The General Services Administration projects its schedules contracts program will lose $14.1 million this year due to increased internal costs.

Figures shown in a Feb. 3 GSA office of inspector general report confirmed by the agency's Federal Acquisition Service show program costs growing by $36.7 million to reach $308.2 million in the current fiscal year, a 13.5 percent increase.

Program revenue--GSA collects .75 percent of each transaction made through each schedules contract--is projected to increase by only 2.3 percent from last year.

As a result, net operating revenue--which has declined every year since fiscal 2008 despite steady, albeit modest, increases in revenue and consistent growth in costs--will dip into the red this year, GSA says. The trend of negative compound annual growth in net operating revenue will likely continue in the future, FAS Commissioner Steve Kempf says in the agency's official response to the audit.

GSA spokeswoman Cara Battaglini said a number of initiatives have combined to increase costs, including development of an Enterprise Acquisition Solution information technology system, although Battaglini said she didn't have readily available figures breaking down specific causes of the $36.7 million growth in costs.

Of EAS, she said that GSA isn't "ready to talk to the press about what that's costing us."

GSA has a reserve of $687.5 million built up in great measure by revenue from the schedules program, but the schedules program funds most "strategic investments" from current year revenues rather than the reserve fund.

However, other FAS programs besides schedules do draw down from the fund, known as the Acquisition Services Fund, the audit notes.

Auditors say GSA should review the .75 percent schedules transaction fee and adjust the rate as necessary. Kempf, in the agency's response, takes issue with what he says is the report's implication that the fee should be reduced, given the negative compound annual growth in net operating expenses.

"If anything, given the trend of increasing growth of costs and decreasing growth of revenues, one might conclude that the fee customers are paying is actually too low," he says.

For more:
- download the report, A090256/Q/A/P12003 (.pdf)

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