Although it buys in much larger volume, the U.S. government pays higher prices for typewriters, electronic calculators, cameras and other equipment than the governments or customers of discount stores pay, according to an investigation by The Washington Post.
The General Services Administration, which provides federal workers with office space and supplies, spends $1.5 billion each year to buy nearly four million different kinds of office equipment and other supplies. Instead of obtaining sealed, competitive bids and buying from the lowest bidders, GSA often negotiates discount prices from supply firms who buy the products from the manufacturers and resell them to the government.
GSA officials have said the prices they pay under this system are as low as possible and save the tax-payers substantial sums of money. But The Post has found numerous products that GSA has bought in large quantities at prices higher than those charged state governments or discount store customers!
GSA pays $612 for a Royal, single element typewriter with 16-inch carriage (Mode No. 970), for which the state of Maryland, using sealed, competitive bidding procedures, pays only $541.94.
GSA pays $228.65 for an Olivetti printing calculator (Model No. £43-PD) that costs the state of Virginia, using sealed, competitive bids, only $149.
GSA pays $56.50 for a General Electric ministure cassette tape recorder (Mode No. 3-5313) that sells for $46.90 at Reliable Home Appliances, a discount retailer with six stores throughout the Washington area.
GSA pays $16.36 for a Canon eight-digit calculator (Model No. Palmtronic 8MS) that costs $14.93 at Best Products Co., Inc. a catalogue sales store with four outlets in suburban Virginia and Maryland.
GSA pays $627 for an Olivetti electric typewriter with 13-inch carriage (Mode No. 90C) that costs the state of North Carolina, using sealed, competitive bids, $520.
GSA pays $662.06 for a 21-inch Sony color television set (Model No. KV-2101) that can be bought for $597.75 at W. Bell & Co., a discount catalogue sales store with outlets in Washington Rockville, Falls Church, Lanham, Baltimore, Atlanta and Houston.
The price paid by GSA for nearly every brand-name item checked by The Post was up to 33 percent more than prices paid for the same products by state governments or discount catalogue store customers. It is impossible, however, to determine just how much money is being wasted because GSA does not keep central records on total numbers of each brand-name item purchased.
Overall, GSA last year paid $40.8 million for electric typewriters, $31.5 million for electric calculators, $82.6 million for photographic equipment and $3.2 million for television sets.
GSA officials have not disputed The Post's findings. However, Frederick B. Bunke, who until recently was GSA's assistant commissioner in charge of procurement in its federal supply service, said the prices do not tell whole story.
Bunde said GSA may receive better warranties than those that normally come with products. But The Post's investigation found the warranties on items that GSA paid higher prices for were the same as warranties that usually are provided.
Bunke also said federal laws do not give GSA the flexibility that permits state governments to buy brand-name merchandise using competitive bids. "Ask the General Accounting Office," he said.
But Jerocne H. Stolarow, director of the procurement and acquisition division of GAO, the audit arm of Congress, said, "That's not true . . . I know of nothing in the law that would prevent GSA from going out and buying IBM, Royal, and Olivetti typewriters using "competitive, sealed bids."
He said manufacturers have applied pressure on GAO to try to alter this interpretation.
GSA's training manual for employes instructs them to pay no more for supplies than the discount prices volume customers. However, most of the firms that sell supplies to GSA have few if any other large customers and in business primarily to sell merchandise to GSA, according to one manufacturer's representative who deals with GSA.
"The first thing you do when you want to sell to GSA is to set up a company that will only sell to GSA," said the manufacturer's representative, who asked not to be identified for fear of losing his clients. "That way, you can tell GSA you don't give anyone else a better discount, and you're telling the truth."
Other suppliers, who do have other customers besides GSA, still do not always charge GSA the lowest price. According to a 1977 GAO report, five of 12 suppliers, examined by GAO failed to tell GSA about better discounts they offered other customers.
If GSA had received these discounts, the GAO said GSA would have saved $1.2 million in purchasing $11.2 million in goods from the five companies.
One supply firm that sells almost exclusively to GSA is Government. Services Inc., a Rockville company with a suite of offices on the first floor of an office building at 701 East Gude Dr. Government Market Services is GSA's major supplier of Texas Instruments calculators and also provides the agency with cassette tape recorders, dictating machines and photographic products.
Sidney Freed, the owner of Government Marketing Services, suggested his company may charge the government higher prices because it has to ship products to each federal agency that orders them. Although he would not make available his company's financial statements, Freed said it made a profit, after taxes, of only 0.7 per cent.
GSA pays Government Market $1,040.25 for a Panasonic video cassette record (Model No. PV-1000) that costs only $780 at a Reliable Home Appliances Store and is available for $895 at Chafitz Electronic Specialty Center in Rockville.
The state of North Carolina pays $66.95 for a Texas Instruments calculator (Model No. TI-5050M) that GSA buys for $89.05 from Government Marketing Services. The same calculator sells for $74.50 at W. Bell here.
A Minolta, 35-millimeter, single less reflex camera with an f/1.7 lens (Models No. SR-T 201), which costs $219.50 at W. Bell, costs GSA $246.14 from Government Marketing Services.
Asking about these price differences, Lawrence E. Fisher, the GSA official in charge of buying office products from Government Marketing Services, said, "If you deal with Bell or other catalogue showrooms, you drive over there, you pick it up; if it doesn't work, you don't go back there to get it fixed."
Fisher's aide, Larry Rothgery, who is responsible for buying calculators, said, "That's standard, for catalogue prices to be lower [than GSA prices].
"You have to pay cash [at catalogue outlets], or if you call in, they'll ask for a credit card number." He said catalogue stores may offer lower prices on some items to draw customers.
Walter Bell, president of the W. Bell firm, a publicly-traded company based in Rockville, said Bell maintains low prices by buying directly from manufacturers, keeping overhead low, and being knowledgeable about prices. Defective merchandise is replaced by W. Bell within 10 days of purchase, according to Bell. He said Bell allows customers to use cash, credit cards or a Bell charge account.
"GSA is probably very unimformed about pricing." Bell said.
Under GSA's system, any established company may supply products so long as they offer what GSA considers a suitable discount. Federal agencies may then choose among a number of brands for the each item.
For example, they can choose among Olivetti, IBM, Royal, or other electric typewriters. The choice is delegated to hundreds of department heads within each agency. They are supposed to select the lowest-priced brand that fits their employes' needs.
However, R. L. Donnelly, who sells $10 million in furniture to GSA each year as a manufacturer's representative, said, "A lot of agencies are kind to themselves and buy large quantities of products at high prices." He said federal department heads generally select products based on a salesman's pitch or the attractiveness of photographs, because they are not trained professionally to evaluate products.
By contrast, state government generally are obligated by law to pick the brand offering the lowest bid price, so long as certain standards are met.
"No city or state could get away with the GSA multiple-award system," said Donnelly, who sells to GSA both through the multiple-award system and through competitive bidding procedures. "They'd be thrown out of office. There are no safeguards on prices."
State purchasing officials interviewed by The Post said that GSA's buying methods keep prices high for all customers.
"Vendors often will not given us a better price because they fear that when they disclose the lower price to GSA, GSA will drop them, or they will have to reduce their price to GSA," said Robin J. Zee, Maryland's chief purchasing official.
"This system keeps prices up for everyone," said Willis Holding Jr. North Carolina's chief purchasing official.
GSA officials say they cannont buy brand-name products using competitive bids, as the states do, because it would be impossible to adequately describe what is wanted in written specifications. It thereby takes advantage of an exemption in federal law that otherwise requires competitive bidding.
State governments routinely write such specifications. However, these specifications - called performance specifications - describe what a product should do rather than how it is made.
When GSA seeks competitive bids in our purchasing programs, it describes how products should be made, often with disastrous results. A manufacturer responding to such a specification must make a special product just for GSA, which adds to its cost.
A July 3 Washington Post story described how one firm, Art Metal Inc., provides GSA with metal desks and filing cabinets with finishes and tops that peel off and drawers and locks that do not work.
When GSA proposed last year to switch from multiple-award to competitive bidding purchases of overhead projectors, more than 80 members of Congress wrote to protest or question the move after they had received complaints from the projector industry. The industry representatives protested that GSA's proposed specifications would not bring in brand-named products. They claimed GSA already receives the best prices through the present multiple-award system.
"They are getting the best discounts available," Kenton Pattie, vice president of the National Audio-Visual Association Inc., wrote to GSA.
Yet, GSA now pays $179.58 for a 3M Co. overhead projector (Model No. 213 Classroom BAA) that costs the state of North Carolina only $145 through competitive bidding procedures.
"Most manufacturers in America do not want to compete on the basis of price," Donelly, the manufacturer's representative, said. "They want to compete on how well they dance or whistle."