GSA plans to drop several thousand contractors from its multiple award schedules and stop allowing new vendors on some schedules, reversing a decades-old policy of welcoming new participants.

Steven Kempf, commissioner of GSA’s Federal Acquisition Service, said the agency wants to eliminate the cost of managing vendors’ contracts that record little or no sales. Nearly 5,000 companies could lose their schedule contracts, according to the majority staff of the House Small Business Committee. That is almost one-third of the small companies currently on the schedules.

During the first two years on the schedule a contractor is required to book at least $25,000 in sales, and $25,000 annually after that, but the requirement has not always been enforced.

Testifying before the House committee’s contracting and workforce subcommittee on June 7, Kempf said GSA’s Demand Based Model will lead to closing on-ramps to two schedules for at least one year and blocking new offers on certain special item numbers in 14 others.

The agency will identify schedules and SINs with low sales and no prospects for growth—what Kempf called “dead ends.” GSA named typewriters, photographic equipment and trophies as examples.

Kempf said it is unfair for vendors to spend their resources getting a schedule contract when they have little or no chance of making sales. The agency projects that most of the new contracts awarded this year will have low or no sales.

The Small Business Committee staff said the schedules targeted for shutdown are 736, temporary administrative and professional staffing, and 871, professional engineering services. No new applications will be accepted for one year, and the status of the schedules will be evaluated after that.

The policy has provoked pushback from contractors. Larry Allen, a consultant with Allen Federal Business Partners, commented, “Periodic closings of your marquee procurement program should be a last option, not the first option out of the gate.”

The subcommittee chairman, Rep. Mick Mulvaney, R-SC, said some vendors use their schedule contract as a credential to prove they are seriously pursuing federal business, even if they don’t book sales through the schedules. He suggested GSA might charge the underperforming vendors a service fee to cover the cost of managing their contracts.

Kempf said administrative costs are high because 40% to 80% of vendors on some schedules had no sales. “It costs money just to leave them there,” he testified, estimating that managing each schedule contract costs $3,000 a year. GSA estimated savings of around $24 million by reducing the number of vendors. The agency collects about $375 million each year through its industrial funding fee.

Kempf said dropping underper-forming vendors and closing some on-ramps would allow GSA to speed up processing of new applications on schedules where demand is strong. In recent years the number of companies seeking schedule contracts has roughly doubled and the volume of contract modifications has tripled, according to GSA figures. The agency is warning applicants that it may take up to a year to get on the schedules.

GSA has already stopped accepting new vendors on Schedule 75 for office supplies and is encouraging agencies to buy supplies through its blanket purchase agreements. Most vendors on the BPAs are small, but Mike Tucker, testifying for the National Office Products Alliance, said thousands of other small retailers are shut out.

Despite the growing use of the BPAs, GSA found that agencies still bought more than half their office supplies from retail stores in 2009.