To the General Services Administration, it looked like a way to cut costs.

To the companies that sell products to the government, it looked like a way to cut many of them out of the market.

Now, more than a year after the GSA instituted a new system for buying some of its annual $12 billion worth of office supplies and furnishings, it looks like the businesses were right. And now other agencies, sympathetic congressmen and the vendors themselves are upset.

In the past, the GSA generally negotiated contracts with several vendors to sell products to the government at prices that matched the firms' lowest wholesale price.

But in September 1983, the GSA introduced "color banding" as a way to spur competition. Similar products were listed in a booklet and graded by price, but not by quality. Pages banded with green, for instance, listed products at the lowest price, while those banded with red listed the most expensive.

Because procurement officials had to fill out more forms and seek the approval of higher officials to buy any but the least expensive products, the GSA said it expected that businesses would lower prices to qualify for the "green band" the next time their contracts were negotiated.

But industry officials argued that the system would force agencies to buy cheap products that might not meet their needs. They also feared that the GSA would look at the range of prices and decide to contract only with companies on the green band and eventually contract with only one vendor.

Their fears appear to have been borne out.

In the past year, the GSA has switched 10 product lines from systems in which many vendors had contracts to a contract with a single firm. And, of the four product lines converted to the banding system, one -- desk-top calculators -- was shifted to a system in which contracts were awarded to individual vendors who would provide a class of calculator.

"We cannot say we didn't expect this, because we did," said Arthur Caulfield, coordinator for the Coalition for Multiple Award Contracts. "We didn't expect that it would happen so quickly."

GSA officials say the savings they have achieved through banding are enormous, ranging from 30 to 40 percent less than the already low wholesale prices. When a contract is then awarded to a single vendor, they say, they can save another 20 to 30 percent, based on their experience so far with the calculators.

Yvonne Kidd, executive director of the Coalition for Common Sense in Government Procurement, said the GSA disregards the fact that the available products don't meet the needs of all agencies.

"The single-award system is not better than the multiple-award system because, in the end, the taxpayer is paying more for the product," Kidd said. She pointed out that under the multiple-award system, vendors can reduce their prices at any time; under the single-award system, the vendor's price is fixed.

Agencies can, however, purchase from other vendors if they can get a better price than the price the GSA negotiated.

Kidd added that studies have shown that the GSA will spend thousands of additional dollars drawing up the specifications for products that will be purchased under contracts with single vendors.

Under the multiple-award and color-banding systems, the agency didn't issue specifications since it relied on products that were commercially available.

Speaking for the GSA, Becky Rhodes acknowledged that writing the specifications for a single-award contract can take from two months to a year. "You just don't all of a sudden say you want a coffee cup," Rhodes said. "That takes specifications."

E. Alex Pais, a regional sales manager for Wright Line Inc., a manufacturer of furniture for automated data processing equipment, said that if agencies that already have certain kinds of equipment are told that "they will all have to buy a particular kind of ADP furniture, you're going to end up with a mishmash of products that don't fit or work well together."

Pais said that when several vendors have contracts, "we have to sell features and benefits -- it's a highly competitive business." But under single awards, he said, agencies can purchase equipment only from the company the GSA picked.

Rep. Frank Horton of New York, ranking Republican on the House Government Operations Committee, said earlier this year that, despite competitive bids for single-award contracts, the government risks paying more than necessary for items in competitive and evolutionary markets like copiers.

L.W. Giles Jr., director of the Navy's policy management division, said in a letter to the GSA that its new requirement to purchase a certain kind of office furniture from one vendor will "likely result in a mismatched collection of items of questionable quality, utility and flexibility."

But Roger Daniero, deputy assistant administrator of GSA's office of Federal Supply and Services, responded, "There's always someone who wants to complain. We're doing what's right, what makes the most sense economically."

"The easiest possible way for GSA to please everyone is to leave the multiple awards schedule alone -- don't do color banding, don't do conversions" to single awards, he added. "But that's not in the government's best interest."

One Defense Department procurement official, who asked not to be named, said GSA's ideas have merit but need to be fine-tuned.

"Their problem is, at presentations, they talk at people who have to buy the products instead of with them to see if it will meet our needs," the DOD official said. "When they make a single award, we're straitjacketed by their effort to help and protect the least sophisticated user in the system."

"The point is," Kidd said, "we don't feel that GSA is capable of determining the needs of all the agencies around the country. That's the strength of the multiple award system -- it allows users to see what will fit their needs for the lowest price."