this reason. However, information concerning the composition of the small purchases is not sufficient to identify all the categories of commodities and services which are affected to an important degree.

For security reasons, various contracts have been reported without a Federal Supply Classification or with a classification other than the one describing the item purchased. Therefore, data for a number of the Federal Supply Classes shown are incomplete."1 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 and was $300 million higher than all purchases reported by the ten civilian executive departments combined.11

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." 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

11 DOD Military Prime Contract Awards by Service Category and Federal Classification, Sept. 12, 1972.

12 Note 8, supra, p. 9.

13 Note 3, supra.

+ Calculated by the Commission.

15 See Appendix A.

16 See Part A, Appendix D.

1 U.S. Office of Management and Budget, Special Analyses of the United States Government, Fiscal Year 1973, p. 102.

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.

18 DOD Logistics Systems Policy Objectives, Defense Industry Bulletin, spring 1971, p. 32.

Station-level Support

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

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

Agency-level Support

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 activ

ities:

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

Establishment of the General Services Administration, as a result of a recommendation of the First Hoover Commission, 20 led to the development of the National Supply System. The system now consists of the coordinated logistics activity of the Federal Supply Service (FSS) of GSA, the Defense Supply Agency (DSA), and other Federal agencies. An understanding of the missions and operations of these agencies is necessary for a proper evaluation of information presented in later chapters.

GSA was created by the Federal Property and Administrative Services Act of 1949 21 to provide the Government with an economical and efficient system for the management of its property and records, including construction and operation of buildings, procurement and distribution of supplies, use and disposal of property, and management of strategic materials, traffic, transportation, and communications. Management of the Government-wide automatic data processing (ADP) resources program was added to GSA's responsibilities in 1965. The statute also authorized the GSA Administrator to assign procurement responsibilities to other agencies; this has been done on a case-by-case basis. GSA provides field support through ten regional offices, corresponding to the ten Federal regions.22 Each region is responsible for procurement support and depot supply functions.

19 U.S. Congress, House, Committee on Government Operations, Military Supply Systems, Cataloging, Standardization and Provisioning of Spare Parts, Forty-first Report, 91st Cong., 2d sess., 1970.

20 U.S. Commission on Organization of the Executive Branch of the Government (1947-1949), Office of General Services, A Report to Congress, Feb. 1949, pp. 2-3.

21 40 U.S.C. 751 (1970).

U.S. General Services Administration, United States Government Organization Manual, 1972-1973, July 1972, p. 450.

The Federal Supply Service procures personal property and nonpersonal services for Federal agencies, stores and distributes supplies, and gives advice on and regulates the supply functions performed by the agencies. It promulgates Federal Specifications and Standards and is responsible for developing and promulgating the Federal Procurement Regulations (FPR) and that portion of the Federal Property Management Regulations (FPMR) dealing with transportation and procurement. It also administers the Government-wide transportation management, motor equipment, and public utilities programs.

FSS uses several basic methods of providing procurement and supply support to Federal agencies:

• Storage depots are located in each of the ten FSS regions. Depot items are purchased and stocked for delivery to fill requisitions from Federal using activities, cost-reimbursable contractors, or other authorized activities. Some regions have service or national commodity assignments for management and distribution, and some services and commodities are procured and distributed from more than one depot. Some regions support DOD and other Federal activities located outside the United States. In addition to regional depots, FSS has self-service stores in various cities of the United States that issue administrative supplies through a charge account system. The supplies and services provided by the depots are mandatory for use by all Federal agencies except for emergency requirements of small dollar value or where the activities' needs cannot be satisfied by the FSS stocked item. In the latter case, waivers must be obtained from GSA.

• GSA periodically publishes a catalog which lists the items stocked at various depots and the information required for ordering. Approximately 8.5 percent of item cost is included in the GSA catalog price to cover direct costs of transportation, in-transit damage, or loss. Requisitions for large quantities of stores stock items can be delivered from the commercial source at catalog price less surcharge. Additional charges for export packing are added for overseas shipments. Depot operating costs, as well as purchasing

and management overhead, are separately paid out of GSA's direct appropriations and not charged to the using agency.23 • Federal Supply Schedules are contractual arrangements negotiated for agency use in ordering directly from contractors by delivery order with the ordering agency paying the contractor predetermined prices. Some items are available from more than one contractor, especially brand-name equipment and supplies. Items covered under Federal Supply Schedules are those that are determined to be uneconomical for depot stock and distribution. No surcharge is paid to GSA by the ordering activity. Most of these schedules are mandatory for use by Federal agencies.

• Responsibility for interagency support can be delegated by FSS to other agencies. For example, the Veterans Administration, as the largest civilian agency user of nonperishable subsistence, drugs, and x-ray films, has been assigned support responsibility for all civilian agencies. The service is provided by either Federal Supply Schedules negotiated by the VA or from the VA depot and field station system.

The Defense Supply Agency is an agency of DOD. DSA's mission is to provide effective logistics support at the lowest feasible cost to the operating forces of all military departments and to assigned Federal civilian agencies.

DSA provides interagency support in three

areas:

• Supply Support. Procures, stores, and distributes items commonly used by the armed forces and by the Federal civilian agencies. These range from clothing to construction equipment. Mandatory use is required except for emergency needs and for requirements under $10.

• Logistics Services. Administers various programs for DOD. These include maintenance of the Federal Catalog System, Materiel Utilization Program, DOD Coordinated Procurement Program, Research and Technology Information System, Surplus Property Disposal Program, Industrial Plant Equipment Reutilization Program, DOD Industrial Security Program, and the DOD

23 Information was supplied by GSA at a briefing on May 26, 1971, to members of Study Group 13A.

wide program for redistribution and reutilization of excess Government-owned and leased automatica processing equipment (ADPE).

• Contract Administration Services. Provides services in support of the military departments and other DOD components, NASA, other designated Federal and State agencies, and friendly foreign governments. These services include contract management, pre-award surveys, quality assurance, payments to contractors, support of small business and labor surplus area programs, transportation and packaging assistance, and surveillance of contractor progress to assure timely delivery of materiel. Agencies other than DOD are charged for services provided.

The overall DSA distribution system is shown in figure 3.

Under the Economy Act of 1932, interagency procurement support can also be obtained from or through agencies other than GSA and DSA. This act authorizes agencies to order supplies or services from the Federal agencies that can fill the requesting agency's requirements. The act further stipulates that payment be made at actual cost or agreed sum and that the supplies or services be obtained from private sources when such sources are convenient or more economical.

Although interagency procurement under the Economy Act of 1932 is overshadowed by the GSA and DSA programs, it provides opportunities for economy and efficiency at all organizational levels. The extent of formality in interagency agreements varies with the complexity of the requirements. Compensation traditionally has been by negotiated agreement between the supporting and receiving agencies. The following interagency programs indicate the type of procurement support that is currently available throughout the Government.

DOD COORDINATED PROCUREMENT PROGRAMS

• Agency Purchase Agreements. 24 Agencies

24 U.S. Department of Defense, DOD Instruction 4115.1, DOD Coordinated Procurement Program-Purchase Assignments, Oct. 14,

1968.