purchaser in the world 
of everything and everybody ought to get the best price every 
time.
    Mr. Safavian. But Chairman, let me weigh in here, because 
there is a different dynamic. If we were going to market on 
every purchase and saying, all 1.8 million civilian employees 
are going to need a pen, so we need 1.8 million pens, we would 
get the absolute best price. Unfortunately, the system doesn't 
work like that.
    Senator Coburn. Why not?
    Mr. Safavian. It doesn't work like that because we will 
have an agency--we can have USDA buying 40,000 pens----
    Senator Coburn. Why?
    Mr. Safavian. And the answer to that is we went from the 
mandatory source where every purchase was funneled into GSA----
    Senator Coburn. You can still have them purchase it.
    Mr. Safavian. No, I am not defending the--and let me point 
out, we went from a system where all of the funding was, or all 
of the purchases were routed through GSA and GSA would make 
these mass buys, in theory that we would get the best prices. 
We stopped making GSA mandatory, but what we also did was we 
walked away from any concept of leveraging our buying power to 
that great extent.
    One of the things that OFPP, my office has embarked upon is 
a strategic sourcing effort. Strategic sourcing is just MBA-
speaking for us looking at what we are buying and then buying 
it better. The first part of that, though, is it requires us to 
understand what we bought last year. Every major company does 
this, and when they do it, we see 20, 30, 40 percent price 
reductions in commodities. And that is where we are going.
    But I will tell you candidly, right now, our initiative has 
training wheels on it. We have asked agencies to identify three 
commodities and do three commodity councils at the agencies to 
leverage the buys.
    Senator Coburn. I want to make the point with you that 
somebody making $20,000 a year in Oklahoma is paying $2,000 in 
Social Security and Medicare taxes, another $2,000 in income 
taxes. What you all have said basically is we can't get it done 
fast enough, and what they are saying is why in the world, if 
you are the biggest purchaser, why doesn't everybody in the 
Federal Government get the best price? I don't think that--give 
me some defense of what you can tell them. The reason is, is we 
don't have the information, or we can't----
    The fact is, the goal ought to be, I believe, is when you 
go to a vendor, give us your best shot because here is what we 
bought last year. Within plus or minus 20 percent, you are 
going to get a shot at that. And anybody else that wants to 
compete after we have competitive bidding can compete at that 
price for a limited portion of the market. But the rest, the 
guy that got out there and gave us the price and said they 
were, they ought to be guaranteed a certain volume, and you can 
do that.
    To say we don't have the knowledge----
    Mr. Safavian. That is true, though.
    Senator Coburn. And so the testimony is we don't know what 
we are buying----
    Mr. Safavian. That is absolutely true.
    Senator Coburn [continuing]. Because we can't use leverage 
to get the best price.
    Mr. Safavian. Not in all cases. Many cases, we do, and I 
can give you chapter and verse on which agencies are doing a 
great job on their strategic sourcing efforts--the Postal 
Service, Agriculture, Homeland Security, surprisingly enough, 
is doing a great job. The challenge is spreading that out to 
all 26 major agencies and getting everybody singing off the 
same page of the hymnal, and we are doing it.
    Senator Coburn. But that is punching buttons on computers.
    Mr. Safavian. No. I disagree with you. That is not punching 
buttons on computers.
    Senator Coburn. Then that means that our whole purchasing 
system is a mess, because every organized business and other 
entity out there now buys computerized generated purchase 
orders--they have a list against which they buy. They know what 
the maximum price is. They know what they are going to pay in 
terms of freight charges. And at the end of the year, they 
punch a button in February and they know what they bought the 
last year and they are anticipating that in October, so they 
are contracting for the next year, and you are telling me we 
can't do that.
    Mr. Safavian. We can to a limited extent. The government 
buys differently than the private sector. Whether we like it or 
not, we have certain mandates and certain social obligations. I 
saw one of your posters over there that talked about JWOD and 
talked about some other mandatory source requirements. Like it 
or not, the procurement system has been turned into a tool of 
socio-economic engineering in a number of cases and that makes 
it a different type of buy.
    Senator Coburn. Can you assess, can you give me a 
percentage or a dollar cost for us doing the social engineering 
through the purchasing system? What does it cost us in terms of 
increased cost? I couldn't give you that number. I don't think 
anybody can give you that.
    Senator Coburn. Mr. Cooper, have you all looked at that?
    Mr. Cooper. No, we haven't. I don't think there is any way 
to come up with a dollar amount for that kind of thing.
    But I would like to add a couple of points, and I think you 
are raising some very important, fundamental questions. GSA 
talks about getting a 33 percent discount. What they don't know 
is the commercial customers for that same vendor were getting 
43 percent discounts. If you look at the GSA IG report that was 
done in 2001, you will find example after example after example 
of where the commercial customers were getting a better deal 
and GSA didn't know because they weren't doing the pre-award 
audits. So the pre-award audits are very important to know 
that.
    The other thing that Mr. Safavian has raised about 
strategic sourcing, I think he has got an excellent point. The 
government can do much better. We have been pushing for the 
last 4 years to get agencies to adopt strategic sourcing 
initiatives. We don't know what we are buying. We have no idea. 
We don't have the information systems. We don't know who we are 
buying from. We don't know what we are paying. And we need to 
have all of that information.
    As you point out, any major corporation in this world that 
is worth their salt, and we have gone out and done best 
practices work at a number of those companies, take purchasing 
as a very serious function, a function that adds to the profit 
line of those companies.
    Senator Coburn. You bet.
    Mr. Cooper. And they go out and they get the best deals 
they can do and they have the information systems and know who 
they are buying from, how much they are buying. And the other 
thing is, those companies also have socio-economic objectives 
that they meet. So they are spreading that purchasing out. You 
don't sacrifice one for the other. You have to manage both.
    Senator Coburn. Let me ask you one question. Would it make 
sense to you, if we are the biggest purchaser, we ought to get 
the best price?
    Mr. Cooper. Absolutely, the best possible price in every 
case.
    Senator Coburn. And the best service?
    Mr. Cooper. And the best service, the best delivery terms, 
you name it. The purchasing power of the government should be 
used to its advantage.
    Senator Coburn. And should that be done in a way that 
vendors like doing business with the Federal Government?
    Mr. Cooper. I think there is enough business coming from 
the Federal Government, there are an awful lot of vendors that 
want that business, yes.
    Senator Coburn. OK. But there are real problems with 
hurdles in doing business with the Federal Government.
    Mr. Cooper. There is no question about that.
    Senator Coburn. And is somebody working on solving those 
problems?
    Mr. Cooper. I would like to talk about the battery case for 
just a minute, because we have, over the years, looked at a 
number of different situations where companies are reluctant to 
deal with the government because of the red tape, the intrusion 
that Mr. Safavian talked about. The Congress has passed all 
kinds of legislation that allow us to streamline our processes 
to reach those people, and I think it comes down to the 
companies making a business decision of whether it is in their 
best interest or not to do business with the government.
    We have something we call ``other transactions.'' It gets 
away from cost or pricing data. It eliminates the requirement 
to follow the Truth in Negotiations Act. It makes it much 
easier for companies to deal with the Federal Government. There 
are all kinds of ways. The contractors can ask for waivers of 
cost or pricing data for these intrusive kinds of things that 
some companies don't want to deal with.
    Senator Coburn. So was that done in these two instances?
    Mr. Safavian. No, but I think this is an absolutely 
critical point. What we are saying is we can waive data 
requirements when it is in the government's best interest or we 
can ask for more data 20 years out after a contract is 
executed. Those are the two ends of the continuum. Twenty years 
is a long time. Let me rephrase that.
    You can either do the post-award audits, where we are 
asking for more data after the transaction, or as Mr. Cooper 
said, there are flexibilities where we can use other 
transaction authority and say, we really don't need the cost 
and pricing data to go get this.
    Senator Coburn. Or we can do what Ms. Murphy said. We can 
have a continuing audit, which she alluded to earlier. You can 
go in--there are other mechanisms which you can check that.
    Mr. Safavian. I think that is right. But what the one thing 
that I think all of us agree here is that at the pre-award 
phase, when the vendors come in and say, here is our data, here 
is what we want to charge you, GSA should be using more pre-
award audits. There is no doubt about that. Where we get into, 
I think, probably an inter-family fight is when we are talking 
about doing more post-award audits, and what we are talking 
about is not whether or not Ford delivered the 1,000 cars it 
said it was going to. We always have the authority to do that.
    What we are talking about is 5 years after Ford came in and 
negotiated its price, can we, as the government, go back to 
Ford and say, we want to see all of the data that you 
calculated your price 5 years ago so that we know whether that 
price 5 years ago was the right price. That is the post-award 
audit we are talking about.
    Now, maybe for Ford, that is fine. But for my family 
business in Trenton, Michigan, Trenton Forging, they are not 
going to keep that data for 5 years or 10 years or 13 years, 
depending on the length of the contract. And that is where we 
get into that red tape issue.
    Senator Coburn. Well, you are talking in terms much longer 
than what I would use that tool. What I would use the tool--I 
would never give away this tool, and the reason I wouldn't ever 
give away the tool is you don't even have to use it but once or 
twice. It is like my proposal. I think we ought to put some 
doctors that are defrauding Medicare in jail, and if you did 
that about ten times a year, there would be a whole lot less 
fraud in Medicare. But we don't use that tool, and so 
consequently, I believe you have kind of disarmed yourself by 
the post-award audit, the lack of--saying it is not going to be 
there, because what you have done is taken away a tool that is 
going to intimidate the wrong behavior, to make sure the wrong 
behavior doesn't happen in some of your contracts.
    Look, most people are honest. I want to see a government 
where we assume people are doing the right thing, not assume 
people are doing the wrong thing, and all across our 
government. We have gone in a different direction in this 
country. We assume everybody is wrong. We have to prove you are 
right. I would like to see it.
    But the tool is to occasionally audit, and that doesn't 
mean you audit everything. That means use the tool effectively 
to lower the prices. I guess my comparison, having a pretty 
long history in business before I was a physician, is we have 
got great tools and you have got the information. It is just 
you can't get it to you, somewhere, the information on what we 
bought. Every agency knows what they bought. We spent $64 
billion on IT equipment last year alone as a government. 
Somewhere, that data is there. The question is that we haven't 
got the CFOs in everyplace to get the transparency and to get 
the accountability that we need to be able to get that. But if 
we start running these under good financial standards, we ought 
to be able to get that.
    Mr. Safavian. Before we started today, David and I were 
talking about the report that you all have, the most recent 
report from GAO, and one of the recommendations, it says--let 
me back up. When we are talking about post-award audits, these 
relatively burdensome and intrusive audits, they are in place. 
There is authority to do that currently at GSA, but it is a 
very high threshold. To put it simply, it is the tool of last 
resort, but it is still available.
    And the one thing that I noticed in the GAO report was it 
said--it didn't say that we should make--that we should be 
lowering the threshold as to whether or not we should do those, 
only that we need to inform our contracting officers that this 
is a tool of last resort and that it is available.
    Senator Coburn. And it ought to be used every now and then 
so they still know it is going to be used.
    Mr. Safavian. Once in a while.
    Mr. Cooper. Yes. What we recommended was to give those 
contracting officers guidance so they knew when to use the 
post-award----
    Senator Coburn. Yes.
    Mr. Safavian. But the last thing we want to do is we don't 
want to see every mom and pop or every large business subject 
to post-award audits. That just hurts everybody.
    Senator Coburn. You don't have to, because that is not the 
intent of it. The intent of it is to be a tool to encourage 
good behavior. If it is used properly, you don't have to use it 
much. It is like a stick on your child. You don't have to use 
it much.
    Mr. Cooper. I think you will hear that from the next panel.
    Senator Coburn. All right. Ms. Murphy, do you have any 
comments on anything we have been talking about here just 
recently?
    Ms. Murphy. Well, I would just say that we at GSA also have 
strategic sourcing, are trying to--we have been partnering with 
the Department of Agriculture, partnering with Homeland 
Security, partnering with other agencies to help them better 
use our schedules, our tools to strategic source to bring down 
prices. We have been--we really are trying to take a 
comprehensive approach to prenegotiation. We have been training 
our contracting officers and specialists. We have got a course 
that is starting next week on pricing mods and how we can 
better negotiate.
    So we are taking this very seriously. We believe this 
responsibility to the taxpayers is one of the penultimate 
responsibilities of a contracting officer and we want to make 
sure that our acquisition workforce has the tools it needs to 
give that best value.
    We also, though, are very conscious of the fact that 80 
percent of our vendors are small businesses, and so any time we 
impose additional burdens on those vendors, it is a real cost 
of business for them----
    Senator Coburn. And it is a reason some of them might not 
want to do business with you. I understand that. I had personal 
experience with it. I understand it.
    First of all, let me thank each of you for coming. I am 
going to invite you back 6 months from today--actually, maybe 
not 6 months from today, that is after Christmas--after the 
first of the year and I want us to discuss this again. I want 
to see whether headway has been made. We are going to have 
another set of people testifying here in a moment.
    Ms. Murphy, you have promised to get us some answers to 
some questions. We will expect that in a prompt manner, if you 
would.
    We are going to look at this, because there is not one area 
of the Federal Government we shouldn't concern ourselves with, 
and I am not just talking about GSA. If you look at the 
hearings I am having, we are not picking on anybody. We are 
picking on everybody, and we are going to help drive efficiency 
and we are going to try to help drive to get rid of the waste.
    This is not a criticism of anybody individually. I am proud 
of the people that work for this government. I think they are 
great people and I think they do a great service. But I think 
sometimes the forest and the trees get confused and we need to 
step back outside.
    I would leave you with this to carry home. We ought to know 
what we are buying. We ought to be able to evaluate that and we 
ought to be able to use that as a tool to buy better and save a 
ton of money. And every tool you have to perk that--I guarantee 
you, the purchasing manager at Ford doesn't wince anything when 
he goes to try to get a better price, and I guarantee he has 
got a guaranteed price. Otherwise, that guy won't have the 
contract the next year and he is going to check it. So we ought 
to be modeling some of that behavior on a way, and I think that 
you all will do that and I appreciate you coming to the 
hearing. Thank you. This panel is dismissed.
    I would hope somebody from GSA would remain and maybe 
somebody from OMB to hear our next witnesses, just so you can 
have input of what they are going to say, because we will be 
using this in the next hearing.
    Senator Coburn. Welcome. Thank you all. On our second panel 
is Kathleen Tighe. She is Counsel to the Inspector General, 
Office of the Inspector General, General Services 
Administration. Also, John Ames, Director for Contract Review 
and Evaluation Division, Office of Inspector General, 
Department of Veterans Affairs. And also, Thomas Graham, the 
Chief Operating Officer of Networld Exchange, Carlsbad, 
California.
    Welcome to each of you. Thank you, number one, for coming. 
Thank you for giving us your testimony earlier than 12 or 13 
hours before the hearing. Your full written statement will be 
made part of the record, and if you would, try to keep your 
comments to under 5 minutes.
    Ms. Tighe.

  TESTIMONY OF KATHLEEN S. TIGHE,\1\ COUNSEL TO THE INSPECTOR 
         GENERAL, U.S. GENERAL SERVICES ADMINISTRATION

    Ms. Tighe. Thank you very much, Mr. Chairman. Before I 
begin, I would like to note that our new Inspector General, 
Brian Miller, was confirmed by the Senate on Friday----
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Tighe appears in the Appendix on 
page 77.
---------------------------------------------------------------------------
    Senator Coburn. Welcome, General.
    Ms. Tighe [continuing]. So he is new to the Inspector 
General community.
    We greatly appreciate the opportunity to testify on GSA's 
procurement processes and present the views of the Office of 
Inspector General. I will primarily address the importance of 
contract audit rights and the vital role we believe they play 
in ensuring that taxpayers' interests are protected.
    The experience of the Office of Inspector General in 
contract auditing has arisen primarily in the context of the 
MAS program we have been talking about so much today. One of 
the aims of the MAS program is to provide agencies with the 
widest possible choice among qualified vendors. In addition, 
GSA commits to MAS users that schedule prices are fair and 
reasonable. Because the goal of the program is to maximize 
choice, there is no head-to-head competition as a means of 
ensuring fair and reasonable pricing. Instead, what GSA does is 
ask for information regarding a vendor's commercial pricing to 
its best customers and seeks to negotiate a price that is equal 
to its best price. It is this use by GSA of vendor-supplied 
information that gives rise to the need to audit.
    Currently, there are two main types of audits conducted of 
MAS contracts, compliance audits and pre-award audits. 
Compliance audits allow our auditors to examine a vendor's 
books and records to check for overbillings and ensure 
compliance with the price reduction and industrial funding fee 
clauses.
    The second type of MAS contract is the pre-award audit. 
These audits, conducted at the request of contracting officers 
in coordination with our office, are performed prior to GSA 
awarding or extending MAS contracts. They examine the pricing 
information a vendor provides in its proposal. This information 
is then used by the CO to negotiate a better price for the 
government under the MAS contract.
    In a report issued by our office in 2001 which GAO 
referenced, we noted the dramatic decline in the use of pre-
award audits in the late 1990s. For example, in 1997, only 
eight pre-awards were conducted. That was the low point. This 
report spurred the formation of a working group within GSA, 
which Ms. Murphy noted, comprised of members of GSA's Federal 
Supply Service and our own office and we were tasked, among 
other things, with increasing the number of pre-award audits. 
By the end of this fiscal year, we expect to have conducted 
about 70 pre-award audits covering about $5.2 billion of 
expected sales and we hope that the trend does go up, and we 
are working, I hope, with GSA and have been fairly successfully 
toward that end.
    Prior to 1997, though, GSA also had the ability to conduct 
post-award audits of pricing information provided during MAS 
negotiations, the so-called defective pricing audits. We 
initiated and conducted these audits and their purpose was to 
determine whether this all-important pricing information MAS 
vendors provided is current, accurate, and complete.
    In 1997, GSA virtually eliminated the authority to conduct 
post-award defective pricing audits. Although GSA did retain 
language, which was discussed very briefly, that would allow 
COs to modify MAS contracts to allow for defective pricing 
audits, the modification requires a high level of approval and 
a CO finding that there is a likelihood of significant harm 
absent inclusion of this audit authority. To date at GSA, this 
clause has never been modified to exercise defective pricing 
authority.
    We believe defective pricing audits are an important means 
of protecting the integrity of pricing disclosures and should 
be reinstated. In the 3-year period prior to the 1997 rule 
change, 84 percent of our post-award audits contained findings 
of defective pricing. Looking only at the small numbers of 
these audits that were referred to the Department of Justice 
because they had indications of fraud, we recovered $110 
million in the 8 years prior to the rule change. This amount of 
money does not include monies recovered by contracting officers 
administratively. It also does not include the amounts 
attributable to improved forward pricing, because the COs can 
take these reports and negotiate good prices going forward, 
also. It is not just about getting money back.
    Every indication we have based on hotline calls and fraud 
actions filed under the civil False Claims Act is that faulty 
and incomplete pricing disclosures are still prevalent at GSA, 
even though we can't audit for them.
    We also don't think, as you yourself mentioned, Mr. 
Chairman, that audits can be measured in terms of numbers of 
contracts audited or dollars recovered. Even at the height of 
our auditing, we conducted only about 40 to 50 post-awards a 
year. It is really the existence of the audit right that serves 
as a deterrent, we believe, to vendors that would misrepresent 
their pricing information to the government, and I believe this 
right encourages companies to put in place internal compliance 
programs and other things and good housekeeping measures 
internally and make them more responsible contractors.
    We believe the success of the Department of Veterans 
Affairs voluntary disclosure program is due in part to the fact 
that it retained contractual defective pricing audit rights.
    We have strongly urged GSA to reinstate post-award audit 
access to negotiation information. The ability of GSA to 
negotiate prices commensurate with the government's purchasing 
power is dependent on getting current, accurate, and complete 
pricing information from vendors. We believe that post-award 
defective pricing audits are a critical adjunct to the existing 
pre-award audits. Although we expect to perform 70 pre-award 
audits this year, as I noted, this only represents a small 
percentage of the over 17,000 total existing MAS contracts. We 
believe that as long as GSA wants to maintain maximum choice, 
the centerpiece of the MAS program, audit rights over pricing 
information should be an appropriate, necessary feature of 
these contracts.
    Thank you very much. I am happy to answer any questions.
    Senator Coburn. Thank you. Mr. Ames, thank you for being 
here.

  TESTIMONY OF JOHN B. AMES,\1\ DIRECTOR, CONTRACT REVIEW AND 
    EVALUATION DIVISION, OFFICE OF INSPECTOR GENERAL, U.S. 
                 DEPARTMENT OF VETERANS AFFAIRS

    Mr. Ames. Mr. Chairman, I am pleased to be here today to 
explain why pre-award and post-award audits of Federal Supply 
Schedule proposals and contracts are in the best interest of 
the government and to discuss the need to maintain post-award 
audit authority in all FSS contracts.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Ames appears in the Appendix on 
page 87.
---------------------------------------------------------------------------
    We strongly believe that pre- and post-award audits help 
ensure VA is getting the best possible price for the American 
taxpayer. VA has been delegated authority by GSA to manage 11 
schedules for health care products and services. These 
schedules encompass over 1,400 contracts with annual sales 
projected to exceed $7 billion in fiscal year 2005.
    In fiscal year 1993, VA entered into a Memorandum of 
Understanding with the OIG to provide audit services for VA's 
FSS contracts on a reimbursable basis, paid for by VA's 
revolving supply fund. This partnership with VA has proven to 
be very successful. During the past 12 years, we have conducted 
240 pre-award audits. These audits contain recommendations for 
better use of funds by obtaining lower contract prices of 
approximately $2.2 billion, of which $390 million was actually 
sustained during contract negotiations.
    In addition, 238 post-award audits were conducted, 
resulting in approximately $319 million in recoveries for VA. 
The recoveries have more than paid for the cost of conducting 
these audits, with a return on investment of $11 for each 
dollar expended. Of the 238 post-award audits, we initiated 107 
in response to vendors' voluntary disclosures. These vendors 
collectively offered to pay back $37.5 million in overcharges. 
However, as a result of post-award audits, we actually 
recovered $113 million for VA.
    The number of voluntary disclosures shows that post-award 
audit authority has had a deterrent effect on industry. These 
audits also provide valuable insight into each vendor's 
commercial practices, which VA has used to improve its 
contracting and purchasing activities.
    In response to industry objections to post-award audits of 
FSS contracts, GSA issued a final rule in August 1997 that 
virtually eliminated the clause permitting post-award 
examination of records for the purpose of auditing pricing 
information submitted during contract negotiations. Because of 
opposition from VA, the Department of Justice, and the GSA OIG 
to eliminating post-award audits, GSA compromised and the final 
rule allowed the awarding agency some very limited discretion 
to include the clause in schedules that were determined to be a 
risk for harm if the clause was not included.
    To further appease industry, the final rule imposed a 2-
year limitation on auditing commercial sales practices and 
other information relied on by the contracting officer in 
awarding a contract or modification.
    In response to the final rule, VA evaluated its schedules, 
identified those that were at risk, and took the actions 
necessary to include the post-award examination of records 
clause in these schedules. As a result, we have continued to 
perform post-award audits.
    In March 2005, GSA has once again raised the issue 
concerning the need and benefit of post-award audits. In 
response to their advance notice, we maintained our position 
that post-award audit clauses, which existed prior to the 
August 1997 final rule, should be reinstated and should be 
included in all FSS contracts. We believe this is needed to 
protect the interests of the government and to ensure that we 
receive fair and reasonable pricing.
    Throughout the past 10 years, industry has made a number of 
arguments in opposition to post-award audits. A primary 
argument is that the audits are overly burdensome on the 
contractors' operations. Our on-site audits at the vendor's 
place of business are only conducted on an as-needed basis and 
are usually completed in 2 days or less. We have reviewed large 
and small businesses and found that most maintain records in 
electronic format, that the information is maintained for many 
purposes, not just government audit requirements, and that the 
information is readily available for review.
    Last, notwithstanding GSA's lack of involvement with VA's 
11 schedules, GSA retains the authority to interpret and issue 
rules affecting all FSS schedules. Because of this, we propose 
that GSA transfer to VA complete authority to manage its 11 
schedules, including all rulemaking authority. This will ensure 
our ability to continue to negotiate and obtain the best prices 
for the government.
    For the reasons stated above, we recommend that GSA 
reinstate the post-award access to records and right to examine 
records clause that was deleted by GSA's final rule. We also 
recommend that Congress consider transferring the 11 schedules 
that VA currently manages from GSA to VA.
    I thank you for the opportunity to testify. This concludes 
my formal statement. I will be pleased to answer any questions.
    Senator Coburn. Thank you, Mr. Ames.
    Mr. Graham, thank you. Welcome. We are glad you came. Thank 
you for coming.

    TESTIMONY OF THOMAS GRAHAM,\1\ CHIEF OPERATING OFFICER, 
            NETWORLD EXCHANGE, CARLSBAD, CALIFORNIA

    Mr. Graham. Good to be here, sir. I really appreciate the 
opportunity to appear before this Subcommittee to talk about 
GSA--GSA fees.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Graham appears in the Appendix on 
page 98.
---------------------------------------------------------------------------
    My answer to your question, is GSA getting the best deal, 
or giving the taxpayer the best deal, I believe very strongly 
that we have to look at this from a balanced and unique 
perspective and we need to look at the current press on GSA, 
which prior testimony more than documented. As we look at this 
current press, it clearly indicates that there is a problem 
within the GSA hierarchy in terms of is GSA doing the best job 
for the American Government. We have to look at GSA not only 
from the perspective of the fees that GSA charges, but we have 
to look at GSA and contracting in terms of the effectiveness 
and the efficiency in which the agency operates as they charge 
those fees.
    I believe that GSA, frankly, mirrors problems that are 
endemic to the government acquisition domain, meaning that 
problems at GSA can be found across the board when we talk 
about franchise agencies as they conduct business for the U.S. 
Government and as they charge fees in the conduct of that 
business.
    If we look at these fees from a larger perspective, one 
could reasonably conclude that they are high. If we look at 
these fees from the perspective of the value that the agencies 
bring to the table and we measure the efficiency and the 
effectiveness of these practices, one element becomes very 
clear. GSA, to quote GSA, GSA has indicated that from their own 
IG that they are not as efficient as they could be. So one 
could conclude that with a bit of reform, with a bit of change 
in the way the GSA does business, that, in fact, they could be 
effective and efficient.
    One of the things that I would like to propose today is 
that that is, in fact, the case and, quoting from GSA's own 
staff, the staff feels that if GSA could automate their 
purchasing practices and create tools that automate what they 
do across the board in terms of compliance and results, that a 
lot of the issues that are being discussed today in terms of 
costs for service and value would be decreased.
    For example, GSA currently operates at a cost to the 
taxpayer averaging 5 percent per action. In previous testimony, 
it has been indicated that an average of about $600 per action 
is the average cost.
    In our case, we believe that we have, and when I say 
``we,'' my company, Networld Exchange, has created in 
cooperation with the Navy Postgraduate School and the 
Department of Interior a contract that responds to a number of 
the issues and questions that have been raised here today.
    For example, the Federal Government has increased spending 
on acquisition issues between 2000 and 2005 by about 30 
percent. This data is public, and one of the things that we 
know is that as the cost of goods and services have increased 
and the cost of acquiring those goods and services using GSA 
and other Federal agencies like GSA, what has occurred at the 
same time is that the acquisition workforce that conducts these 
actions have been actually decreasing, taking away with them 
past knowledge that could be very useful in creating new 
opportunities and new knowledge base to create new 
opportunities.
    The Navy Postgraduate School conducted a study a number of 
years ago, and in the findings at the Navy Postgraduate School, 
the question was raised whether the efficiency of the current 
acquisition workforce could be improved to save money for the 
Federal Government and the answer was clearly no. So as a 
direct consequence, the Navy Postgraduate School created a 
think tank that would study acquisition, logistics, research 
and development, and the result of that effort was the creation 
of what is currently called the Open Market Corridor.
    The Open Market Corridor is administered by the Department 
of Interior National Business Center in Fort Huachuca, Arizona, 
and research and development in a constant form is conducted 
between the Navy Postgraduate School and my company, Networld 
Exchange. OMC was developed with zero up-front costs to the 
Federal Government. The government paid nothing for the 
software.
    One of the other issues that OMC brought to the table was 
the fact that this development was done in collaboration 
between industry and the government. Current purchasing 
practices at GSA does not have that selective kind of 
collaboration, particularly when dealing with IT purchases. 
Information technology purchases particularly are a fast-
growing item within the acquisition milieu of the Federal 
Government.
    The Federal Government pays more for IT purchases than the 
private sector does, and one of the reasons for that is that 
the knowledge base within the Federal Government regarding IT 
purchases is suspect. As a matter of fact, recent publications 
indicate that many agencies now are hiring chief executives to 
handle IT purchases.
    The intent of OMC was to demonstrate that a web-based 
procurement execution and administration system compliant with 
the FAR, particularly FAR 12, could be an effective tool that 
could be applied across government. Using OMC, we think that 
the shrinking procurement workforce can become a more efficient 
organization in the sense that OMC allows greater use of time 
and availability of folks that are involved in the procurement 
domain.
    Senator Coburn. Can I get you to summarize, if you would.
    Mr. Graham. Yes, sir. We believe that, basically, as a 
developer, that the government needs to take a very close look 
at how purchases occur in terms of working collaboratively with 
industry to reduce costs. Thank you.
    Senator Coburn. Thank you.
    Ms. Tighe, who set the policy that choice is more important 
than price and quality?
    Ms. Tighe. I think that has been the longstanding sort of 
reason for the MAS program, so it was sort of no one person or 
no one time. Ever since I have been involved in the MAS 
program, which has been the last 15 years, that has been the 
operating principle of the program.
    Senator Coburn. Can you give me the background on why that 
would be? I am having trouble understanding why that trumped 
price and service.
    Ms. Tighe. Well, I don't think it is intended to 
necessarily trump price. I think it just means you have to go 
about getting good prices another way. I mean, one way of 
getting good prices on the MAS program would, of course, be to 
limit the number of people who can get schedules. Now, that 
would instill competition on the front end. You wouldn't 
necessarily need to go get data, wouldn't necessarily need to 
go do pre- or post-awards. But I think the intention is to--you 
know, it is sort of the big umbrella for the Federal Government 
and you want to--the agencies like to know that they can go at 
a very low, good price and go to Dell Computer and buy 
computers or go to Gateway or go to whoever they want to and 
not be limited in their choice, and I think that has always 
been sort of the reason behind the thought.
    Senator Coburn. Can you give me the logical reason behind 
it? I mean, there is not that much difference between a 
Gateway, an IBM Thinkpad, and a Dell, other than price. I mean, 
they are all using Intel chips. So can you explain to me where 
that came about? What was the reason behind that? Is it because 
that was demanded by the different agencies, that they wanted 
more say in it?
    Ms. Tighe. That is essentially my understanding, is that 
was the feedback they were getting from other agencies.
    Senator Coburn. You talked about the $5 billion that was 
purchased this last year. I think you made mention of----
    Ms. Tighe. Yes. Actually, I think it is--this year is 
looking at, like, $31 billion under the MAS program.
    Senator Coburn. But of the total government purchases--this 
is an important number--$291 billion, right? And so if we look 
at the total purchases and we look at what it costs to run GSA, 
which is the $20 billion, we are at almost 7 percent cost. The 
question is, if we are motivated based on choice, not on price, 
and the price is actually too high, then that ratio actually 
goes much higher, the cost of GSA services for the price.
    Ms. Tighe. I understand. I believe it is possible to keep 
what GSA wants to--maximum choice and get good prices if you do 
a better job of looking at the information vendors give up 
front and have ability to check it, spot check it as contract 
terms go on.
    Senator Coburn. And you agree that we need to have pre- and 
post-award audits?
    Ms. Tighe. I do agree. Yes, absolutely.
    Senator Coburn. Was that a unilateral decision that was 
made by GSA, to eliminate--this happened in 1997, correct?
    Ms. Tighe. Nineteen-ninety-seven, correct.
    Senator Coburn. To eliminate post-award audits?
    Ms. Tighe. It was a decision made by GSA, but also with the 
blessing of the Office of Federal Procurement Policy----
    Senator Coburn. In OMB?
    Ms. Tighe. Yes, in OMB. There was much discussion during 
the time. Department of Justice had input. We had input. VA had 
input. They certainly listened to our viewpoints, and I don't 
quibble with that. But in the end, GSA made the decision that 
it was going to eliminate post-award audit rights.
    Senator Coburn. And if you were to try to defend that based 
on what you have heard here today, can anybody legitimately 
defend that position of not having that tool out there where it 
can be used?
    Ms. Tighe. In my opinion, no. I think it was very short-
sighted. I think GSA gave in to vendor pressure and arguments 
that it was unduly burdensome, which I don't agree with.
    Senator Coburn. Well, it could be.
    Ms. Tighe. I understand that.
    Senator Coburn. If you are a small business and you are 
doing it all the time----
    Ms. Tighe. Absolutely.
    Senator Coburn. But that wasn't what it was intended and 
that wasn't----
    Ms. Tighe. And that is what we try to focus our auditing on 
the large dollar contracts or the contractors with risk factors 
or have a reason to audit. It is not done to go out and look at 
small businesses.
    Senator Coburn. Or to raise costs.
    Mr. Ames, why does GSA want to take your authority for pre- 
and post-audits away? You have done a wonderful job, another 
area where the VA is leading. The VA is leading in the Internet 
technology in health care. You are leading in terms of purchase 
savings. Why do they want to take that away?
    Mr. Ames. I would comment and echo some of the same 
statements that Ms. Tighe just made. I distinctly remember the 
years following up to the 1997 final rule. I felt as if we were 
in the vanguard, trying to protect the pre- and post-award 
audit rights. The GSA basically caved into industry pressure. 
Now, you also had FASA of 1994 in that time frame and you had 
the Clinger-Cohen Act and some people went so far as to say, 
well, those pieces of legislation prohibited post-award audits. 
We never saw it that way at all.
    We didn't think the legislation did prohibit the audits, 
and quite frankly, with the voluntary disclosures that we have 
had, when I heard the critics mention that the audits are 
overly burdensome and cumbersome, some of our best corporate 
citizens, best corporate companies are ones that we have had 
voluntary disclosures and we have had settlement agreements 
with. One drug company in particular, we had an $8 million 
settlement with. Following that settlement, they have come 
forward with about 15 voluntary disclosures. So time and time 
again, and they have come forward with things that probably we 
would not have found had it not been for their disclosures.
    So I think that, from our standpoint, we feel that we 
conclusively know that were it not for post-award audits, the 
voluntary disclosure program would dry up overnight. And we 
equate business integrity and accountability. If you have 
business integrity, you shouldn't mind being accountable for 
your business transactions.
    Senator Coburn. All right. I would like to submit for the 
record an OMC/GSA comparison table on six items,\1\ and I think 
these were in the last month, where it shows every time OMC 
beats GSA, plus OMC is taking 2 percent off the top for their 
own profits. We are going to ask for more records.
---------------------------------------------------------------------------
    \1\ Chart entitled ``OMC/GSA Comparison Table'' submitted by 
Senator Coburn appears in the Appendix on page 154.
---------------------------------------------------------------------------
    There are also some other interesting things associated 
with it. The delivery is faster, 2 weeks versus 5 days or 2 
days. Vendor choice is not necessarily less. And yet the 
savings looks to me about somewhere around 4 or 5 percent over 
what GSA can buy the same thing.
    Without your objection, Senator Carper, I would like to 
introduce that into the record.
    Senator Carper. Clearly, it ought to be in there.
    Senator Coburn. I would like to recognize Senator Carper 
now. We have had a great hearing. Sorry you couldn't be here 
earlier. I know you had a conflict in your schedule, but we 
have had good testimony and it is your time.

              OPENING STATEMENT OF SENATOR CARPER

    Senator Carper. I apologize for not being here for all of 
it. We are trying to get to a place where we can bring the 
Postal reform bill, that I know you have an interest in----
    Senator Coburn. Yes.
    Senator Carper [continuing]. To the Senate floor, so we 
have been distracted with that for the last hour or so.
    I have a number of questions, one of which I want to submit 
for the record. I will mention that one first.
    It is an outfit, a private company, I think they are called 
Silver Oak Solutions, that works with a number of States, maybe 
some local governments, as well, and one of the things that 
they do is try to help those States to reduce their cost of 
purchasing all kinds of items, and I think the approach is an 
online bidding competition that pits all kinds of vendors for 
the same particular commodity or product, enables them to bid 
against each other, and in the end, somebody has the low bid 
and wins the bid and the State walks off with a little bit of 
savings and the goods that they need.
    I just want you to take a look at it and see if there are 
any lessons, any applicability for what is going on in those 
State Governments that might help us at the Federal level.
    Not having been here to hear your testimony, let me just 
ask each of you, and I will just start with you, Mr. Graham, 
because I like your first name----
    Mr. Graham. OK. Fantastic. [Laughter.]
    Senator Carper. I want to start with you and just ask you 
to share with me some of the take-aways. I ask you, what should 
I be taking away in terms of what you presented to this 
Subcommittee?
    The other thing I am going to ask, after we go through that 
and talk about that for a while, I am going to ask you, what 
should we do? What should this Subcommittee do? What should 
this Committee do? What should the Senate and the Congress be 
doing, and the Administration? What should we be doing?
    We all know we have these huge budget deficits. They are 
out of control. There are a variety of things we need to do, 
probably all of them that we need to do, I think will help us 
rein this deficit back in. But what should specifically this 
Subcommittee and this Senate be doing in response to the 
concerns that we are discussing here today?
    First, though, if you will, the take-aways for me, and for 
others who might not have been here.
    Mr. Graham. OK, fantastic. The first take-away, I think we 
would like to address, is the entire issue of government 
acquisition and how it works. A number of folks here have 
testified that government acquisition is actually--the way the 
system works can be actually a deterrent to participation from 
large and small business and that, in fact, occurs.
    But the other thing, of course, is that is just part of the 
problem. We want to talk about solutions and the solution 
resides in really reform, and the particular issue that I would 
like to bring forward is automation. There have been a number 
of cases where agencies have decided to automate. There are a 
number of initiatives in government, IAE initiatives and DOD. 
However, there is no commonality among those initiatives so the 
result is usually the same in the sense that everybody does 
their own thing and there is no connectivity between those 
agencies.
    What I believe is that the Federal Government, particularly 
this Subcommittee, should insist on that, especially insisting 
on it within the milieu of Homeland Security. There are two 
major IT projects currently in the Homeland Security Department 
where they started last year, they awarded it to Bearing Point, 
and less than a year later, they are not sure where they are 
going, and both of those projects are literally today at a 
standstill.
    To address your suggestion from the company you are talking 
about that helps the States, what you are talking about are 
reverse auctions. The government has tested reverse auctions 
with mixed results because----
    Senator Carper. When you say the government, the Federal 
Government?
    Mr. Graham. The Federal Government, yes.
    Senator Carper. OK.
    Mr. Graham. Particularly the Navy. The U.S. Navy uses 
reverse auctions quite frequently, and one of the things that 
occurs is that----
    Senator Carper. Do you think my interest in reverse 
auctions has anything to do with my being a Naval flight 
officer for 23 years? Do you think it is just a coincidence, 
maybe? [Laughter.]
    Mr. Graham. Probably a coincidence. I believe that the 
results are not usually the results that are expected, because 
many times, if you do a reverse auction, participants in that 
reverse auction usually decrease over time if you use it as 
your only tool.
    For example, the Navy has a contract called Seaport 
Enhanced. The entire Seaport Enhanced contract is a reverse 
auction involving 650 vendors, and they have mixed success in 
Seaport. They are in their third or fourth year. Today, they 
still cannot quantify savings. So they are moving in the right 
direction. However, there needs to be a little more oversight 
of that program.
    I don't know if there is any optimal solution to Federal 
savings. However, I believe that the government, and I do agree 
with you, Dr. Coburn, that the government can, in fact, demand 
lowest price. The number of corporations in the United States 
that would not exist without doing business with the 
government, there are quite a few of them, and all the usual 
suspects--the Lockheed Martins of the world and the SAICs of 
the world.
    The question still remains, however, is how do you 
accomplish that, and I am not sure you can accomplish that with 
the current practice across the board, including practices at 
GSA.
    Senator Carper. Later on, I will come back to you and just 
ask what should we be doing.
    Mr. Ames. Two major take-aways, Senator Carper, from my 
testimony. The first is that we strongly believe that there is 
a place for pre- and post-award audits under the Federal Supply 
Schedule or Multiple Awards Schedules Program.
    And the second matter is that we would like to see the 11 
schedules that GSA has delegated to the VA--these schedules 
deal with health care products and health care services--that 
those be transferred to the VA and the VA have complete 
rulemaking authority over those schedules.
    Senator Carper. Ms. Tighe.
    Ms. Tighe. I think my take-aways are very similar to Mr. 
Ames's, because we are sort of like-minded on the issues of 
pre- and post-award audits. At the Office of Inspector General, 
we feel we work for the taxpayers ultimately and it is the 
taxpayers we look to first to make sure that they are getting 
the best prices or whatever the issue happens to be.
    We worry about the prices on the MAS schedule, not because 
we necessarily have hard, concrete data that there is 
widespread overpricing problems, but we see enough problems in 
the course of the few audits that we do that we worry about the 
audits we don't do. Our past history has indicated that, in 
fact, there is a problem out there and GSA has backed away from 
it. We would like to see them reinstitute post-award defective 
pricing audits and we will be happy to work with them, as we 
are right now, to continue to increase the number of pre-
awards.
    Senator Carper. Going back to you, Mr. Graham, were you in 
the Navy?
    Mr. Graham. No, sir. I am an Air Force person.
    Senator Carper. Air Force, good for you. Were you ever 
stationed at Dover?
    Mr. Graham. No, sir.
    Senator Carper. OK. What should we do in response to what 
you are presenting to us and the first panel presented to us 
today?
    Mr. Graham. Well, I believe that the first order of 
business is to insist that agencies like GSA do their job, and 
by that I mean this. We see a lot of plans. We see a lot of 
intentions, fully well documented intentions. For example, one 
of those is the ``Get it Right'' Program. If you look at the 
elements of the ``Get it Right'' Program that was just agreed 
to between DOD and GSA, one would have no quarrels with that 
if, in fact, it gets done and if, in fact, the results prove 
the intent.
    We think, and rather than do a shameless plug for my 
company, we think that working with the Navy Postgraduate 
School, we have at least gotten a handle on a number of the 
problems that were raised here today, and I will give you a few 
examples of those.
    We have created a product where any company listed on the 
central contractor registry can, in fact, do business with the 
Federal Government. For example, Mr. Safavian gave an example 
of two companies that had fairly innovative products that have 
refused to do business with the Federal Government because of 
the red tape.
    Senator Carper. Because of what?
    Mr. Graham. Red tape. Our contract, in effect, has 
eliminated quite a bit of that red tape, at least in the 
methodology that we use today. If the Federal Government needed 
those products, wanted those products, they could get at those 
companies today if they needed to use our contract.
    One of the other issues that has been discussed extensively 
here is the entire issue of audits and post-audits and more 
than look at the element of the audits and post-audits, I think 
that the Subcommittee needs to take into consideration why we 
do these audits. One of the reasons that I think these audits 
are necessary is to ensure that, in fact, the government is 
getting what it is paying for.
    In our situation, we have created a domain where every 
element of every contract within the--or tasked within our 
contract can be audited from the first time someone enters into 
the system to the time they execute the buy to the time they 
close out the buy. Every piece of paper that is attached to 
that contract is done in an automated form and it is easy.
    For example, one of the things that many vendors complain 
about, particularly in post-audit situations, is the cost to 
that vendor of money because, let us say the government, 
particularly the Defense Department, DFAS, it takes a long time 
for them to pay you sometimes, and if you are a small business, 
90, 120 days is a very long time. It is probably, Dr. Coburn, 
why you gave those folks those lenses a number of years ago, 
because it is frustrating.
    Well, we have created a situation where, in fact, the 
agency and the vendor can actually look at issues as they 
occur, pieces of paper. You go to the site and if you lost the 
piece of paper which is necessary for payment in some cases, 
you can download the form again that is filled out because the 
computer does all that and sign the piece of paper and pay. And 
I think that kind of automation needs to happen more often than 
not in the government.
    Senator Carper. Thank you. Mr. Ames, what should we do?
    Mr. Ames. Senator Carper, I would say that in terms of what 
I think you should do would be very similar to my two take-
aways that I gave in the testimony, and that is----
    Senator Carper. This is what we call staying on message in 
my business. [Laughter.]
    Pretty good at it, too, isn't he? [Laughter.]
    Mr. Ames. Which we do strongly feel that the post-award 
audits and the pre-award audits have their place. We strongly 
believe that we should be able to manage and do all of the 
things that would be done with the 11 schedules that we have.
    And also, I guess I would say that I certainly applaud the 
opportunity to be at a hearing of this type, because I think it 
is something that for years has needed to be looked at and I 
applaud you for having the hearing.
    Senator Carper. Well, it was hard for me to convince Dr. 
Coburn to do this, but he finally relented. No, no, no---- 
[Laughter.]
    It wasn't hard at all. It was hard to drag the rest of us 
here.
    Senator Coburn. I wonder which dog is dragging which? 
[Laughter.]
    Senator Carper. All right. Ms. Tighe, at least from you, 
the last word in this round.
    Ms. Tighe. Senator, I would would hope that GSA on its own 
would restore our post-award audit rights that they took away 
from us in 1997. If they aren't willing to do so 
administratively on their own, it may be that some legislative 
fix needs to happen. I think they are important and I think it 
is an area that we could really do something for the taxpayer 
by having that right back.
    Senator Carper. Good. Thanks. I think my time may have just 
expired. Thank you, Mr. Chairman.
    Senator Coburn. Just for your benefit, Senator Carper, one 
of the points I made with OMB is, and I will paraphrase it in a 
different way, if somebody came to Earth today and said, you 
are going to spend $291 billion for the American Government and 
you want to design a system to buy it efficiently, on time, 
best price, best quality, would you have the GSA, and that is a 
legitimate question we have. Or, if not, how would you have it? 
Would it be totally automated? Would it be to where everybody 
had information at their fingertips? Would it be the audit 
trail that you can track electronically rather than have to be 
there? So I think there is a lot of place for movement.
    I want to ask just a couple favors of you, Mr. Graham. You 
said that there were a couple of projects with Bearing Point 
ongoing right now that haven't maybe accomplished what they 
intended. Would you mind giving that stuff to my staff?
    Mr. Graham. Yes, I certainly will.
    Senator Coburn. And I want to have a conversation with you 
about the magnetometer, the hand-held, and the battery pack, 
because I think it would be a wonderful demonstration project 
if we started buying those for the Federal Government through 
this Subcommittee so they could show they could buy them.
    Mr. Graham. Yes, sir.
    Senator Coburn. So I look forward to your help on that.
    Any other questions, Senator Carper?
    Senator Carper. I said earlier I was going to submit at 
least one question in writing, and if you will take a few 
minutes and look it over and give me a good response, I would 
be grateful. Again, we appreciate your being here. Thank you.
    Senator Coburn. Thank you all very much. The hearing is 
adjourned.
    [Whereupon, at 4:17 p.m., the Subcommittee was adjourned.]


                            A P P E N D I X

                              ----------                              

[GRAPHIC] [TIFF OMITTED] T3165.001

[GRAPHIC] [TIFF OMITTED] T3165.002

[GRAPHIC] [TIFF OMITTED] T3165.003

[GRAPHIC] [TIFF OMITTED] T3165.004

[GRAPHIC] [TIFF OMITTED] T3165.005

[GRAPHIC] [TIFF OMITTED] T3165.006

[GRAPHIC] [TIFF OMITTED] T3165.007

[GRAPHIC] [TIFF OMITTED] T3165.008

[GRAPHIC] [TIFF OMITTED] T3165.009

[GRAPHIC] [TIFF OMITTED] T3165.010

[GRAPHIC] [TIFF OMITTED] T3165.011

[GRAPHIC] [TIFF OMITTED] T3165.012

[GRAPHIC] [TIFF OMITTED] T3165.013

[GRAPHIC] [TIFF OMITTED] T3165.014

[GRAPHIC] [TIFF OMITTED] T3165.015

[GRAPHIC] [TIFF OMITTED] T3165.016

[GRAPHIC] [TIFF OMITTED] T3165.017

[GRAPHIC] [TIFF OMITTED] T3165.018

[GRAPHIC] [TIFF OMITTED] T3165.019

[GRAPHIC] [TIFF OMITTED] T3165.020

[GRAPHIC] [TIFF OMITTED] T3165.021

[GRAPHIC] [TIFF OMITTED] T3165.022

[GRAPHIC] [TIFF OMITTED] T3165.023

[GRAPHIC] [TIFF OMITTED] T3165.024

[GRAPHIC] [TIFF OMITTED] T3165.025

[GRAPHIC] [TIFF OMITTED] T3165.026

[GRAPHIC] [TIFF OMITTED] T3165.027

[GRAPHIC] [TIFF OMITTED] T3165.028

[GRAPHIC] [TIFF OMITTED] T3165.029

[GRAPHIC] [TIFF OMITTED] T3165.030

[GRAPHIC] [TIFF OMITTED] T3165.031

[GRAPHIC] [TIFF OMITTED] T3165.032

[GRAPHIC] [TIFF OMITTED] T3165.033

[GRAPHIC] [TIFF OMITTED] T3165.034

[GRAPHIC] [TIFF OMITTED] T3165.035

[GRAPHIC] [TIFF OMITTED] T3165.036

[GRAPHIC] [TIFF OMITTED] T3165.037

[GRAPHIC] [TIFF OMITTED] T3165.038

[GRAPHIC] [TIFF OMITTED] T3165.039

[GRAPHIC] [TIFF OMITTED] T3165.040

[GRAPHIC] [TIFF OMITTED] T3165.041

[GRAPHIC] [TIFF OMITTED] T3165.042

[GRAPHIC] [TIFF OMITTED] T3165.043

[GRAPHIC] [TIFF OMITTED] T3165.044

[GRAPHIC] [TIFF OMITTED] T3165.045

[GRAPHIC] [TIFF OMITTED] T3165.046

[GRAPHIC] [TIFF OMITTED] T3165.047

[GRAPHIC] [TIFF OMITTED] T3165.048

[GRAPHIC] [TIFF OMITTED] T3165.049

[GRAPHIC] [TIFF OMITTED] T3165.050

[GRAPHIC] [TIFF OMITTED] T3165.051

[GRAPHIC] [TIFF OMITTED] T3165.052

[GRAPHIC] [TIFF OMITTED] T3165.053

[GRAPHIC] [TIFF OMITTED] T3165.054

[GRAPHIC] [TIFF OMITTED] T3165.055

[GRAPHIC] [TIFF OMITTED] T3165.056

[GRAPHIC] [TIFF OMITTED] T3165.057

[GRAPHIC] [TIFF OMITTED] T3165.058

[GRAPHIC] [TIFF OMITTED] T3165.059

[GRAPHIC] [TIFF OMITTED] T3165.060

[GRAPHIC] [TIFF OMITTED] T3165.061

[GRAPHIC] [TIFF OMITTED] T3165.062

[GRAPHIC] [TIFF OMITTED] T3165.063

[GRAPHIC] [TIFF OMITTED] T3165.064

[GRAPHIC] [TIFF OMITTED] T3165.065

[GRAPHIC] [TIFF OMITTED] T3165.066

[GRAPHIC] [TIFF OMITTED] T3165.067

[GRAPHIC] [TIFF OMITTED] T3165.068

[GRAPHIC] [TIFF OMITTED] T3165.069

[GRAPHIC] [TIFF OMITTED] T3165.070

[GRAPHIC] [TIFF OMITTED] T3165.071

[GRAPHIC] [TIFF OMITTED] T3165.072

[GRAPHIC] [TIFF OMITTED] T3165.073

[GRAPHIC] [TIFF OMITTED] T3165.074

[GRAPHIC] [TIFF OMITTED] T3165.075

[GRAPHIC] [TIFF OMITTED] T3165.076

[GRAPHIC] [TIFF OMITTED] T3165.077

[GRAPHIC] [TIFF OMITTED] T3165.078

[GRAPHIC] [TIFF OMITTED] T3165.079

[GRAPHIC] [TIFF OMITTED] T3165.080

[GRAPHIC] [TIFF OMITTED] T3165.081

[GRAPHIC] [TIFF OMITTED] T3165.082

[GRAPHIC] [TIFF OMITTED] T3165.083

[GRAPHIC] [TIFF OMITTED] T3165.084

[GRAPHIC] [TIFF OMITTED] T3165.085

[GRAPHIC] [TIFF OMITTED] T3165.086

[GRAPHIC] [TIFF OMITTED] T3165.087

[GRAPHIC] [TIFF OMITTED] T3165.088

[GRAPHIC] [TIFF OMITTED] T3165.089

[GRAPHIC] [TIFF OMITTED] T3165.090

[GRAPHIC] [TIFF OMITTED] T3165.091

[GRAPHIC] [TIFF OMITTED] T3165.092

[GRAPHIC] [TIFF OMITTED] T3165.093

[GRAPHIC] [TIFF OMITTED] T3165.094

[GRAPHIC] [TIFF OMITTED] T3165.095

[GRAPHIC] [TIFF OMITTED] T3165.096

[GRAPHIC] [TIFF OMITTED] T3165.097

[GRAPHIC] [TIFF OMITTED] T3165.098

[GRAPHIC] [TIFF OMITTED] T3165.099

[GRAPHIC] [TIFF OMITTED] T3165.100

[GRAPHIC] [TIFF OMITTED] T3165.101

[GRAPHIC] [TIFF OMITTED] T3165.102

[GRAPHIC] [TIFF OMITTED] T3165.103

[GRAPHIC] [TIFF OMITTED] T3165.104

[GRAPHIC] [TIFF OMITTED] T3165.105

[GRAPHIC] [TIFF OMITTED] T3165.106

[GRAPHIC] [TIFF OMITTED] T3165.107

[GRAPHIC] [TIFF OMITTED] T3165.108

[GRAPHIC] [TIFF OMITTED] T3165.109

[GRAPHIC] [TIFF OMITTED] T3165.110

[GRAPHIC] [TIFF OMITTED] T3165.111

[GRAPHIC] [TIFF OMITTED] T3165.112

[GRAPHIC] [TIFF OMITTED] T3165.113

[GRAPHIC] [TIFF OMITTED] T3165.114

[GRAPHIC] [TIFF OMITTED] T3165.115

[GRAPHIC] [TIFF OMITTED] T3165.116

[GRAPHIC] [TIFF OMITTED] T3165.117

[GRAPHIC] [TIFF OMITTED] T3165.118

[GRAPHIC] [TIFF OMITTED] T3165.119

[GRAPHIC] [TIFF OMITTED] T3165.120

[GRAPHIC] [TIFF OMITTED] T3165.121

                                 
