Federal contractors, information technology vendors in particular, can expect an additional squeeze on margins from the federal government, according to officials who testified June 30 before an ad hoc subcommittee on contracting oversight within the Senate Homeland Security and Governmental Affairs Committee.

"IT is one of the areas where, in my opinion, we have the richest target of opportunity for more strategic sourcing," said Dan Gordon, administrator of the White House Office of Federal Procurement Policy. Strategic sourcing is when the government seeks lower pricing in exchange for commitments to buy large quantities.

But OFPP won't be along in seeking lower prices. The General Services Administration will undertake more pre-award audits of would-be schedule program contractors, said Steve Kempf, acting commissioner of the GSA's Federal Acquisition Service. Federal agencies made approximately $47 billion worth of purchases through the schedules program in fiscal 2009.

"We have asked for our [inspector general] for more audits, but with shorter durations, and with a focus on delivering actionable information to our contracting officers," Kempf said.

Although GSA administers the schedules program, federal agencies don't need to send money to GSA in order to make a purchase via the schedules. Rather, in most cases, agency contracting officers buy directly from the schedule contract holder.

As a result, GSA lacks data on schedule transactions such as the final price agencies pay for a good or service compared to the listed price (GSA schedule prices are all negotiable; in fact, GSA recommends that agencies attempt to bargain with schedule holders). The Government Accountability Office believes that GSA should start collecting that data, and "provide this information to the people who are negotiating the contracts," said John Needham, GAO director of acquisition and sourcing management, who was also at the hearing.

Federal agency contract vehicles will also be affected by the current mood of asceticism in federal contracting. Later this summer, OFPP will issue guidance that agencies should follow when setting up multi-agency contract vehicles, such as the Air Force's NETCENTS vehicle or the Treasury Department's TIPSS-3 vehicle.

MAC vehicles allow multiple agencies to use the contracts awarded on a MAC vehicle, although generally in order to do so those agencies must share a similar mission to the agency administering the vehicle. Agencies will have to address in the business case the anticipated impact the vehicle could have on the government's overall ability to leverage its buying power in order to gain discounts through volume buying, according to Gordon. Agencies will also have to compare the administrative costs of a MAC vehicle against the costs of using an existing vehicle or using an interagency acquisition center, such as GSA or the Interior Department's National Business Center.

The hearing chairwoman, Sen. Claire McCaskill (D-Mo.), criticized the federal contracting world for is tendency to use acronyms.

"In preparing for this hearing, I felt like I was in the Armed Services Committee, they have as many acronyms as you guys do. BPAs is our version of Costco, right?" she asked Gordon.

Gordon's reply what that he is "not a member of Costco, so I'm not positive."

For more:
- go to the hearing webpage, complete with prepared statements and webcast
- find the nearest Costco warehouse

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