State and local markets languish, but potential is there

The General Services Administration has, for the past decade, offered state and local governments the ability to purchase IT using Schedule 70 through a Cooperative Purchasing Program created under the E-Government Act of 2002. Tribal organizations and educational institutions such as colleges and schools can also use the schedule.

It took a while to develop a user base — sales were only in the low hundreds of thousands of dollars in the first years — but by fiscal 2010, sales had reached $482 million, and that was followed the next year by a nearly 33 percent jump to $641 million. By fiscal 2012, market watchers such as GovWin were projecting that sales would grow to as much as $1.65 billion by 2016, a compound annual growth rate of 19 percent.

It has since tempered that forecast. Sales plateaued in fiscal 2012 in the mid-$600 million range, and it projects fairly low growth from that base over the next few years because of what analysts see as cultural barriers to sales between a federal sales organization and state and local governments. State and local organizations particularly don’t like the Industrial Funding fee GSA charges on each schedule sale going back to Washington, D.C., instead of to their own governments.

“The potential is there, but that’s based on a level of collaboration between state and local government that we haven’t seen yet,” said Jason Sajko, a principal analyst at GovWin. A lot of the success that Schedule 70 has had in the state and local market is due to a vigorous marketing effort by GSA. Schedule personnel regularly attend and speak at state and local events, and GSA runs several well-stocked websites specifically for state and local buyers.

The “Programs for State and Local Governments” ( site provides general information on the Cooperative Purchasing Program and what governments can buy through it. Another, “State and Local Government Ordering,” ( provides details on how IT products and services can be purchased on Schedule 70.

However, despite the fact that nearly 600 Schedule 70 contract holders sell to the state and local market each year, it’s clear that it isn’t a major objective for them. The yearly sales so far only come to around 1 percent of total annual state and local IT spending.

Many of those vendors make regular presentations to state and local governments, but they usually end up using Schedule 70 only rarely, such as when those governments are not able to find items elsewhere. Many states have their own schedules and prefer to use them rather than those run by GSA.

On the other hand, many states have contractual requirements that vendors that want to do business with them on their schedules must also carry a GSA schedule so the state buyers can compare prices. At least half of the states require vendors to update their state schedules if they also update their GSA schedules.

In fact, Sajko said, the bulk of the state and local Schedule 70 purchases are made by local governments and educational organizations, which have somewhat more freedom to buy from the GSA schedules and, in some cases, prefer the speed of the more streamlined cooperative purchasing process. State and local governments might also already have a relationship with a vendor they want to do business with, and the easiest way to do that might be through Schedule 70.

“If there were a real effort established to find commonalities, GSA could find more opportunity for leveraged purchasing between the feds and S&L government,” Sajko said. “But we just don’t see anything happening over the next four or five years to break down the barriers.”