State procurement is a tough nut to crack. It's too large to get your arms around, and it's hard to picture clearly standing as it does in the shadow of its high profile cousin, federal government contracting.
The regulations implementing the state procurement provisions of the E-Government Act of 2002 tantalize us with the enormity of this market and challenge us with its complexity: 50 states, 3,139 counties, 19,365 incorporated municipalities, 30,386 subdivisions, 3,200 public housing authorities, 14,178 school districts, 1,625 public educational institutions, and 550 Indian tribal governments.
But how much do these state governments really buy? Can a vendor use its GSA Schedule contractor to sell to states? If not, does it help to have a GSA Schedule contract anyway? Not easy questions to answer, and because there is no one source to turn to, we'll approach it from several angles to piece this puzzle together.
Figures on state procurement are hard to come by in large part because state governments are not required to report their procurements in a database corresponding to the federal procurement data system. We can, however, extrapolate and interpolate, and see where it gets us.
According to the California Department of General Services Web site, the state of California bought around $4 billion worth of goods and services in 2003. Since California has a population of 35 million, or 12 percent of the U.S. population, the states should procure roughly $33 billion in goods and services combined. I think that number is low, since the California number probably reflects only major state procurements.
We also know that the Department of Homeland Security is allocating approximately $4 billion to state governments for security goods and services. While the actual disbursement of this money has lagged far behind its political hype, we know that money is flowing to state governments over time to deal with security matters. Adding up what we know, and throwing in a guestimate of the procurements that are not readily tracked, we can surmise the annual total state, county, city, municipal and local government at about $100 billion, give or take a couple kopeks.
You don't need a special contract vehicle to sell to state governments -- it just makes it easier on the customer if you have an available contract vehicle. And making it easy on the customer is often the deciding factor in who gets the order.
To establish standing contract vehicles, states are increasingly trying to "piggyback" on GSA Schedule contracts. A leader in this area was California with its California Multiple Award Schedule (CMAS) contract, which takes a vendor's GSA Schedule contract, adds a layer of California terms and conditions, and gives the contractor the opportunity to sell its commercial items to California state and local government agencies.
This is no small market; if California were a free-standing, sovereign country, it would have the fifth largest Gross Domestic Product in the world. Other states going the piggyback Schedule route include Texas, Louisiana, and Ohio.
Some states, such as New York, don't have a true MAS contract program like California and Texas. Instead, New York often uses prices found in other competitively negotiated contracts. This is done on a procurement-by-procurement basis, and apparently these contracts are not available for use by other New York agencies on a regular basis.
As the example of New York suggests, it is common practice for state governments to ask if a vendor has a competitively price contract for the items solicited, and the easiest, neatest example is a GSA Schedule contract. States are free to use the GSA Schedule contract as a comparison or ceiling price on the state procurement and often do so. Moreover, GSA rarely looks at an offeror's pricing to state governments when negotiating a fair and reasonable GSA Schedule contract price, so it's not uncommon for a state to insist on a price equal to or lower than the benchmark GSA Schedule contract price.
Pursuant to the E-Government Act of 2002, the GSA IT Schedule contract was opened up to state governments to enable them to buy the IT equipment needed to combat terrorism. According to GSA, approximately 1,100 GSA IT Schedule contractors are now participating in the GSA IT Schedule Cooperative Purchasing program.
Cooperative purchasing has two definitions. One is the states' use of federal government contracts, such as the GSA IT Schedule Cooperative Purchasing program. The second, earlier definition is state or local governments banding together to get better deals for combined purchasing power. For many years, states have been using their own cooperative purchasing programs, and there are now hundreds of state and local agencies that use these programs for various products and services.
GSA estimates sales to states under the GSA IT Schedule to be anywhere from $10 million to $32 million for the first quarter of FY 2004. They numbers are fuzzy because many GSA Schedule vendors are incorrectly reporting sales under this new program.
In addition, Section 803 of the Defense Authorization Act of 2004, once implemented, will permit either the Department of Defense or the DHS to establish programs giving state governments access to GSA Schedule contracts to procure products and services "for the purpose of preventing, detecting, identifying, deterring, or recovering from acts of terrorism." Currently, under the National Defense Authorization Act of 1994, law enforcement agencies may purchase items related to counter-drug activities through GSA Schedule contracts.
