GSA struggles to right the ship

Foundering agency tries to steer back on course as leaders report sharp revenue drop

The General Services Administration, once the first stop for agencies needing procurement services, is losing revenue as customers find alternatives to GSA’s offerings, agency officials said last week.

GSA is trying to cut short-term costs and find ways to bring back long-term customers. But observers say such a turnaround — if feasible at all — would require GSA’s procurement experts to shake some bad habits that they have developed during the past couple of years.

If they don’t fix these problems quickly, “this agency is gone,” said Bob Woods, president of Topside Consulting Group and former commissioner of the Federal Technology Service.

The most conspicuous problems are in the area of assisted services, in which GSA employees play a hands-on role in helping agencies plan and manage big procurements. FTS’ information technology services revenue has fallen from $7.2 billion in fiscal 2004 to a projected $4.3 billion for fiscal 2006, a 40 percent drop. GSA is merging FTS with the Federal Supply Service to create the Federal Acquisition Service.

Two factors contributed to the revenue drop, said Marty Wagner, acting administrator of FAS. The first was “inappropriate rapid growth,” spurred by contract misuses that GSA uncovered in a series of internal probes in recent years, Wagner said. GSA has taken steps to curb those practices.

The other factor, he said, is a shift in agency buying behavior that GSA must address. The agency’s response to customer needs will determine whether it retains its identity as a one-stop acquisition shop, Wagner said.

Some experts believe the hill may be too tall to climb. Woods is one such skeptic.

“These guys are going to have to fight and claw for every nickel of revenue,” he said, adding that even the best effort may not be enough. GSA has so many structural problems that it “may be too far gone,” he said.

GSA lost customer focus
For the past three years, some observers say GSA stopped thinking about meeting its customers’ needs and instead focused on reining in contracting abuses.

The response was an overreaction, critics say. Soon, there was “one guy working and three guys double-checking him,” Woods said. Since then, the agency has been encumbered in contract oversight that has slowed the contract award process. Frustrated agencies are going elsewhere for contracting needs or are doing the work internally.

“The agency turned inward and lost track of the fact that external customers are vital to an agency run primarily on fee-for-service funds,” said John Okay, a partner at Topside Consulting Group. The Get It Right program that former GSA Administrator Stephen Perry launched in 2004 “got it mostly wrong,” Okay said.

The Get It Right campaign cleaned up inappropriate acquisition methods and brought them in line with regulations. But many in the acquisition community worried that the campaign would swing acquisitions too far away from innovation and toward more conservative practices, a fear that some feel has been coming true.

Okay said Get It Right put too much emphasis on contracting policies and de-emphasized customer service. “GSA’s current mantra is ‘acquisition excellence,’” he said. “But what good are excellent acquisitions if there are no customers?”

Bill English, national representative for the National Federation of Federal Employees’ GSA Council, said Get It Right forced employees to work under a microscope. GSA’s management “said the customer doesn’t matter. What matters is that the documents are perfect,” English said. “They self-destructed their own agency.”

Many of those forgotten customers have turned to internal contracting vehicles. They found that they could do the work faster and cheaper. Get It Right instituted complex and time-consuming checklists and procedures, hampering the ability of GSA’s procurement experts to serve their customers, said Ray Bjorklund, senior vice president and chief knowledge officer at Federal Sources.

“If you can’t find a way to do it quickly and correctly, people are going to vote with their feet,” Bjorklund said.

Get It Right had another unexpected, effect, Wagner said. “When we pulled back — tightened up procedures — that led to a reduction in the rate of growth and an actual decline,” he said, adding that GSA had forecast revenues based on the older, looser practices.

Cost-cutting measures
The operating philosophy of a fee-for-service organization — as many of GSA’s activities are — is that generated revenue covers the activity’s costs, making the agency mostly self-sustaining without appropriated funds. GSA needs to cover its costs, Wagner said.

To patch that problem, GSA has requested authority from the Office of Personnel Management and the Office of Management and Budget to offer employees early-outs and buyouts. Wagner said he expects to get the authority within a few weeks.

Jack Hanley, president of the National Federation of Federal Employees’ Council of GSA Locals, said he learned in a Feb. 22 briefing that the early-outs and buyouts could affect about 400 workers. Hanley said Deidre Lee, assistant commissioner of integrated technology services at GSA, cited that number, but Wagner would not confirm it.

Wagner said, however, the number is “not in Never Never Land.” The early-outs and buyouts would target areas in which business has dropped, he said. GSA hopes to avoid invoking a formal force reduction, in which agency officials could force out employees, he said.

Meanwhile, David Bibb, GSA’s acting administrator, froze hiring for the general management and administration staff at the central office and in the agency’s regional locations for fiscal 2006, which he announced internally in a Feb. 24 memo. In January, Wagner halted hiring at FTS and FSS, the memo states.

Recovery isn’t certain
Acquisition professionals aren’t sure about GSA’s future. In the best case, they say, it will take time to bring customers back into the fold. Agencies such as the Homeland Security Department and the Defense Department are setting up their own agencywide contracts.

To woo agencies back, GSA must show value in using its contract vehicles, said Carl DeMaio, president of the Performance Institute.

Some successful GSA functions, including other contract programs, could slow the recovery of assisted procurement services. Agencies may not need the aid until existing short-term contracts expire, Okay said.

chart Wagner said he does not foresee rapid improvement for GSA. The agency’s first priority should be to stop the bleeding, Okay said. The early-outs and the buyouts are necessary to shed costs. The problem is that GSA’s senior managers and well-qualified customer service specialists might leave, he said.

Customers, meanwhile, are watching the agency with some wariness, wanting to see it continue to deliver value without breaking the rules.

“We expect GSA to provide good service and value” to DOD, said Domenico Cipicchio, acting director of Defense procurement and acquisition policy. “This means we expect quality products [and] services delivered to DOD at reasonable prices and compliance with the rules. From our perspective, GSA is taking positive steps to support the DOD customer.”

“GSA needs to be a market-based organization” that realizes it only exists for the customer, Bjorklund said.

Experts are unsure how a GSA revolution will reform the agency. Some say it will be smaller and have a narrowed core mission, becoming more agile to meet rapidly changing customer demands. Others foresee it becoming larger and broader.

But experts agree that GSA’s success depends on how it treats its customers, and the agency must reform quickly.

Wagner affirmed the urgency when he explained the need to trim employees from the payroll. “The fact that things may turn around a year from now doesn’t help me,” he said. “I have to act today.”

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