General Services Administration: Vendor Concerns About GSA's On-line
Ordering System (Correspondence, 06/29/2000, GAO/GGD-00-162R).

Pursuant to a congressional request, GAO provided information on the
General Services Administration's (GSA) on-line ordering system, GSA
Advantage, focusing on: (1) vendor concerns; and (2) the Federal Supply
Service's (FSS) views on the concerns and the actions it is taking to
improve Advantage.

GAO noted that: (1) an information technology (IT) industry
representative was concerned that FSS requires vendors who sell high-end
IT equipment, such as servers and mainframe computers, to provide
product information, including features and options available on the
equipment, for Advantage that is too detailed and is already available
on vendors' World Wide Web sites; (2) the IT industry representative and
vendors said that buyers of these products are unlikely to purchase them
on-line because of the complexity involved in designing system
configurations and the multitude of options available with the
equipment; (3) according to the vendors, buying these products requires
direct contact with the vendors to determine the best configuration; (4)
the IT industry representative and the vendors also said that formatting
the pricing and product information for Advantage is very labor
intensive because the information is continuously changing,
necessitating frequent updates on Advantage; (5) the IT industry
representative and selected vendors were also concerned that Advantage
orders often have errors that necessitate follow-up discussions and the
submission of paper or faxed purchase orders; (6) they believed that the
problem stemmed from the length of time it can take to get FSS to
approve price changes and update price and product information on
Advantage; (7) as a result, buyers often submit orders with prices that
vendors consider outdated or for products that may have changed or been
discontinued; (8) this is a particular problem with IT products because
as indicated earlier, prices can change daily, and new products are
always becoming available; (9) another concern was that despite the
resource investment that IT vendors incur in placing products on
Advantage, sales volume through Advantage has been low; (10) the IT
industry representative estimated that Advantage sales typically have
accounted for less than 1 percent of IT vendors' total schedule orders;
(11) FSS officials said they are committed to making Advantage easy and
effective for vendors while providing a world class Web site for buyers
that is efficient to use; (12) they said that their efforts ultimately
are intended to increase competition and address the socioeconomic
programs of the federal government; (13) the officials added that they
have made many changes in response to issues raised by vendors, such as
eliminating the requirement for product codes with each item submitted;
and (14) they also established a vendor support center to assist vendors
5 days a week, 12 hours a day and are willing to meet with vendors to
discuss problems.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-00-162R
     TITLE:  General Services Administration: Vendor Concerns About
	     GSA's On-line Ordering System
      DATE:  06/29/2000
   SUBJECT:  Federal supply systems
	     Federal procurement
	     ADP procurement
	     Contractors
	     Prices and pricing
	     Computers
	     Web sites
	     Internet
IDENTIFIER:  GSA Advantage Program
	     Federal Supply Schedule

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GAO/GGD-00-162R

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B-285662
Page 4                    GAO/GGD-00-162R GSA On-line Ordering
B-285662

June 29, 2000

The Honorable Tom Davis
Chairman, Subcommittee on the District of Columbia
Committee on Government Reform
House of Representatives

The Honorable Stephen Horn
Chairman, Subcommittee on Government
    Management, Information, and Technology
Committee on Government Reform
House of Representatives

Subject: General Services Administration: Vendor Concerns
About GSA's On-line Ordering System

This letter responds to your request to follow up on vendor
concerns about the General Services Administration's (GSA) on-
line ordering system, GSA Advantage! (Advantage). These
concerns were brought to your attention in April 2000 by an
information technology (IT) industry representative. Advantage
was the federal government's first electronic catalog on the
Internet. It allows agencies to search for products and
services and place orders with GSA's federal supply schedule
vendors. GSA's Federal Supply Service (FSS) was responsible
for the development and implementation of Advantage. As you
know, FSS-a component of GSA-provides federal buyers with
nonmandatory contract arrangements worth over $10 billion per
year for commercial products and services, including IT,
through its federal supply schedule contracts. In its effort
to improve service and adopt commercial practices, FSS
established Advantage in 1996 so that customers could use
electronic commerce-the process of buying, selling, and paying
electronically over the Internet-to obtain products and
services available through the FSS supply schedules.1 FSS'
Office of the Chief Information Officer (CIO) manages the
Advantage program.

According to FSS officials, the structure of Advantage
reflects the laws, rules, and socioeconomic programs that are
unique to federal procurement, and it is designed to enhance
competition. Currently, all government agencies with Internet
access can use Advantage-top customers of Advantage include
the Air Force, the Army, and the U.S. Postal Service. Over
2,000 schedule vendors are on Advantage, and fiscal year 1999
sales were $86 million. Fiscal year 2000 sales were over $64
million through the end of May. According to FSS officials,
Advantage has won several government and private sector awards
for its innovation and quality.

As agreed with your offices, our objectives were to (1)
describe the vendor concerns and (2) discuss FSS' views on the
concerns and the actions it is taking to improve Advantage. To
meet these objectives, we obtained documentation on the
concerns from your offices, discussed the concerns with the IT
industry representative and selected vendors the IT
representative identified, interviewed FSS officials about the
concerns, and reviewed various documents provided by FSS
officials related to Advantage. We also contacted GSA's Office
of the Inspector General (IG) to discuss work it had done on
Advantage and reviewed a 1998 IG report on Advantage.2 We did
not attempt to verify the information we collected, resolve
the vendor concerns, or determine the extent of vendor
dissatisfaction with Advantage. We did our work in May and
June 2000 in accordance with generally accepted government
auditing standards. We requested comments on a draft of this
letter from the Administrator of GSA and the IT industry
representative. The oral comments we received are discussed
near the end of this letter.

Results

The IT industry representative identified vendor concerns that
generally related to three areas: data requirements for
Advantage, the quality of Advantage orders, and sales volume
through Advantage. An explanation of the concerns, a
discussion of FSS' views on them, and information on efforts
FSS has under way to improve Advantage follow.

Data Requirements

The IT industry representative was concerned that FSS requires
vendors who sell high-end IT equipment, such as servers and
mainframe computers, to provide product information, including
features and options available on the equipment, for Advantage
that is too detailed and is already available on vendors' Web
sites.3 Furthermore, the IT industry representative and
vendors we contacted said that buyers of these products are
unlikely to purchase them on-line because of the complexity
involved in designing system configurations and the multitude
of options available with the equipment. According to the
vendors, buying these products requires direct contact with
the vendors to determine the best configuration. In addition,
the IT industry representative and the vendors said that
formatting the pricing and product information for Advantage
is very labor intensive because the information is
continuously changing, necessitating frequent updates on
Advantage.

As an alternative, the IT industry representative recommended
over a year ago that FSS allow vendors to provide basic
"reference" information on Advantage and that FSS establish
links on Advantage to vendors' Web sites so that buyers can
access detailed product information and directly contact
vendors. According to the IT industry representative, FSS
agreed with this recommendation but has not fully implemented
it. FSS officials said they agreed to accept reference
information for high-end IT products and to allow buyers to
order them directly from vendors' Web sites. FSS' CIO said
that FSS has implemented the policy for services contracts,
although it is still in the process of developing uniform,
well-defined criteria that contracting officers throughout FSS
can use for determining which products will require reference
information. The CIO recognized vendors' concerns on this
issue and said that FSS is striving to come up with criteria
that will be agreeable to FSS and the vendor community. The
CIO also said that the new criteria should be completed by
September 2000. The CIO added that in the interim, FSS
contracting officers to date have already allowed vendors to
provide reference information for several hundred products.

Quality of Orders

The IT industry representative and selected vendors were also
concerned that Advantage orders often have errors that
necessitate follow-up discussions and the submission of paper
or faxed purchase orders. They believed that the problem
stemmed from the length of time it can take to get FSS to
approve price changes and update price and product information
on Advantage. As a result, buyers often submit orders with
prices that vendors consider outdated or for products that may
have changed or been discontinued. According to the vendors we
contacted, this is a particular problem with IT products
because as indicated earlier, prices can change daily, and new
products are always becoming available. One vendor said that
in addition to orders with outdated prices, the orders
sometimes do not reflect the terms and conditions of the
vendor's contract. For example, the vendor has received orders
from overseas, although the vendor's contract specifies that
no shipments will be made overseas. This vendor also has
received orders for quantities under the minimum order amount
specified in the vendor's contract.

FSS officials said that they have no information indicating a
major problem with errors on orders. These officials said that
the information printed on Advantage orders is based on the
information transmitted by the vendors. The CIO said that FSS
updates the information on Advantage daily and has corrected
prior problems that may have caused errors on orders. To
determine if errors in orders were a problem, FSS officials
contacted a major IT vendor. This vendor reported that for the
month of May 2000, 1 of the 76 Advantage orders it received
contained an error. The vendor did not provide any information
on how this error rate compares with orders that are not
placed through Advantage. We did not determine to what extent,
if any, errors in orders are a problem. Nonetheless, the CIO
said that FSS is willing to discuss any problem that vendors
are having with Advantage to find a solution. Related to the
concerns raised by one vendor about terms and conditions, the
CIO acknowledged that overall, FSS needs to determine how to
better serve its overseas customers. However, the CIO said
that information on vendors' terms and conditions is included
on Advantage for the buyer to review.

Sales Volume

Another concern was that despite the resource investment that
IT vendors incur in placing products on Advantage, sales
volume through Advantage has been low. For example, the IT
industry representative estimated that Advantage sales
typically have accounted for less than 1 percent of IT
vendors' total schedule orders. The vendors we contacted
indicated that given their resource investment in Advantage,
sales were disappointing. FSS officials said that they believe
sales are not the only reason for having a Web site. According
to these officials, Advantage exists for buyers to do
research, as well as purchase items, and that Advantage usage
statistics indicate that many buyers locate products through
Advantage and then place orders through more traditional
means. These officials also said that it is not their intent
to require all orders to go through Advantage and that many
companies have Web sites that generate only a fraction of
their total sales.

Efforts to Improve Advantage

FSS is taking steps to improve Advantage in part as a result
of the 1998 GSA IG report on Advantage and the feedback that
it has gotten from vendors. Vendors contacted by the IG had
concerns similar to those discussed in this letter. For
example, the IG reported that GSA was experiencing
difficulties in placing schedule products on-line and that
vendors had concerns about data formatting and transmission
issues. Some vendors contacted by the IG felt that Advantage
duplicated their own Web sites and that Advantage was not very
cost-effective for them. The IG recommended that FSS develop a
comprehensive plan that would outline the critical actions
needed for achieving Advantage's objectives. In response to
the IG report, FSS contracted with Arthur Andersen to assist
in developing an action plan for improving Advantage. The
action plan is based on Arthur Andersen's strategic
methodology for assisting organizations that are looking to
enhance their electronic commerce capabilities. The
methodology, which FSS plans to follow, was tailored to help
FSS reassess the vision of Advantage and systematically review
the environment-including the vendor community's needs-and
develop opportunities for Advantage.

Overall, FSS officials said they are committed to making
Advantage easy and effective for vendors while providing a
world class Web site for buyers that is efficient to use. They
said that their efforts ultimately are intended to increase
competition and address the socioeconomic programs of the
federal government, such as programs designed to enhance
participation by small and minority-owned businesses and
handicapped individuals. The officials added that they have
made many changes in response to issues raised by vendors,
such as eliminating the requirement for product codes with
each item submitted. They also established a vendor support
center to assist vendors 5 days a week, 12 hours a day and are
willing to meet with vendors to discuss problems. The IT
industry representative and the vendors we contacted said that
despite the concerns raised, FSS has generally taken positive
steps toward improving Advantage for vendors and that the
vendor community has a good working relationship with FSS.

IT Industry Representative and Agency Comments

On June 16, 2000, the IT industry representative told us that
the information contained in a draft of this letter was
accurate. Similarly, on June 20, 2000, FSS' GAO Liaison
informed us that FSS officials had reviewed the draft letter
and believed that it was an accurate portrayal of the issues.

We are sending copies of this letter to Representative Eleanor
Holmes Norton, Ranking Minority Member of the House
Subcommittee on the District of Columbia; Representative Jim
Turner, Ranking Minority Member of the House Subcommittee on
Government Management, Information, and Technology; and, the
Honorable David J. Barram, Administrator of GSA. We will make
copies available to others on request. If you have any
questions, please contact me on (202) 512-8387 or at
[email protected].

Bernard L. Ungar
Director, Government Business
  Operations Issues

_______________________________
1 GSA also is required by law to provide governmentwide on-
line computer access to information on products and services
that are available for ordering through its multiple award
schedules (40 USC  1501).
2 Audit of the FSS's Efforts to Place Multiple Award Schedule
Items on GSA Advantage (Report Number A83307/F/H/V98019, Aug.
31, 1998).
3 Supply schedule vendors who register with Advantage are
responsible for transmitting product and pricing information
to FSS. To format data for Advantage, vendors have the option
of using electronic data interchange (EDI), which is a
standard computer-readable syntax used both in the private and
public sectors to electronically send and receive information,
or the Schedule Input Program (SIP), which is a data input
program that FSS developed for vendors that do not have the
capability to use EDI.
*** End of document ***