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As a buyer of commercial products, the Government has little influence on industrial practices. Prices are established by competitive demand in the open market, not by cost analysis. However, the procedures used to sell to the Government and the degrees of risks assumed by sellers under Government contracts differ from standard commercial procedures and contracts.
The Government procurement process requires potential suppliers to develop an information base concerning Government needs and to respond to contractual solicitations in unique ways. These needs are expressed almost exclusively through specifications or purchase descriptions. Frequently, aggregate requirements for specific products or services may be consolidated for central procurement by a designated agency. Customer services or other assistance normally offered to users in the private sector are generally considered unnecessary by most Government buyers in the interest of securing the lowest possible price and of avoiding the appearance of favoritism.
Regulations (FPR) prescribe the information to be reported to GSA by each civilian executive agency.? GSA then issues a compilation of the data submitted by these agencies.
Parties interested in the total procurement activity of the executive agencies generally add the figures reported by DOD with those compiled by GSA. This results in a figure that is large and impressive but incomplete and potentially misleading.
GSA data does not include all executive agencies, and many of the figures reported for specific agencies are incomplete. For example, it does not include procurements made by the Equal Employment Opportunity Commission (EEOC), the Federal Maritime Commission (FMC), or the U.S. Postal Service (USPS). The United States Tax Court is reported although it is part of the judicial branch. In fiscal 1972, figures reported for the U.S. Department of Agriculture (USDA) totaled only $261 million although its procurement obligations would exceed $2.6 billion if the food acquired for sale or donation were included.
Some agencies do not appear to realize they are required to report their procurements to GSA, or they interpret their specific authorizing legislation and the FPR as exempting them from reporting.
Data on the dollar value of purchases, what is bought, and who buys it are needed to develop an efficient, economical procurement system. Following are some reasons why the system for collecting and disseminating procurement statistics should be improved:
• Congress needs this basic information to make informed decisions on matters of broad public policy relating to procurement programs. • The executive branch needs this information to determine the policies necessary for managing the procurement process. • Interagency support activities require this
No single organization in the Government is responsible for collecting and reporting data on what the executive agencies buy or on the total value of their purchases. The public and Congress have a right to this type of information; with it the executive branch could improve procurement management.
Recommendation 1. Improve the system for collection and dissemination of statistics on procurement by commodity and agency to meet congressional, executive branch, and industry needs.
Each agency collects the procurement data it deems necessary for internal management and for submission of reports to the Office of Management and Budget (OMB) and Congress. Some activities, such as those in the Department of Defense (DOD) and the General Services Administration (GSA), compile and publish extensive data involving procurement transactions. Others publish little data; and some, none at all. The Federal Procurement
U.S. General Services Administration, Office of Finance, Procurement by Civilian Executive Agencics, July 1, 1971-June 30, 1972.
• The Tax Reform Act of 1969, Public Law 91-172, 83 Stat. 483, 26 U.S.C. 7441 (1970).
Note 3, supra. « Agricultural Trade Development and Assistance Act of 1954, ch. 469, 68 Stat. 454; 7 U.S.C. 1704 and 1721 (1970). See also Part A, Appendix D.
information to develop and improve the services they offer. • Suppliers need this information to develop programs to serve the Federal market. Full information creates a more competitive marketplace and provides a more equal opportunity for individual suppliers to compete.
project grants. What one agency may purchase by contract, another may obtain by grant, especially a project grant. It is reasonable to assume that if a commonly accepted definition of procurement existed for all agencies, many project grants would fall within the definition of procurement and be reported.
Part of the problem lies in an understanding of what is meant by "procurement." For example, until recently the Veterans Administration did not classify the purchase of hospital or nursing home care for a veteran as procurement to be reported. Because there have been many changes in the methods of reporting to GSA, the data for agency participation and categories of procurement vary from year to year and cannot be used for comparative analysis over an extended period.
Civilian agencies do not report procurements made through the Government Printing Office (an agency of the legislative branch) or Federal Prison Industries, Inc. (a U.S. Government corporation). Defense activities normally do not report transactions paid for directly with nonappropriated funds. To the extent that nonappropriated fund activities obtain items from Federal supply operations financed by a revolving general-purpose stock fund, the total value of transactions reported includes procurements paid for with nonappropriated funds. In the case of commissary resale, the stock fund is essentially a nonappropriated fund activity, but it is capitalized by the Government.
DOD reports procurements made for foreign governments although the funds for these purchases are drawn from a trust account maintained by the Department of the Treasury in which foreign governments make deposits for this purpose. Transportation under Government bills of lading (GBL) and Government transportation requests (GTR) are special categories of procurement expressly excluded from the DOD and GSA reporting system.
It is estimated that Federal expenditures through grants and revenue sharing totaled more than $39 billion in fiscal 1972,' exclusive of
The lack of accurate or complete data makes it extremely difficult to estimate the total value of commercial products procured. Moreover, there is no commonly understood definition of a commercial product. Each agency has different management systems, with the result that no two systems report against the same data base. Very few activities report data in a manner that permits a valid analysis of the types and kinds of commercial products they are buying.
Both GSA and DOD compile extensive procurement statistics and provide breakdowns which make it possible to estimate their procurements of commercial products by commodity or product group. DOD, however, does not provide a commodity-group breakdown for military procurements of less than $10,000. There were 10.2 million of these actions during fiscal 1972 that, although amounting to only 10.1 percent of the dollars spent by DOD, still totaled $3.9 billion.10 In this connection, DOD stated:
Contracts and purchases below $10,000 each for which product and service information is not collected are excluded. In each of the Fiscal Years 1969 through 1972, these small transactions totaled from $3 to $4 billion. This exclusion tends to understate procurement of commercial type items and services more than military hard goods items which usually are bought in large dollar amounts. It is known, for example, that Subsistence (FS Group 89) is severely understated for
United States Government, Fiscal Year 1973, table P-9, Federal Aid to State and Local Governments, p. 254. For a discussion on grants, see Part F.
& Military Prime Contract Awards and Subcontract Payments of Commitments, July 1971-June 1972, Sept. 1972, p. 38. (Figure rounded by the Commission.)
Calculated by the Commission. 10 Note 8, supra, p. 9. (Figure rounded by the Commission.)
* U.S. Office of Management and Budget, Special Analyses of the
tion, communication, computers, maintenance services, standard commercial items, and those special requirements that do not require extensive research and development. Figure 1 shows that even in DOD a major share of procurement is for commercial products and seryices.
CLASSIFICATION OF DOD FISCAL 1972 MILITARY PROCUREMENT
TOTAL $39.5 BILLION
$12.5 AIRCRAFT, SHIPS,
$5.8 RESEARCH AND DEVELOPMENT
this reason. However, information concern-
The $3.9 billion of purchases under $10,000 by DOD in fiscal 1972 12 was three times the $1.3 billion total of all purchases reported by GSA 13 and was $300 million higher than all purchases reported by the ten civilian executive departments combined.14
Table 3 is the Commission's estimate of the total procurements of the executive agencies in fiscal 1972. When transportation expenditures are added to DOD procurements of $38.3 billion, the military department total exceeds $39.5 billion.15 This figure represents 69 percent of the $57.5 billion of total Government procurement estimated by the Commission.16
The term “procurement programs” generally is associated with the acquisition of hardware such as aircraft, missiles, ships, combat vehicles, and other weapons as outlined in the United States budget. 17 While not always identified as such in appropriation statutes, construction, research and development, and requirements in support of agency operations and maintenance may also be accomplished through procurement. Except for salaries and other direct personnel expenditures, most of the funds allotted to an agency are expended through grants or some form of procurement.
Federal procurement of equipment, goods, and services in support of agency operations, including building and maintenance of equipment and facilities, is similar to that by State and local Governments, industry, and the general public. It includes utilities, transporta
$2.0 A-E, CONSTRUCTION, AND REAL PROPERTY
11 DOD Military Prime Contract Awards by Service Category and Federal Classification, Sept. 12, 1972.
13 Note 8, su pra, p. 9.
11 U.S. Office of Management and Budget, Special Analyses of the United States Government, Fiscal Year 1973, p. 102.
The acquisition systems used by executive agencies are varied and extensive. They encompass the determination of requirements, the techniques of procurement, and the logistics of supply and distribution. While elements of a particular system can be considered as separate and distinct, they are in fact mutually interactive and exist for the same ultimate purpose. The military concept that "logistics systems exist solely to provide responsive sup
TABLE 3. ESTIMATED GOVERNMENT EXPENDITURES FOR PROCUREMENT AND GRANTS
Total Estimated Government Procurement by Executive Agencies, Fiscal 1972
(Billions of dollars)
Atomic Energy Commission
2.62 National Aeronautics and Space Administration
2.48 General Services Administration
1.31 Veterans Administration
0.74 Department of Health, Education, and Welfare
0.72 Department of Transportation Department of the Interior
0.65 Department of Labor
0.38 Department of Housing and Urban Development
0.25 Tennessee Valley Authority
0.23 Department of State
0.20 Department of Commerce
0.17 Department of the Treasury
0.16 Other agencies Other expenditures which should be classified as procurement Executive printing by GPO •
0.18 Blind-made products
0.02 Government bills of lading
1.05 Government transportation requests a
0.38 Commercial utilities and communications
1.50 Rents paid by GSA •
0.51 Total estimated Government procurement'
* U.S. Department of Defense, Office of the Secretary of Defense, Military Prime Contract Awards and Subcontract Payments and Commitments, July 1971-June 1972; and Commission Studies Program.
U.S. General Services Administration, Office of Finance, Procurement by Civilian Executive Agencies, Period July 1, 1971-June 30, 1972; and Commission Studies Program.
Estimated by the Commission, & Information furnished by GAO and Commission Studies Program. e Information furnished by GSA and Commission Studies Program. ! Does not include salaries of personnel engaged in procurement activities.
Federal Aid Expenditures for Grants and Shared Revenues a
Fiscal 1971 (actual)
(Billions of dollars)
Fiscal 1973 (est.)
* U.S. Office of Management and Budget, Special Analyses of the United States Government, Fiscal Year 1979, table P-9, Federal Aid to State and Local Governments, p. 254.
Source: Part A, Appendix D.
port to the operating forces” 18 applies equally to all support systems.
The procurement and distribution systems, as applied at all levels of support, are outlined in figure 2. These systems can best be described in terms of the organizational level at which they operate.
Virtually every Government activity includes a unit that receives requisitions for supplies which it either fills from station stocks or relays to a central depot or local purchasing office. Station-level procurement offices may be independent of the supply unit or be a specialized function of the supply activity. The procedures
18 DOD Logistics Systems Policy Objectives, Defense Industry Bulletin, spring 1971, p. 32.
Procurement authority is delegated to an agency by authorization and appropriation statutes. The head of an agency has latitude in determining the levels of support needed to accomplish the agency's mission, and he is normally empowered to redelegate his procurement authority.
Each agency determines the type of goods that will be procured on an agencywide basis. These products are then either stored, stocked, and issued through an agency depot or station, or contracts are made for direct delivery from manufacturers or wholesalers to station activities. Some contracts provide for station supply personnel to schedule deliveries directly from contractors or suppliers.
Examples of agency central support activities:
followed by the users to communicate their requirements to the supply units vary by agency, commodity, and source. For items in high demand and designated by Federal Stock Numbers (FSN), an automated ordering procedure provides the user swift, economical, and responsive support from agency depots. Items of supply that cannot be effectively procured, stored, and issued by an agency or interagency system are procured by the station.
There are many variations among agencies, and in some cases within agencies, concerning the organization, authority, and procedures used by a station-level activity. At small stations, procurement and supply may be a parttime function of an administrative officer. At large stations, procurement is performed as a special function. Procurement efforts can be di
• The Army Materiel Command operates seven commodity support commands and one functional support command at 77 installations, including five procurement activities and a depot complex. • The Naval Material Command operates six functional system support commands, including the Navy Supply Systems Command. The Navy supply system has four national inventory control managers, a depot complex, and 16 area purchasing offices. • The Air Force Logistics Command operates five Air Materiel Areas that provide procurement and supply support for specific systems and items. • The Veterans Administration operates one of the largest civilian agency-level support systems. This includes a Marketing Center providing central procurement support and a system of three depots for stock support.
Items stored, stocked, and issued through a central depot system are cataloged and given a Federal Stock Number. The cataloging and numbering system is managed by the Defense Logistics Support Center (DLSC) at Battle