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GPO Special Report
(This response is very detailed - about 4 printed pages. You may wish to use the feature above to print this page.)
May 15, 2002
Response from Andrew M. Sherman, Director - Office of Congressional and Public Affairs, GPO
EDITORs NOTE: Among those offering feedback to yesterdays special report - Reforming GPO: A Multi-Billion Dollar Opportunity was Andrew Sherman, Director - Office of Congressional and Public Affairs - GPO. He has commented, in great detail on many of the topics discussed in our report. Sherman writes about the ramifications of GPO reform as proposed by the Bush administration and disputes their reasoning item by item.
Also, see our comments to his response at the end of this article.
Response from Andrew M. Sherman, Director - Office of Congressional and Public Affairs, GPO
We at the GPO read your report, "Reforming GPO: A Multi-Billion Dollar Opportunity", with great interest. In the interest of a full discussion of this issue, we thought you might be interested in what GPO's views are.
First, the notion that there is a "multi-billion dollar" opportunity in changing the way GPO currently works is highly overstated. Last year, GPO procured $431.7 million in printing for executive branch agencies, and this is where the focus of the issue is. Even including GPO's in-plant printing of $173.9 million, which is primarily legislative printing, the Federal Register, passports, postal cards, and other essential products, GPO's work was not even two-thirds of a billion dollars.
Now to the issue at hand. OMB Memorandum M-02-07 proposes to devolve authority for printing executive branch documents away from GPO and to executive branch agencies themselves. Currently, section 501 of Title 44 of the United States Code requires Federal agencies of the executive branch to use GPO for their printing and printing procurement needs. The OMB memorandum proposes that the Federal Acquisition Regulation (FAR) - the rules under which executive branch agencies procure goods and services - be revised.
Presumably, a revision to the FAR would be accompanied by a period of public notice and comment under the provisions of the Administrative Procedures Act, so the policy announced in the OMB memorandum would not take effect immediately. Moreover, it is not clear how Federal agencies would behave if the proposed FAR revision is effected and the current language of 44 U.S.C. 501 remains unchanged.
The OMB memorandum echoes earlier efforts to transfer printing authority to executive branch agencies. This policy was pursued by the Reagan Administration in 1987 with a proposal to revise the FAR regarding printing. It was pursued by the Clinton Administration in 1993-94 as part of its "reinventing Government" initiative. In the former case, the FAR revision was withdrawn after Congress enacted a law requiring executive branch agencies to procure printing for their publications (including forms) through GPO. In 1994, following hearings on the issue, Congress declined to take up legislation to effect the transfer of authority.
During both of those earlier efforts, a number of issues were raised by GPO and by other parties about the potential for cost increases in Federal printing and reduced public access to Government information that would result from decentralizing Federal printing authority. What follows is a summary of those issues with respect to the current policy proposal.
Is GPO Really a "Monopoly"?
Under current law, GPO produces about 25% of all printing requisitions in-plant. About 75% of all printing requisitions sent to GPO are procured from the private sector. The vast majority of work for executive branch agencies is produced this way, including census documents, IRS forms and instructions, military publications, and a wide variety of books, reports, pamphlets, and forms.
However, it is well-established that GPO is not the sole provider of Federal Government printing, and so it hardly can be called a "monopoly." Several executive branch agencies have statutory authority to print their own publications. Many others have been authorized to operate their own printing and duplicating facilities (ostensibly to produce work for their own needs, although frequently the facilities are used to produce publications that otherwise should be sent to GPO). As a result, less than half of all Federal printing flows through GPO.
Based on OMB's recent object class analysis for all Federal printing and reproduction expenses for FY 2001, GPO's printing and binding revenues were about 47% of the total (adjusting for the apparent double-counting of GPO's procurements under "Reimbursable Obligations"). In addition, as noted above, GPO subjects 75% of all printing requirements to the highly competitive forces of the marketplace. Many contracts are established for agencies as "direct deal" contracts, providing agencies with control over the placement of printing orders.
Finally, under the law GPO cannot determine what is or is not printed. It functions only in a ministerial capacity to achieve the most economical printing and ensure that printed products are disseminated as required by Federal law. Again, these facts undercut the characterization of GPO as a "monopoly". What GPO does is provide the Government and the taxpayers with economical printing services and effective access to the information products their tax dollars were used to produce.
"Government At Its Best"
In operation for about 50 years, GPO's printing procurement program has been recognized as one of the Federal Government's most successful purchasing programs. A 1998 management audit of GPO by Booz- Allen & Hamilton, Inc., an independent consulting firm working under contract to the General Accounting Office at the direction of Congress, found "universal support" in the executive branch for the GPO's services.
"These agencies viewed this service that GPO provides as an example of 'government at its best,' and none of them felt that they wanted to or could do this function better than GPO," the report said.
As a centralized purchasing program achieving significant economies of scale, GPO's printing procurement program obtains substantial savings for the taxpayers. It procures printing openly and competitively from a master bid list of 10,000-12,000 private sector printing firms nationwide, which represent about one-quarter of the printing industry and as many as 240,000 workers. This universe of potential vendors results in intense competition for printing jobs, with resulting low costs.
A principal way that GPO achieves this kind of economy is by grouping together orders for similar products from different agencies under term contracts that are bid out to the lowest responsible, responsive bidder. In FY 2001, GPO contracted with commercial printers to ship 147,800 printing jobs and achieved a 98.2 percent on-time delivery rate.
A Broad Range of Procurement Support Services Are Covered by GPO's Surcharge.
For a surcharge of 7% (on jobs worth up to $285,715; the surcharge declines thereafter), GPO earns revenues that support its procurement program. (A maximum rush surcharge of 14% can also be charged, but was imposed on only 2.9% of all procurement job orders in FY 2001, and virtually always at the request of the ordering agency in order to move their jobs to the front of the procurement line; the rush surcharge reflects the cost of the additional effort to immediately bid rush jobs, sometimes in a matter of hours.)
No funds are appropriated by Congress to GPO to support its printing procurement program. Revenues from the surcharge cover the cost of GPO's 330 procurement personnel, who are located in Washington, DC, and in 20 regional and satellite procurement offices around the country to support the printing needs of executive branch agencies nationwide. The many Federal entities with whom GPO does business are currently represented by approximately 6,300 billing address codes in all three branches of Government, with the preponderant number in the executive branch.
GPO's 7% rate covers the cost of a wide variety of services: GPO reviews requisitions and offers suggestions for economizing; develops specifications; competes, awards, and administers contracts; performs press inspections and other on-site reviews to assure quality; performs quality control reviews utilizing a unique program that quantifies quality ranking factors that has become widely recognized throughout the industry; provides voucher examination and payment services; provides legal advice on contracting; and makes available a dispute resolution service through GPO's Board of Contract Appeals.
Buying printing is not like buying paper clips. A knowledge of printing requirements and processes is essential to ensure the acquisition of the best possible value. GPO printing contracts are developed and carried out by knowledgeable printing experts via a package of procurement support services. This package of services is highly economical. The vast majority of GPO's procured print jobs are worth $2,500 or less, yielding a surcharge of about $175 to cover all the services available to support the procurement.
For each job, whether it is worth $100 or $1 million, GPO charges a nominal processing fee of $7.50 -- that's right, just $7.50 ($15.00 for the rare rush-surcharged order). This fee helps recover procurement costs on small dollar orders. For 147,800 orders in FY 2001, this fee recovered a little over $1 million. For FY 2001, GPO generated total printing procurement revenues of $431.7 million; total surcharge revenues (including the revenues from the flat fee per procurement) were $32.5 million (not $50 million to $70 million as suggested by OMB).
From its total procurement revenues for FY 2001, GPO earned prompt payment discounts of $6.6 million (an effective rate of 1.5%, not 5% as stated by OMB). GPO is able to make prompt payments usually in 28 days or less due to its specialization in dealing with private sector printers. GPO's Revolving Fund benefits executive branch agencies by operating as a temporary funding mechanism. GPO pays the contractor promptly upon evidence of performance. The ensuing collection by GPO from the agency may sometimes take longer.
Because GPO's Revolving Fund is able to make the payment and finance the lag, there is continuity of printing services to the agency. In a decentralized system of printing, if there are delays in payments by agencies, the cost of future printing orders with contractors could increase.
Significant Cost Increases to the Taxpayers Are Likely Under OMB's Proposal.
Previous studies have indicated that decentralizing authority for printing among executive branch agencies could lead to significant cost increases in Government printing. The extent of the cost increases would vary depending on how agencies decide to handle their work.
The most significant cost increase would occur if agencies produce their printing work in their own printing and duplicating facilities. Previous studies by the General Accounting Office, the Office of Technology Assessment, the Joint Committee on Printing, and various Inspectors General have shown that it can be has much as 50% more expensive for agencies to print in-house than to procure their printing through GPO. That alone could result in an annual cost increase of $216 million over current GPO printing procurement revenues.
Make no mistake about it: the potential that agencies will pull work out of the procurement stream and produce it in their own facilities is very real under the OMB memorandum. The memorandum specifically says that executive branch agencies "may rely on agency in-house printing and duplicating operations and agency cross-servicing arrangements" albeit "only when such in-house operations and agency cross servicing arrangements offer the best combination of quality, cost, and delivery, based upon a full account of all costs [emphasis in the original].
It will be extremely difficult to police this provision: remember that currently, all agencies are required to use GPO for printing, yet GPO only sees about half of all Federal printing needs.
What authority will there be to ensure that agencies do not abuse this provision by pulling all their printing out of the procurement stream for production in-plant? It will also be difficult to use Government accounting records to "develop a full account of all costs" to prove that Government printing costs favor procurement over in-plant production. Most Federal agency accounting systems are not as sophisticated as GPO's in capturing all the costs associated with printing.
As an example, a 1995 General Accounting Office (GAO) comparison of Department of Defense (DOD) and GPO printing costs was inconclusive in large part because of GAO's "concerns about the completeness, accuracy, and reliability of Defense Printing Service's cost accounting system."
On the other hand, if agencies procure work themselves from the private sector, earlier analyses have suggested that they would be likely to pay more for their own procurement costs. Of course, agencies would be required to perform the same contract-support services that GPO provides; there is no escaping this fact, and so the savings that OMB envisions resulting from not having to pay GPO's procurement surcharge are a fantasy. Moreover, without GPO's economies of scale, agency procurement costs are likely to be substantially higher than GPO's. A real-life test has borne out this theory.
A 1997 HHS and GPO Inspector General review of the printing program of the National Institutes of Health, which has its own printing authority by law, is instructive: the review disclosed that NIH internal printing procurement costs ran between 10% and 18% of the value of procured work, more than double GPO's surcharge. This means that for every agency to maintain the same level of printing procurement support services that GPO currently provides, the taxpayers' costs will go up significantly.
Previous analyses have also indicated that the prices that agencies pay for printing itself are likely to be higher. Agencies are unlikely to maintain the same universe of competition among private sector printers that GPO achieves (10,000 - 12,000 printers). The resulting decrease in competition could result in significant price increases. Private sector firms would have to deal with procurement process established by the Federal Acquisition Regulation instead of GPO's Printing Procurement Regulation.
Decreased competition could also lead to increased opportunities for favoritism and corruption. In addition, with the loss of GPO's one-stop-shopping alternative for printing contracts, private sector printers would need to increase their costs to locate contracting opportunities among the multitude of agencies seeking vendors. They would also lose the standardization for bidding for printing jobs that currently is available through GPO, potentially increasing their paperwork costs. For large private printing firms, these costs may not impact price appreciably, but for smaller firms there could be a substantial impact. Currently, 77% of all GPO printing procurement orders are handled by small businesses.
Finally, previous testimony has suggested that the removal of executive branch printing from GPO would increase the cost of remaining GPO in-plant work. Roughly half of all GPO in-plant printing is for Congress and the other half is for agencies, primarily the Federal Register and associated products. Both have their work produced cost-effectively using the same staff and equipment. Removing executive branch work could double the cost of the remaining congressional work. Likewise for the cost of executive branch work that is removed.
Other Negative Impacts on Government Printing Are Likely.
Earlier analyses have acknowledged that there could be other impacts on Government printing, or negative externalities, under a system of decentralized printing authority. GPO would no longer be able to apply uniform standards of print quality to Government work. As a result, it would be difficult to ensure standardization of quality government wide, leading to problems in contract disputes between vendors and agencies. GPO would be unable to monitor and enforce the consistent application of requirements for the use of recycled paper, alkaline and permanent papers, and vegetable oil-based printing inks, all required by law.
With the prospect of reduced printing jobs flowing to the private sector, or increased costs for those jobs, the financial stability of many private sector printing firms could be jeopardized. GPO's employees would also be impacted.
Public Access Could be Severely Impaired.
More important than the effects on the cost of printing would be the impact of decentralizing printing authority on public access to Government information. All earlier discussions of this issue have focused heavily on the problems that would arise from breaking the efficient link between production and distribution of Government documents that currently exists in GPO. Without this link, the public's access to Government publications and information would be significantly impaired.
This link currently serves as the source of publications for GPO's Federal Depository Library Program (FDLP), which GPO operates in partnership with approximately 1,300 academic, public, law, and other libraries nationwide, and which serves millions of citizens every year. Also impacted would be GPO's cataloging and indexing program, statutory distribution program, and international exchange program, as well as GPO's Internet information service, GPO Access (www.gpo.gov/gpoaccess).
These programs are funded by legislative branch appropriations. Some observers have suggested that decentralizing printing authority to executive agencies would effectively transfer the responsibility for ensuring public access to Government information from the legislative branch, where this responsibility resides closest to the elected representatives of the people, to the executive branch.
A footnote to OMB's memorandum addresses how agencies are to discharge their documents distribution responsibilities. They would still be required to provide publications for these distribution programs, as they currently are under section 1903 of Title 44. However, there is evidence that compliance rates would be low.
Publications that belong in the FDLP and related programs but are not included are called "fugitive documents." Already, the rate of fugitive documents is high: prior estimates have placed it in the neighborhood of 50%, which corresponds roughly to the amount of Federal printing not coming through GPO. With the decentralization of printing authority to Federal agencies, the rate of fugitive documents would be likely to increase. A 1998 HHS Inspector General review of NIH's publications program found that 78%of NIH's publications qualified as fugitive documents.
The IG's report said: "NIH did not always provide copies of printed publications to GPO for distribution to [depository libraries], or provide single copies to GPO for [cataloging and indexing]...By NIH not providing copies of publications to GPO for FDLP distribution, depository libraries, and the public who use them, do not have ready access to documents to which they are entitled, that were being printed with taxpayer money..."
While GPO's distribution programs are increasingly electronic, print, microfiche, and CD-ROM products continue to play an important role in providing public access to Government information. There is still a substantial amount of Government information for which no reliable online alternative exists, and problems with ensuring permanence and other issues are still present for many online products. In FY 2001, GPO distributed 5.9 million copies of approximately 14,700 tangible titles to depository libraries.
GPO achieves important economies of scale in the distribution of tangible products by combining multiple products from different agencies in shipments to the libraries. For approximately thousands of Federal entities to ship nearly 15,000 products annually to 1,300 libraries in an organized, cohesive system could be expensive, if possible at all.
The success of GPO Access, which makes available nearly 225,000 Government information titles, and from which the public retrieves more than 31 million documents per month, is dependent in part on the centralized system established by Title 44. GPO uses that system to monitor for new electronic products which can either be loaded on GPO's servers or to which GPO can link. Without it, the current level of comprehensive access would likely be diminished.
Another development that could emerge is the proliferation of alternative publishing agreements that impede public access. Some agencies have already pioneered agreements that turn over copyrights for taxpayer-subsidized information to private sector information industry companies -- not necessarily printing companies -- in exchange for the costs of printing. With GPO as the central printing and distribution source, these developments can be monitored and addressed as they arise. Without GPO, there would be little to prevent agencies from engaging in these practices, resulting not only in lost opportunities for printing contracts but impaired public access to taxpayer-subsidized information.
For all of the above reasons, we at the GPO believe that the system proposed by the OMB memorandum will result in higher costs to the taxpayer, reduced printing contract opportunities to the small businesses that dominate the printing industry, and impaired public access to taxpayer-subsidized information produced by the Government.
As the review of the OMB's memorandum progresses through the executive and the legislative branches of Government, GPO will further detail its concerns about the future direction of Government printing policy.
Andrew M. Sherman
Office of Congressional and Public Affairs
WTT: For the record, our report included comments Sherman recently made to the press about GPOs position. We felt GPOs views on this topic were well represented - especially considering that many sources we quoted stood with GPO on most key points.
Sherman disputes our use of multi-billion dollar opportunity in describing GPO reform. Based on several very qualified sources, we believe the total value of print generated by the Federal Government that could be included in GPO reform is $2 - $3 billion. This includes the current $600 million in print produced/outsourced by GPO now PLUS the amount they never see from agencies that bypass GPO by seeking waivers or buying high volume production machines for use in-house.
Even so... its a lot of money and still presents an "industry opportunity." We are very pleased to have published his letter and thank Mr. Sherman for further educating our members and the industry about this matter. WTT
Please offer your feedback on Mr. Sherman's comments.
In case you missed yesterdays report, see it now.
- GPO History
- A Battle on the Horizon
- Will the new policy really save the government money?
- The Fairness Factor
- Special comments by William A. Gindlesperger, Chairman and CEO of e-LYNXX Corporation and Ben Cooper, Executive Vice President for Public Affairs at Printing Industries of America
- And a list of the top 50 printers in America doing work for GPO
The Special Report includes 3 additional articles.
1) What Does the War on Terrorism Have to Do with GPO?
2) A Possible Solution: The Outsourcer Plan and
3) Printers - Citizens, Pay Attention to GPO Reform Efforts - a special take by Bob Neubauer, editor of NAPCO's In-Plant Graphics magazine.