Public-Private Mix: Effectiveness and Performance of GSA's In-House and
Contracted Services (Letter Report, 09/29/95, GAO/GGD-95-204).
GAO reviewed the cost-effectiveness and performance of the General
Services Administration's (GSA) real property management services, such
as building maintenance and custodial services. The cost comparison,
performance evaluation, and historical tracking data GAO reviewed for 54
activities indicated that GSA's decisions to retain activities in-house
or contract them out were sound. Post-decision analyses and evaluations
by GSA showed that the agency generally obtained services at a
reasonable cost and at an acceptable level of performance and that it
made relatively few reversals from its original decisions. GAO found no
evidence of performance problems in the case files for a majority of the
54 sample activities. For 11 activities, however, GAO found serious
problems, such as defaults or terminations for unsatisfactory
performance. All but one of these activities involved maintenance
services. In general, the files provided evidence of GSA's efforts to
oversee the activities and take appropriate corrective action, including
deductions from payments to contractors, when necessary. Information on
private sectors practices that GAO reviewed and that GSA gathered to
support its reinvention efforts indicated that real estate organizations
commonly used approaches such as performance measurement and
benchmarking to manage and evaluate their operations and activities and
decide whether to contract out. The approaches offer an opportunity for
GSA to improve the oversight and evaluation of its services. Although
GSA has begun to implement some performance measures, such as customer
satisfaction surveys, the specific performance measures that it will use
after its reorganization is completed are still being developed.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: GGD-95-204
TITLE: Public-Private Mix: Effectiveness and Performance of GSA's
In-House and Contracted Services
DATE: 09/29/95
SUBJECT: Maintenance services contracts
Facility management
Cost effectiveness analysis
Cost control
Contractor performance
Federal procurement policies
Procurement evaluation
Real property
Competitive procurement
IDENTIFIER: National Performance Review
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Cover
================================================================ COVER
Report to Congressional Requesters
September 1995
PUBLIC-PRIVATE MIX - EFFECTIVENESS
AND PERFORMANCE OF GSA'S IN-HOUSE
AND CONTRACTED SERVICES
GAO/GGD-95-204
Public-Private Mix
(246078)
Abbreviations
=============================================================== ABBREV
BOMA - Building Owners and Managers Association
CFM - Commercial Facility Management
FTE - full-time equivalent
GSA - General Services Administration
MEO - most efficient organization
NPR - National Performance Review
OMB - Office of Management and Budget
PBS - Public Buildings Service
Letter
=============================================================== LETTER
B-260097
September 29, 1995
The Honorable Wayne T. Gilchrest
Chairman
The Honorable Bob Wise
Ranking Minority Member
Subcommittee on Public Buildings
and Economic Development
Committee on Transportation and Infrastructure
House of Representatives
The Honorable James M. Inhofe
United States Senate
The Honorable John J. Duncan, Jr.
The Honorable James A. Traficant, Jr.
House of Representatives
This report was prepared in response to your request that we review
(1) the cost-effectiveness and performance of the General Services
Administration's (GSA) real property management services, such as
building maintenance and custodial services, to determine whether
GSA's decisions to retain the services in-house or contract them out
were sound and (2) evaluation approaches used by private sector real
property management organizations to determine whether any practices
could improve oversight and evaluation of the effectiveness of GSA
services.
Much of our past work on contracting out has been based on requests
to review individual, usually controversial, studies and decisions
and focused on procedural compliance issues rather than general
results. Because much of this work found procedural problems,
information gaps, and administrative shortcomings, it contributed to
congressional skepticism about the effectiveness of contracting out
as a whole.\1 This report presents findings from a retrospective
review of GSA's contracting decisions in real property services since
1982 that provided an opportunity to address the broader performance
question of the effectiveness of contracting-out programs. It is the
second and final report on the results of our retrospective review.
The first report provided general information on the extent to which
real property management services were contracted out or retained by
GSA.\2
--------------------
\1 Government Contractors: An Overview of the Federal
Contracting-Out Program (GAO/T-GGD-95-131, Mar. 29, 1995); Achieving
Cost Efficiencies in Commercial Activities (GAO/T-GGD-90-35, Apr.
25, 1990); and A-76 Program Issues(GAO/T-GGD-90-12, Dec. 5, 1989).
\2 Public-Private Mix: Extent of Contracting Out for Real Property
Management Services in GSA (GAO/GGD-94-126BR, May 16, 1994).
BACKGROUND
------------------------------------------------------------ Letter :1
GSA is the central management agency responsible for policy and
oversight of administrative services (except personnel) and is a
central provider of real property services, such as buildings
acquisition and management, for federal agencies. GSA and its Public
Buildings Service (PBS) have been undergoing a lengthy transformation
in size and organization. Beginning in the 1980s, significant
downsizing occurred in GSA's workforce. Total employment in GSA
declined from about 35,800 full-time equivalent (FTE) positions in
1980 to about 16,900 FTEs by 1995. While this general downsizing was
occurring, PBS also began to systematically review its real property
management activities, using the guidelines in the Office of
Management and Budget's (OMB) Circular A-76,\3 to determine whether
such activities should be provided in-house by government personnel
or contracted out.\4
The National Performance Review (NPR) recommended a competitive
environment as the catalyst to provide the greatest impetus for GSA
to streamline its real property activities. In the fall of 1993, the
GSA Commissioners of PBS and the Federal Property Resources Service
initiated a joint Real Property Reinvention Task Force. The task
force analyzed the GSA real property organization, systems, and
processes and recommended a new organizational structure for real
property management to implement the NPR recommendations. This
restructuring was implemented in the second quarter of fiscal year
1995. GSA is now engaged in further reinvention efforts under Phase
II of NPR and additional downsizing.\5
--------------------
\3 OMB Circular A-76 establishes the federal policy on commercial
services. The circular specifies cost-comparison procedures for
determining when it is more economical to contract out for services
currently done by federal employees.
\4 Throughout this report, we use the term "services" to refer to
such services as custodial or cleaning services in general. We use
the term "activities" to refer to services at specific locations, for
example, mechanical operation and maintenance service for the Federal
Building and Courthouse in St. Paul, Minnesota.
\5 For further information on GSA's reorganization efforts, see
Public Buildings: GSA's Reinvention Initiatives (GAO/T-GGD-95-100,
Mar. 2, 1995).
RESULTS IN BRIEF
------------------------------------------------------------ Letter :2
The cost comparison, performance evaluation, and historical tracking
data we reviewed for 54 sample activities indicated that GSA's
decisions to retain individual activities in-house or contract them
out were sound. Post-decision analyses and evaluations by GSA
generally showed that GSA was obtaining services at a reasonable cost
and at an acceptable level of performance, and GSA made relatively
few reversals from its original decisions. On average, the winning
contractor bid in contract actions after the original decision (e.g.,
renewals, resolicitations) was 18 percent below GSA's estimated cost
for government performance of the same services. These actions
occurred as many as 12 years after and on average 5 and one-half
years after GSA's original decisions. Reported actual costs for six
retained activities were lower than the original estimates for
in-house performance. Only one retained activity reported actual
costs of more than 10 percent above the estimated costs for in-house
performance, a threshold the agency established for taking corrective
action. While the agency's decisions appeared to be sound, we could
not, based on the available evidence, conclusively demonstrate that
the selected alternatives generated the level of savings estimated at
the time of the original decisions.
We found no evidence of performance problems in the case files for a
majority (29) of the 54 sample activities. For 14 of the sample
activities, we only found evidence of relatively minor problems, such
as incomplete tasks or paperwork. For 11 sample activities, we found
evidence of serious problems, such as defaults or terminations for
unsatisfactory performance. All but one of the activities with
evidence of serious performance problems involved maintenance
services. In general, the files provided evidence of GSA's efforts
to oversee the sample activities and take appropriate corrective
action, including deductions from payments to contractors, when
necessary. If problems continued or were more serious, the agency
resolicited or restudied the activity. However, 39 of the sample
activities (about 72 percent) continued to be delivered by the sector
originally selected by the agency. Four other sample activities were
abolished for economic reasons.
Information on private sector practices that we reviewed and that GSA
gathered to support its reinvention efforts indicated that real
estate organizations commonly used approaches such as performance
measurement and benchmarking to manage and evaluate their operations
and activities and decide whether to contract out. These approaches
offer an opportunity for GSA to improve the oversight and evaluation
of its services. In general, the private sector organizations
focused the evaluation of their operations on a "vital few" key
performance measures, such as cost and customer satisfaction, in
contrast to GSA's typical reliance on process checks and detailed
inspections. GSA has begun to implement selected performance
measures, such as customer satisfaction surveys. However, the
specific performance measures GSA will use after its reorganization
is completed are still being developed.
OBJECTIVES, SCOPE, AND
METHODOLOGY
------------------------------------------------------------ Letter :3
The objectives of this assignment were to review (1) the
cost-effectiveness and performance of both in-house and contracted
real property management services in GSA to determine whether its
contracting decisions were sound and (2) evaluation approaches used
by private sector real property management organizations to determine
whether any practices could improve the oversight and evaluation of
the effectiveness of GSA commercial services. For the purposes of
this report, real property management services were defined as those
services that GSA provides to federal agencies relating to housing
for staff and facilities for the storage of equipment and supplies.
Because most GSA real property services are the responsibility of
PBS, our analyses focused on PBS activities.
To address the first objective and support analysis for the second
objective, we relied primarily on our examination of a random
stratified sample of 54 activities in PBS that were originally
reviewed as part of its A-76 program; 21 of the activities were
originally retained in-house, and 33 were not. No one clear, common
measure was available to evaluate the cost-effectiveness and
performance of the sample activities, so we used three types of
evidence from the sample case files to assess whether the agency's
original decisions to retain or contract activities were sound. The
evidence was (1) subsequent cost comparisons, analyses, and
modifications that GSA did to indicate whether it was obtaining
services at a reasonable cost; (2) agency evaluations and related
documents to indicate whether GSA was obtaining services at an
acceptable level of performance; and (3) changes in the status of the
activities tracked over time to indicate whether GSA reversed its
original decisions or selected other alternatives because of cost,
performance, or other factors. Because our sampling strategy
precluded the selection of contracted activities from some regions of
the country, the results of our assessment, although representative
of a significant portion of PBS' A-76 inventory, are not
generalizable to all activities in PBS' A-76 program.
To address the second objective, we examined methods and practices
used by private sector property management organizations to measure
service performance and determine whether activities should be
retained in-house or contracted out. We reviewed industry studies
and met with officials from private sector real estate organizations.
In addition, we reviewed GSA plans and proposals developed in
response to NPR, the Government Performance and Results Act (P.L.
103-62 (1993)), and resulting reorganization efforts.
A more detailed description of the methodology we used and specific
data limitations are provided in appendix I. We did our work from
September 1994 to July 1995 in accordance with generally accepted
government auditing standards. We also incorporated information
gathered in the preparation of our previous report on contracting out
real property management services at GSA, where appropriate.\6 We
asked the Administrator of GSA for comments on a draft of this
report. The comments are summarized and analyzed on page 16 and
presented in appendix V.
--------------------
\6 Public-Private Mix: Extent of Contracting Out for Real Property
Management Services in GSA (GAO/GGD-94-126BR, May 16, 1994).
ORIGINAL DECISIONS WERE SOUND
------------------------------------------------------------ Letter :4
Our review of the sample activities indicated that GSA's original
decisions to retain sample activities in-house or contract them out
were sound. GSA's subsequent evaluations and analyses of government
cost estimates and contractor bids for those activities confirmed
that the sector originally selected, in-house or contract, provided
services at a reasonable cost to the government. Case file documents
also furnished evidence that performance was generally satisfactory.
Finally, the sector GSA originally selected for the activities,
whether in-house or contract, generally did not change over time.
GSA's cost analyses and evaluations done after the original decision
to retain or contract out a sample activity provided a useful measure
of whether the costs of the activities remained reasonable.\7 The
clearest measure of cost-effectiveness was found when GSA resolicited
or reviewed an existing contract for renewal. (See app. IV for
further information on the approaches used by GSA to determine
reasonable costs.) While we could not recreate complete histories for
the sample activities that were contracted out, we were able to
examine cost data from 34 separate contract solicitations or
renewals. For those sample activities originally retained in-house,
we reviewed GSA evaluations that compared the government's cost
estimates at the time GSA decided to retain the activity with the
actual costs experienced by in-house performance. At the time of our
review, GSA had completed evaluations for 14 of the in-house sample
activities.
Information in the case files showed that contractor bids remained
lower than the independent government cost estimates for in-house
performance in all but three sample activities that were contracted
out. However, the three activities included situations in which
price was not the determining factor in the agency's decision. One
of the sample maintenance activities was brought back in-house when
GSA personnel won a resolicitation that combined three separate
federal activities into a single activity. The low contractor bid in
that case was 6.4 percent above the government's bid. Overall, the
low contractor bids ranged from 12 percent above to 51 percent below
the government cost estimate and averaged 18 percent below the
government cost estimates. These actions occurred as many as 12
years after and on average 5 and one-half years after GSA's original
decisions. Figure 1 presents cost data from the subsequent contract
actions.
Figure 1: Percentage
Differences Between Contractor
Bids and Government In-House
Estimates in Subsequent
Contract Actions for Sample
Activities
(See figure in printed
edition.)
Note: Results are displayed for individual contract solicitations or
renewals for contracted sample activities in descending order of the
percentage difference between the low responsive contractor bid and
the government's estimated cost for in-house performance. The
government estimate was used as the base for comparison. The
difference for action five equaled -0.05 percent.
Source: Data from GSA contract files.
An internal evaluation process for in-house activities, known as the
post-MEO review, was developed by GSA to determine whether those
activities retained in-house continued to perform within the
government cost estimates and performance requirements established in
the A-76 competition.\8 The post-MEO reviews did not consider what
current contractor bids would be for the same activity. According to
those reviews, only one sample activity reported actual costs that
were more than 10 percent above the estimated costs for in-house
performance, a threshold GSA has established for taking corrective
action. Overall, the post-MEO reviews showed actual costs to range
from 13.5 percent below to more than 25 percent above the estimated
costs. The reported actual costs for six sample activities were
below the original estimates for in-house performance. The sample
activity with a difference of more than 25 percent between actual and
estimated costs failed the post-MEO review and was converted to
contract. Figure 2 presents cost data from post-MEO reviews of
sample activities retained in-house.
Figure 2: Percentage
Differences Between
Government's Actual and
Estimated Costs for Subsequent
Reviews of In-House Sample
Activities
(See figure in printed
edition.)
Note: Results are displayed for individual post-MEO reviews of
in-house sample activities, in descending order of the percentage
difference between the actual cost and the estimated cost of in-house
performance. The estimated cost was used as the base for comparison.
The difference for review eight equaled 0.02 percent.
Source: Data from GSA post-MEO review files.
We found that detailed documentation on performance was somewhat
limited in the case files for the sample activities, especially for
the in-house activities, which tended to be evaluated as part of
larger organizational components. However, the available information
from GSA inspections, performance reviews, and evaluations, including
post-MEO reviews, indicated that GSA was obtaining a satisfactory
level of performance for most of the sample activities. We found no
evidence of performance problems in the case files for a majority
(29) of the sample activities. For 14 of the 54 sample activities,
we found evidence of only relatively minor problems. These problems
usually involved tasks or paperwork that were incomplete or not up to
specified performance standards. For those activities that were
contracted out, these problems were not serious enough to preclude
GSA from exercising contract options or extensions.
There was evidence of more serious problems for 11 of the sample
activities. These activities included three contractor defaults,
five terminations for unsatisfactory performance (one terminated
contract involved two sample activities), and two occasions in which
no contractor was willing to take on the sample activity. Five of
these cases were converted from contract to in-house or vice versa;
new contractors were found for four others, and the remaining
activity was abolished when GSA disposed of the building.
Performance problems were found more often in maintenance activities
(both contract and in-house) or Commercial Facility Management (CFM)
contracts,\9 including all examples of terminations or defaults.
Agency officials in the GSA regional and field offices also said that
they had experienced more frequent and serious performance problems
with contracted maintenance activities than with other types of
activities.
In general, the case files for the sample activities we reviewed
provided evidence that GSA made efforts to oversee those activities
and take appropriate corrective action when necessary. Oversight
actions ranged from official correspondence or records of meetings in
which GSA identified problem areas and requested corrections to GSA's
taking deductions from monthly payments. If problems continued or
were more serious, GSA terminated or resolicited the activity, even
reversing its original decision.
Because complete cost and performance data were not available for the
entire history of each sample activity, we also compared the original
status of each sample activity to its overall status at the time of
our review. This comparison provided a proxy measure of whether
cost, performance, or other factors resulted in GSA changing its
original decision. Only 8 of the 54 sample activities (about 15
percent) had changed from contract to in-house, or vice versa, by the
time of our review. Thirty-nine of the sample activities (about 72
percent) continued to be delivered by the sector originally selected
by the agency. Of the remaining seven activities, four were
abolished for such economic reasons as disposal of the federal
building originally covered by the activity; two were pending restudy
because of changes in scope; and one had been delegated, in large
part, to other federal agencies. All of the 10 activities that
changed or were scheduled for restudy involved maintenance services.
Table 1 presents summary data on the status of the sample activities
at the time of our review. (Tables III.1 and III.2 in app. III
provide more detailed information on each of the individual sample
activities.)
Table 1
Status of Sample Activities at Time of
GAO Review
Sample activities Number
-------------------------------------------------------------- ------
Originally retained in-house 21
Status as of GAO review
Performed in-house 15
Converted to contract 3
Scheduled to be restudied because of changes in scope 2
Responsibility partially delegated to other federal agencies 1
Not originally retained in-house 33
Status as of GAO review
Contracted out 24
Returned in-house 5
Abolished for economic reasons 4
----------------------------------------------------------------------
Note: The time of GAO review varied for individual sample activities
because of the travel required to review some of GSA's files for
these activities.
Source: GAO analysis of GSA data on sample activities.
--------------------
\7 For the purposes of this report, we did not revisit cost data from
GSA's original decisions. Rather, we focused on the costs of sample
activities after GSA retained them in-house or contracted them out.
\8 MEO refers to most efficient organization, which is the
government's estimate, developed during the A-76 review process, of
the most efficient way to structure an in-house activity. Appendix
II contains a more detailed description of the A-76 and post-MEO
review processes.
\9 CFM contracts are used to bundle several types of services for a
specific facility or facilities into one service contract. For
example, a CFM contract for federal facilities in Nashville,
Tennessee, covered facility management, operations and maintenance,
elevator maintenance, maintenance repairs, architectural and
structural maintenance, janitorial services, utilities and fuels, and
additional special services.
NO CLEAR ASSESSMENT OF WHETHER
GSA REALIZED EXPECTED SAVINGS
------------------------------------------------------------ Letter :5
While GSA's original decisions appeared to be sound, we could not
conclusively demonstrate that they generated the estimated level of
savings or improved the cost-effectiveness of GSA's services. Our
attempt to systematically assess GSA's commercial services was
frustrated by two main factors. First, there was no common basis for
measuring costs and outcomes. Second, we found that post-decision
comparisons would be difficult because most activities did not remain
static over time.
In-house and contract activities were not subject to the same
evaluation. Without a common basis for measurement, we were not able
to confirm whether cost-effectiveness had improved since the original
decisions, nor were we able to compare the actual costs of these
activities with what could have been the cost if another decision had
been made. Some indirect evidence was available in looking
case-by-case at activities after a decision was made, but we could
not verify the agencywide impact.
Even if consistent data were available for evaluation purposes, we
found that post-decision comparisons would still be difficult because
most activities did not remain static over time. Our review showed
that analysis at the activity level was very difficult given changes
in scope. The evidence was incomplete and also more indirect for
in-house activities than it was for contracted ones. However, in 30
of 42 cases for which information was available, we found some
changes in scope--i.e., work that was done as part of an activity
that was not part of the activity when GSA originally reviewed it.
Changes in scope ranged from minor adjustments, such as incorporating
trash removal into the custodial contract for an activity in
Elizabeth City, North Carolina, to drastically restructuring the
original activity. For example, one sample case was originally a
small activity involving one full-time equivalent position to provide
maintenance services for the federal building in Kingston, Tennessee.
This sample activity was subsequently folded into a broader CFM
contract. The CFM contract covered facilities management, utilities,
operations and mechanical maintenance, elevator maintenance,
maintenance repair, architectural and structural, janitorial, and
protection services for federal buildings in Kingston and five other
cities (Knoxville, Athens, Wartburg, Chattanooga, and Jacksboro). We
also found 13 modifications to the CFM contract that changed the
scope of services for that particular contract. The Kingston
activity was not an isolated example; at least 13 other sample
activities became part of broader multisite contracts or in-house
activities.
PRIVATE SECTOR APPROACHES
EMPHASIZED USE OF PERFORMANCE
MEASURES AND BENCHMARKING
------------------------------------------------------------ Letter :6
To support its reinvention efforts, GSA collected information on
private sector practices. This information indicated that real
estate organizations commonly used performance measurement to
evaluate their activities and to decide whether to contract out. We
obtained similar information in our review of industry studies and
through feedback from directors of several Fortune 500 organizations
with large investments in real estate during roundtable discussions
on how corporate America manages its real estate strategies and
tasks. Specifically, the organizations identified the value of such
practices as developing and using performance measures to evaluate
the effectiveness of programs and service delivery and benchmarking
an organization's own performance against that of others.
The evidence we reviewed suggests that the use of performance
measures was the most widespread of these practices. During our
roundtable discussion, it was also the practice most often cited by
the private sector participants as a key element of successful
management. We obtained evidence to a lesser degree on the use of
benchmarking, reengineering, and such techniques as activity-based
costing.\10 As we have found in our related management work, a common
element in each of these practices is that they tend to focus on the
outcomes of their programs in addition to the performances of their
core operations and activities.
Across the industry, private sector organizations employ a wide
variety of specific performance measures. Among the most common
general categories are cost, profit, and customer feedback. GSA's
Real Property Reinvention Task Force found that unlike GSA's reliance
on process checks and detailed inspection, private sector
organizations relied on a few key performance measures.\11 In its
report, the task force noted that industry benchmark data, such as
the Building Owners and Managers Association (BOMA) Experience
Exchange Report, are commonly used as a reference.\12 The feedback
from our roundtable participants was consistent with the task force's
findings. The participants also pointed out the importance of
performance measures for customer satisfaction, costs of operations,
and profitability.
Private sector officials stressed the need for an organization to
measure performance in order to effectively manage real estate
operations. Among the advantages the officials cited for using such
data were the ability to (1) analyze changes in performance over time
and (2) identify opportunities for improvement. Benchmarking and
performance measures also assisted organizations in deciding which
services to retain in-house or contract out. For example, several
private sector officials said they benchmarked their performance
against those of their peers. According to these officials, if the
data indicated that the officials' organizations were not
demonstrably best in class, adding value to the parent organization,
or providing services at least as well as others could, they would
turn to outside sources. Performance measures and analysis also
helped organizations focus on what services and mix of skills they
needed to keep inside the unit (i.e., their "core" business) and what
remaining needs should be filled through contracts, alliances, or
other relationships with outside providers.
While most of the private sector organizations we met with or
reviewed information on used benchmarking and performance measures to
some extent, we found a range of opinions on what type of data they
used in their evaluations. Some organizations were concerned with
finding comparable data. These organizations were likely to rely on
internal comparisons of their own data for benchmarking purposes
rather than making comparisons to data from outside sources. Other
organizations were concerned with measuring their performance against
operations considered best in class. Those organizations would seek
out data from peers in the industry and even organizations that might
be very different from their own in terms of size or even the field
of business, because the other organizations did some things very
well. The organizations taking the broader approach appeared to be
less concerned with straightforward cost comparisons than with
identifying best practices and setting higher standards for their own
performance. In the middle ground, organizations looked to industry
sources, such as BOMA, or to special studies for local or regional
markets.
--------------------
\10 Activity-based costing is an accounting technique that identifies
all costs associated with individual activities constituting a value
stream or process regardless of its place within the organization.
\11 We reported similar findings in recent testimony on measuring
performance in the federal government. See Managing for Results:
Critical Actions for Measuring Performance (GAO/T-GGD/AIMD-95-187,
June 20, 1995).
\12 The BOMA report cites average costs to clean, operate, and rent
space by geographic location and type of space.
GSA PROPOSALS REFLECT CLOSER
ALIGNMENT WITH PRIVATE SECTOR
PRACTICES
------------------------------------------------------------ Letter :7
GSA's reorganization of PBS along private sector business lines
presents GSA with an opportunity to apply private sector performance
measures and benchmarking practices. GSA has already begun to
implement selected performance measures, for example, through
customer satisfaction surveys.\13 The reorganization was designed, in
part, to help PBS measure its performance against commercial
practices and identify opportunities for improvement. Such
opportunities may not only include improving areas in which the
performance of PBS' business lines falls short of industry benchmarks
but also replicating and reinforcing areas in which PBS' performance
and practices can be demonstrated to exceed industry benchmarks.
Recent GSA proposals, generated as part of GSA's efforts to
reorganize PBS, would begin to implement a number of the common
private sector practices. For example, the Real Property Reinvention
Task Force recommended the following general types of performance
measures: (1) customer satisfaction, as determined through surveys,
personal contacts, and such indicators as complaint trends and
customer retention statistics; (2) competitiveness, as determined by
cost-recovery pricing versus commercial pricing; (3)
cost-effectiveness, as measured through benchmarking against other
providers; and (4) timeliness, as measured through the percentage of
reimbursable work authorizations completed on schedule. Subsequent
business design documents proposed more specific versions of the
general categories of performance measures set forth in the task
force report.
The use of multiple performance measures reflects the general trend
found in the research on industry practices. On a more practical
level, our review of the sample activities also showed that no single
measure could account for all aspects of a service. For example,
while data on customer satisfaction and operating costs are among the
most common measures established by firms, such data are imperfect
measures of some service aspects, such as preventive maintenance of
the physical plant and equipment. GSA officials we interviewed
expressed similar concerns, particularly about finding suitable
measures for preventive maintenance.
Our work on federal, state, foreign, and private sector reform
efforts has shown that the experiences of leading organizations
suggest that the number of measures should be limited to a vital few
that provide the most needed information for accountability,
policymaking, and program management. The use of a few significant
performance measures provides a clearer basis for an organization to
assess accomplishments, facilitate decisionmaking, and focus on
accountability. Too many measures, including those that have little
value for stakeholders, can confuse and overwhelm users or make a
performance measurement system unmanageable.
For GSA to implement benchmarking within PBS business lines, it would
not be necessary to find perfectly compatible data. In fact, there
are examples, from corporate real estate and other industries, of
organizations that have benchmarked their performance by looking
outside their business line. Private sector real estate officials
pointed out that GSA could also focus first on developing measures
using data already available internally. At a minimum, such internal
benchmarks could show GSA's units how they have progressed since the
last measurement period. Both private sector and GSA officials
pointed out that cost benchmarks should take into account some
special circumstances, for example, whether a facility has 24-hour
operations (e.g., Customs' border stations or data processing
centers) or has additional security requirements (e.g., courts).
According to private sector real estate officials, some common
elements of private industry costs, such as taxes and insurance,
would also not be applicable to federal space. However, they said
that GSA would still be able to focus on the elements that are
applicable in the detailed industry data that are reported.
The existing post-MEO review structure could be a very valuable tool
when applied to analysis of GSA operations against broader cost
benchmarks or similar performance goals. The structure allows for
variation in individual cost components as long as the aggregate
results remain within accepted limits. This approach recognizes that
the performance within individual cost elements may go up and down
over time and, in fact, that some variation should be expected. The
most common feedback we received from regional and field office
officials in GSA was that such flexibility was needed in evaluating
and analyzing the performance of GSA operations.
--------------------
\13 In 1994, GSA's agencywide customer satisfaction survey was
developed in conjunction with the International Facilities Management
Association.
CONCLUSION
------------------------------------------------------------ Letter :8
On the basis of cost comparison, performance evaluation, and
historical tracking data we reviewed for our 54 sample activities, we
found GSA's decisions to retain individual activities in-house or
contract them out to be sound. The results of our review of the
sample activities and evaluation approaches used by private sector
organizations showed that there are management practices used by
private sector real property organizations that could improve
oversight and evaluation of GSA's services. Through its response to
NPR's recommendations, GSA is restructuring its real property
management organization and practices to become more comparable with
private sector practices. GSA's proposed wider use of performance
measurement and benchmarking practices used by other organizations
could improve overall evaluation of cost-effectiveness and
performance of services and provide the basis for decisions to
contract out. Among the benefits of such practices are that they
could (1) provide a common basis for evaluating cost and performance,
regardless of which sector was providing a service and (2) enable GSA
to measure the outcome of services, regardless of changes in the
scope of an individual activity. Because GSA is actively
investigating the applicability of such private sector practices as
performance measurement and benchmarking in its restructuring review,
we are making no recommendations in this report.
AGENCY COMMENTS AND OUR
ANALYSIS
------------------------------------------------------------ Letter :9
We provided copies of a draft of this report for review by officials
in the GSA offices and regions where we did our audit work. On
August 10, 1995, we met with GSA's A-76 Program Coordinator and the
Deputy Director, Portfolio Team, from the Office of Property
Management. They fully agreed with the facts presented and provided
additional information on GSA's reinvention efforts that we
incorporated in the background.
On August 29, 1995, the Administrator of GSA provided written
comments on this report (see app. V) in which GSA generally
concurred with the report's conclusions, including our opinion that
additional management practices used by private sector real property
organizations could improve oversight and evaluation of GSA's
services. The Administrator also said that he was pleased that we
found GSA's decisions in this area to be sound for all sample
activities reviewed. Contrary to the Administrator's apparent
interpretation, our conclusion regarding the soundness of GSA's
decisions represents a summary observation based on the sample
activities in their entirety rather than a specific endorsement of
all individual decisions. The Administrator also suggested some
specific changes to the report text. These suggested changes dealt
with additional information on GSA's reinvention efforts, which we
had already made to the text, having received the same information in
the August 10 meeting.
---------------------------------------------------------- Letter :9.1
We are sending copies of this report to the Administrator of GSA, the
Director of OMB, and appropriate congressional committees. Copies
will also be made available to other interested parties upon request.
If you have any questions concerning this report or would like
further information, please contact me on (202) 512-8676. The major
contributors to this report are listed in appendix VI.
L. Nye Stevens
Director, Federal Management
and Workforce Issues
OBJECTIVES, SCOPE, AND METHODOLOGY
=========================================================== Appendix I
The objectives of this assignment were to review (1) the
cost-effectiveness and performance of both in-house and contracted
real property management services in GSA to determine whether its
contracting decisions were sound and (2) evaluation approaches used
by private sector real property management organizations to determine
whether any practices could improve the oversight and evaluation of
the effectiveness of GSA's real property management services.\1 For
purposes of this report, real property management services were
defined as those services that GSA provides to federal agencies
relating to housing for staff and facilities for the storage of
equipment and supplies. Because most GSA real property services are
the responsibility of GSA's Public Building Services (PBS), our
analyses focused on PBS' activities.
To address the first objective and support analysis for the second
objective, we relied primarily on our examination of a random,
stratified sample of 54 commercial services activities in GSA's PBS.
The sample was based on the universe of real property management
activities in PBS that had been reviewed by GSA from fiscal years
1982 through 1992 as part of its A-76 program.\2 Although the A-76
program accounts for only a portion of all government contracting
activity, more complete data were available for PBS' A-76 actions
than for contracting actions in general, especially on cost
estimates. PBS' A-76 inventory also provided a set universe from
which we selected a sample of both retained and contracted service
activities.
We stratified the population of PBS A-76 actions by whether an
activity had been retained in-house or contracted out and by region
of the country. Because copies of GSA evaluations for in-house
activities are kept at GSA headquarters, we were able to select a
sample of retained activities from each of GSA's regional offices.
Because detailed records of GSA's contracted activities are retained
in the regional offices, we sampled contracted activities from 3 of
the 11 GSA regions at the time of our review for more efficient use
of resources. We traveled to GSA regional offices in Atlanta,
Chicago, and Fort Worth to review files for sample contract cases.
These three regions accounted for about 50 percent of all contracted
activities in the PBS' A-76 inventory from 1982 to 1992, and our
sample activities were representative of those regions. As a result
of its original review, GSA decided to retain 21 of the selected
sample activities in-house and not retain the remaining 33
activities.
There was no one clear measure that demonstrated whether GSA made
sound decisions, so we relied on three indicators: (1) cost
comparison data, (2) evaluations of performance, and (3) a tracking
of the status of sample activities over time. Cost data were used to
confirm that the alternatives selected by GSA provided services at a
reasonable cost to the government. To compile relevant data, we
reviewed PBS' acquisition plans, solicitations, performance work
statements and modifications, cost studies, price analysis reports,
price negotiation memos, post-MEO evaluation packages and independent
reviews, financial statements for direct operations, and supporting
worksheets. We used evaluations, inspection reports, and related
documentation, including correspondence, to indicate whether the
performance of the sample activities was generally satisfactory. We
tracked the status of the sample activities over time because we
could not recreate a complete history for each activity. The sample
reflected GSA's reviews from as far back as 1982, so many related
case documents had been retired from the active files and, in some
cases, destroyed. We therefore needed a broad proxy measure of
whether progress had been satisfactory after GSA's original decision.
We found that documentation on actual performance was somewhat
limited and uneven in the case files for the sample activities. In
general, more evidence was available for the activities that were
contracted out than for those retained in-house. In part, this may
reflect the difference between having individual contract files for
contracted activities, while GSA's evaluation and inspection reports
for in-house operations tended to focus on performance at levels of
service that were broader than individual activities, such as entire
GSA field offices. For both in-house and contracted activities, the
evidence on the performance of individual activities focused on the
documentation of specific problems. The case files, therefore,
tended to show the exceptions to satisfactory performance rather than
provide a guide to the general level of performance for individual
activities.
We supplemented our review of the case files with interviews of GSA
officials, including regional personnel in the contracts offices and
PBS managers responsible for the facilities covered by the sample
activities. We asked their observations on both in-house and
contracted services and did not limit the interviews to only the
sample activities. In addition, we obtained their perceptions on
what practices have or have not worked well in their experience.
They also provided insights on what information was most useful for
day-to-day management and oversight of in-house and contracted
activities as well as possible changes that could improve management
of real property services.
To address the second objective, we examined methods and practices
used by private sector property management organizations to measure
service performance and determine whether activities should be
retained in-house or contracted out. We reviewed industry studies
and met with officials from private sector real estate organizations.
The officials participated in roundtable discussions on how corporate
America manages its real estate strategies and tasks. The
discussions were jointly hosted by GAO and GSA, and participants
included representatives from private sector organizations; other
outside experts; and federal representatives from Congress, OMB, GSA,
and other agencies. In addition, we reviewed GSA plans and proposals
developed in response to the National Performance Review, the
Government Performance and Results Act (P.L. 103-62 (1993)), and
resulting reorganization efforts.
We did our work from September 1994 to July 1995 in accordance with
generally accepted government auditing standards. Where appropriate,
we also incorporated information on sample activities that was
gathered to prepare our previous report on the extent to which GSA
contracted out or retained in-house the real property management
activities in PBS.\3
--------------------
\1 Throughout this report, we use the term services to refer to such
services as custodial or cleaning services in general. We use the
term activities to refer to services at specific locations, for
example, mechanical operation and maintenance service for the Federal
Building and Courthouse in St. Paul, Minnesota.
\2 As part of its A-76 program, GSA systematically reviewed its real
property management activities using the guidelines provided by OMB
Circular A-76. The circular specifies cost comparison procedures for
determining when it is more economical to contract out for services
currently done by federal employees.
\3 Public-Private Mix: Extent of Contracting Out for Real Property
Management Services in GSA (GAO/GGD-94-126BR, May 16, 1994).
DESCRIPTION OF THE A-76 AND
POST-MEO REVIEW PROCESSES
========================================================== Appendix II
OMB Circular A-76 establishes the federal policy on commercial
services (referred to in the circular as commercial activities). The
circular and its cost comparison handbook specify procedures for
determining when it is more economical to contract out activities
currently done by federal employees. The A-76 guidance does not
always require a formal cost study for an agency to convert a
commercial activity to contract. OMB and federal agencies are to
maintain records on the reviews done using the A-76 guidance. GSA's
PBS established guidance and technical procedures for evaluating
activities that remained in-house after GSA performed an A-76 review.
The purpose of these evaluations was to certify that the activity was
meeting the cost and performance requirements established during the
A-76 review.
THE A-76 REVIEW PROCESS
-------------------------------------------------------- Appendix II:1
OMB characterizes Circular A-76 as a management reinvention process
designed to use competition to encourage change and improve the
quality and cost of commercial support services. The circular
defines a commercial activity as one that is operated by a federal
executive agency and provides a product or service that could be
obtained from a commercial source. Certain government activities are
not subject to contracting out under Circular A-76 because they are
so closely related to the public interest that they must be done by
federal employees. These activities are referred to as inherently
governmental.\1 In addition, Congress has exempted some activities
from the A-76 review process.
To implement the circular, an agency first evaluates its activities
to determine whether they are governmental or commercial and
completes an inventory of all the commercial activities. Along with
a description of the nature and location of each activity, the
inventory includes the number of full-time equivalent (FTE) positions
assigned to the activity at the start of an A-76 review. For
example, one activity in PBS' A-76 inventory that was selected for
our sample was mechanical maintenance services for the U.S. Post
Office/Court House and U.S. Customs House in Galveston, Texas, which
involved three FTE positions when the activity was studied in fiscal
year 1990. At GSA, one FTE is not necessarily comparable to one
employee; PBS' A-76 inventory includes authorized positions,
temporary employees, and borrowed labor in its FTE figures.
Some inventory activities may be converted to contract without
undergoing a formal cost study. The two primary circumstances under
which a direct conversion to contract may occur are (1) if the
activity should be contracted to a noncompetitive, preferential
procurement program source in accordance with applicable regulations
and (2) if the activity employs 10 or fewer FTEs. While a formal
cost study is not required, an agency may use available cost data to
help determine the reasonableness of proposed contract prices and
ensure that contracting out will result in a cost that is less than
the government's cost of operation.
Agencies are supposed to review the remaining activities in their
commercial inventories through a three-step process: (1) the
development of the agency's performance work statements, (2) the
completion of a management study of in-house operations, and (3) the
submission of formal bids for cost comparison. The purpose of the
performance work statement is to allow government employees and the
private sector to competitively bid on the same scope of work. It
requires agencies to define their workload requirements in terms of
measurable performance standards. The purpose of the management
study is to determine the most efficient way to provide the
requirements using a federal workforce. The resulting government
estimate of the lowest number and type of employees required for
in-house performance is generally referred to as the most efficient
organization (MEO). According to OMB, the management study to
identify the MEO protects current employees from historical
inefficiencies in the cost comparison, creates incentives to
restructure services and reduce costs, and serves to protect the
procurement process by protecting the in-house bid. The MEO is used
to develop the government's cost estimate for the activity being
studied.
This MEO cost is then compared to private sector bids. The
circular's cost comparison handbook describes the specific cost
elements of a cost comparison and includes areas such as fringe
benefits, material support, facilities, insurance, contract
administration, and overhead. A contract is to be awarded for an
activity if three conditions are met: (1) the contractor is judged
by the government to be able to meet all of the government's
standards for quality, timeliness, and quantity; (2) the total cost
of contract performance is less than the government's total estimate;
and (3) the projected cost advantage to the government is at least 10
percent of the government's personnel costs. The 10-percent margin
is included in the cost comparison to take into account unpredictable
costs that may occur as a result of the conversion to contract. If
these three conditions are met, the activity is to be contracted out.
If not, the activity is to remain in-house, but the government must
implement the MEO standards developed during the management study to
streamline operations and reduce costs.
--------------------
\1 According to OMB's Policy Letter on Inherently Governmental
Functions, published September 30, 1992, governmental functions
normally fall into two categories: (1) the act of governing, i.e.,
the discretionary exercise of government authority and (2) monetary
transactions and entitlements.
THE POST-MEO REVIEW PROCESS IN
PBS
-------------------------------------------------------- Appendix II:2
Much of the information we used in our analysis of sample activities
retained in-house was generated through the review processes
described in this section. However, this description reflects the
general guidance and practices used by PBS at the time of our review.
Because GSA is currently involved in major reinvention and
reorganization efforts, the specific processes and terminology may
not apply to future PBS evaluations of in-house activities.
The objective of PBS' post-MEO reviews of retained activities was to
certify that PBS implemented the cost and performance requirements
established in the A-76 review. The PBS general guidance on post-MEO
review and certification noted that the implicit contractual
commitment made when commercial activities were retained in-house
after an A-76 competition required a method of in-house contract
administration. The post-MEO review process was therefore developed
to determine whether those PBS activities retained in-house continued
to perform within the government cost estimates and performance
requirements established in the PBS MEO.
To evaluate cost, the post-MEO review compared the government's
adjusted actual costs to adjusted estimated costs proposed at the
time of the A-76 competition. According to the guidance, to ensure
an equitable review, post-MEO worksheets included adjustments in the
costs of fringe benefits, depreciation, and insurance. The review
also might have included adjustments for inflation, depending on the
period under review and how inflation was handled in the original
A-76 cost comparison. Other worksheets covered actual costs for the
period under review in areas such as labor, supplies and materials,
contracts, and utilities. If actual costs, as summarized in the
worksheets, appeared to be excessively high for any of these areas
(i.e., more than 10 percent above the estimated cost), the reviewer
was supposed to complete additional worksheets to explain or show
adjustments to the costs, as appropriate. In explaining or adjusting
excessive costs, the reviewers were to examine GSA cost reports and
other documents to determine whether the costs coded for the MEO
activity actually reflected items or work within the MEO's scope of
work.
According to the PBS guidance, if the review indicated that actual
costs for a full year of MEO operation are within 10 percent of the
cost estimate, the activity could be certified as meeting the cost
requirements. If the actual costs were between 10 and 25 percent of
the estimate, an action plan was to be prepared to bring the activity
within the 10 percent tolerance and implemented within 180 days.
Activities for which the variance exceeded 25 percent were to be
scheduled for A-76 recompetition.
To determine whether an activity operated within the government's
predicted performance objectives, the post-MEO review was to include
the most recent GSA Field Office Evaluation.\2 Evaluations were done
by teams of inspectors who rated the quality of service delivery and
administration for operations. There were 12 categories of
operations, such as custodial management, contracting, and security,
that might be included in the evaluation if applicable for the
location being reviewed. The quality score from the Field Office
Evaluation determined the performance level of the activity being
reviewed. A score of 75 or more (out of 100) signified an acceptable
level of performance.
Before final certification and acceptance of the post-MEO review
results, GSA's Central Budget Office completed an independent review.
The independent review officer was not responsible for performing a
separate audit but had to concur on the calculations and analysis on
which the post-MEO certification was based. One of the most
important tasks of the independent review officer was to ensure again
that the scope of the post-MEO review matched the scope of the MEO
performance work statement, including any approved modifications.
If the review showed that the in-house activity failed to (1) meet
either cost or performance thresholds, (2) adequately explain the
reasons for excessive cost variances, or (3) have an approved
modification to the MEO, the activity was to be scheduled for A-76
recompetition. However, an activity that failed the post-MEO review
was required to recompete using its current organization and
operational cost without reconfiguring it for a revised MEO.
--------------------
\2 Field offices were an administrative level within GSA's regions
generally organized around a geographic inventory of facilities. As
part of its reorganization efforts, GSA is replacing its field office
structure with property management centers.
SUMMARY INFORMATION ON INDIVIDUAL
SAMPLE ACTIVITIES
========================================================= Appendix III
The following tables present information on each of the sample
activities reviewed for this report. Table III.1 includes those
sample activities that were retained in-house after GSA's initial
A-76 review, while table III.2 includes those sample activities that
GSA decided not to retain in-house.
Table III.1
Sample Activities Originally Retained
In-House (21)
A-76 ID Type of Original review Activity status at time
number activity Location action of GAO review
---------- ---------- ---------- ----------------- -------------------------
02PMM022 Maintenanc New York, Studied and Converted to contract
e NY retained in- (September 1989).
house, FY 1983 Subsequently became a
Commercial Facilities
Management (CFM)
contract.
02PMM024 Maintenanc New York, Studied and Retained in-house. Post-
e NY retained in- MEO review of performance
house, FY 1989 showed the activity to be
9.4% above the adjusted
MEO estimate.
03PMM006 Maintenanc Roanoke, Studied and Retained in-house. Post-
e VA retained in- MEO review of performance
house, FY 1990 showed the activity to be
10.4% below the adjusted
MEO estimate.
03PMM008 Maintenanc Charlottes Studied and Retained in-house. Post-
e ville, VA retained in- MEO review of performance
house, FY 1989 showed the activity to be
12.6% below the adjusted
MEO estimate.
04PMM056 Maintenanc Gastonia, Studied and Retained in-house. Post-
e NC retained in- MEO review of performance
house, FY 1988 showed the activity to be
0.02% above the adjusted
MEO estimate.
04PMM087 Maintenanc Savannah, Studied and Retained in-house. Post-
e GA retained in- MEO review of performance
house, FY 1989 showed the activity to be
5.5% above the adjusted
MEO estimate.
05PMM003 Maintenanc St. Paul, Studied and Retained in-house. Post-
e MN retained in- MEO review of performance
house, FY 1988 showed the activity to be
2.2% below the adjusted
MEO estimate.
05PMM073 Maintenanc Chicago, Studied and Retained in-house. Post-
e IL retained in- MEO review of performance
house, FY 1987 showed the activity to be
13.5% below the adjusted
MEO estimate.
06PMM001 Maintenanc St. Louis, Studied and Scope changed. Scheduled
e MO retained in- for restudy.
house, FY 1985
06PMM003 Maintenanc Kansas Studied and Retained in-house. Post-
e City, MO retained in- MEO review of performance
house, FY 1986 showed the activity to be
0.5% above the adjusted
MEO estimate.
06PMM020 Maintenanc N. Platte, Studied and Retained in-house. The
e NE retained in- activity is exempt from
house, FY 1986 post-MEO review because
it is remote and
uneconomical to study.
06PMM025 Maintenanc St. Louis, Studied and Scope changed. Scheduled
e MO retained in- for restudy.
house, FY 1986
07PMM004 Maintenanc San Studied and Converted to a CFM
e Antonio, retained in- contract.
TX house, FY 1983
07PMM021 Maintenanc Oklahoma Studied and Retained in-house. Post-
e City, OK retained in- MEO review of performance
house, FY 1989 showed the activity to be
3.2% above the adjusted
MEO estimate.
08PMM035 Maintenanc Bismarck, Studied and Retained in-house. Post-
e ND retained in- MEO review of performance
house, FY 1989 showed the activity to be
1.6% above the adjusted
MEO estimate.
09PFS026 Full Andrade, Studied and Retained in-house. The
service CA retained in- activity is exempt from
house, FY 1986 post-MEO review.
09PMM088 Maintenanc Sacramento Studied and Retained in-house. Post-
e , CA retained in- MEO review of performance
house, FY 1988 showed the activity to be
1.7% below the adjusted
MEO estimate.
09PMM089 Maintenanc Laguna Studied and Failed post-MEO review
e Niguel, CA retained in- (over 25% above the
house, FY 1989 adjusted MEO estimate).
The activity was
contracted out (May
1993).
10PMM045 Maintenanc Everett, Studied and Retained in-house but was
e WA retained in- combined in a full
house, FY 1984 service group for W.
Washington. The post-MEO
review for the combined
activity found it to be
operating at 7.1% below
the adjusted MEO
estimate.
10PMM202 Maintenanc Portland, Studied and Retained in-house. Post-
e OR retained in- MEO review of performance
house, FY 1990 showed the activity to be
7.1% above the adjusted
MEO estimate.
11PMM019 Maintenanc Washington Studied and Retained in-house but
e , D.C. retained in- reconfigured.
house, FY 1983 Responsibility for
managing almost all of
the facilities covered by
the original activity was
delegated to other
federal agencies.
--------------------------------------------------------------------------------
Table III.2
Sample Activities Not Retained In-House
After Original Review (33)
A-76 ID Type of Original review Activity status at time
number activity Location action of GAO review
---------- ---------- ------------ ---------------- ------------------------
04PCS014 Custodial Louisville, Direct The activity remained
KY conversion to contracted out, but the
contract, FY active contract added
1985 janitorial services at
the Federal Building-
Agency Motor Pool to the
original activity
covering the Courthouse-
Customhouse.
04PCS046 Custodial Pikeville, Direct The activity remained
KY conversion to contracted out.
contract, FY
1982
04PCS052 Custodial Elizabeth Direct The activity remained
City, NC conversion to contracted out.
contract, FY
1982
04PCS065 Custodial Nashville, Direct The activity remained
TN conversion to contracted out but
contract, FY became part of a CFM
1982 contract covering the
Federal Building and
Courthouse, Federal
Building/Courthouse
Annex, and parking
garage.
04PCS069 Custodial Jacksboro, Direct The activity remained
TN conversion to contracted out but
contract, FY became part of a CFM
1982 contract. The CFM
contract covered
facilities management at
the Knoxville, Athens,
Wartburg, Chattanooga,
Kingston, and Jacksboro,
Tennessee federal
buildings. The services
included were operations
and mechanical
maintenance, elevator
maintenance, maintenance
repair, architectural
and structural,
janitorial, utilities,
and protection.
04PCS084 Custodial London, KY Direct The activity remained
conversion to contracted out. The
contract, FY active contract also
1982 included services for
Corbin, KY.
04PCS097 Custodial Asheville, Direct The activity remained
NC conversion to contracted out. The
contract, FY active contract resulted
1982 from resolicitation
after previous contract
options were not
exercised due to
unsatisfactory
performance.
04PCS099 Custodial Sumter, SC Direct The activity remained
conversion to contracted out but had
contract, FY been combined with other
1982 activities handled out
of the local field
office.
04PMM030 Maintenanc Albany, GA Contracted after The contractor
e cost study, FY defaulted, and the
1984 activity was brought
back in-house (Jan.
1992).
04PMM039 Maintenanc Newnan, GA Direct GSA reviewed the
e conversion to activity and determined
contract, FY it would be beneficial
1986 to return the activity
in-house (Feb. 1989).
04PMM058 Maintenanc Winston- Cost study The activity was
e Salem, NC started but abolished for economic
never completed reasons.
04PMM066 Maintenanc Anderson, SC Direct The activity had been
e conversion to combined with another
contract, FY activity in Greenville.
1986 When the contractor for
that activity defaulted,
everything was brought
back in-house (Jan.
1992).
04PMM093 Maintenanc London, KY Attempted The activity was
e conversion to returned in-house
contract, FY because GSA could not
1987 get a contractor to take
on this activity (no
satisfactory commercial
source).
04PMM157 Maintenanc Kingston, TN Direct The activity remained
e conversion to contracted out. It
contract, FY became part of the CFM
1989 contract that includes
Jacksboro, TN (see
04PCS069).
05PCS007 Custodial Chicago, IL Direct The activity remained
conversion to contracted out.
contract, FY
1985
05PCS024 Custodial Port Huron, Direct The activity became part
MI conversion to of a CFM contract for
contract, FY five locations in
1982 Michigan. The active
contract was an
emergency procurement
(previous contract not
renewed due to poor
performance).
05PCS048 Custodial Sault Ste. Direct The activity remained
Marie, MI conversion to contracted out.
contract, FY
1982
05PMM020 Maintenanc Detroit, MI Direct The activity remained
e conversion to contracted out. It
contract, FY became part of the CFM
1984 contract that includes
Port Huron, MI (see
05PCS024).
05PMM039 Maintenanc Columbus, OH Contracted after The contract was
e cost study, FY terminated by GSA in
1984 1986. The activity was
combined with two other
locations in Columbus
and Zanesville and
retained in-house after
resolicitation in 1987.
The most recent post-
MEO review of
performance (1992)
showed the activity to
be 7.24% above the
adjusted MEO estimate.
07PCS005 Custodial Little Rock, Direct The activity remained
AR conversion to contracted out.
contract, FY
1991
07PCS024 Custodial Hot Springs, Direct The activity remained
AR conversion to contracted out.
contract, FY
1982
07PCS031 Custodial Alexandria, Direct The activity remained
LA conversion to contracted out.
contract, FY
1983
07PCS037 Custodial Ruston, LA Direct The GSA activity was
conversion to abolished. Federal
contract, FY offices previously
1982 covered under this
activity were covered in
a full service lease.
07PCS045 Custodial Claremore, Direct The activity remained
OK conversion to contracted out but
contract, FY became part of a full
1983 maintenance contract.
07PCS066 Custodial McKinney, TX Direct There was no service in
conversion to the building since April
contract, FY 1992. The building was
1983 excessed, and the GSA
activity was abolished.
Federal offices
previously covered under
this activity were
covered in a full
service lease.
07PMM009 Maintenanc Albuquerque, Direct The activity remained
e NM conversion to contracted out. The
contract, FY activity is to become
1984 part of a CFM contract
in November 1995.
07PMM018 Maintenanc Austin, TX Contracted after The activity remained
e cost study, FY contracted out.
1989
07PMM023 Maintenanc Baton Rouge, Direct The activity remained
e LA conversion to contracted out.
contract, FY
1986
07PMM031 Maintenanc Lafayette, Direct The activity remained
e LA conversion to contracted out.
contract, FY
1986
07PMM047 Maintenanc Galveston, Direct The activity remained
e TX conversion to contracted out but
contract, FY became part of a CFM
1990 contract.
07PMM058 Maintenanc Marshall, AR Direct The activity remained
e conversion to contracted out but was
contract, FY expanded to cover full
1983 maintenance services.
07PMM060 Maintenanc Russellville Direct The activity remained
e , AR conversion to contracted out.
contract, FY
1986
07PMM065 Maintenanc Chickasha, Direct The contract reviewed
e OK conversion to was terminated for
contract, FY default. The building
1985 was disposed by GSA
(June 1992).
--------------------------------------------------------------------------------
APPROACHES USED BY GSA TO
DETERMINE REASONABLE COSTS FOR
SERVICES
========================================================== Appendix IV
GSA EMPLOYED RANGE OF PRACTICES
TO OBTAIN COMPETITIVE PRICES
-------------------------------------------------------- Appendix IV:1
Once a decision was made to compete an activity, our review indicated
that the government could determine a fair price for services without
resorting to lengthy cost study processes, even if direct competition
was limited. Formal A-76 cost comparison studies were used for only
two of the sample contract activities we reviewed, because the
activities were under the circular threshold requiring a cost
study.\1 The other contract activities were all direct conversions to
contract. While inadequate cost or price analysis documentation has
been identified as a broad area of concern by prior GAO, OMB, and
agency reviews of contracting practices, our review of the sample
case files did not reveal such problems.\2 We found that it was
common practice for GSA managers and contracts personnel to compile
detailed cost data to evaluate prospective bids for activities going
out to contract.
GSA personnel used a variety of approaches to establish a reasonable
price range for the desired services. For example, documents in the
contract case files showed that bid prices could be analyzed on the
basis of an analysis and comparison of (1) competitive bids received
for the current solicitation; (2) the prior contract price; (3)
prices paid for similar services in different GSA locations (a market
analysis); (4) an independent government cost estimate; and (5)
industry data, such as reported average costs of specific services.
Documentation in the contract case files indicated that GSA usually
used a combination of these approaches as part of its cost analysis
and negotiations and rarely relied on only one data source. We found
that this type of analysis was done even for a legally mandated
contract source.\3
In some of the more complex cases, particularly multistage
solicitations, we found that GSA contracts personnel had completed
detailed analyses of individual cost components, hourly rates, and
prices for special services that contractors proposed in their bids
to GSA. An independent government estimate for these items was often
incorporated into the analyses. Such analyses permitted both the
government and the bidders to identify areas in which costs appeared
to be out of line (either too high or too low) and determine whether
adjustments were necessary. GSA resolved problems with two
solicitations in this manner--one in which the government had
underestimated the costs associated with new services and another in
which the private sector sources and the government had widely
different assumptions about requirements in the scope of work on
which they were bidding.
--------------------
\1 Appendix II describes the conditions under which an activity may
be converted to contract without undergoing a cost study. Coding in
the GSA A-76 database indicated that all 21 of the in-house sample
activities were retained after a study.
\2 For example, see Summary Report of Agencies' Service Contracting
Practices, Office of Management and Budget, Office of Federal
Procurement Policy (Jan. 1994).
\3 For example, Congress has included a provision in the Treasury,
Postal Service and General Government Appropriations Act for fiscal
year 1995 that generally prohibits GSA from contracting out for
guard, elevator operator, messenger, and custodial activities that
are performed by GSA employees, unless it is to a sheltered workshop
employing the severely handicapped. The act does not require that
the source provide services at a lower cost than government in-house
operations. Only if the workshops decline to contract for the
provision of the covered services may GSA procure the services by
competitive contract. Public Law 103-329 (1994), 40 U.S.C. 490c.
(Congress has included a provision similar to this in every GSA
appropriation, starting with fiscal year 1983.)
COMPETITION WAS LIMITED FOR
SOME ACTIVITIES
-------------------------------------------------------- Appendix IV:2
GSA officials in the regional offices told us that the number of
bidders competing for some of the real property activities had been
limited. Our review of the case file materials for active and
previous contracts generally confirmed their observation. We were
able to obtain information on the number of responsive, responsible
(i.e., technically and financially acceptable) bidders for 42
individual solicitations. Table IV.1 shows the overall distribution
of bidders.
Table IV.1
Distribution of Number of Bidders for
Sample Activities
Number of bidders 0 1 2 3 4 5 6 7+
-------------------------------------- -- -- -- -- -- -- -- --
Distribution of solicitations 3 10 5 5 7 4 6 2
involving sample
activities
----------------------------------------------------------------------
In four of these cases, competition was limited to a mandatory
source, such as workshops employing the severely handicapped. The
limited amount of competition for some sample activities underscored
the value of GSA's practice of relying on more than a low bid to
determine whether the government was obtaining cost-effective
services.
(See figure in printed edition.)Appendix V
COMMENTS FROM THE GENERAL SERVICES
ADMINISTRATION
========================================================== Appendix IV
MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix VI
GENERAL GOVERNMENT DIVISION,
WASHINGTON, D.C.
Charles I. Patton, Jr., Associate Director, Federal Management and
Workforce Issues
Frances P. Clark, Assistant Director, Federal Management and
Workforce
Issues
Timothy A. Bober, Evaluator-in-Charge
K. Scott Derrick, Evaluator
Kiki Theodoropoulos, Communications Analyst
Bonnie J. Steller, Senior Statistician
*** End of document. ***