Wagner: Why GSA matters

Business process economies have surpassed economies of scale in importance today

Recent press coverage of the General Services Administration has not been all positive, so we should remind ourselves why GSA matters and will continue to matter. This minor agency, known primarily within the federal government, plays an important role in helping the rest of the government fulfill its mission. But much has changed since the agency was formed in 1949. It is worth reviewing why an organization created to solve the procurement problems of a post-World War II era government is relevant in the era of the Internet, globalization and the war on terrorism.

In today’s world, economies of process are more important than economies of scale. It is just as important to standardize our business processes around best practices as it is to get a great deal on what we are buying — a good deal on 10 items is not a good deal if eight of the items sit in a warehouse for six months. Spending $200 on administrative processing costs to save $10 on acquisition costs can only be justified on the basis of ignorance and poor data. We don’t pay too much for hammers. We just pay too much to buy them.

Effective management extends end to end. Good managers worry about what we pay for an item or service, how much of it we actually use, whether it is the right thing to buy, whether something else would work better, and what it actually costs to get the item or service into the hands of those who use it. Effective managers also consider how processes play over the long haul.

That’s where GSA comes in. Let’s consider two approaches:
  • Aggregating the government’s buying power tends to lower costs. GSA will soon award the Networx contracts for a large portion of the government’s telecommunications spending. Trust me, Networx prices will be better than you can get at home. But what about the business processes? After award, agencies will work directly with the Networx contractors to make sure their particular needs are met, but they will be using standard processes. Because processes have their own economies of scale, costs to both the agencies and the vendors will be reduced. Agencies get a virtual private contract that takes advantage of the government’s buying power but ensures that they — and not a third party — are in charge of getting what they need.
  • Perhaps more important, contracts such as Networx give agencies a means of responding to a changing marketplace and changing technology. In the Internet-enabled world, standards and common strategies are more important than ever. The movement to IPv6 and electronic signatures will be easier if we work together with industry, rather than one agency at a time.

  • The multiple-award schedule contracts are also critical but for different reasons. Their value comes from competing for a solution quickly and cheaply using standard terms, conditions and business rules. The schedules enable agencies to get lower-cost solutions faster. They don’t automatically give you a great price. But for price, they are a good beginning. Their primary value lies in making it easier for agencies to get the right solution at the best price.
Those two approaches have evolved during the past 10 years and will continue to as technology and markets change. Nonetheless, a long lever and a place to stand will be critical to the federal government’s success. GSA offers both.

Wagner is a retired acting commissioner and deputy commissioner of the General Services Administration’s Federal Acquisition Service.

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