[Senate Hearing 109-515]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 109-515
 
           GSA: THE PROCUREMENT PROCESS FROM START TO FINISH

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

                                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

                               __________

                           SEPTEMBER 29, 2005

                               __________


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






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        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             MARK PRYOR, Arkansas

                      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...............................................     3

                                WITNESS
                      Thursday, September 29, 2005

Stephen A. Perry, Administrator, U.S. General Services 
  Administration:
    Testimony....................................................     5
    Prepared statement...........................................    34

                                APPENDIX

GAO Report GAO-05-960R Improvements Needed to Federal Procurement 
  Data System--Next Generation...................................    27


           GSA: THE PROCUREMENT PROCESS FROM START TO FINISH

                              ----------                              


                      THURSDAY, SEPTEMBER 29, 2005

                                       U.S. Senate,
            Subcommittee on Federal Financial Management,  
        Government Information, and International Security,
                                   Committee on Homeland Security  
                                          and Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 3:02 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. The Federal Financial Management Oversight 
hearing will come to order.
    I asked for this hearing because as I looked at GSA, I was 
having trouble figuring out how GSA works and where the 
transparency was and what was the goal, what are the 
parameters, how do you measure the goal, and how do you measure 
whether you are doing that? The purpose of the hearing today, 
Mr. Administrator, is to try to get a better understanding and 
see if we are getting a good price.
    Americans have given us their credit card. They are on a 
hook for a bill with ever-accumulating interest. That bill is 
so big right now, our generation certainly won't pay it off. 
Our children's generation won't pay it off. And maybe our 
grandchildren's generation might pay it off, but they will pay 
it off through a markedly decreased standard of living.
    We have a moral obligation to take the trust that has been 
given to us with their money and do that in a wise way. When 
they ask to see the receipt, they shouldn't get an answer that 
is so complex that we can't explain why they can't see the 
receipt. The demands that Americans are making aren't really 
very complicated. They want to know what we bought on their 
dime, how much it cost, did we do everything we could to get 
the best price out of it and get the best deal, and I believe 
they deserve to have those questions answered.
    The budget of the United States now stands at $2.6 
trillion. That means the Federal Government spends over $7 
billion a day. Federal Government spending has skyrocketed, as 
we all know, from the 1960s, especially in the last 4 to 5 
years, it has grown at about a 5 to 7 percent rate, greater 
than its historical rate. Because the government is not 
spending within its means, it means that the Treasury is forced 
to borrow hundreds of billions of dollars each year to pay for 
that, which translates to our children and our grandchildren.
    One important way we can reduce the burden on the American 
taxpayer and help spare our grandchildren a lower standard of 
living is to make sure the goods and services the Federal 
Government buys are bought at the best price, at the best 
terms. And we don't really have a good answer for them for 
anything other than that.
    We are the largest purchaser in the world of almost 
anything. The purchasing power is massive. GSA was established 
to harness that incredible purchasing power by providing 
central oversight and coordination of procurement. As the 
government grows, it becomes all the more important for 
agencies' procurement efforts to be tracked and coordinated in 
order to build efficiencies and purchase in bulk whenever 
possible.
    Some questions we are going to try to address at today's 
hearing are, are we doing better than the ceiling price in the 
GSA catalog? The GSA fee structure, is it appropriate? 
Accountability requiring transparency--do we have transparency 
in terms of being able to measure performance indicators for 
GSA? And discuss about the competing procurement agencies out 
there that you compete with, the purpose for them and what is 
going on in that area.
    I want to thank Administrator Perry for being here today. I 
would note that the questions that we submitted in the middle 
of August were delivered to my office an hour ago, which 
handicaps our ability to be informed for this because my staff 
hasn't had a chance to read the answers to those. So what it 
probably will entail, based on what is in those answers, is 
another hearing, which we could have facilitated not having had 
we had the answers in a more timely way. I recognize you have a 
lot of things to do besides answer questions to us. We are 
going to ask some questions today and we would just appreciate 
a little more timely response so that we can do our job in 
terms of oversight.

                  PREPARED STATEMENT OF SENATOR COBURN
    Americans have given us their credit card. They are on the hook for 
the bill and the ever-accumulating interest. Already, that bill is so 
big that they can't pay it off, but their children and grandchildren 
will. Congress has a moral obligation to take this trust seriously, and 
shop for the best price. We shouldn't throw everything into our 
shopping cart without even comparing price. When they ask to see the 
receipt, they shouldn't get an answer that is so complex that we can 
hardly hold a coherent hearing on the subject in plain English. The 
demands Americans are making aren't complicated. They want to know what 
we bought on their dime, how much it cost, and if we did everything we 
could be haggle for the best deal. It's their grandkids' future on the 
line, and they deserve to have these questions answered.
    The budget of the U.S. Government now stands at $2.6 trillion 
dollars. That means the Federal Government spends an average of over $7 
billion every day. Federal Government spending has skyrocketed at a 
rate unseen since the 1960s. Because the government is not spending 
within its means, the Treasury is forced to borrow hundreds of billions 
of dollars each year to pay for it. Our grandchildren will have to pick 
up the tab when the bill comes due.
    One important way we can reduce the burden on the American 
taxpayer, and help spare our grandchildren a lower standard of living, 
is to make sure that the goods and services the Federal Government 
purchases are bought at the best possible price. And quite frankly, 
there's no excuse for anything else. The purchasing power of the 
Federal Government in the market is massive--our spending on goods and 
services exceeds the Gross Domestic Product of all but three countries.
    The GSA was established to harness that incredible purchasing power 
by providing some central oversight and coordination of procurement. As 
government grows, it becomes all the more important for agencies' 
procurement efforts to be tracked, coordinated in order to build 
efficiencies and purchase in bulk whenever possible.
    We know that product prices on the GSA catalogue are ``ceilings'' 
rather than the best price. GSA negotiates a ``ceiling price'' from 
which agencies may further negotiate. One goal of this hearing is to 
find out whether agencies are actually negotiating down from these 
ceiling prices.
    We'll be looking at the incentive structures created by GSA's 
operations, especially its fee-based system. Does this system create 
the right incentives for contracting officers to get the taxpayers the 
best deal?
    Perhaps most important of all for intelligent procurement planning 
and implementation is good information. We simply must know what we're 
buying, for what purpose, in what quantity, and at what price. If we 
don't, then we can't possibly develop strategies to get better prices, 
set spending priorities based on what we're actually spending, avoid 
inefficiencies and duplication, and appropriately steward the 
taxpayers' financial trust. We will be looking today at the systems we 
have for tracking procurement and if they are adequate to the task. 
I'll be particularly interested in transparency of the process--do we 
have access to the right information, and accountability--is someone 
responsible for what gets bought, and if it gets bought at the best 
price?
    Finally, Federal procurement has come a long way since GSA was 
first established. There are tons of different ways that agencies can 
make purchases. They don't have to use GSA at all. They can use 
different types of vehicles at GSA. They can use government competitors 
of GSA, sometimes referred to as mini-GSAs. They can use private sector 
procurement products. GSA is now performing a minority of all 
government procurement. Our hearing will examine GSA's evolving mission 
and its relevance to the procurement process.

    I would like, without objection from Senator Carper, to 
submit for the record the GAO report that was issued yesterday 
highlighting the flaws in the data system that tracks 
procurement. It was just released yesterday.\1\
---------------------------------------------------------------------------
    \1\ The GAO Report GAO-05-960R appears in the Appendix on page 27.
---------------------------------------------------------------------------
    I would like to introduce Mr. Perry after Senator Carper 
finishes his opening statement. He has advised us that he will 
have to leave for another hearing that is ongoing at the 
concurrent time and I appreciate him so much for being here. I 
also want to tell him I appreciate the fact that we are working 
together, bipartisan, to look at costs and spending and 
wasteful government spending, and that we both have a desire 
not to single people out, but to make sure that after a 
hearing, there is something accomplished that makes us better 
at what we do. So there is nothing personal intended at any of 
these hearings, but rather how do we all do a better job for 
the American people.
    Senator Carper.

              OPENING STATEMENT OF SENATOR CARPER

    Senator Carper. Thanks, Mr. Chairman. Mr. Perry, I always 
say, everything I do, I can do better, and I think that is 
probably true of most of us, including Federal agencies. We 
welcome you here today.
    I was joking with Mr. Perry that I heard a song riding in 
to catch the train this morning, on the radio, an old song by 
Journey whose lead singer was Steve Perry. I hear him on the 
radio in the morning----
    Senator Coburn. And now he is testifying before you.
    Senator Carper [continuing]. And now he is testifying. We 
will see if he is as good in person as he was on the radio. We 
are glad you are here, and Mr. Chairman, I thank you for 
inviting him to come by and to give us a little bit of a primer 
on how GSA does what it does.
    As the Chairman said, I wish right now I could be two 
places at once. I can't, and I have made a commitment with 
Senator Voinovich to be with him and some others on trying to 
figure out how to retrofit devices in diesel-powered buses and 
trucks and trains and boats to reduce the emission of bad stuff 
into our air. So I am going to go over there and spend some 
time with them and then I will come back.
    I think this hearing may have been inspired, Mr. Chairman, 
by some testimony that we heard earlier this summer regarding 
whether GSA is doing what it needs to do to be certain that the 
agencies that use its service are getting the very best value, 
and I think that may have been the impetus. While I am going to 
slip out for a while, I just would say I am very interested in 
hearing what you have to say and the man who is sitting right 
behind me, John Kilvington, will make sure that I get a full 
briefing for that which I miss.
    When taxpayers expect that when agencies go to GSA to 
purchase a good or a service, and I believe some agencies may 
have no choice but to go to GSA for some of what they use, that 
they are not going to pay more than they need to, and that just 
makes common sense.
    I believe we heard at our last meeting that the GSA has 
been doing pure audits of the contracts that they have with 
outside vendors and this trend coincides with a tremendous 
interest in the level of business that takes place through GSA, 
and what I am told is a decline in the savings negotiated by 
GSA personnel.
    We look forward to hearing from you, Mr. Perry, today about 
what might be behind these trends, if they are correctly 
characterized, and also what we are going to be doing going 
forward. I know you have some reforms on the way already at 
your agencies--at least that is what I am told--so we are 
interested in learning what they may mean with respect to 
savings for your customers and ultimately for the taxpayers we 
work for.
    Again, thanks for being here and we are glad you are able 
to share this time with us.
    Senator Coburn. Let me introduce Mr. Perry. Stephen Perry 
was appointed the 17th Administrator of the U.S. General 
Service Administration on May 31, 2001. He is from Canton, 
Ohio. He was a senior business executive who retired March 31, 
2001, as Senior Vice President, Human Resources, Purchasing, 
and Communication. His retirement marked the conclusion of a 
37-year career at the Timken Company of Canton, Ohio, a leading 
international manufacturer--I bought a lot of Timken bearings 
when I was in business, I want to tell you--of highly-
engineered bearings and alloy steels with annual sales of $2.6 
billion and 20,500 workers.
    In 1991, then-governor, now U.S. Senator George Voinovich 
appointed him to his cabinet as Director of the Department of 
Administrative Services, which provided services to the State 
agencies that are similar to what GSA provides to Federal 
agencies. After a success in State Government, Mr. Perry 
returned to Timken in 1993.
    A 1963 graduate of Timken High School in Canton, Mr. Perry 
earned his Bachelor's degree in accounting at the University of 
Akron in Ohio. I can relate to that. I have a degree in 
accounting, as well. He attended the University of Michigan 
Executive Development Program and earned a Master's degree in 
management from Stanford University in California.
    Mr. Perry and his wife, Sandra, have five adult children 
and six grandchildren.
    Mr. Perry, welcome. We are so thankful you are here and we 
appreciate you. You will have as much time as you would like to 
make your opening statement. Since I am going to be here 
probably by myself, take your time, and what we want to do is 
just go through and get a great understanding. So thank you 
very much for being here.
    Senator Carper. Mr. Perry, if I could, I am a Buckeye. I 
was an Ohio State Buckeye and it is always nice to welcome a 
Zipper from the University of Akron. I am going to go see 
George Voinovich right now. I will tell him that I was just 
with you. I am sure he will want to be remembered, as well. 
Thank you.
    Senator Coburn. You may proceed.

 TESTIMONY OF STEPHEN A. PERRY,\1\ ADMINISTRATOR, U.S. GENERAL 
                    SERVICES ADMINISTRATION

    Mr. Perry. Good afternoon, Dr. Coburn and Senator Carper. I 
am pleased to have this opportunity, actually, to talk about 
the acquisition processes that we use at the U.S. General 
Service Administration.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Perry appears in the Appendix on 
page 34.
---------------------------------------------------------------------------
    As you know, I have submitted a written statement for the 
record, so I will make my remarks brief and leave most of our 
time for dialogue.
    Let me take the opportunity to say that I do regret the 
fact that in our last appearance before your Subcommittee, we 
were late in submitting testimony to you, and I regret to learn 
that we were also late in submitting the answers to the 
questions that you presented to us. I know what a hardship that 
is, and I also know that we are making an effort inside GSA to 
improve upon that.
    As you are certainly aware, GSA's primary mission is the 
acquisition of facilities and products and services for other 
Federal agencies. GSA acquires all the office space and 
products and equipment and telecommunications services and so 
forth that over 1.1 million Federal workers need and use in the 
successful operations of their agencies. We also provide 
support to the Department of Defense, our men and women in 
uniform, and to first responders in the event of situations 
such as we are suffering through in the Gulf States now.
    We believe that by providing these acquisition services, we 
enable Federal agencies to focus more of their resources and 
their expertise on achieving their own core mission and leaving 
the acquisition, if you will, to be accomplished by the folks 
at GSA.
    We know that we have a very important responsibility. I 
would agree completely with the remarks that you made about how 
important it is for us to be efficient, to be effective, to be 
reliable, to be consistent, and, of course, to be compliant 
with all the rules and regulations that we have to follow in 
order to provide best value for the government for the American 
taxpayers.
    It has been my privilege to be involved in public service 
during these past four-plus years at the U.S. GSA. I believe 
that the people who work there do share a strong commitment to 
meeting the mission of GSA. It is an aspiration. We know that 
we don't always measure up to the extent that we would like, 
but there is a strong aspiration to do so.
    I think also there is a strong understanding among GSA 
associates that we are part of the value chain of providing 
government services to the people who live in this country, 
which in one way or another actually serves to improve the 
quality of their life to the extent that we do that well. We 
also know that the extent to which we do not do that well, then 
we are impeding the ability of other agencies to provide the 
government services that are necessary for U.S. citizens.
    So we do have that strong commitment and I just wanted to 
iterate that to you. In the course of our discussion, I could 
talk a little bit about the things that we are doing or have 
done to emphasize that as a foundation, because it is that 
commitment to excellence in acquisition which forms the 
foundation on which all these other things rest.
    In addition to our commitment to achieve the GSA mission 
and to be efficient and effective, we also have spent a lot of 
time focusing on and rededicating and enhancing our commitment 
to what we call our GSA values. These are not necessarily 
values that we brought to the agency. These are values that we 
discovered exist at the agency and we have attempted to 
highlight them, to make them a part of our everyday jargon. 
There are just five.
    The first and foremost is ethics and integrity in 
everything we do. That speaks to a lot of what you have on that 
chart there.
    A second value is treating our fellow associates with 
respect, which ties directly into our third value which is very 
important, and that is the value of teamwork.
    As we discovered at GSA, as is the case with many Federal 
agencies or, for that matter, many private sector 
organizations, as well, we were a bit stovepiped. We had our 
Public Building Service, our Federal Technology Service, our 
Federal Supply Service. We had our Chief Financial Officers' 
Office, our Chief People Officers' Office, a number of units 
which were not working well together. There was autonomy. There 
was a great deal of autonomy, too much autonomy, in my view, 
between our regional offices and our national offices. So 
teamwork, we have discovered in our organization, is critical 
to being able to meet the needs of our customers.
    We are unlike some large corporations that may have 
unrelated divisions, one division produces light bulbs, another 
division produces jet engines. It might not be necessary for 
them to have a strong collaboration. But in our case, our 
customer agencies look to us to provide a broad spectrum of 
products and services that they need to operate and they expect 
us to work together. So this issue of treating our fellow 
associates with respect and teamwork are values that are very 
important to our ability to be successful.
    A fourth value is the value of results orientation, which 
perhaps should go without stating, but it is the view of some 
that in some organizations, we can be a little bit academic and 
not enough focused on results and we are changing that.
    And then the last value is that of professionalism, and I 
can tell you from my experiences in the last four-plus years at 
GSA that I have seen many examples of personal actions or 
individual decisions or, in some cases, major GSA-wide 
initiatives that truly do reflect these values. I have seen a 
lot of opportunities for people to make decisions or to take 
actions which clearly reflect the values that I have talked 
about.
    Unfortunately, I also have to report to you that I have 
seen a few examples where we have fallen short of living up to 
those values. However, I can also tell you that the 
overwhelming part of the work that we do is done within the 
confines, the guidelines of these values, and I know that we 
are committed to continuing to strive for full achievement of 
these values.
    Mr. Chairman, as you may know, the model that is used by 
the Federal Government to consolidate a lot, not all of, but a 
lot of its acquisition of commercial products and services into 
GSA, I believe is a very efficient, effective approach. It is 
an approach that would be used by--as a best practice in the 
private sector, to take all of the purchasing activity that has 
to occur in Plant A and Plant B and various locations around 
the country or around the world and to some extent consolidate 
that and to leverage the synergies that might be captured by 
doing so.
    So I think the approach that we use is a wise approach. It 
enables us to bring together the expertise that is necessary to 
really understand the supply markets for the various products 
and services we are buying, the expertise as it relates to the 
Federal Acquisition Regulations, as you pointed out, which are 
very complicated, and to leverage the volume of the Federal 
Government's purchases so that we can have a better opportunity 
of deriving the best value for the government and for the 
American taxpayers.
    It also, in my judgment, provides a sort of a streamlined 
approach that makes it actually easier or more effective, or at 
least a little less confusing for the industry to be able to 
interact with the government when they pursue Federal 
Government contracts.
    Another point that I wanted to make is that GSA operates 
using a revolving fund approach, and what that means is that, 
in general, we don't receive direct appropriated funds to cover 
the cost of providing office space or the acquisition services 
that we provide. Rather, we receive reimbursement from the 
agencies in the way of rent or cost of goods sold to reimburse 
us for the expense that we may have incurred to pay for the 
acquisition of a telecommunications system or what have you. 
And then, in addition to that, there are some amount of fees 
that we charge in order to cover the costs of our overall 
operation.
    As a general proposition, the fee approach and the revenue 
receipt approach that we have is intended to be a break-even 
approach. There is no incentive, or should not be an incentive 
for us to try to derive revenues in excess of our expenses. In 
the case of our Federal Supply Fund, for example, any revenues 
in excess of expenses go back into the general Treasury. So, so 
much about fees, and we will talk about that more, I am sure.
    The other point I wanted to make has to do with the 
approach that we have used to manage the operations. In a short 
expression of this, the primary approach that we have used is 
what I call our Performance Management Process, which begins 
with an understanding of our customer requirements so that we 
could work with them proactively and so that we could set goals 
for ourselves which are commensurate with achieving the 
customer's expectations, and with those goals in place, then we 
have developed and documented and written out action plans, who 
is responsible to do what by when to achieve those goals, and 
we have, in addition to organizational goals for each of the 
organizational units, we now have in place Individual Associate 
Performance Plans which also document what is expected of each 
individual, and that is used as the basis of our performance 
evaluations for accountability and recognition at the end of 
the year.
    We also have put in place what we call a Performance 
Measurement Tool, which we review on a regular basis--I have 
personal reviews of each of them on a quarterly basis--to 
determine where we are in terms of achieving the various goals 
that have been set, getting an understanding of why we are 
where we are, and then spending some time to talk about 
corrective action that may be necessary to get us back on track 
or to keep us on track with respect to achieving those goals. 
And in the course of our discussion, I will be happy to talk 
about what some of those goals are and the progress we are 
making toward them.
    In addition to what I called the Performance Management 
Process, another process we have put in place which comes out 
of the President's Management Agenda is what is referred to 
there as the Strategic Management of Human Capital, and you 
know the reasons why that is in place. It is certainly very 
relevant for GSA. But we think the places where we have used 
this now are places where it is bearing very good results.
    In the Strategic Management of Human Capital as we employ 
it, it starts again with an understanding of what our 
customers' future performance expectations are of us. And then 
when we have that understanding of what is expected, we make a 
statement or a documentation of what kinds of skills and 
competencies will be necessary for us to successfully achieve 
those goals. A third step, which is the toughest of all, then, 
is to discover what is the gap between our current skills and 
competencies and that which we need for success and what will 
be our strategy to bridge the gap from where we are today to 
where we need to be.
    We have employed that, for example, in our Public Building 
Service, first at the national office, made, I would say, 
pretty dramatic change in the way that unit of our organization 
operates. And that in turn, then, was spread to the Public 
Building Service entities within each of our 11 regional units. 
That process is ongoing. I think the result of it has been and 
will be that we are being much more effective in using the 
dollars that are available to us to provide work space for 
Federal workers.
    It still is a challenge, obviously, to do that in an 
efficient and effective way, but again, we have been talking 
about some of our goals, for example, the fact that our leased 
space, we acquire that leased space at rates at least double-
digit below what would be the case if our agencies were using 
private sector leasing companies or brokers to provide that 
space directly. In the case of providing maintenance, including 
utility costs and cleaning for the public buildings that we 
operate, again, that is double-digit below, in some years as 
much as 14 below the estimates of what that benchmark should 
be, and that is just true in a number of instances.
    So we think that we are taking advantage of the leverage 
that comes from providing this service and, as a result, 
providing it at rates that could not be achieved if agencies 
were acting alone.
    At this point in time, we have gone beyond the PBS area in 
terms of organizational design, and as you may know, we are 
looking at our Federal Technology Service and our Federal 
Supply Service and looking to combine those into one unit that 
we will call our Federal Acquisition Service, and the purposes 
are the same. There was a point in time, we believe, when the 
separation of those two acquisition services might have made 
some sense. It makes less sense in today's world, and so we are 
moving to accomplish that change. All of those organizational 
design changes are intended to enhance our organizational 
capability to meet the future needs of our customer agencies.
    And then just one other point that we focused on heavily 
and that is to do what we call Achieve Excellence in Federal 
Acquisitions, sometimes referred to as our ``get it right'' 
plan. You may know that there was a point in time, I believe in 
2002, late in 2002, it began to emerge, and my view is that as 
a result of our values, one of which says ethics and integrity 
in everything we do, some of our associates were coming to our 
managers and saying, if you guys are really serious about 
ethics and integrity in everything we do, I need to tell you 
about a few of our longstanding practices that I am not sure 
really fit in that value.
    So as we began to look at that, we found that there were 
enough things that we were doing that were not in full 
compliance with the Federal Acquisition Regulations, that we 
would go beyond just a management review and we actually asked 
our Inspector General to come in and to conduct a review at 
each of our 11 client support centers around the country to 
determine the extent to which we had, over the years, gotten to 
a point where we were cutting a few corners. I will say that I 
think that corner cutting was done in the effort to serve our 
customers, but nevertheless, there is no justification for it, 
and some of it was bad judgment, some of it was more egregious 
than that.
    I believe that we took appropriate steps not only to 
eliminate it, but, where necessary, to have consequences for 
those individuals that were involved and to provide a way going 
forward where we emphasized the fact that as a result of our 
discovery of those adversities, we will actually be better than 
we otherwise would have been because of the increased focus 
that we have made on getting it right and going beyond simply 
getting it right to actually achieve excellence in Federal 
acquisitions.
    So with that, Mr. Chairman, I will stop with my brief 
opening remark and be happy to respond to questions that you 
might have.
    I should also mention, I have asked to join me today some 
of our leaders of the Public Building Service, our Federal 
Acquisition Service, our Chief Acquisition Officer, and they 
will be happy to participate in this dialogue, as well.
    Senator Coburn. Great. Thank you. They are going to be more 
than welcome to if they want.
    First of all, the five parameters you work under are great 
and I am glad to see them installed. I take care of a lot of 
Federal employees in my medical practice. They are stellar. I 
think across this country, we are very fortunate for the 
Federal employees we have. My questions are going to deal more 
not with the employees, but are we structured right and do we 
have performance indicators that you can actually measure based 
on what the mission of the GSA is.
    The first question I have for you is how is it that GSA 
ends up with all these competitors in the government doing 
exactly the same thing you are doing? How did that happen, and 
why did it need to happen, and if it needed to happen, why?
    Mr. Perry. Well, I will give you my take on that. As you 
know, the franchise funds were established by Congress. The 
several that exist, as you point out, in many instances 
purchase items that agencies could elect to purchase through 
GSA. In other cases, they are very specific.
    For example, in the Veterans' Administration, they purchase 
pharmaceuticals and they have a special expertise there. That 
probably makes sense. There are some purchases that may be made 
by NASA that are of a very highly technical nature and it might 
make sense that would happen there, as well. But for those 
agencies who are involved in the purchase of standard 
commercial items off the shelf, it is a question.
    Now, what I have gotten as a response when I have asked the 
same question is that there was a point in time, in our distant 
history, hopefully, where GSA was not perceived to be fast on 
its feet. We had gotten to be bureaucratic, partly as a result 
of the fact that in our early days, we were a mandatory source. 
Today, we are not. Agencies can elect to use GSA for services 
are not. There are some exceptions. For example, in the leasing 
of real estate, you still have to use GSA unless GSA gives you 
a delegation of authority. But for the acquisition of 
commercial products----
    Senator Coburn. You mean like the SEC did?
    Mr. Perry. Yes, or the Pentagon is another example. But at 
any rate, I can't attest as to whether or not that was factual, 
but that seems to be the folklore, that some people felt that 
by having some healthy competition within government, that 
would cause GSA and the other agencies, in fact, who are 
running these franchise funds, to be on their toes and to be 
the best they could be.
    Senator Coburn. So is there any measurement of that? Is 
there any way to measure whether we are getting a better value 
as a country now that we have all these competing agencies?
    Mr. Perry. I think there is----
    Senator Coburn. And how do we measure that?
    Mr. Perry. Well, what it would take, for example, is if we 
took the Department of Interior, who has a franchise fund, and 
if we made an apples-to-apples comparison as to what is being 
invested by that unit to acquire technology versus GSA, I think 
that would be part of the answer in terms of how efficient the 
two units are. That is not the complete answer.
    The GAO did a study of that and one of the things that they 
determined was whereas the fees or rates that GSA publishes and 
charges is an all-inclusive rate, that it includes its share of 
the agency overhead, as it should, but what we believe that 
report showed as it relates to the other funds, they were 
incremental rates. In other words, they were not fully-loaded 
rates. So on the surface of it, our view is that if we did that 
competition and we looked at it on an apples-to-apples basis, 
you would see that the GSA rates are lower.
    Senator Coburn. OK. That brings me to my next question. Can 
GSA today take 2004 purchases and know, here is what we bought, 
here is how much we bought, here is what price we compared for 
it, and compare that to the private sector or any one of these 
other agencies?
    Mr. Perry. Yes, in some of our business lines there----
    Senator Coburn. Well, but is the model there to do that 
everywhere?
    Mr. Perry. I would say everywhere, and I would have to 
think about whether we could do that in the case of our 
Multiple Award Schedules. That would be the exception that 
comes to mind. And the reason I say that, Senator, is that in 
the case of the Multiple Award Schedules, those are acquisition 
vehicles that are used directly by our customer agencies 
without GSA's direct involvement. So if the Department of 
Interior or Social Security Administration or somebody else 
uses the Multiple Award Schedule, we would be able to capture 
how many dollars were purchased. I don't know whether we would 
have all the information that we might want to have as to----
    Senator Coburn. I promise you, you don't. We have already 
asked this question in the hearing before.
    Mr. Perry. But there would be some exceptions to that. For 
example----
    Senator Coburn. OK, but I want to get to the point. I 
believe that there are some exceptions, but if we are going to 
measure performance, why would we not structure GSA to have an 
information system that is designed to measure that?
    For example, you can tell us how many books you buy, and 
you can tell us within a framework what price you paid, but you 
can't tell us by publisher on value that a competitive price, 
whether you got a good deal or a bad deal unless you do a post-
award audit.
    Mr. Perry. I don't think even the post-award audit would 
still not address the----
    Senator Coburn. Because you are not looking at price in the 
post-award audit----
    Mr. Perry. Right.
    Senator Coburn [continuing]. Which is another question that 
I have. Why in the world would we not look at price in the 
post-award audit?
    Mr. Perry. Well, we look at whether or not the contract was 
carried out in accordance with the terms and conditions of the 
contract. So we don't look at whether or not the terms and 
conditions of the contract were the best that they could 
possibly----
    Senator Coburn. For management purposes, once you have done 
the contract, I know you have cut the deal.
    Mr. Perry. Right.
    Senator Coburn. But for management purposes, why wouldn't 
you want to know that information?
    Mr. Perry. The time to know it is prior to----
    Senator Coburn. Right. What if you are going to contract 
with them again next year? But if you don't know that 
information--in other words, what I am trying to get is to why 
isn't there in GSA a way to know what the Federal--just from 
you, let alone everybody else--what we bought, how much of it 
we bought, and what price we paid for it?
    Mr. Perry. I agree with that.
    Senator Coburn. But we don't have that----
    Mr. Perry. You don't have that.
    Senator Coburn. We don't have that. So my question to you 
then is, how do we do that? What do you need from me to help 
you do that? How do I create that where you have the 
information systems that are necessary to evaluate performance, 
including price and value?
    Mr. Perry. Well, may I start that answer to that question 
with one thing that we do today, and then I will end it with my 
answer to the thing that we have on the horizon which I think 
gets to your basic question.
    When we make our technology acquisitions today, we do make 
a calculation that we call the Independent Government Cost 
Estimate of what that technology acquisition should cost. So at 
the outset, we have a target----
    Senator Coburn. And that is a large portion of what you 
buy, right?
    Mr. Perry. Yes.
    Senator Coburn. IT?
    Mr. Perry. IT, other than buildings. So we do have that 
Independent Government Cost Estimate, and then as we make the 
acquisition, we measure ourselves as to whether or not we 
achieved the acquisition somewhere close to or right on or even 
below the estimate. We do the same thing in construction. We 
obviously have on-time, on-budget goals and we measure that. So 
I just want to say, it is not that nothing is measured. Some 
things are measured.
    Senator Coburn. Oh, I know that, and I have studied, I have 
read the testimony from what we had last time. This is not an 
attack on what you are doing today. It is in the question of I 
see, coming from the private sector, what I see is the real 
fact is we can't measure--we don't know what is exactly bought 
and at what price in this country.
    Mr. Perry. That is right.
    Senator Coburn. OK.
    Mr. Perry. We can't get it at the granular level that is 
actionable.
    Senator Coburn. But we ought to be able to if we really 
want to leverage purchasing power, would you agree with that?
    Mr. Perry. I agree with that.
    Senator Coburn. OK. So we can't do that now, and since we 
can't do that, one of the performance measures of success can't 
be measured because we can't go out and compare, did we really 
get the best price, because we don't know how much it was 
bought off your catalog----
    Mr. Perry. Right.
    Senator Coburn [continuing]. And we don't know what they 
paid for it. We know what the ceiling is, but we don't know--
for example, when you all negotiate a price----
    Mr. Perry. That is right.
    Senator Coburn [continuing]. Your testimony in the last 
hearing, or your staff's testimony in the last hearing before 
this Subcommittee is you negotiate what you think is the best 
price and that becomes the ceiling.
    Mr. Perry. Right.
    Senator Coburn. And you have some pre-audit certifications 
and some post-audit to see that they didn't do it--post-audits, 
you are not looking at price. On pre-audits, sometimes you are. 
But the point is, as that happens, in terms of negotiating, we 
can't measure----
    Mr. Perry. Right.
    Senator Coburn. The real matter of the fact is maybe 
somebody else wants to come and sell all of this to you in one 
lump sum and will be available and can do it in a better way 
and get us a better price.
    Mr. Perry. Well, I should say we are beginning to do some 
of that now, a little bit of it. That is what you are referring 
to is in the case of our Multiple Award Schedules, there is a 
schedule price, which is a ceiling. There are some acquisitions 
that agencies would make against that--let us say they were 
buying two computers. Well, they might judge it is not worth 
doing a special effort to get the price down. They will just go 
with the scheduled price.
    Senator Coburn. Yes.
    Mr. Perry. But if they are buying 500 computers, they 
really should. What we are now doing in our Chief Acquisition 
Officer's Office is we are going to customer agencies who use 
the schedule and asking that very question. In how many of the 
instances where you made acquisitions did you conduct a 
separate competition with an effort to get a price lower than 
the scheduled price? We will be tracking that. But that is on 
an audit based as opposed to an automated basis.
    Senator Coburn. But you understand what I am saying.
    Mr. Perry. Yes.
    Senator Coburn. Why shouldn't the whole systemwide system 
be set up to track the information so that when you want to 
really measure any aspect of your--at Timken, you all knew what 
you paid for something, right?
    Mr. Perry. Sure.
    Senator Coburn. You knew, and then you put out bids for 
steel and everything else the next year and the clips for the 
bearings and your grinding wheels for the steel and all this 
other stuff. You put it out and you knew, based on the bids 
that you got, how you tracked it, you knew exactly how much you 
bought and you knew what you could go back to negotiate the 
next year with based on that.
    And my question is, take that same application from Timken 
for telephone sets in the Federal Government. How many were 
bought? Nobody knows. You know how many computers to a degree, 
but you don't know how many computers we actually bought 
because, first of all, the Pentagon isn't hooked in----
    Mr. Perry. Right.
    Senator Coburn [continuing]. Through the system. So what I 
am asking you is--what I am looking for is a culture change so 
that your information systems in GSA become designed to measure 
any performance across the government----
    Mr. Perry. Right. I was going to say----
    Senator Coburn [continuing]. And that is how you will get 
the business back.
    Mr. Perry. And that is through what is called our FPDS, 
Federal Procurement Data System, which, as you certainly know, 
begins to capture some of that information, but not at the 
granular level that it needs to be. We are making an 
improvement upon that, but it still doesn't go to the extent 
that you are saying. My answer to your question is we would 
need to go yet further than anything that is on the drawing 
boards on an across-the-government basis to be able to analyze 
the data in terms of what the government purchases.
    I would make one other observation, and that is--I will use 
the Timken case. When we did our purchasing, as I think we 
should do it here, you would make a stratification as to what 
are your really strategic items? Where are the elephants that 
have the biggest opportunity for savings? I think it wouldn't 
be unwise of us to start there.
    For example, one of the things we are doing now and over 
the last year or so is a strategic purchasing initiative that 
we call SmartBuy. We know the government spends a tremendous 
amount of money on software. We know that various agencies 
spend differing amounts of money on software. And so to your 
point, we were not able to go to the FPDS system and get all 
the information that should have readily available as to what 
are we spending by agency for software and then types of 
software. We were able to gather that information, though, 
through other means, by making a data call and using agency 
data to bring that together.
    But I don't disagree. It would be ideal to do that more 
globally. But I am also saying that even in this interim period 
before we have that, there is some strategic sourcing that we 
can do. We can improve upon the value that we are getting now 
as we are putting that other system in place.
    Senator Coburn. And that is great, but what about all the 
other agencies that are buying and we are losing the buying 
power of being combined because they have their own buying 
power? In other words, that is like Pfaffner. Pfaffner was a 
competitor of Timken.
    Mr. Perry. Pfaffner, that is correct.
    Senator Coburn. So we have got Pfaffner and Timken here and 
they are both buying the same product, but we are not 
leveraging the fact that they have tremendous more buying power 
if they buy together. Now, in this country, it is illegal 
because they are competitors, but it is not illegal to combine 
the Federal Government.
    So if we can't direct--if we don't have the information, 
then we are not going to ever get the best value. We are going 
to go to a level, and I guess what I am asking is to rethink 
the model to think bigger than what you are doing today because 
to me, it makes no sense to have 13 different buying agencies 
in the Federal Government, none. It makes no sense for the 
Defense Department to procure outside of you, or some agency, 
whichever it is, or at least not use their combined buying 
power to facilitate the rest of the Federal Government's 
purchasing.
    Mr. Perry. Absolutely right.
    Senator Coburn. So the question I have to you is, how do we 
get to the point where all these guys who are in these other 
Federal buying agencies can't compete with you anymore because 
you know price, you know availability, you know value, you know 
numbers, and I don't understand why that is not a priority on 
the catalog stuff, for example.
    Mr. Perry. Well, as a matter of fact, Senator, to some 
extent, I would say that some of those customers, while they 
view price as important, they don't view it as the final 
determinant.
    For example, the Department of Defense, who is a big 
customer of ours, and I think for the most part we provide them 
with services that they are very satisfied with, but I have had 
discussions with base commanders and others who say, I have to 
make sure that I have a reliable source, that it is consistent 
and compliant. If it costs me 10 percent more to do it myself, 
then it is so important to the achievement of my mission that I 
am willing to do that. So what we have to convince them of, not 
only that we are lower cost, we are able to do that now, but 
also that we are absolutely reliable, consistent, and 
compliant.
    Senator Coburn. But in Timken, if you had assistant 
purchasing agents that didn't perform, you would fire them.
    Mr. Perry. Right.
    Senator Coburn. OK. And so what we are saying is if you 
don't perform, there is no cost. We will just go do it 
ourselves. That is what the military is saying, based on their 
value of feeling comfortable about having--value is quantity, 
price, and service----
    Mr. Perry. Right.
    Senator Coburn [continuing]. And having that delivered at a 
fixed time that they feel comfortable with. My point is, that 
is achievable if you have measurable systems operating 
throughout your IT that says, we know what the performance 
indicator, and in terms of the military, timeliness of delivery 
is just important. That is their big component for value.
    So I think it is the same thing. All these parameters can 
be measured if you put the system in to measure. Did we get it? 
Did we get what we thought we were going to get? Is it at the 
right price, at the right time? That is called measured 
performance, and that is how we used to measure purchasing 
agents. Did you get it in on time, and did you get us a good 
term?
    Mr. Perry. Right, and we----
    Senator Coburn. And we pay for it in 90 days instead of 30.
    Mr. Perry. Well, the reason I said that there are certainly 
cases where we do exactly what you are saying and some cases 
where we don't, it is a little more difficult.
    Senator Coburn. Well, I am trying to stay just on the 
catalog here for a minute.
    Mr. Perry. OK. You are just----
    Senator Coburn. Just stay on the catalog. I know that there 
are technical things like IT purchases and things like that. I 
haven't even begun to look at that.
    Mr. Perry. OK.
    Senator Coburn. We haven't even begun to look at leases and 
we haven't begun to look at building purchases and things like 
that, which we are going to. But just on the catalog, you 
cannot--and I think this is true, and tell me--you cannot tell 
us what was bought, how much, and what price was paid through 
that catalog.
    Mr. Perry. We can tell you from the Federal Procurement 
Data System how much was spent totally by agency. We could tell 
you by certain categories. We could tell you how much was spent 
on IT. What we can't do is say how much of that IT was for 
laptops, which is what we need. We need to get to the next 
level of granularity. But we can, for example, say how much was 
spent on furniture, how much was spent on supplies. There are 
certain categories that we can map out.
    Senator Coburn. Right, but I am talking down to the line 
item in the catalog.
    Mr. Perry. Right. We can't do that.
    Senator Coburn. It comes with the same computer 
transmission that transmitted anything else back. It is just a 
subcategory.
    Mr. Perry. Right. What would happen----
    Senator Coburn. Which book did you buy?
    Mr. Perry. Right. And where that information resides, 
because as I mentioned, the individual agencies use our 
Multiple Award Schedules independently--what would be required 
is that their acquisition systems would have to feed that line 
item-level detail into the system, which does not happen today.
    Senator Coburn. Well, we can get it today. I have gone to 
get it on several things. You know where I get it? The 
supplier.
    Mr. Perry. And that would be--you talked about Timken, and 
let me go back to that.
    Senator Coburn. Yes.
    Mr. Perry. That is exactly what we did in many instances. 
You take the grinding wheel suppliers----
    Senator Coburn. Yes, Norton----
    Mr. Perry. Norton was our primary. We picked two or three, 
not ten, two or three who would be our strategic partners. Part 
of the deal would be we share information. Where we got the 
information in the case of the software purchases was, again, 
going back to suppliers, and we could do that in some of these 
cases, as well. But sometimes, we----
    Senator Coburn. You see where I am going with that.
    Mr. Perry. Yes.
    Senator Coburn. All right. Let me see where I want to go 
next. My staff just gave me a reminder of something we talked 
about earlier. If you go and compare GSA purchasing to the 
private sector programs that are out there today, what I just 
described to you, they can tell you in 30 minutes on anything 
that is on their line. They know what was bought, they know how 
much was bought, they know what price was bought, they know the 
delivery rate it was bought, and they know the terms it was 
bought.
    So if the private sector has that software technology, we 
ought to be able to get it. First of all, we are the biggest 
purchaser, so it is a big purchase in software, but we ought to 
be able to buy it cheaper than anybody can buy it, correct?
    Mr. Perry. That is right, probably.
    Senator Coburn. So you will concede that in some of the 
buying mechanisms that are out there competing in the private 
sector, this has already been accomplished.
    Mr. Perry. Yes. I think the software is not the challenge.
    Senator Coburn. OK. What is the challenge?
    Mr. Perry. The challenge would be for each agency to input 
the data, either manually or through some automatic or 
automated process at the level of granularity that we need in 
order that the database of information would be available for 
analysis.
    Senator Coburn. But they are purchasing most of that 
through a purchase requisition that has to get paid someway.
    Mr. Perry. Right.
    Senator Coburn. And I am not talking about the petty cash 
purchases and the small things.
    Mr. Perry. Right.
    Senator Coburn. I am talking about how do we leverage what 
we do to where we get a better price.
    The second area I want to spend some time with you on is--
--
    Mr. Perry. I would say, as we do that, my judgment is, on 
systems development or in this case implementation of system 
data collection, one of the questions is do you do everything 
at once or do you start with a phase where you are dealing with 
your most strategic sourcing opportunities, and I would just 
suggest that as we do this, we would select the one or two or 
five areas where we really believe the greatest value is there. 
We might not put pencils and papers in the first phase.
    Senator Coburn. I think that is a management decision you 
should make. What I am looking for is how do I help you get 
that, facilitate, get that done, either through legislation or 
appropriation riders or things like that to where you can 
accomplish it.
    But the other thing that needs to be accomplished is if we 
agree that more information and more detailed information will 
result in leveraging buyer power to a greater degree, then we 
ought to be having all these others--when they are inputting, 
it doesn't take much to transmit--if they have it in their 
computers, they are buying it on a purchase requisition, so 
they know what they are buying, they know what the price is, 
since they are negotiating the price below the ceiling price 
sometimes, so they know what that is. That data is there. All 
it is is reporting it----
    Mr. Perry. Right.
    Senator Coburn [continuing]. And they can do that once a 
month to you. But we need to have a central collection of what 
everything is bought so we can actually enhance the buying 
power, because if you go to a vendor right now on your catalog 
and you say, here is what we want. We are going to qualify you 
as a vendor. What is this----
    Mr. Perry. Schedule?
    Senator Coburn [continuing]. Central contractor 
registration, you have 350,000 people registered and you have 
9,500 people on the schedule. We are going to put you as a 
vendor on the schedule and we are going to collect the data. 
But if you don't know it for the whole country, we may not be 
able to get the best ceiling price. If I understand the 
testimony properly and the history properly, your procurement 
officers--price isn't the No. 1 thing that they are working on. 
They are working on value and quality and deliverability----
    Mr. Perry. Right.
    Senator Coburn [continuing]. And then they look at price. 
And they are looking for the best price at the time, but that 
is not part of their stated goal, correct?
    Mr. Perry. That is not price alone, if that is what you are 
saying.
    Senator Coburn. Yes. It is value.
    Mr. Perry. Value.
    Senator Coburn. But in terms of value, when you take this 
350,000 people that are on this contractor registration form, 
how do we get more of those people in the mix? In other words, 
we have 9,500 and we have 350,000 people out here that are on 
it, and I know there is a web placed application to do that. 
But what I hear is that it takes forever. For example, a 
minority-owned business that can't pay a consultant to walk 
this thing through, they are never going to get on the list.
    Mr. Perry. Well, that is an interesting question, Senator. 
First of all, I agree with you that it takes too long, and I 
also know that we have been taking some steps to bring that 
time down, including putting it online. We had a meeting just 
last week or 2 weeks ago with a firm who said they did all of 
their own paperwork, processing to get on schedule with the 
help of the GSA folks, never used a consultant, and they did it 
over a period of 6 to 8 weeks. In the same room was another 
similar-sized company who said, ``I paid $25,000 to a 
consultant to provide me that same service.''
    So we have been telling our small businesses that want to 
get on schedule, you really don't have to pay what consultants 
are charging. I don't know what the consultants promise. Maybe 
they promise they will work with you not only to get on 
schedule, but will work with you to get your first contract. 
Some say that.
    All I am saying is that we have taken steps to streamline 
the process. We need to do more. We should not have a situation 
where a small business has to pay an unaffordable amount for 
them to get on the government contract schedule.
    Senator Coburn. And if you would agree in principle that if 
you have more vendors of quality and value competing, the price 
is likely to go down.
    Mr. Perry. To some extent.
    Senator Coburn. Yes. But in regular markets----
    Mr. Perry. Yes.
    Senator Coburn. If you are at GM and they have five guys 
competing for seat belts----
    Mr. Perry. Right.
    Senator Coburn [continuing]. Versus two guys competing for 
seat belts, the likelihood that the price for the seat belt is 
going to go down.
    Mr. Perry. That is right.
    Senator Coburn. OK.
    Mr. Perry. But the question is, when you go from 5 to 15 or 
5 to 10, will it actually go down further?
    Senator Coburn. And I understand that. I know that there is 
not always going to be a price decline. But the fact is, if we 
had 350,000 vendors on there now competing for the same list of 
items that are on your schedule, is it not conceivable to think 
that the price on each one of those items might be somewhat 
less?
    Mr. Perry. That is logical. I am only--I don't disagree. I 
am only reflecting, there are certain places where we have 400 
or 500 vendors listed to provide a certain commodity or product 
or service, and when we put that solicitation out, of that 400 
on the list, we may only get four to six bidders.
    Senator Coburn. Yes.
    Mr. Perry. The point I am making is, I don't know that all 
400 will focus on every solicitation or acquisition that is out 
there. The number that we tend to get----
    Senator Coburn. But in principle, the more purchases you 
have--the more vendors you have and the more competition you 
have, if quality and service is the same, the better the price.
    Mr. Perry. That is right.
    Senator Coburn. You agree. So to create a system to where 
you have the maximum number of vendors who are qualified, and I 
know you have to have somebody that says, this is a fly-by-
night company. We don't want them selling to the government.
    Mr. Perry. Right.
    Senator Coburn. And I understand that. But that process 
should be very short and not be an average 6 months, which is 
what it averages today, which cuts a lot of people who have 
something great to offer, especially minority businesses, 
because they don't have the capital to put up front, and the 
government is a great contractor because you are a good payer. 
You are not going broke on them. And so their risk to sell is 
less.
    I just want to come to an agreement that if we could, both 
in terms of trying to create the information that needs to be 
there to measure performance, and not just at GSA, across the 
government----
    Mr. Perry. Right.
    Senator Coburn [continuing]. And two, is that the more 
vendors there are and the easier it is for quality vendors to 
get on your list off of the CCG, the better off we are liable 
to be. And then once we know numbers government-wide and 
increased number of vendors, then the capability of squeezing 
them based on price, once quality and service are the same, the 
ability to squeeze on price is there.
    Mr. Perry. Right. Competition will have that effect.
    Senator Coburn. Let me ask you one general question. If you 
were to look--and this is subjective and I am not holding you 
to this at all--when you buy the same thing that, let us say, a 
Wal-Mart buys for use in their business, not to resell but in 
use in their business, when you buy something, do you think you 
get as good a value as they do? Do you think you all buy it as 
well?
    Mr. Perry. I would say in our technology arena, I think we 
are as good as anybody. I don't know, let us say, for something 
like tools. Some of us can go in a hardware store and sometimes 
see a tool on sale for a price less than our own GSA schedule. 
We see that all the time. We had that when I was at Timken, 
because when you negotiate a price, it doesn't say that that 
company couldn't somehow on occasion have sales that are 
actually below your price. But at any rate, I would say in the 
area where we have really focused, and technology being one, I 
am not so sure that we don't do as well as Wal-Mart.
    The other is the one I mentioned at the outset. We do 
compare ourselves in the area of real estate, and I know that 
is not your focus here, but there is a real-time set of 
information available as to what companies are achieving when 
they lease space and we are double-digit below that rate 
specifically.
    Senator Coburn. I really hope that is true, and we will 
have a hearing on that.
    Let me tell you my experience as a Congressman. When I 
became a Congressman, we were in the Federal Building and the 
rate the Federal Building paid for my office was twice what I 
could rent private space, nicer and bigger. And so my own 
personal experience--I don't doubt that is true, because I was 
buying little space and paying. But I have no doubt to say that 
you will probably do a great job in that.
    And remember, this isn't about me trying to criticize GSA. 
It is for me--my goal is to make sure that the new movement in 
terms of management in the Federal Government gets extended as 
far down as it can. With the CFO Act in terms of the President 
making sure we have Chief Financial Officers everywhere, where 
we have accountability and transparency so we can measure 
performance so that we know what is going on.
    You have been great. I appreciate you coming. We will go 
through these other questions, and Senator Carper is here, just 
in time, so that is great.
    Senator Carper, we have just had a great discussion. I am 
learning about the GSA, and it is all yours.
    Senator Carper. I presume you have already talked a bit 
about pre-award and post-award audits?
    Mr. Perry. A little bit.
    Senator Coburn. We did a little bit, but it needs to 
probably be covered a little bit more.
    Senator Carper. If we could just revisit a little bit, we 
heard some testimony, I think over the summer, about the 
benefits of pre-award versus post-award audits, at GSA and 
maybe the Veterans' Administration. I think maybe the VA uses 
them somewhat more aggressively, I don't know. But from what I 
have heard, what we have heard, the benefits can be 
significant, and I understand that GSA is in the process of 
increasing the number of contracts that you audit, is that----
    Mr. Perry. On a pre-award basis?
    Senator Carper. I think so.
    Mr. Perry. Yes. For example, a few years ago the number 
was, I think, 17. Next year, it will be over 100. So we are 
doing a great deal more in pre-award and we are using not only 
our GSA folks, but engaging the Inspector General in our office 
to provide the resources to do some of that. So we are, and we 
had gotten lax in terms of doing pre-award audits so there is a 
substantial increase in the number of pre-award audits that are 
occurring now.
    Senator Carper. Why do you suppose you all got lax?
    Mr. Perry. Well, again, and I was saying to Dr. Coburn, it 
is speculation on my part to some extent, but I think we had a 
focus on meeting the needs of our customers doing things as 
quickly as we possibly could in many instances and we got into 
a mindset of it is OK to cut this corner. It is OK to not do 
this step in the process because we will be able to process 
more orders for our customers.
    What we discovered, though, in the course of doing 
everything we could to meet the needs and growing needs of our 
customer agencies, that some of those corner-cutting was not a 
good thing for us to do. So now we have gone back, we have 
reestablished our acquisition processes in such a way that each 
of the steps that need to be a part of that process are back 
in.
    Senator Carper. It is probably premature to ask this 
question, but is it possible that in the past, that the audits 
were deemed to be burdensome either for the GSA or for the 
vendors? Did you ever hear any of that?
    Mr. Perry. Well, the post-award audits certainly are deemed 
to be burdensome, particularly by the industry, partly because 
it is not in the specifications, in the document up front. 
There are, in the course of administering the contract, during 
the time the contract is being executed, that is actually the 
best time to make sure that the vendor is complying with all 
the terms and conditions of the contract, as opposed to coming 
along 6 months later and doing it. Their view was that we are 
doing that during the course of the contract. It shouldn't be 
necessary to do it again after the fact.
    And also, I am not sure this is the case, but some 
indicated that they would have to retain records for an 
extended period of time until we conducted the post-award 
audit.
    But at any rate, we are still reviewing that factor. We had 
a hearing on it, a public hearing. We requested information 
from the public, and that includes the industry. We are 
reviewing that information as it has been received and will be 
making a determination as to how to go forward on that.
    Senator Carper. I am going to switch gears, if I could, and 
if you already got into this, you can just truncate your 
response. Could you just please explain, at least for me and 
maybe for us, the impact that the merger between the Federal 
Supply Service and Federal Technology will have on customer 
service----
    Mr. Perry. Yes.
    Senator Carper [continuing]. And on, I guess, oversight of 
contract negotiations, and do you think it will help with your 
efforts to ensure that GSA is offering the best value?
    Mr. Perry. I absolutely do on all three of those points. 
One of the aspects of bringing these two components of our 
agency together is the fact that we today have two separate 
revolving funds that we use, one for the acquisition of 
information technology products and services, and another for 
essentially everything else. It is a commercial item other than 
facilities.
    There was a point in time when I think it was a good 
practice to keep IT acquisitions completely separate from 
everything else, in the early 1990s and before when the 
government was getting very much involved in that. There needed 
to be some tracking of that, maybe some management control of 
it. There probably was even some incentive to say, let us do 
more and more of that for purposes of improving the operations 
of government agencies.
    But today, when agencies make acquisitions of major 
technology systems, it is a combination of IT, professional 
services, and maybe telecommunications to make an overall 
system. Today, we have to account for those separately. We have 
to make those as separate acquisitions. In fact, the Inspector 
General makes a finding against us if we buy a camera that is a 
part of a border control system that ties into computers if our 
judgment was that that camera was a part of an information 
technology system and the IG's judgment was that the camera is 
a camera and it is not IT. So when you think about it, you say, 
well, why should we have that separate accounting? So we have 
asked Congress for the authority to put those two funds 
together, and that is someplace where I would encourage your 
support.
    At the same time as we look at bringing the funds together, 
we looked at the fact that we have certain other duplication 
between our two services that is not useful or meaningful from 
a customer perspective. So we think that by bringing them 
together, actually taking out several layers of senior 
management that were over that, consolidating that, we will be 
able to have more people focused on meeting customer 
requirements. We should be more efficient, more effective. It 
ought to give us a more streamlined approach to deal with 
management controls, both at our national office and our 11 
regional offices.
    So in the case of all three components of your question, 
yes, we will provide better customer service, we will be more 
efficient, and our management controls will be applied in a 
more effective way.
    Senator Carper. You just mentioned one area where you think 
we could be helpful and supportive of you. Are there other 
things that we need to be mindful of? You may have already 
mentioned some of these to our Chairman, but any other ideas 
that come to mind where we can be supportive of your efforts to 
provide better value at a better price?
    Mr. Perry. The combining of the two funds is certainly one. 
We did have some discussion of the fact that a system that we 
use as a government-wide system, not just a GSA system, but we 
have a big role in it, the FPDS, the Federal Procurement Data 
System is a system that can be used and further developed as a 
means of capturing government-wide data with respect to our 
purchases so that we can analyze data and use that as a basis 
for our strategic sourcing. We are doing some of that today. 
Since we can't get the granular level of information from the 
overall system, we do it through the use of data calls and 
asking agencies or suppliers to provide information that we can 
then analyze and use for purposes of strategic sourcing.
    I can't say that, and I say this just so that none of us on 
the acquisition side use this as an excuse, because some would 
say, well, until 2008 when that Federal Procurement Data System 
is up and running and providing all of the information, then we 
will just stay in place. My view is that there is some 
strategic sourcing we can do in the interim and we should be 
focusing on getting that done even as we work on enhancing the 
Procurement Data System.
    Senator Carper. OK. Mr. Chairman, could I ask maybe just 
one more question?
    Senator Coburn. Sure.
    Senator Carper. While I am looking for my question, I will 
just say I went to my other hearing with Senator Voinovich, and 
I walked in mindful of the fact that you had been a member of 
his cabinet and I said, I just came from a meeting with Steve 
Perry and he said to tell you hi.
    Mr. Perry. Great.
    Senator Carper. And he said, ``Steve Perry?'' He said, ``I 
love Journey.'' [Laughter.]
    No, I am just kidding. He said to tell you hello, give you 
his best.
    I understand that the amount of business contracted through 
GSA has increased, and I am told dramatically. The size of the 
GSA staff has pretty much stayed the same----
    Mr. Perry. Gone down.
    Senator Carper. Has it? OK. And I would just ask, do you 
think you have the resources and staff that you need to conduct 
more audits or even to effectively negotiate a large number of 
contracts?
    Mr. Perry. Well, I was going to answer that question in one 
way before you said more audits. We probably--we are using the 
Inspector General and we are using some of our people who are 
most highly skilled on Federal Acquisition Regulations to 
conduct the audits. That is a precious resource. We don't have 
enough people to do that.
    But the other point I was going to make is, and it is 
really one of the underlying reasons that we want to do the 
FAS, the FTS and FSS reorganization, we believe that it is 
always going to be difficult for us to expand measurably the 
size of our organization, although in a moment I can make an 
argument that maybe that is exactly the right thing we ought to 
do.
    So anyhow, part of our reason for the organizational design 
is to, with the same number of people, expand our 
organizational capability, just to do things better, faster, 
smarter with the resources that we have. That is the plan that 
we are on.
    But to help make the argument that we must at least do 
that, and maybe we should do more, you are all aware that, as 
you were just pointing out, our acquisitions of information 
technology products and services for government agencies has 
really grown. It went from $1 or $2 billion just a few years 
ago to about $9 or $10 billion now.
    Senator Carper. Say those numbers again.
    Mr. Perry. One or two billion dollars probably 6 or 8 years 
ago to $9, close to $10 billion now.
    Senator Carper. OK.
    Mr. Perry. The same could be said for the growth of our 
Multiple Award Schedule. I don't know what it was 5 or 6 years 
ago, but it probably wasn't more than $20 million. It is $40 
billion now.
    So what that means is that GSA is making more and more 
acquisitions on behalf of other agencies. We think that is a 
statement that says that they find value in using our service. 
But it also is the case that, one, we have fewer people doing 
it today than we had 4 or 5 years ago, many fewer people. Two, 
you read reports that use that same statement as it relates to 
government-wide. The government as a whole now is purchasing 
over $300 billion a year with far fewer people in its 
acquisition workforce than we had a few years ago.
    Some people contend that the solution to that problem is 
for each agency to add to its acquisition staff. I think that 
is a big mistake. I think this would be the opportunity to say, 
OK, GSA or maybe it is three or four agencies. It may be not 
just one. We are going to rely upon you as the government's 
central entity to really bring about productive acquisitions, 
and if we did that, we would say, instead of expanding the 
acquisition workforce in each agency, we are going to expand it 
in GSA and diminish it elsewhere.
    That might address the issue of the franchise funds. As we 
were talking, there are a number of other agencies who are 
involved in the acquisition of information technology, although 
it is not their core mission, and they, in fact, use the 
revenue in excess of expenses from those activities to fund the 
basic program, which is another issue.
    And then one last point related to that, I use this 
statistic with our folks all the time when we are trying to 
make the point that our up-sight potential at GSA in terms of 
making us a more and more viable part of our Nation's Federal 
Government is this. I mentioned that today, GSA is involved in 
the acquisition of maybe $10 billion of the IT, but the 
government as a whole spends $65 billion. So that says there 
are a lot of agencies out there doing their own thing.
    With respect to telecommunications, we know that the unit 
price that we have negotiated for long-distance and local 
telephone service, voice and data, is better than the best 
commercial prices that those providers offer to their largest 
commercial customers, and yet in some parts of our country, 
only 10 percent of the Federal agencies in those locations use 
the GSA contracts.
    So there is a lot more value that we could be providing if 
we could focus on GSA as the agency who has the responsibility, 
and there is some amount of work that has to be done to get the 
other agencies to, even though it is voluntary, recognize that 
if there is a better value here, in those cases where we can 
demonstrate it, as we can in the instance of telecommunication 
services, they should do it.
    Senator Carper. Thanks, Mr. Chairman.
    Senator Coburn. Let me just make one point. If you had the 
kind of information I wanted you to have, you would never have 
to do a post-award audit, right?
    Mr. Perry. Well, if you were still trying to----
    Senator Coburn. If you knew by price, by vendor, by 
purchasing segment in the Federal Government, if you had that 
data, you would know what they were charging and you would know 
whether or not you can go to the government agency, if they 
have got the quality and service, and they can tell you that, 
and then you can measure price and you can measure quantity if 
you had the kind of data that I am talking about, the 
information system.
    Mr. Perry. Right.
    Senator Coburn. So you would agree with that?
    Mr. Perry. I would agree with that.
    Senator Coburn. OK. I will tell you, the House has passed 
the legislation. It is stuck in our Committee. You have my 
commitment in terms of combining----
    Mr. Perry. Funds? Thank you.
    Senator Coburn. You have my commitment----
    Mr. Perry. Thank you.
    Senator Coburn [continuing]. To have the support to try to 
get that through. I will talk with Senator Collins on it 
tomorrow. My staff will talk with Senator Collins and see if we 
can't get that through to help you on that.
    If you don't have anything else, Senator Carper, I think 
the one thing that I look at is we don't know what we are 
buying, what we are paying for it, the satisfaction levels. We 
do in certain areas, and I think in terms of the IT and things 
like the specialized areas that you do, but on this area 
outside IT and outside buildings, the other things, especially 
catalog, we don't really know.
    My belief is, as a former businessman, without that 
knowledge, we are not going to ever do as good as we could do. 
Now, that doesn't mean that we are not doing a good job, and I 
am not accusing anybody of that.
    I think that there is a vacuum of data, and I know the new 
system and the fact that the Pentagon isn't on it and they 
should be on it. I am going to be looking at that, too. why 
aren't you on it? But I want it to go further. Everybody here 
that is computer literate knows that if you have got something 
in front of you and you are going to punch it in and put it in 
a file, it can all go into the file or you can take some out. 
But the point is, is it in there, and if it is something that 
is already there, it is collectable, and that is what the 
wonderful part of computers are, is they can make data 
available in an array that you never would have been and to 
give you an analysis that you never would have gotten with 
clerks trying to run this down.
    So I would first of all tell you how much I enjoyed your 
testimony. Thank you. I think your leadership style is great. I 
think we still have some real procedural difficulties in the 
Federal Government. The fact that we have 10 or 13 different 
groups purchasing and not using, like you were talking about, 
voice and data rates, that they are not getting the best thing. 
If that was designed to get competition, how do we measure that 
we are getting a better price? We don't know that.
    If anybody ought to be able to develop the capability to 
measure our purchasing value, it ought to be us, and I want to 
work with you to try to do that.
    Mr. Perry. Thank you.
    Senator Coburn. We are going to look forward to working 
with you on some of these other areas, too. Thank you, Mr. 
Perry.
    Mr. Perry. Thank you, Dr. Coburn. Thanks, Senator.
    Senator Coburn. The hearing is adjourned.
    [Whereupon, at 4:13 p.m., the Subcommittee was adjourned.]



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