General Services Administration

Recommendations and Actions

GSA01: Separate Policymaking From Service Delivery and Make the General Services Administration A Fully Competitive, Revenue-Based Organization


The General Services Administration (GSA) was established in 1949 as a result of recommendations from the first Hoover Commission; its authority is derived from the Federal Property and Administrative Service Act. When created, GSA was intended to regulate the various administrative services under its purview and only to provide those services directly when it was more economical to do so.(1) GSA now not only develops and oversees governmentwide policies and standards, it is also the primary provider of many of the government's supplies and services.

GSA is responsible for acquiring, storing, distributing, and disposing of personal property and supplies, and for acquiring, managing, and disposing of real property. The Department of Defense (DOD) has similar responsibilities for defense-related activities. Over the years, GSA, DOD, and other agencies have further divided responsibilities for various supply management functions, and other civilian agencies have also received authority to acquire, manage, and dispose of real property.

GSA is organized into four major service organizations and a headquarters that includes the office of general management and administration (GM&A), the Inspector General, and the Office of FTS2000 (which until recently was part of the Information Resources Management Service). GM&A comprises the Office of the Administrator; the Associate Administrator for Acquisition Policy; the Board of Contract Appeals; and the normal complement of staff offices. The four services (each of which conducts operations and develops and enforces governmentwide policy) and their areas of responsibility are:

---the Federal Supply Service (FSS), which is responsible for federal supply management;

---the Public Buildings Service (PBS), which is responsible for general purpose space to house the federal government;

---the Federal Property Resources Service (FPRS), which is responsible for real property disposal; and

---the Information Resources Management Service (IRMS), which is responsible for information processing and telecommunications.

Geographically, GSA is organized into a central office headquartered in Washington, D.C., and 10 regions, including the National Capital Region (NCR).(2) The regions are responsible for providing services to federal agencies and (in most cases) enforcing policies developed by the central office. The regional headquarters' offices are in Washington, DC; New York; Philadelphia; Atlanta; Chicago; Kansas City; Fort Worth; Denver; San Francisco; and Auburn, WA. GSA full- time employment (FTE) for the central office and regions totalled 19,502 in fiscal year 1993.

In fiscal year 1994, GSA plans to obligate about $11 billion, of which only $210 million (two percent) is from direct appropriations. GSA's fiscal year 1994 budget request allocates resources as follows:

While GSA's direct budget of $210 million is relatively small, GSA directly controls or indirectly influences agency spending--through multiple awards schedules, building rental costs, telecommunications, and information resources--of about $45 billion.(5) Quite a difference.

               FY 1993 GSA Full Time Employment(3)
         FSS   PBS   FPRS   IRMS   FTS2000   GM&A   IG   Other   Total
 Office  838   459   72     1,076  265       873    412   29     4,024
 NCR     3     2,241 0      227    0         124    0     39     2,634
 York    363   878   23     0      0         82     0     21     1,367
 Phili.  706   859   0      154    0         72     0     18     1,809
 Atlanta 572   805   24     199    0         67     0     43     1,710
 Chicago 188   1,097  0     0      0         63     0     0      1,348
 City    310   619   0      0      0         456    0     40     1,425
 Worth   729   836   16     220    0         387    0     71     2,259
 Denver  0     434   0      0      0         14     0     0        448
 Fran.   863   865   26     178    0         88     0     35     2,055
 Auburn  0     412   0      0      0         11     0     0        423
      4,572  9,505   161   2,054   265      2,237   412   296   19,502
                   GSA's FY 1994 Budget Submission(4)
                                        Total               Direct 
                                       Obligations      Appropriations
                             FTE      ($in Millions)   ($ in Millions) 
 Federal Supply Service     4,520         2,860               68
 Public Buildings Service   9,435         6,462                7
 Federal Property 
 Resources Service            162            21               18
 Information Resources
 Management Service         2,063           911               46
 FTS2000                      245           503                0
 Management & 
 Administration             2,243           182               31
 Inspector General            418            36               35
 Other                        295            51                5
 Total                     19,381        11,026              210

The overwhelming majority of GSA's expenses are paid by its customers through reimbursable and revolving funds. GSA has arranged its financial structure so that most of its staff functions (the Office of the Administrator, the finance and budget offices, and the General Counsel, for example) are largely reimbursed by the various services; that overhead is in turn charged to GSA's customers. The concept of cross-charging or inter-divisional charging has its basis in attempting to provide business units or divisions with as close to their own Profit and Loss (P&L) statements and balance sheets as possible.(6) The idea is that this will drive them to optimize their profitability.


GSA Profit and Loss Summary (Dollars in Thousands) *************************** (By FY) 1994 1995 1996 1997 1998 Revenue (revolving funds) 9,404,443 9,591,690 10,010,794 10,474,270 10,896,184 General Supply Fund (GSF) 2,791,978 2,793,313 2,861,992 2,932,122 3,004,824 Telecomm/ADP (IT Fund) 1,255,585 1,294,480 1,320,111 1,344,897 1,360,758 Federal Buildings Fund 4,831,155 5,318,981 5,653,775 5,962,335 6,345,686 Carryover plus rescission (PBS) 525,725 184,916 184,916 184,916 184,916 Cost of Goods & Services Sold 5,555,974 5,995,213 6,298,076 6,574,366 6,834,584 General Supply Fund 2,141,434 2,142,458 2,196,019 2,250,919 2,307,192 Telecomm/ADP Costs 1,110,000 1,138,860 1,167,332 1,196,515 1,226,428 Federal Buildings Fund 2,304,540 2,713,895 2,934,725 3,126,932 3,300,964 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Gross Margin 3,848,469 3,596,477 3,712,718 3,849,904 4,061,600 Operating Expenses ****************** 1994 1995 1996 1997 1998 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Personnel Salaries/ Benefits 930,449 935,175 954,742 976,529 1,003,724 Less Internal Reimb. Salaries (106,654) (105,719) (109,277) (114,631) (122,138) Depreciation 208,908 211,418 215,028 219,754 224,598 Other PBS 1,689,927 1,935,630 2,065,957 2,061,498 2,201,756 Other, GSF/IT Fund 227,218 233,660 237,118 240,307 251,521 Other Policy/ Regulatory (Approp ) 88,581 88,850 83,148 81,636 74,572 Subtotal, Operating Expenses 3,038,429 3,299,014 3,446,716 3,465,093 3,634,033 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Net Profit/ (Loss) 810,040 297,463 266,002 384,811 427,567 Less Reserve to RCP (Supply/ Vehicles) 113,219 108,000 110,700 113,467 116,305 From Reserve for Use (IT Fund) (11,672) (7,677) (19,817) (13,999) (36,280) Buildings Reserve for Future Use 184,916 184,916 184,916 184,916 184,916 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Profit/ (Loss) 523,577 12,224 (9,797) 100,427 162,626 Available for New Construction (733,773) (224,832) (200,021) (312,352) (372,583) ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Deficit/ (Shortfall) (210,196) (212,608) (209,818) (211,925) (209,957) Budget Authority (approp) 210,196 212,608 209,818 211,925 209,957

Although cross-charging is widely practiced in private business, even the most sophisticated companies can and have been burned by the process. This usually occurs when the cross-charging (usually known as allocations) becomes so complex that the origins of the costs (or expenses) become lost. This, combined with the fact that in most cases those charged the costs have little or no authority over them, leaves large elements of cost uncontrolled. In one recent example at a major corporation, allocations became so complex that not only operating management but also top management lost control.

If this can happen in private business where real profits and losses are at stake and cash must come from profits or private capital markets, then it is clear that cross-charging can cause serious loss of control in government--no matter how well intentioned the managers are.

In GSA's case, cross-charging is especially troublesome because the prices GSA charges its customer agencies are not subject to the market disciplines resulting from competition. The "excess margins'' are used for two purposes: (1) to cover GSA's operating expenses, and (2) to build up reserves--in the case of the Public Buildings Service, to build up a Federal Buildings Fund with a current balance of $4.5 billion.

Since most of GSA's customer "revenues'' are not now subject to competition, there is a classic case of inelastic prices, with little incentive to reduce costs.

Recently, GSA has taken steps to provide its customers some freedom of choice and authority to make management decisions. GSA has:

---instituted a building delegation program transferring management responsibility for single-tenant buildings to the agency occupying the building;

---made it easier for agencies to buy supplies from sources other than the Federal Supply Schedules;

---encouraged the establishment of cooperative administrative support units to simplify the use of common administrative support services;

---implemented the use of a purchase card that allows simplified procurement of supplies; and

---delegated authority to agencies to procure information technology products and services.

In managing FTS2000, GSA recognized the value of customer input by establishing an Interagency Management Council, composed of agencies using FTS2000, to provide advice on management and technical issues. A number of other organizations have been created to elicit customer input on GSA services, such as the Public Buildings Service's Real Property Executives Advisory Committee and four Federal Supply Service Interagency Committees-- on Travel Management, Transportation and Traffic Management, Supply Management, and Aircraft Policy.

Reinvention Laboratories

As a central management agency, GSA plays a unique part in other agencies' reinvention efforts. GSA took an early leadership role to help other agencies unfetter their reinvention laboratories by providing a list of personnel designated to assist in clarifying and waiving GSA regulations. GSA also gave other agencies the authority to waive Federal Acquisition Regulations for the reinvention labs. These actions underscore GSA's active support for the reinvention process throughout government.

GSA has established nine reinvention laboratories of its own. They are:

---regionwide laboratories in Philadelphia and Denver,

---interagency fleet consolidation,


---ADP support services,

---commercial products acquisition,

---local telecommunications,

---governmentwide electronic mail,

---office products regional commodity center, and

---time and attendance.

Need for Change

1. Conflict Between Policymaking and Service Delivery. The General Accounting Office (GAO), the Senate Government Affairs Committee, and others maintain that the current GSA organization, which places responsibility for development and enforcement of governmentwide policies with its service organization, has led to confusion--both inside GSA and with its customers--over GSA's primary role, has caused insecurity within GSA over its policymaking and oversight responsibilities, and has contributed to GSA's "lackluster performance in both areas."(7)

As long as policymaking and operational responsibilities are combined within the same organization, there will be a tendency for operational demands to supersede strategic policy considerations. Requiring service delivery organizations to oversee and enforce agency compliance with policies and regulations also interferes with service delivery and the development of good customer relations.

State and foreign governments have found that the most effective way to resolve the conflict between policymaking and day-today operations is to separate the two functions.(8) GAO has emphasized that, especially in a decentralized environment, it is critical that policies be sensible and flexible and that they be accompanied by consistent and knowledgeable guidance.(9) This suggests that GSA should separate its policymaking functions from its service delivery organizations and reorient oversight and enforcement to concentrate on providing advice and results-oriented evaluations. GSA should also serve as a clearinghouse for information on the various services it provides, providing a central database to encourage the exchange of information and reduce duplication of effort.

Unfortunately, policy organizations often lose sight of the full impact their policies have on the field organizations that actually perform the work of the government. One way to mitigate this problem would be to establish personnel policies ensuring that people serving in policy organizations have had prior field experience and that they return to field activities from policy assignments. Another solution would be to develop policies and oversight processes in collaboration with affected federal agencies and field activities.

2. Monopolistic Service Delivery. A basic tenet of the National Performance Review is that agency heads and line managers are intelligent, honest people capable of making good decisions on how to allocate resources to best accomplish their missions. The existing system of overly complex and detailed laws, rules, and regulations, combined with centralized controls and decisionmaking, interferes with a manager's ability to exercise initiative and balance resources to fulfill agency needs. To correct this problem, and to better hold managers accountable for mission accomplishment, full authority and responsibility for all the resources needed and used must clearly and unambiguously rest with the manager.

Present management policies often require managers to use a single source (whether in their own agency or in a central management agency such as GSA) to obtain needed resources. Such policies usually allow a third party to control the resources a manager uses, to usurp management resource decisions, or to control an agency management process. These policies improperly dilute the authority and responsibility of the line manager (and in many cases, the agency head), thereby spreading accountability for mission accomplishment among people not responsible for results. This significantly weakens the ability of oversight agents (including the President and Congress) to evaluate responsibility for program successes and failures, and contributes to a misplaced emphasis on monitoring the use of inputs rather than on results.

Examples of controls GSA exercises over other agencies include:

---the Public Buildings Service monopoly over the price, amount, location, and quality of agency space;

---mandatory use requirements in the Federal Supply Schedules;

---controls over disposition of personal and real property exercised by both the Federal Supply Service and the Federal Property Resources Service;

---the requirement for the Information Resources Management Service to review and approve agency automatic data processing (ADP) acquisitions; and

---the mandatory requirements for agencies to use FTS2000 for long distance telecommunications service or IRMS contracts for local phone service.

GSA has made some recent improvements in its service operations. However, it must now recognize that the system of centralized controls and monopolistic services does not allow agencies to meet today's challenges and opportunities. It is not enough that GSA try to become a better monopoly; true change will not occur until agencies are free to choose where and how they spend their money. GSA must become a fully competitive source for agency business and further reinvent itself according to the principles that serve as the basis for the National Performance Review, especially:

---empowering employees (and, in GSA's case, customers);

---delegating authority and responsibility;

---replacing regulations with incentives; and

---exposing federal operations to competition.

Many of the recommendations in the NPR Accompanying Report Reinventing Support Services directly affect GSA's organization and operations. Those recommendations, when implemented, will help improve GSA's service delivery, free GSA's customers, and transform GSA into a competitive service organization. For GSA to have the management freedom it needs to become competitive, the Office of Management and Budget (OMB) must revise its policies and allow GSA-- along with other federal agencies that provide competitive, fully reimbursable services--to be free from full-time equivalent (FTE) personnel controls.(10) OMB must also revise other budgetary restrictions (such as scoring rules) that interfere with good decisionmaking.(11) This will help GSA optimize its ability to compete. Management success and accountability would then be determined by GSA's customers, not by arbitrary controls.

There may be occasions where the interests of the government--in terms of meeting agency mission requirements at reduced overall costs--may be better served by agencies working together or using a common service, rather than acting independently. In those instances where agencies agree that the preferred course of action is for GSA to act as a mandatory service, the service should be managed like a regulated utility, with a board of overseers comprising customer agencies who would oversee GSA's policies, rates, operations, and service delivery for that service.(12)

3. Functional Transfers. Over time GSA has become responsible for providing administrative support for activities that might more properly be assigned to other agencies. Two of these are:

---Indian Trust Accounting Office--This office provides accounting services related to the adjudication of Indian Tribal claims against the government. Its activities are directed by the Department of Justice (DOJ), which is the exclusive user of the services.

---Transportation audits--GSA is required to conduct post-payment audits of all transportation bills submitted to the government.(13) Recoveries from overcharges are used to pay audit costs. Any excess receipts are returned to the Treasury, which results in agencies losing use of funds that would otherwise be available for agency programs. GSA has demonstrated that the technology now exists to audit transportation bills prior to payment. By reviewing bills before payment, erroneous payments will be avoided and funds will remain available to the agency conducting the audit. Agencies using the transportation services, rather than GSA, should conduct the prepayment audits and gain the associated benefits.

In fiscal year 1995, 65 people and about $5 million would be shifted from GSA if the activities discussed above were transferred to other agencies.

4. Acquisition of New Real Property, Supplies, and Services. GSA plans to spend about $800 million a year in the next five years acquiring new federal office space and courthouses. At the same time, federal employment will be reduced by at least 252,000; the Resolution Trust Corporation (RTC) continues to sell property at 10 cents to 50 cents on the dollar; private office vacancy rates are running in the 10-25 percent range; one NPR issue paper would make significant changes in the ways agencies demand, and GSA supplies, real property assets; another set of recommendations would examine the mission, size, structure, and locations of Department of Housing and Urban Development, Health and Human Services, and Agriculture field offices; and federal courthouses continue to be built to overly expensive, inefficient design standards.(14) All of these factors suggest that it may be wise to reconsider the scope of GSA's current building acquisition program.

Similarly, the changes that are occurring in the federal workforce, agency organizations, and government procurement systems suggest that there may be opportunities to achieve efficiencies in acquiring goods and services--that is, the government should be able to reduce procurement costs while still buying the goods and services that it needs.(15)


1. Separate policymaking and oversight from service delivery and fund policymaking from direct appropriations.(1)

By April 1994, the GSA administrator should clearly separate governmentwide policy and oversight functions from the GSA service delivery organizations (FSS, PBS, FPRS, IRMS, and FTS2000). This would:

1. improve GSA's ability to manage both policymaking and service delivery;

2. help eliminate the use of regulatory authorities to promote centralized services; and

3. make it easier for GSA to develop proper service relationships with its customers.

GSA should always develop policy guidance in consultation with other federal agencies. That guidance should be in the form of flexible broad guidelines, rather than rigid rules. GSA should refocus its oversight and enforcement activities to emphasize leadership and results-oriented evaluations. To ensure that the flexibility and authority being granted by GSA to the agencies is passed on to line managers, GSA's evaluations of other agencies should include a review of the restrictions imposed by those agencies on their line managers.

By April 1994, the GSA administrator should establish personnel policies to ensure that employees assigned to policy organizations have prior field experience (whether in GSA or in other agencies) and that they return to field assignments after service in the policy organizations.

The GSA administrator and the OMB director should ensure that all of GSA's governmentwide policy and oversight functions are fully funded by direct appropriations and are not underwritten by charges to GSA customers. GSA and OMB should work together to establish staffing and funding levels that would allow GSA to fulfill its policymaking and oversight responsibilities.

2. Allow agencies to choose whether to purchase GSA services, and fund GSA service delivery from customer revenues.(1)

The GSA administrator should transfer authority, revise regulations, and develop legislation so that GSA's customers--whether they use real property, communications services, supplies, computers, or disposal services--have the freedom to choose where they do business.

GSA should create competitive enterprises to compete as service providers to other federal agencies.16 Federal agencies will be required to procure services from a single source only if there is a demonstrable advantage to the government as a whole. If agencies and GSA agree that monopoly service would both meet agency mission requirements and be more beneficial to the government, the GSA operation providing the service must be guided by a board of overseers comprising GSA customers using the service. The board of overseers would approve policies, oversee operations, evaluate service delivery, and set rates (including overhead charges).

All GSA service operations should be fully paid for through customer revenues. The GSA administrator should ensure that there are no cross-subsidies between different accounts within or between the services.

3. Transfer activities not related to GSA's central mission to other agencies.(2,3)

---Indian Trust Accounting Office. By October 1995, the OMB director should transfer this office to the Department of Justice (DOJ).

---Transportation audits. By October 1993, the OMB director should submit legislation eliminating the requirement for post-payment audits. Until Congress passes that legislation, the GSA administrator should further encourage agencies to conduct prepayment audits by increasing its delegations.

4. Suspend acquisition of net new office space and courthouses.(1)

The GSA administrator should place an immediate hold on GSA's acquisition (whether by construction, purchase, or lease) of net new office space, reduce and rescope new courthouse construction, and begin aggressive lease negotiations for both existing and new leases. These actions will enable GSA to save at least $450 million per year over the next 5 years.

5. Reduce procurement spending.(1)

The GSA administrator should convene an ad hoc committee of the President's Management Council to develop specific recommendations to reduce procurement spending 5 to 10 percent per year from current levels without reducing products or services. The committee should provide its recommendations to the Vice President by December 1994.

6. Improve GSA service delivery.(4)

As GSA is made a fully reimbursable, competitive organization and as the recommendations contained in the NPR Accompanying Reports Reinventing Support Services and Reinventing Federal Procurement are implemented, the GSA administrator should consider the following opportunities to improve effectiveness and customer service:

---Implement one-stop shopping. Ensure customer requirements are met simply and quickly by establishing account executives to provide a single face to the customer and act as facilitators with other GSA offices.

---Reduce overhead. Examine the distribution of personnel between staff offices and line operations (in both the central office and the regions) and between headquarters and field activities. Additional opportunities may exist to put more people to work directly serving agency customers.

---Streamline the organization. Determine whether some functions performed at the central office might be eliminated or transferred to one of the regions, whether the number of regions should be reduced, and whether the present organization best serves its agency customers.

---Improve telecommunications management. Return FTS2000 to IRMS as soon as practical. FTS2000 was separated from IRMS to focus greater management attention on telecommunications. However, the management problems appear to have been resolved and long distance telecommunications services in the Office of FTS2000 and the information technology services in IRMS are increasingly interconnected. The two offices should be reunited organizationally.

Cross References to Other NPR Accompanying Reports

Reinventing Support Services, SUP01: Authorize the Executive Branch to Establish a Printing Policy that Will Eliminate the Current Printing Monopoly; SUP03: Improve Distribution Systems to Reduce Costly Inventories; SUP04: Streamline and Improve Contracting Strategies for the Multiple Award Schedule Program; SUP05: Expand Authority and Eliminate Congressional Control over Federal Vehicle Fleet Management; SUP06: Give Agencies Authority and Incentives for Personal Property Management and Disposal; and SUP08: Give Customers Choices and Create Real Property Enterprises that Promote Sound Real Property Asset Management.

Reinventing Federal Procurement,PROC08: Reform Information Technology Procurements.

Transforming Organizational Structures, ORG06: Identify and Change Legislative Barriers to Cross-Organizational Cooperation.

Mission-Driven, Results-Oriented Budgeting, BGT04: Eliminate Employment Ceilings and Floors By Managing Within Budgets.

Improving Financial Management,FM06: "Franchise" Internal Services; and FM12: Manage Fixed Asset Investments for the Long Term.


1. Memorandum from David Haun, Office of Management and Budget, August 6, 1993.

2. The NCR provides administrative support to the federal agencies in and around Washington, D.C.

3. Figures provided by GSA's Office of the Chief Financial Officer, and are projections of FTE at the end of fiscal year 1993.

4. Figures provided by GSA Financial Office.

5. Ibid.

6. GSA's Financial Office prepared the profit and loss statement for GSA.

7. U.S. General Accounting Office (GAO), General Services Issues, OCG-93-28TR (Washington, D.C.: U.S. General Accounting Office, December 1992).

8. Interviews with Babak Armajani, Public Strategies, Inc., and Jim Stevenson, Australian Department of Finance.

9. GAO.

10. See also NPR Accompanying Report Mission-Driven, Results-Oriented Budgeting, BGT05:"Replace Across the Board FTE Ceilings.''

11. See NPR Acompanying Report Improving Financial Management, FM12: Manage Fixed Asset Investments for the Long Term.

12. Interview with Babak Armajani, who advises that this approach has been used very successfully by the State of Minnesota.

13. See 31 U.S. Code 3322, 3528, and 3726.

14. See NPR Accompanying Report Reinventing Support Services, SUP08: Give Customers Greater Choice and Create Real Property Enterprises that Promote Sound Asset Management.

15. See NPR Accompanying Report Reinventing Federal Procurement.

16. These changes, and the dates by which they are to be accomplished, are described in detail in the NPR Accompanying Reports Reinventing Support Services and Reinventing Federal Procurement.

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