Small Businessperson saved from GSA-created paperwork

“Government is not reason; it is force!  Like fire, it is a dangerous servant and a fearful master.” – George Washington.

To say our Federal Government Agencies are out of control and spiraling toward disaster is to be kind, or, naive.  To understand that government is “a dangerous servant and fearful master” is to properly view it and warily make use of government as a tool, a dangerous tool.

A personal experience yesterday is a microcosm of the larger (hugely larger) problem.

Our company has a contract with the GSA (General Services Administration).  This contract allows Federal Government buyers to purchase goods from our company at established prices that have been pre-negotiated with us by GSA negotiators.  The purpose of the contract from the government perspective is to negotiate once for the best price and then allow all government buyers to benefit from that one-time negotiation.  It also gives each buyer the confidence that the GSA has checked out the company for quality, delivery, financial stability, etc.  This is much like a union or guild or consumer’s group.  A large group of people or organizations band together to negotiate better insurance rates or commodity prices, etc.  So in theory, the company only has to go through the negotiation once (saving time and money) and the GSA does the drill on behalf of the Army and the Dept. of Agriculture and the FDA, etc. so they, too, save time and money.  That’s the theory.

Unfortunately for all of us, practice differs from theory here, as almost everywhere.

Consumer groups or guilds do not have the power of law like the GSA.  If the AARP can’t get the best deal with Holiday Inn, it suggests to its members that they stay at Comfort Inn.  AARP does not have the right to any data not available to the public.  It cannot force Holiday Inn to do anything other than negotiate for a price and terms.  The two work as equals:  a large group of consumers, who want favorable terms, negotiates with a large corporation who is willing to offer concessions to get that business.  Either  the negotiation is successful for both parties or it is successful for neither and they agree to disagree, i.e., no contract is signed.

The GSA, however, can require companies to comply with all of the hundreds of requirements of the FAR (Federal Acquisition Regulation) in order to have the opportunity to attempt to get a contract.  If you think by saying “hundreds of requirements” I am exaggerating, consider that the Index for the FAR runs 144 pages.  The ‘basic’ document runs 2,007 pages, and the FAR is updated or changed on a regular basis.  There are companies you can hire who employ large numbers of people who do nothing but ‘help’ other companies to interpret and understand the FAR.  I would argue that it is not possible to fully “understand” the FAR and that is proven by the government disclaimer that any advise you receive from the GSA or the government websites is not reliable (“Disclaimers: The Federal FAR Helpdesk Service is provided to assist government personnel in answering FAR questions. You should first search the FAR to find your answer, talk to your policy office and or legal office before resorting to this Helpdesk. Questions regarding agency supplements should be directed to your internal policy or legal office.”)  

Back to my personal experience yesterday that gave rise to this post/rant:  In renegotiating our contract for a five year extension, which we have been working on for the past three months (don’t ask the administrative cost to our company of seven people), we finally came down to near the end yesterday.  We received a list of the final 25 things (that’s the actual number of items on the  list of “last few items”) we needed to provide, confirm, attest to, or otherwise answer to the GSA, by law!  Item number four made reference to the IFF (Industrial Funding Fee – that’s the fee we must pay to the GSA for the ‘service’ they provide to us and which fee we are required to add on to our price to the government so we are not burdened with the fee).  Our IFF (and I thought all GSA contract holders’ IFF) has been 0.75% of the total price of the goods or services provided to the government.  In other words, if we sell $100,000 of goods to the Army, we must pay $750 to the GSA for their “service.”  Since that fee was built into the price to the Army, our only real cost is the administrative cost of accounting for the fee, writing the check, and making the quarterly filing to the GSA.  However, in item 25 of the list it asks us to confirm that our IFF is .9925% of sale amount.  We emailed to find out why the two different figures and were told the fee had been changed and they were sorry for any confusion they had caused us.  By the way, this fee is non-negotiable, by law.  In the real world all terms are negotiable

I can live with the increased fee since it is a direct pass-through to the buyer.  It doesn’t change our cost to file quarterly (even when we make no sales).  It is a minor issue to change all our prices but, by law, we are not allowed to change our prices until at least 12 months after the renewal of the contract.  So the effect is that we eat their fee increase for at least 12 months.  I can live with that, too.  $242.50 for each $100,000 in sales will not kill our company.  What bothers me is: why is there a need for an increase?   Since the fee is a percentage of sale, and since the GSA is not doing anything more to ‘help’ either its government customers (Navy, FDA, etc.), why do they need more money?  My guess is that they have grown the number and scope of the rules and regulations and have increased their staff to account for it.  In other words, I think the bureaucracy has grown and is increasing the cost to all GSA customers to pay for it.  In short, government will pay more for goods and services and the Fed will have to print more money or you will have to pay more taxes.

And, remember, the GSA is a tiny part of our government.  Its budget request for 2012 was just over $600,000,000 ($600 Million compared to the actual 2010 budget of $275 Million).  As part of the $3.7 Trillion 2012 budget, the GSA is just .016% or 16 hundred-thousandths of the total federal government budget.  Now imagine if the entire government had to increase its budget by (275 to 600 plus or well over 200% increase) or its fees by over 30% (.0075 to .009925) every two years.  Oh, wait, that has actually happened.  Our total government spending between 2008 and 2010 went from $2.9 Trillion to $3.5 Trillion or over 15% (and that doesn’t count all the commitments made in the Stimulus Bill, Obamacare, etc.).

I have a hard time imagining how our government could spend more money on what it buys today if the FAR and most centralized government purchasing ended tomorrow; if agencies became responsible to buy for themselves.  When rules are made to prevent fraud and corruption by the worst actors in our society, they invariably hurt the good guys.  They also drive up the price for everyone.  To save agencies from having to hire and manage honest and resourceful buyers, the FAR punishes all others in the system, but, especially the taxpayers who must foot the tremendous bill.

I don’t like to criticize without being constructive.  Therefore I will offer a suggested alternative.  Each manager of each government agency shall have as part of his or her duty the management of a strict operating budget for his or her group, department, or agency.  Failure to live within the budget must have consequences up to and including loss of pay, position, benefits, and the actual job.  When was the last time you saw a mission statement from a government agency that included “operating within the budget established for the agency”???  Make it part of the Mission of every government operation and put some teeth in it.