_______________________________________________________________________________
Title: General Services Issues
Subtitle:
Report No.: GAO/OCG-93-28TR Date: December 1992
_______________________________________________________________________________
Author: United States General Accounting Office
Office of the Comptroller General
Addressee: Transition Series
This file contains the text of a GAO report. Delineations within the text
indicating chapter titles, headings, and bullets are preserved. No attempt has
been made to display graphic images or pagination of the typeset report.
Footnotes appear in brackets at the reference point in the text. Underlined
text is indicated by underscore characters (_Introduction_). Superscript
characters are preceeded by a backslash (\a). Figures may be omitted or
replaced with tables. Tables may not resemble those in the printed version.
A printed copy of this report may be obtained from the GAO Documents
Distribution Facility by calling (202) 512-6000 or faxing your request
to (301) 258-4066 or writing to P.O. Box 6015, Gaithersburg, MD 20877.
_______________________________________________________________________________
CONTENTS
General Services Issues
Resolving Conflicting Roles
Making GSA More Businesslike
Strengthening GSA's Internal Management Systems
Improving GSA's Governmentwide Procurement Practices
Bolstering Congressional Oversight
Related GAO Products
Transition Series
- Economics
- Management
- Program Areas
Office of the Comptroller General
Washington, DC 20548
December 1992
The Speaker of the House of Representatives
The Majority Leader of the Senate
In response to your request, this transition series report discusses major
policy, management, and program issues facing the Congress and the new
Administrator of the General Services Administration. These issues include (1)
resolving the fundamental conflict between the agency's roles as service
provider and regulator, (2) replacing outmoded centralized methods of
delivering services with new methods based on entrepreneurial and competitive
principles, (3) strengthening weak and ineffective internal management
systems, and (4) improving GSA's oversight of governmentwide procurement
practices. In addition, we point out that improvements are possible in
congressional oversight of GSA's many activities.
The GAO products upon which this report is based are listed at the end of the
report.
We are also sending copies of this report to the President-elect, the
Republican leadership of the Congress, the appropriate congressional
committees, and the Administrator-designate of the General Services
Administration.
GENERAL SERVICES ISSUES
-------------------------------------------------------------------------------
We did not issue a transition report on general services issues in 1988
because our work at the General Services Administration (GSA) did not provide
a comprehensive overview of the agency and its functions. Since then, however,
we have completed a general management review of GSA and reviewed in depth
many of the areas for which GSA serves as the government's central management
agency--such as public buildings, supply, and information resources.
The time is due for a significant restructuring of the way government agencies
obtain the general purpose goods, offices, and services they need to support
their missions. The governments of many other countries and some state and
local governments in this country have revamped the way they provide general
administrative services, separating policy and regulation from operations,
encouraging competition, and decentralizing some operations to bring services
closer to the customer. The next Administrator of GSA faces two fundamental
challenges. First, he or she must continue to improve, as the current GSA
Administrator has done, the internal management of an agency with a history of
operational problems, a mix of regulatory and service functions, and frequent
changes in leadership and direction. Second, the new Administrator must
address the underlying structural weaknesses in the way GSA does business. As
long as GSA depends for survival on its monopoly over the provision of office
space, supplies, telecommunications, and computers, it will lack the incentive
and pressure needed to meet modern standards its customers--the rest of the
government--demand. The Congress, too, has an opportunity to reshape its
oversight of GSA by providing for periodic reauthorization of the agency's
major functions on the basis of the agency's performance at meeting specified
strategic goals.
GSA was established in 1949, when centralized institutions were perceived as
necessary to secure economies of scale. The Hoover Commission identified
supply, records management, and the operation and maintenance of public
buildings as needs common to all agencies, and GSA was created to bring
central direction to the federal government's essential housekeeping
functions. Civilian departments and agencies, with some exceptions, were
required to come to GSA for common goods and services. GSA was envisioned,
primarily but not exclusively, as a policymaking body with the option of
delegating its authorities while maintaining comprehensive accountability to
the Congress for efficiency and economy in these areas.
Since its creation, GSA has been torn between an internal dynamic that favors
a centralized approach to directly providing services to agency customers, and
a largely external expectation that its primary role should be to issue
governmentwide policy guidance and oversee decentralized operations within the
departments and agencies themselves. GSA has historically concentrated on
day-to-day operations under its direct control. By 1978, GSA had about 37,500
employees running buildings and switchboards, driving cars, storing records,
and doling out supplies.
Today, however, changing work concepts brought about by new information and
telecommunications technologies and a highly developed private sector service
capability are calling this traditional centralized way of functioning into
question. GSA has been reduced to about 19,000 employees, primarily through
contracting out and delegating its functions during the early 1980s, driven by
staffing reductions imposed by the Office of Management and Budget. In this
process, agencies have commonly found that the quality of housekeeping
services correlates directly with the closeness and accountability of those
providing the service to the final customer.
Although GSA has reluctantly surrendered many of its operational functions, it
is still insecure in its governmentwide policy role. Decentralized operations
require a long-term strategy, sensible and flexible common policies,
consistent and knowledgeable guidance from market and technical specialists,
coordination to prevent competition among agencies, and comprehensive
reporting and oversight so that the Congress can hold the executive branch as
a whole accountable for efficient use of the taxpayer's money. Lacking
comprehensive and strategic information in these areas, the Congress cannot
set priorities, establish budgets, or take action based on desired outcomes
and is forced into making narrow, project-by-project decisions.
GSA, however, still tends to be preoccupied with its role as a direct
deliverer of services and has not developed a long-term strategy for managing
the government's valuable property assets or relationships with contractors.
For example, GSA protects its control over 7,000 government buildings in its
custody but lacks the solid cost and performance information necessary for
effective oversight of the 2,000 buildings for which it has delegated
operational responsibility to agency tenants. More significantly, GSA has not
developed a comprehensive policy framework for managing the government's
overall 400,000-building real estate portfolio to better integrate people,
information, technology, and space to make the workplace more productive and
responsive to agencies' missions. GSA's 1991 "strategic plans" were heavily
oriented toward the need to improve the delivery of services to
customers--laudable goals, but underlining the message that GSA's basic role
remains service delivery, not central management, policy-setting, and
oversight.
Our most recent examinations of how other countries are managing similar
organizations indicated that the most effective way of addressing the tendency
for operations to drive out strategic policy considerations may be to separate
policy and regulatory functions from responsibility for day-to-day operations.
An important first step toward strategic leadership has just been taken. On
November 30, 1992, the GSA Administrator established the Federal Property
Asset Management Service. The new organization is intended to shift GSA away
from its historical focus on the use and disposal of real estate toward a
proactive role in governmentwide asset management. For the first time, a
federal organization will look at the government's real estate holdings as
valuable national assets and seek to provide governmentwide policy guidance to
ensure that resources are invested where the return will be greatest. The
organization will promote a life-cycle approach to real estate management,
with emphasis on planning, policy, oversight, contractual services, and
inventory management. The success or failure of the fledgling organization
will depend on the support given to it by the new Administrator.
MAKING GSA MORE BUSINESSLIKE
-------------------------------------------------------------------------------
GSA is in many respects a large, diversified business enterprise. Its real
estate portfolio, supply procurement and distribution activities, travel and
transportation services, telecommunications and computer services, and
property management and disposal functions involve a cash flow of more than
$10 billion annually. If GSA were a private company, it would rank among the
top 50 on the Fortune 500 list. Despite its businesslike mission, however, GSA
all too rarely operates in a businesslike manner, as the following examples
illustrate:
-- _Depot operations_. Our most recent work on GSA's supply depot operations
found that GSA has spent millions of dollars to modernize two of its four
large depots but that the effort has been largely wasted because key
software is lacking. This modernization effort comes at a time when the
private sector is reducing the need for depots and their inventory by
relying on improved information systems that transmit retail sales
information directly to the manufacturer to regulate production and
delivery. Our work found that millions could be saved by significantly
reducing depot operations. GSA should increase reliance on direct vendor
delivery to federal agencies, eliminate uneconomical orders, and
systematically question the need for its depots.
-- _Real estate operations_. GSA does not manage its real estate portfolio
strategically. For example, the lack of a consistent cost-conscious
location policy concentrates the government in the nation's highest-cost
labor markets, fails to take modern telecommunications capabilities into
account, and ignores the incentives that localities may offer to attract
employers. Agencies also lack incentives and analysis of alternatives to
make efficient decisions on the amount and location of needed office space.
Though GSA charges them rent, agencies typically treat office space as
required overhead rather than as a cost within their control. In addition,
GSA has yet to employ the basic concepts of asset management to determine
the relative cost-effectiveness of building construction, purchase, lease,
lease-purchase, modernization, or disposal so that decisionmakers can
choose the options that offer the greatest economic return on investment.
We have also found that GSA's ability to take advantage of the current
downturn in the commercial real estate market is impeded by structural
rigidities, such as a lack of discretionary building purchase authority and
budget scorekeeping limitations that discourage capital investment in favor
of short-term leases.
-- _Disposal activities_. GSA's program to identify and dispose of excess and
underutilized government property has been largely ineffective. Because
they have no financial incentive to do so, federal agencies have reported
very few holdings as excess property to GSA. As a consequence, the
government is incurring opportunity costs, since much of the property could
be recycled to more economic uses, exchanged for needed property, or sold.
The government also unnecessarily incurs considerable costs in holding,
managing, repairing, and safeguarding property that could more
appropriately be recycled or sold. GSA needs a practical ability to
identify and remove buildings from its own portfolio that have passed their
useful life. More than half of GSA's buildings are over 40 years old, face
rehabilitation backlogs that GSA has not fully aggregated, and in some
cases buildings may have a negative return on further investment.
To be responsive to the needs of its customer agencies, GSA should replace
these inefficient and outmoded methods of delivering services with new methods
based on entrepreneurial and competitive principles. While much can be done to
improve GSA's management under its present structure, in the longer run the
government needs to revamp the manner in which general services are provided
to bring to bear the competitive forces of the marketplace. As long as GSA has
a monopoly on the provision of office space, vehicles, supplies,
telecommunications, and computers, it will lack the incentive and pressure to
meet modern needs and standards.
Other countries--including Great Britain, Australia, New Zealand, and
Sweden--have embarked on fundamental reform of their administrative service
operations. Line agencies are given the choice to use their funds to obtain
office space, maintenance, transportation, printing, and supplies from either
the central government provider or private sector competitors. Since the funds
are not earmarked for specific services, the customer agency decides on the
desired quantity and quality by its own standards of value.
These countries share a common result. Where agencies have the choice between
government providers and private providers and varying levels of service, the
government providers have become more efficient, innovative, and businesslike.
Concepts like asset management and strategic planning have been adopted,
output-based performance measures have been developed, and incentives and
corporate cultures have been changed.
STRENGTHENING GSA'S INTERNAL MANAGEMENT SYSTEMS
-------------------------------------------------------------------------------
Given the nature, dollar magnitude, and governmentwide scope of GSA's
activities, it is especially critical that the agency's operations be
supported by reliable information systems and be adequately protected from
fraud, waste, and mismanagement. Any losses and inefficiencies in GSA's
activities not only adversely affect the agency's own operations, but also the
operations of federal agencies that rely on GSA for facilities and other
day-to-day support.
Our work over the last 3 years has found that GSA's general management and
internal control systems and practices need substantial improvement. Our
November 1989 general management review made 33 recommendations aimed at
improving GSA's performance in executive leadership and direction setting, the
management of information and human resources, and the adoption of a more
strategic approach to the agency's responsibilities. Our April 1991 follow-up
report noted that GSA was making good progress in the areas of executive
leadership and information management, but that several of our key
recommendations on human resources and strategic planning related to
facilities management had not been implemented.
Our September 1992 report on internal controls found that despite efforts by
GSA to improve its performance, its operations are not adequately protected.
Certain of its functions are high risk not only inherently, but also because
key internal controls have not worked as intended or as well as they should.
GSA's past efforts have been focused primarily on establishing control
structures and procedures, and only secondarily on their outcomes and
effectiveness in implementation. Historically, GSA has relied too much on the
Inspector General (IG) as the agency's primary control to stop misguided
actions. Although there has been some improvement, remaining deficiencies in
management information continue to impede GSA's ability to improve the
agency's operational performance and detect losses and inefficiencies.
Consequently, our September 1992 report made several recommendations designed
to (1) improve GSA's existing efforts in three key areas--overall agency
emphasis, implementation, and oversight of internal controls; resolution of
GAO and IG audit findings and recommendations; and Financial Integrity Act
(FIA) implementation and reporting--and (2) more fully protect the eight GSA
functions and activities that our assessment indicated are high risk.
GSA agreed with and committed to implement our recommendations and has other
initiatives under way aimed at resolving the various management, operational,
and oversight deficiencies discussed in the report. For example, GSA agreed
that it needs to make the prevention and detection of fraud, waste, and
mismanagement a higher agencywide priority and has already revised its
strategic plan to do this. Also, GSA agreed that it should (1) focus more on
the expected outcomes and measurable results of control structures and
processes; (2) hold GSA services, regions, program offices, and managers fully
accountable for more effective implementation of existing internal controls
and audit recommendations; and
(3) ensure that its FIA reports disclose all material internal control
weaknesses and properly characterize the status of previously reported
weaknesses. Finally, GSA has efforts under way to upgrade the capability and
reliability of its various program management information systems.
Since full implementation of the recommendations is a long-term process, it is
essential that the corrective actions begun by the outgoing GSA Administrator
be sustained by his successor.
GSA is responsible for operating or overseeing several governmentwide
procurement programs. Among these programs are the multiple award schedules
and competitive indefinite delivery contracts programs to provide agencies
with easy methods of acquiring commonly used supplies and equipment and a
program to acquire short- and long-distance telecommunications services. Under
the Brooks Act, GSA has oversight responsibility for information technology
acquisition throughout the government. Our work in each of these areas
indicates that effectiveness could be improved substantially.
GSA needs to reexamine its governmentwide procurement programs to (1) ensure
clear and rational negotiation strategies,
(2) eliminate chronic poor performers,
(3) compare government requirements with commercial practices to determine
whether the requirements are value added, and
(4) identify and correct common or systemic problems. Specifically, GSA needs
to address the following:
-- _Multiple award schedules_. Our ongoing work on the multiple award
schedules program has indicated that GSA's policies on pricing and
negotiation are poorly crafted and lead to widespread inconsistency,
misunderstanding, and mistrust both within GSA and in the private sector.
From the perspective of agency purchasing patterns, we found that, for the
most part, agencies filled users' requests for a specific manufacturer's
product without determining if other schedule products could satisfy the
requirement at a lower price. GSA's negotiating policy statement needs a
basic revision to clarify and rationalize discount goals and reduce
burdensome and irrelevant data requirements for vendors.
-- _Competitive supply contracts_. GSA continues to award contracts to vendors
who repeatedly have supplied defective or poor-quality products or who were
late with deliveries. Such procurement practices are wasteful and have
adverse operational consequences, such as compromising customer agencies'
mission accomplishment. GSA continues to do business with poor-performing
contractors because it (1) lacks complete, readily usable data on vendors'
past contract performance and (2) has not consistently emphasized product
quality, on-time delivery, or vendor performance in awarding and
administering contracts. GSA has recently initiated actions to correct
these problems, but it is too early to judge their effectiveness or whether
they will be sustained.
-- _Governmentwide telecommunications_. In 1988, GSA awarded FTS (Federal
Telecommunications System) 2000 contracts to two vendors--AT&T and US
Sprint--to provide state-of-the-art telecommunications services to federal
agencies. These contracts are estimated to be worth over $10 billion in
total over a 10-year period. Since the contract was awarded, we have
identified numerous problems with GSA's management of the program and have
questioned the cost-effectiveness of the contracts. GSA has implemented our
recommendations and made other management improvements. For example, GSA
recently completed a recompetition between the two vendors that brought
prices below comparable commercial rates, generating savings of over $450
million over the remaining 6 years of the contracts. GSA is also
negotiating price cap mechanisms to ensure that future prices remain
cost-effective. The FTS 2000 program now seems on track. The
ever-increasing importance of telecommunications to the office environment,
however, combined with continuing budget pressures, indicates that GSA even
now must begin defining governmentwide telecommunications strategies for
the longer term future.
-- _Agency procurement of computer equipment, software, and services_. The
federal government spends over $20 billion annually acquiring computer
hardware and software. GSA is the principal agency responsible for ensuring
that the government acquires and manages this technology effectively. Under
GSA's ineffective oversight, agency actions continue to result in poorly
designed, ineffectively managed procurements with overruns measured in
years and in the hundreds of millions of dollars. We found GSA's
procurement and information technology management reviews, which are to
help agencies develop good computer procurement practices, were too limited
in scope and number. GSA needs to refocus its procurement review process by
identifying and analyzing data on common or systemic problems.
Information resource management issues are addressed in more detail in a
separate transition report entitled _Information Management and Technology
Issues_ (GAO/OCG-5TR, Dec. 1992).
While the Congress has kept a watchful eye over some efforts--such as FTS
2000, computer procurements, and certain building projects--over the years it
has not devoted comprehensive or sustained oversight to GSA. The Congress has
not been engaged in the debate over GSA's role or tried to hold GSA
accountable for its overall performance as an agency. One reason is that
jurisdiction over GSA is divided between the Public Works and the Government
Operations/Governmental Affairs Committees, and Appropriations Committee
attention has been affected by the unusual condition that less than 5 percent
of GSA's funds are appropriated directly to the agency.
The current building prospectus process also hinders comprehensive
congressional attention to GSA. GSA presents the Congress with dozens of
prospectuses for capital investment projects each year, but the agency fails
to cast them in any long-term context. S. 2068, introduced last year,
recognized this problem and the importance of developing a broad,
comprehensive approach to congressional oversight. If the bill had passed, it
would have required GSA to submit 5-year plans for meeting public buildings
needs with an explanation of their priorities to the Congress. This would have
addressed GSA's full range of needs from acquisition through disposal.
In the 103rd Congress, more than half of the chairpersons and ranking minority
members of GSA's authorization, oversight, and appropriations subcommittees
will change through reorganization or turnover. This circumstance, combined
with new leadership for the agency, necessarily means that a large number of
new actors will have an opportunity to influence GSA's direction. It also
offers an opportunity to place congressional oversight of GSA on a new
footing.
H.R. 3161, which was considered during the 102nd Congress, contained a section
providing for the first time that GSA be periodically reauthorized by the
Congress as a means of improving legislative oversight. If the focus of
reauthorization is to hold GSA accountable for achieving a number of specific
goals and objectives over a sustained period, the process could provide the
regular and comprehensive congressional oversight that GSA has historically
lacked.
