Cheaper than Wholesale
Should schools, colleges, hospitals and other recipients of federal grants be allowed to purchase or use needed equipment from the federal government’s property supplies, or should they be required to buy these items on the market at much higher prices?
This is the question that has pitted the Nixon Administration and a powerful coalition of wholesalers and distributors, with annual sales of $300 billion, against an unorganized group of federal grant recipients in the educational, health, research and local governmental fields.
It all started in 1967 when the Johnson Administration initiated a policy permitting the General Services Administration, the government’s buying agent, to open its supply sources in fulfillment of grant programs. Also, GSA excess property could be borrowed by these recipients, under the 1967 regulation. The idea was to stretch the federal grant dollar. Professor Fairfax Leary claims it is saving taxpayers about $400 million a year.
There are other advantages to the GSA policy, which the White House has now demanded be revoked. For example, a southern city’s department of education says the policy saves on inventory tie-ups and paperwork and permits quicker purchases at about 25 percent savings. Another state department of education notes, not only savings of almost 44 percent, but more realistic, competitive bids from private suppliers. Rigged bids, collusion, and outright monopolies have long been associated with state and local government procurement practices. Private hospitals and other research and educational institutions which have to purchase diagnostic, therapeutic and scientific instruments have had similar experiences. The comparatively tiny GSA regular and surplus supply outlet helps keep corporate price gougers less greedy and a little more competitive.
Items purchased by federal grantees from GSA surplus are not frivolous; they include office supplies, school laboratory items, cleaning materials and other essentials. From spark plugs to garbage cans, some purchase prices have been as much as 50 to 65 percent lower.
The National Association of Wholesalers, and its allied trade groups, have been lobbying strenuously for the past five years to overturn government attempts to devise government procurement policies that save taxpayers’ money. In 1969 they succeeded, also through the White House, in blocking GSA from coordinating purchases with state and local governments. GSA buys directly from the manufacturers. Most state and local governments buy from wholesalers, paying over $6 billion a year in markups and commissions. This inefficient procurement pattern often benefits campaign contributors and corrupts state and local politics.
So powerful was the lobbying effort of the NAW coalition on Congress and the White House that the GSA dropped its plan in 1969, just as it is now about to implement a White House directive to close its doors to federal grant recipients. In recent weeks, some of these recipients, such as junior colleges, are mounting a protest from all over the nation. They are demanding a public hearing so that all the facts can be considered openly and not in closed-door exchanges between Budget Director, Caspar Weinberger, and trade association representatives. Financially hard-pressed local governments and vocational schools want to state their case and show how they have been able to purchase or use needed equipment that they otherwise could not have afforded. Their chief supporter in Congress has been Senator Walter Mondale of Minnesota.
Mr. Weinberger likes to talk about economy in government, but he practices waste and distorts the GSA program with misleading alarums about minor abuses. Instead of seeing that abuses are stopped, he wants to throw out the entire program. In an election year, a booming $300 billion wholesale and distribution lobby is obviously worth more to the White House than a paltry $400 million saving to the taxpayer and better equipped schools and hospitals.