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1,100 | hat interest expense is the cost component that, more than any other, challenges TVA’s ability to provide power at projected market rates in the future. This situation continues to be true today. However, as we state in our report, ultimately, TVA’s ability to be competitive will depend on the future market price of power, which cannot be predicted with any certainty. To the extent TVA is able to improve the financial ratios set out in our report, the better positioned it will be to deal with this future un |
1,101 | certainty. As agreed with your offices, unless you publicly announce its contents earlier, we plan no further distribution of this letter until 7 days from its date. At that time, we will send copies of this report to appropriate House and Senate Committees; interested Members of Congress; Craven Crowell, Chairman, TVA’s Board of Directors; The Honorable Spencer Abraham, Secretary of Energy; The Honorable Mitchell E. Daniels, Jr., Director, Office of Management and Budget; and other interested parties. The |
1,102 | letter will also be available on GAO’s home page at http://www.gao.gov. We will also make copies available to others upon request. Please call me at (202) 512-9508 if you or your staffs have any questions. Major contributors to this report are listed in appendix IV. We were asked to answer specific questions regarding TVA’s (1) debt and deferred assets, (2) financial condition, (3) potential stranded costs, and (4) bond rating and its impact on TVA’s interest costs. As agreed with your offices, this report |
1,103 | addresses the first three questions. We plan to issue a separate report to address the fourth question. Specifically, for each of these three areas, you asked us to determine: 1. Debt and deferred assets The progress TVA has made in achieving the goals of its 10-year business plan for reducing debt and deferred assets. The extent to which TVA has used the additional revenues generated from its 1998 rate increase to reduce debt and deferred and regulatory assets. How TVA’s financial condition, including debt |
1,104 | and fixed cost ratios, compares to neighboring investor-owned utilities (IOUs). The link between TVA’s debt and its potential stranded costs. Whether TVA has calculated potential stranded costs for any of its distributors, and if so, what methodology they used. TVA’s options for recovering any potential stranded costs. To identify the progress TVA has made in achieving the goals of its 10-year business plan for reducing debt and deferred assets, we reviewed GAO’s prior report on TVA’s 10-year Business Plan |
1,105 | ; interviewed TVA and Congressional Budget Office (CBO) officials; reviewed and analyzed various TVA reports and documents, including annual reports, audited financial statements, TVA’s 10-year business plan, and proposed updates to the plan; and analyzed supporting documentation (analytical spreadsheets, etc.) and assumptions underlying TVA’s 10-year plan and proposed updates to the plan. To identify the extent to which TVA has used the additional revenues generated from its 1998 rate increase to reduce de |
1,106 | bt and deferred and regulatory assets, we obtained an estimate from TVA of the amount of additional revenue generated from its 1998 rate increase; analyzed sales and revenue data in the supporting schedules to the proposed revision to the 10-year plan to determine whether TVA’s estimate was reasonable; and compared the estimate of the amount of additional revenue generated from the 1998 rate increase to the reduction in debt and deferred assets over the first 3 years of the plan. To determine how TVA’s fina |
1,107 | ncial condition, including debt and fixed ratios, compares to its likely competitors, we reviewed prior GAO reports on TVA that analyzed its financial determined likely competitors by analyzing prior GAO reports and other reports by industry experts; obtained and analyzed financial data from the audited financial statements of TVA, seven IOUs, and one independent power producer; computed and compared key financial ratios for TVA and the other eight reviewed the annual reports of the eight entities to determ |
1,108 | ine what steps they have taken to financially prepare themselves for competition; interviewed TVA officials about their efforts to position themselves competitively, including their efforts to reduce debt, recover the costs of their capital assets, and recover stranded costs, and analyzed data on the future market price of power. The ratios we used in our comparison were computed as follows: The ratio of financing costs to revenue was calculated by dividing financing costs by operating revenue for the fisca |
1,109 | l year. The financing costs include interest expense on short-term and long-term debt, payments on appropriations (TVA only), and preferred and common stock dividends (IOUs only). Note that preferred and common stock dividends were included in the IOUs’ financing costs to reflect the difference in the capital structure of these entities and TVA. The ratio of fixed financing costs to revenue was calculated by dividing financing costs less common stock dividends by operating revenue for the fiscal year. Commo |
1,110 | n stock dividends were excluded from the IOUs’ financing costs because, since they are not contractual obligations that must be paid, they are not fixed costs. The ratio of net cash from operations to expenditures for PP&E and common stock dividends was calculated by dividing net cash from operations by expenditures for PP&E and common stock dividends for the fiscal year. Net cash from operations represents the cash received from customers minus the cash paid for operating expenses. Thus, net cash from oper |
1,111 | ations represents the cash available for expenditures for PP&E, common stock dividends (IOUs only), and other investing and financing transactions. Again, we included common stock dividends in the IOUs ratios to reflect the difference in cash flow requirements for these entities and TVA. Preferred stock dividends were not included because they come out of operating revenues and thus are already reflected in the net cash figure. Because these data were not available for all entities, we excluded the effect o |
1,112 | f capital assets acquired through acquisition. The ratio of accumulated depreciation and amortization to gross PP&E was calculated by dividing accumulated depreciation and amortization by gross PP&E at fiscal year-end. The ratio of deferred assets to gross PP&E was calculated by dividing deferred assets by gross PP&E at fiscal year-end. Deferred assets include construction in progress and for TVA only, its deferred nuclear units. Deferred nuclear units are included for TVA because TVA treats them as constru |
1,113 | ction in progress (i.e., not depreciated). For comparison purposes, we selected the major IOUs that border on TVA’s service area because industry experts told us that due to the high cost of transmitting electricity, TVA’s competition would most likely come from IOUs located close to its service area. However, to represent the changing structure of the electricity industry, we included one large independent power producer. We did not include any publicly owned utilities in our analysis because the publicly |
1,114 | owned utilities that provide electricity in the states served by our IOU comparison group generally only distribute but do not generate electricity. The IOUs used in our comparisons include (1) American Electric Power, (2) Carolina Power & Light, (3) Dominion Resources, (4) Duke Power, (5) Entergy, (6) LG&E Energy Corporation, and (7) Southern Company. The independent power producer was AES Corporation. To obtain information on various issues facing utilities in a restructuring industry, we reviewed documen |
1,115 | ts from the Energy Information Administration (EIA) and the annual reports of TVA and the IOUs. We also spoke with the organization that represents TVA’s distributors to understand their concerns about TVA’s future competitiveness. In addition, we contacted financial analysts to identify the criteria they use to evaluate the financial condition of electric utilities. To identify the link between TVA’s debt and its potential stranded costs, we interviewed industry experts at the Federal Energy Regulatory Com |
1,116 | mission, Edison Electric Institute (EEI), and CBO on the options other utilities have pursued to recover stranded costs; reviewed EIA documents pertaining to how stranded costs have been dealt with in the states that have restructured; questioned TVA officials on TVA’s plans for mitigating, calculating, and recovering potential stranded costs; and analyzed TVA’s contracts to determine whether TVA has contractually relieved its customers of any obligation to pay for stranded costs. To determine whether TVA h |
1,117 | as calculated stranded costs that could potentially be assessed against it distributors, and if so, the methodology used, we questioned TVA officials on whether they had calculated potential stranded costs for any of its distributors and obtained information on the methodology TVA used to calculate potential stranded costs for the two distributors who informed TVA of their intent to leave its system. To identify the options for recovering any potential stranded costs at TVA, we obtained and analyzed informa |
1,118 | tion from EIA, EEI, and CBO regarding the mechanisms for stranded cost recovery that have been used in states that have restructured their electricity industries and interviewed FERC officials and reviewed FERC documents pertaining to stranded cost recovery. We conducted our review from April 2000 through January 2001 in accordance with generally accepted government auditing standards. To the extent practical, we used audited financial statement data in performing our analyses, or reconciled the data we use |
1,119 | d to audited financial statements; however, we were not able to do so in all cases and we did not verify the accuracy of all the data we obtained and used in our analyses. Information on TVA’s debt reduction, deferred asset recovery and projection of the future market price of power was based on TVA’s anticipated changes to the 10-year plan at the time of our review. During the course of our work, we contacted the following organizations. Congressional Budget Office, Department of Energy’s Energy Informatio |
1,120 | n Administration, Federal Energy Regulatory Commission, Office of Management and Budget, and Tennessee Valley Authority. Moody’s Investors Service, New York, New York, and Standard & Poor’s, New York, New York. Tennessee Valley Public Power Association, Chattanooga, Tennessee. Federal Accounting Standards Advisory Board, Washington, D.C., Edison Electric Institute, Washington, D.C., and Standard & Poor’s DRI, Lexington, Massachusetts. In the states that have restructured their electricity industries, there |
1,121 | have been three commonly used mechanisms to mitigate stranded costs. These mitigation measures can be employed either before or during restructuring. Depending on the approval of state regulators, utilities have the following options: Securitization − Under securitization, state restructuring legislation authorizes a utility to receive the right to a stream of income from ratepayers, such as a competitive transition charge. The utility turns over that right to a state bank for cash, thus effectively refinan |
1,122 | cing present debt and trading a regulated income stream for a lump sum of money. The state bank issues debt (i.e., sells bonds) secured by future customer payments or the competitive transition charge on customers' bills. The benefits from securitization stem from lower financing costs − the state bonds generally are free from state tax and have a higher rating than the utility, thus reducing interest expense. Therefore, the customer surcharge required to pay off the bonds is less than the charge that would |
1,123 | be necessary to produce the same amount of money had the utility issued the bonds itself. Mitigation before restructuring − With this option, regulators allow a utility to take steps to reduce potential stranded costs before full restructuring is implemented, including allowing accelerated depreciation. To the extent a utility is permitted to mitigate potential stranded costs, customers benefit. Mandatory asset divestiture − Requiring a utility to divest itself of generating assets produces revenue that ca |
1,124 | n be used to recover potential stranded costs, potentially benefiting all customers. When a utility sells its assets, it can use the cash to reduce debt. At the same time, it no longer has to recover the cost of those assets, making its power potentially more competitive. However, it also must now purchase power and is thereby subject to market risk. In addition, proceeds from the sale are assumed to cover the book value of the asset; if not, potential stranded costs remain. Also, asset divestiture affects |
1,125 | stockholders; to the extent a utility receives cash in excess of book value, stockholders benefit. In addition to the individual named above, Richard Cambosos, Jeff Jacobson, Joseph D. Kile, Mary Merrill, Donald R. Neff, Patricia B. Petersen, and Maria Zacharias made key contributions to this report. The first copy of each GAO report is free. Additional copies of reports are $2 each. A check or money order should be made out to the Superintendent of Documents. VISA and MasterCard credit cards are accepted, |
1,126 | also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. Orders by mail: U.S. General Accounting Office P.O. Box 37050 Washington, DC 20013 Orders by visiting: Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders by phone: (202) 512-6000 fax: (202) 512-6061 TDD (202) 512-2537 Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past |
1,127 | 30 days, please call (202) 512-6000 using a touchtone phone. A recorded menu will provide information on how to obtain these lists. Web site: http://www.gao.gov/fraudnet/fraudnet.htm e-mail: [email protected] 1-800-424-5454 (automated answering system) |
1,128 | The federal government buys a myriad of goods and services from contractors. Federal agency acquisitions must be conducted in accordance with a set of statutes and regulations designed to accomplish several objectives, including full and open competition and various social and economic goals, such as encouraging small business participation. In the late 1980s and early 1990s, some became convinced that the federal procurement system had become complex, unwieldy, and overwrought with tension between the basi |
1,129 | c goals of efficiency and fairness because of a proliferation of requirements governing almost every aspect of the acquisition process. In this environment, there were concerns about the government's ability to take full advantage of the opportunities offered by the commercial marketplace. In response to these concerns, Congress enacted two major pieces of reform legislation, FASA and Clinger-Cohen, aimed at creating a more efficient and responsive federal acquisition system. Concerns remain about whether t |
1,130 | he changes brought about by acquisition reform during the 1990s have come at the expense of placing small business at a disadvantage. The federal procurement process underwent many legislative and administrative changes during the 1990s, some of which have the potential to affect the ability of small businesses to obtain federal contracts. Other changes occurred during this time, such as reductions in the amount the government spent on goods and services and the size of its acquisition workforce, which agen |
1,131 | cy officials believe have also encouraged procurement streamlining. These changes included the use of certain contract vehicles, such as MACs. In addition, reforms have modified the dollar range of contracts that are reserved for small businesses and encouraged the use of purchase cards, which are similar to corporate credit cards, for the use of certain purchases. Some organizations that represent small businesses are concerned that these changes could potentially erode the ability of small businesses to r |
1,132 | eceive federal contracts. At the same time that acquisition reform legislation was enacted, other factors changed how much the federal government bought as well as the way it buys goods and services. During the 1990s, the federal government decreased the amount spent on goods and services and downsized the acquisition workforce. The total amount of goods and services that the government purchased, including those bought with purchase cards, declined by about 7 percent from an inflation-adjusted $224 billion |
1,133 | in fiscal year 1993 to $209 billion in fiscal year 1999. Consequently, all businesses had to compete for a reduced total of federal contract expenditures. Figure 2 shows the trend in total federal procurement expenditures during this period. Federal agencies also reduced their acquisition workforce personnel from 165,739 in fiscal year 1990 to 128,649 in fiscal year 1998, or approximately 22 percent, during this time, with many of these reductions taking place at the Department of Defense (DOD). According |
1,134 | to agency officials, contracting officials have sought ways to streamline procurement practices within the applicable statutes and regulations partly as a result of these workforce reductions; this includes the use of previously authorized contracting vehicles such as blanket purchase agreements (BPA), indefinite-delivery indefinite-quantity (IDIQ) contracts, and GSA federal supply schedule contracts. Appendix I provides a description of these contract vehicles. Contract bundling is an acquisition practice |
1,135 | that received a lot of attention in the 1990s and is often associated with but, in fact, is not actually contained in acquisition reform legislation enacted during this period. Federal agencies combine existing contracts into fewer contracts as a means of streamlining as well as reducing procurement and contract administration costs, a practice generally referred to as “contract consolidation.” A subset of consolidated contracts is “bundled contracts” that the Small Business Reauthorization Act of 1997 defi |
1,136 | nes as the consolidation of two or more procurement requirements for goods or services previously provided or performed under separate, smaller contracts into a solicitation of offers for a single contract that is likely to be unsuitable for award to a small business concern due to the diversity, size, or specialized nature of the elements of the the aggregate dollar value of the anticipated award; the geographic dispersion of contract performance sites; or any combination of these three criteria. This act |
1,137 | requires each federal agency, to the maximum extent practicable, to (1) promote participation of small businesses by structuring its contracting requirements to facilitate competition by and among small businesses and (2) avoid the unnecessary and unjustified bundling of contracts that are likely to be unsuitable for small business participation as prime contractors. Federal policy has also encouraged the use of governmentwide commercial purchase cards for micropurchases. The purchase card, issued to a broa |
1,138 | d range of authorized agency personnel to acquire and pay for goods and services, is similar in nature to a corporate credit card and is the preferred method for purchases of $2,500 or less. Some organizations that represent small businesses believe that the purchase card makes it easier for government personnel to make purchases from sources other than small businesses because that may be more convenient for the purchaser. Small businesses, as a group, have received the legislatively mandated goal for fede |
1,139 | ral contract expenditures each fiscal year from 1993 to 1999. Between fiscal years 1993 and 1997, when the legislative goal was at least 20 percent, small businesses received between 24 and 25 percent of total federal contract expenditures. In both fiscal years 1998 and 1999, when the goal increased to 23 percent, small businesses received 23 percent of total federal contract expenditures. Focusing on expenditures for new contracts worth over $25,000, our analysis shows that small businesses have received b |
1,140 | etween 25 and 28 percent of these expenditures during this period. In addition, focusing on the various categories of goods and services that the federal government purchases, small businesses received a higher share in fiscal year 1999 of expenditures in new contracts for most categories of goods and services than they did in fiscal year 1993. Several contract vehicles accounted for about one quarter of all governmentwide expenditures for contracts over $25,000 in fiscal year 1999, and small businesses rec |
1,141 | eived between 26 and 55 percent of expenditures for these contract vehicles in that year. We could not determine the amount or impact of contract bundling or the impact of the increased use of government purchase cards on small businesses. Although FASA requires that contracts over $2,500 up to $100,000 generally be reserved exclusively for small businesses, we could not determine the amount of expenditures for these contracts because, in some cases, information is reported to FPDC on contracts together wit |
1,142 | h modifications. SBA and FPDC data indicate that federal agencies, as a whole, have met their annual governmentwide small business procurement goal from fiscal years 1993 to 1999. This legislative goal increased from at least 20 percent of total federal contract expenditures to 23 percent effective fiscal year 1998. Between fiscal years 1993 and 1997, when the legislative goal was at least 20 percent, small businesses received between 24 and 25 percent of total federal contract expenditures. In fiscal years |
1,143 | 1998 and 1999, when the legislative goal increased to 23 percent, small businesses received 23 percent of total federal contract expenditures. Figure 3 shows the share of total federal contract expenditures going to small businesses for this period. Under the Small Business Act, SBA has authority to prescribe a method to measure the participation of small businesses in federal procurement. In calculating the actual achievement of small business procurement goals for individual federal agencies, SBA exclude |
1,144 | s certain categories of procurements from the base, or denominator. SBA has identified several categories of procurements that are excluded from the base because SBA officials believe that small businesses do not have a reasonable opportunity to compete for them, including (1) foreign military sales; (2) procurement awarded and performed outside the United States; (3) purchases from mandatory sources of supplies as listed in the Federal Acquisition Regulation; and (4) purchases for specific programs from th |
1,145 | e Departments of State, Transportation, and the Treasury. SBA's Office of Advocacy disagrees with SBA's approach of excluding categories of procurements in establishing the base. Adding back the categories of procurement that SBA excluded, the Office of Advocacy reported that small businesses received about 21 percent of total federal procurement in fiscal year 1998 (rather than the 23 percent that SBA reported) and that, therefore, the governmentwide goal for small business procurement was not met in fisca |
1,146 | l year 1998. Some organizations that represent small businesses have expressed concerns that small businesses are at a disadvantage when competing for new federal contracts. Therefore, we analyzed the share of expenditures for new contracts going to small businesses. These data do not include modifications to existing contracts, which account for approximately half of all governmentwide procurement expenditures during this time. Our analysis of FPDS data of new contract expenditures shows that small busines |
1,147 | ses have received between 25 and 28 percent of such expenditures for contracts worth more than $25,000 between fiscal years 1993 and 1999. Figure 4 shows the results of our analysis. In calculating the share of total expenditures on new contracts going to small businesses from fiscal years 1993 to 1999, we used FPDC data on expenditures for new contracts worth more than $25,000 and did not exclude the types of expenditures that SBA excludes to calculate the small business procurement goal. As noted in figur |
1,148 | e 2, the federal government has been spending less money on goods and services since fiscal year 1993. The only categories of goods and services that experienced increases in governmentwide purchases on new contracts worth more than $25,000 between fiscal years 1993 and 1999 were real property and other services. Despite this overall decline in contract purchases, small businesses received a higher share in fiscal year 1999 than in fiscal year 1993 of expenditures on new contracts worth $25,000 or more than |
1,149 | for 5 of the 8 categories of goods and services of government procurement: equipment, research and development, architect and engineering, automatic data processing services, and other services. Figure 5 shows governmentwide trends for purchases under new contracts of goods and services worth more than $25,000 and the share of these purchases going to small businesses. We analyzed FPDS data on the governmentwide use of certain contract vehicles for contracts over $25,000, including those that became popula |
1,150 | r during the 1990s. We found that these vehicles represent a small but growing share of federal procurement expenditures. Because FPDS only captures data for some of these contract vehicles, we had to limit our analysis to MACs, IDIQs, BPAs, and GSA schedules. Expenditures for the four types of contract vehicles we analyzed represented 25 percent of federal procurement expenditures on contracts over $25,000 in fiscal year 1999, compared with 16 percent in fiscal year 1994. Small businesses received 32 perce |
1,151 | nt of expenditures for these contract vehicles in fiscal year 1999 compared with 24 percent in fiscal year 1994. For each of the four types of contract vehicles in our analysis, the share of expenditures going to small businesses was between 26 and 55 percent in fiscal year 1999, depending on the type of contract vehicle. For example, expenditures going to small businesses for MACs increased from $524 million in fiscal year 1994, or 8 percent of all expenditures for MACs, to $2 billion in fiscal year 1999, |
1,152 | or 26 percent of all expenditures for MACs. Expenditures going to small businesses for IDIQs from fiscal years 1994 to 1999 remained relatively stable, near $7 billion. The percentage of total expenditures for IDIQs going to small businesses increased from 24 percent of total expenditures for IDIQs in fiscal year 1994 to 28 percent in 1999. The small business share of GSA schedules increased from 27 percent in fiscal year 1994 to 36 percent in fiscal year 1999, from $523 million to $3 billion. Finally, the |
1,153 | small business share of BPAs fell from 97 percent in fiscal year 1994 to about 55 percent in fiscal year 1999, although the expenditures increased for small businesses from about $141 million in fiscal year 1994 to about $2 billion in fiscal year 1999. In conducting a review of contract bundling in 2000, we found that there are only limited governmentwide data on the extent of contract bundling and its actual effect on small businesses. Federal agencies do not currently report information on contract bundli |
1,154 | ng to FPDC; therefore, FPDC does not have data on this topic. Our review of consolidated contracts worth $12.4 billion at 3 procurement centers showed that the number of contractors and the contract dollars were generally reduced due to consolidation as agencies sought to streamline procurement and reduce its associated administrative costs. SBA determined that the consolidation of the contracts we reviewed did not necessarily constitute bundling. In fact, 2 of the largest consolidated contracts involved on |
1,155 | ly large businesses and the remaining 11 consolidated contracts were awarded to small businesses. We analyzed the total amount of governmentwide purchase-card expenditures for fiscal years 1993 to 1999 and found that in fiscal year 1999 such expenditures totaled $10 billion, or about 5 percent, of all federal procurement purchases. As figure 6 shows, these purchases have steadily increased since 1993, when the total amount bought with purchase cards was $527 million. These data include expenditures for all |
1,156 | purchase-card transactions, both under and over $2,500. FASA permits purchases for goods or services up to $2,500 from any qualified suppliers. Since FPDS does not collect detailed data on purchase- card expenditures, we could not determine what share of such governmentwide expenditures are going to small businesses. We requested comments on a draft of this report from the Administrator of SBA, the Director of OMB, and the Administrator of GSA. SBA's Chief Operating Officer provided written comments in conc |
1,157 | urrence with our report. She pointed out that preliminary data for fiscal year 2000 show that federal agencies are finding it more difficult to meet the legislative goal of ensuring that 23 percent of the value of federal prime contracts go to small businesses. We did not include data for fiscal year 2000 in our review because these data are preliminary. Another area of concern was that since detailed data on purchase-card expenditures are not included in the FPDS database, trend analyses of these expenditu |
1,158 | res were not included in our report. As we note in our report, purchase-card expenditures have increased, but data are not available to determine the share of these purchases going to small businesses. In addition, SBA's Chief Operating Officer made several technical comments that we have reflected in this report, as appropriate. Officials from GSA's Offices of Enterprise Development and Governmentwide Policy provided technical comments that we have addressed in this report, as appropriate. OMB had no comme |
1,159 | nts on our draft report. The comments we received from SBA are in appendix III. To identify procurement changes that could affect small business contractors, we reviewed FASA, the Clinger-Cohen Act, the Small Business Reauthorization Act of 1997, and the Federal Acquisition Regulation. We also identified other changes that occurred during the 1990s that might have an effect on small businesses by interviewing agency officials and representatives of industry associations, and by reviewing agency documents. W |
1,160 | e met with officials from GSA, SBA, OMB's Office of Federal Procurement Policy (OFPP), and the Procurement Executives Council. We also met with representatives of the U.S. Chamber of Commerce, Small Business Legislative Council, and Independent Office Products and Furniture Dealers Association. To determine the trends in federal procurement from small businesses, we analyzed data from the Federal Procurement Data Center's (FPDC) Federal Procurement Report for fiscal years 1993 through 1999 and other data we |
1,161 | requested from FPDC and SBA for those same years. FPDC administers the Federal Procurement Data System (FPDS) within GSA. Since FPDC relies on federal agencies to report their procurement information, these data are only as reliable, accurate, and complete as the agencies report. In 1998, FPDC conducted an accuracy audit and reported that the average rate of accurate reporting in the FPDS database was 96 percent. Our analyses focused on total contract expenditures for federal procurement and the percentage |
1,162 | of expenditures going to small businesses for new contracts and for certain contract vehicles. Unless otherwise noted, all expenditures were adjusted for inflation and represent constant fiscal year 1999 dollars. We conducted our review between March and October 2000 in accordance with generally accepted government auditing standards. A detailed discussion of our objectives, scope, and methodology is presented in appendix II. As agreed with your office, unless you publicly announce its contents earlier, we |
1,163 | plan no further distribution of this report for 30 days. At that point, copies of this report will be sent to appropriate congressional committees and other interested Members of Congress; the Administrator of the Small Business Administration; the Administrator of the General Services Administration; the Director of the Office of Management and Budget; and other interested parties. We will also make copies available to others on request. Staff acknowledgements are listed in appendix IV. If you or your sta |
1,164 | ff have any questions about this report, please contact me at (202) 512-8984 or Hilary Sullivan at (214) 777-5652. Indefinite-Delivery, Indefinite-Quantity Contract: This type of contract provides for an indefinite quantity, within stated limits, of goods or services during a fixed period of time. Agencies place separate task or delivery orders for individual requirements that specify the quantity and delivery terms associated with each order. The Federal Acquisition Regulation (FAR) expresses a preference |
1,165 | for multiple awards of these contracts, which allows orders to be placed using a streamlined, commercial style selection process where consideration is limited to the contract awardees. The competition between the multiple awardees is designed to encourage better prices and responses than if the agency were negotiating with a single contractor. Contractors are to be afforded a fair opportunity to be considered for award of task and delivery orders but cannot generally protest the award of such orders. Indef |
1,166 | inite-delivery, indefinite-quantity contracts include GWACs and GSA federal supply schedule contracts. Federal Supply Schedules: Under the schedule program, GSA enters into indefinite-delivery, indefinite-quantity contracts with commercial firms to provide commercial goods and services governmentwide at stated prices for given periods of time. Authorized buyers at agencies place separate orders for individual requirements that specify the quantity and delivery terms associated with each order, and the contr |
1,167 | actor delivers products or services directly to the agency. The program is designed to provide federal agencies with a simplified process for obtaining millions of commonly used commercial supplies and services at prices associated with volume buying. The program consists of single award schedules with one supplier and multiple award schedules, in which GSA awards contracts to multiple companies supplying comparable services and products, often at varying prices. When agency requirements are to be satisfied |
1,168 | through the use of multiple award schedules, the small business provisions (such as the exclusive reservation for small businesses for contracts over $2,500 up to $100,000) of the FAR do not apply. Blanket Purchase Agreement: A simplified method of filling anticipated repetitive needs for supplies or services by establishing “charge accounts” with qualified sources of supply, and may include federal supply schedule contractors. Under such an agreement, the contractor and the agency agree to contract clause |
1,169 | s applying to future orders between the parties during its term. Future orders would incorporate, by reference or attachment, clauses covering purchase limitations, authorized individuals, itemized lists of supplies or services furnished, date of delivery or shipments, billing procedures, and discounts. Under the FAR, the existence of a blanket purchase agreement does not justify purchasing from only one source or avoiding small business preferences. Our objectives were to identify (1) provisions in acquisi |
1,170 | tion reform legislation enacted in the 1990s and other changes in procurement taking place during this time that could affect small business contractors and (2) trends that might indicate possible shifts in the ability of small businesses to obtain federal contracts in the 1990s. To achieve our first objective, we analyzed several pieces of legislation enacted in the 1990s, federal acquisition regulations, governmentwide procurement data, and interviewed federal officials at several agencies. We examined th |
1,171 | e Federal Acquisition Streamlining Act of 1994 (FASA), the Clinger-Cohen Act of 1996, the Small Business Reauthorization Act of 1997, and the Federal Acquisition Regulation. We analyzed governmentwide procurement data reported by GSA's Federal Procurement Data Center (FPDC) and data on the governmentwide acquisition workforce reported by GSA's Federal Acquisition Institute in its Report on the Federal Acquisition Workforce for fiscal years 1991 and 1998. We interviewed officials at GSA, OFPP, SBA, and the P |
1,172 | rocurement Executives Council. We also interviewed representatives of the U.S. Chamber of Commerce, Small Business Legislative Council, and Independent Office Products and Furniture Dealers Association. To achieve our second objective, we gathered governmentwide data on federal procurement from FPDC and SBA for fiscal years 1993 through 1999. We could not determine the direct impact of legislative changes and other trends on small businesses because of the numerous concurrent factors and the insufficiency o |
1,173 | f governmentwide data to directly measure the effect of these changes on small business contractors. Federal agencies report procurement data to FPDC in two categories, (1) contract awards of $25,000 or less each and (2) contract awards greater than $25,000. Each agency reports summary data on contracts worth $25,000 or less to FPDC and includes information such as type of contractor and procurement methods. Agencies report greater detail on each individual contract over $25,000 or more, including type of c |
1,174 | ontract action, type of contractor, and product or service purchased. We analyzed aggregate data reported in FPDC's Federal Procurement Report for each of the years. We requested additional data from FPDC for contracts over $25,000 to include information on expenditures going to small businesses for new contracts; total expenditures going to small businesses, including for new contracts and contract modifications, for specific contract vehicles; and expenditures going to small businesses for new contracts f |
1,175 | or all products and services. The data on new contracts that FPDC provided includes expenditures on original contract actions, as opposed to expenditures on modifications to existing contracts. FPDC categorizes all federal contract expenditures into eight broad categories of products and services. According to FPDC officials, FPDS is updated constantly as federal agencies report updated procurement information. The data we received from FPDC are as of July 2000. In addition, we analyzed the summary informat |
1,176 | ion on government purchase- card transactions from the Federal Procurement Report for each year. We also collected data from SBA and FPDC on the achievement of the governmentwide federal procurement goal for small businesses. The SBA data on the achievement of this goal for fiscal years 1993 through 1997 are from The State of Small Business. Because the most recent version The State of Small Business was published in fiscal year 1997, we used FPDC data published in its annual Federal Procurement Report on t |
1,177 | he achievement of the legislative goal for fiscal years 1998 and 1999. As indicated earlier, SBA began using FPDS data to calculate the achievement of the small business legislative goal as of fiscal year 1998. Although FASA requires that contracts over $2,500 up to $100,000 be exclusively reserved for small businesses, we could not determine the amount of expenditures or share going to small businesses for these contracts because, in some cases, information is reported to FPDC on contracts commingled with |
1,178 | modifications. Unless otherwise noted, we adjusted all dollar amounts using a gross domestic product price index from the Bureau of Economic Analysis using fiscal year 1999 as the base year. We did not independently verify FPDC or SBA data. FPDC relies on agencies to report their procurement information. Therefore, data are only as reliable, accurate, and complete as the agencies report. In 1998, however, FPDC conducted an accuracy audit of some of its data elements and reported that the average rate of acc |
1,179 | urate reporting in the FPDS database was 96 percent. We performed our work at SBA headquarters, OFPP, and GSA headquarters. We conducted our review between March and October 2000 in accordance with generally accepted government auditing standards. Jason Bair, William Chatlos, James Higgins, Maria Santos, Adam Vodraska, and Wendy Wilson made key contributions to this report. The first copy of each GAO report is free. Additional copies of reports are $2 each. A check or money order should be made out to the S |
1,180 | uperintendent of Documents. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. Orders by mail: U.S. General Accounting Office P.O. Box 37050 Washington, DC 20013 Orders by visiting: Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders by phone: (202) 512-6000 fax: (202) 512-6061 TDD (202) 512-2537 Each day, GAO issues a list of newly available reports and testimo |
1,181 | ny. To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone. A recorded menu will provide information on how to obtain these lists. Web site: http://www.gao.gov/fraudnet/fraudnet.htm e-mail: [email protected] 1-800-424-5454 (automated answering system) |
1,182 | In June 1997, we reported on the results of our interviews with state WIC officials in 8 states that had unspent federal funds in fiscal year 1995 and 2 states that did not have unspent funds that year. These state officials identified a variety of reasons for having unspent federal WIC funds that were returned to the U.S. Department of Agriculture’s (USDA) Food and Nutrition Service (FNS) for reallocation. In fiscal year 1996, the states returned about $121.6 million, or about 3.3 percent, of that year’s $ |
1,183 | 3.7 billion WIC grant for reallocation to the states in the next fiscal year. Some of the reasons cited by the WIC directors for not spending all available funds related to the structure of the WIC program. For example, the federal grant is the only source of funds for the program in most states. Some of these states prohibit agency expenditures that exceed their available funding. As a result, WIC directors reported that they must be cautious not to overspend their WIC grant. Because WIC grants made to som |
1,184 | e states are so large, even a low underspending rate can result in millions of returned grant dollars. For example, in fiscal year 1995, California returned almost $16 million in unspent WIC funds, which represented about 3 percent of its $528 million federal grant. Unlike California, New York State had no unspent grant funds in fiscal year 1995. New York was one of 12 states that supplemented its federal WIC grant with state funds that year and hence did not have to be as cautious in protecting against ove |
1,185 | rspending its federal grant. Overall, the group of states that supplemented their WIC grants in fiscal year 1995 returned a smaller percentage of their combined WIC funds than did the states that did not supplement their federal grants. States also had unspent federal funds because the use of vouchers to distribute benefits made it difficult for states to determine program costs until the vouchers were redeemed and processed. Two features of the voucher distribution method can contribute to the states’ diff |
1,186 | iculty in determining program costs. First, some portion of the benefits issued as vouchers may not be used, thereby reducing projected food costs. Participants may not purchase all of the food items specified on the voucher or not redeem the voucher at all. Second, because of the time it takes to process vouchers, states may find after the end of the fiscal year that their actual food costs were lower than projected. For example, most states do not know the cost of the vouchers issued for August and Septem |
1,187 | ber benefits until after the fiscal year ends because program regulations require states to give participants 30 days to use a voucher and retailers 60 days after receiving the voucher to submit it for payment. The difficulty in projecting food costs in a timely manner can be exacerbated in some states that issue participants 3 months of vouchers at a time to reduce crowded clinic conditions. In such states, vouchers for August benefits could be provided as early as June but not submitted for payment until |
1,188 | the end of October. Other reasons for states having unspent WIC funds related to specific circumstances that affect program operations within individual states. For example, in Texas the installation of a new computer system used to certify WIC eligibility and issue WIC food vouchers contributed to the state’s having unspent funds of about $6.8 million in fiscal year 1996. According to the state WIC director, the computer installation temporarily reduced the amount of time that clinic staff had to certify a |
1,189 | nd serve new clients because they had to spend time instead learning new software and operating procedures. As a result, they were unable to certify and serve a number of eligible individuals and did not spend the associated grant funds. In Florida, a hiring freeze contributed to the state’s having unspent funds of about $7.7 million in fiscal year 1995. According to the state WIC director, although federal WIC funds were available to increase the number of WIC staff at the state and local agency level, sta |
1,190 | te programs were under a hiring freeze that affected all programs, including WIC. The hiring freeze hindered the state’s ability to hire the staff needed to serve the program’s expanding caseload. Having unspent federal WIC funds did not necessarily indicate a lack of need for program benefits. WIC directors in some states with fiscal year 1995 unspent funds reported that more eligible individuals could have been served by WIC had it not been for the reasons related to the program’s structure and/or state-s |
1,191 | pecific situations or circumstances. On the basis of our nationwide survey of randomly selected local WIC agencies, we reported in October 1997 that these agencies have implemented a variety of strategies to increase the accessibility of their clinics for working women. The most frequently cited strategies—used by every agency—are scheduling appointments instead of taking participants on a first-come, first-served basis and allowing other persons to pick up participants’ WIC vouchers. Scheduling appointment |
1,192 | s reduces participants’ waiting time at the clinic and makes more efficient use of the agency staff’s time. Allowing other persons, such as baby-sitters and family members, to pick up the food vouchers for participants can reduce the number of visits to the clinic by working women. Another strategy to increase participation by working women used by almost 90 percent of local agencies was issuing food vouchers for 2 or 3 months. As California state officials pointed out, issuing vouchers every 2 months, inst |
1,193 | ead of monthly, to participants who are not at medical risk reduces the number of visits to the clinic. Three-fourths of the local WIC agencies had some provision for lunch hour appointments, which allows some working women to take care of their visit during their lunch break. Other actions to increase WIC participation by working women included reducing the time spent at clinic visits. We estimated that about 66 percent of local WIC agencies have taken steps to expedite clinic visits for working women. For |
1,194 | example, a local agency in New York State allows working women who must return to work to go ahead of others in the clinic. The director of a local WIC agency in Pennsylvania allows working women to send in their paperwork before they visit, thereby reducing the time spent at the clinic. The Kansas state WIC agency generally requires women to participate in the program in the county where they reside, but it will allow working women to participate in the county where they work when it is more convenient fo |
1,195 | r them. Other strategies adopted by some local WIC agencies include mailing vouchers to working women under special circumstances, thereby eliminating the need for them to visit the clinic (about 60 percent of local agencies); offering extended clinic hours of operation beyond the routine workday (about 20 percent of local agencies offer early morning hours); and locating clinics at or near work sites, including various military installations (about 5 percent of local agencies). Our survey found that about |
1,196 | 76 percent of the local WIC agency directors believed that their clinics are reasonably accessible for working women. In reaching this conclusion, the directors considered their clinic’s hours of operation, the amount of time that participants wait for service, and the ease with which participants are able to get appointments. Despite the widespread use of strategies to increase accessibility, 9 percent of WIC directors believe accessibility is still a problem for working women. In our discussions with thes |
1,197 | e directors, the most frequently cited reason for rating accessibility as moderately or very difficult was the inability to operate during evenings or on Saturday because of lack of staff, staff’s resistance to working schedules beyond the routine workday, and/or the lack of safety in the area around the clinic after dark or on weekends. Our survey also identified several factors not directly related to the accessibility of clinic services that serve to limit participation by working women. The factors most |
1,198 | frequently cited related to how working women view the program. Specifically, directors reported that some working women do not participate because they (1) lose interest in the program’s benefits as their income increases, (2) perceive a stigma attached to receiving WIC benefits, or (3) think the program is limited to those women who do not work. With respect to the first issue, 65 percent of the directors reported that working women lose interest in WIC benefits as their income rises. For example, one ag |
1,199 | ency director reported that women gain a sense of pride when their income rises and they no longer want to participate in the program. Concerning the second issue, the stigma some women associate with WIC—how their participation in the program makes them appear to their friends and co-workers—is another significant factor limiting participation, according to about 57 percent of the local agency directors. Another aspect of the perceived stigma associated with WIC participation is related to the so-called “g |
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