EDITOR’s NOTE: We present this Special Report as a free Premium Feature for all members at WhatTheyThink.com. Why? This report covers many issues surrounding the flow of information from the Government to the citizens of this country. We hope this story will be an important reference point for industry leaders who wish to understand GPO and the effects that reform would have on the printing industry. When we published the original news story on May 6th, we had no idea that there would be such a reaction from our members -- many of whom print for GPO. During the last several days, we have spoken with numerous people who have a vested interest in this matter. Its an emotional topic for sure. We would like to thank all who contributed their analysis and background. Please offer your feedback about this article. And if you are not a Premium Access Member, please try it today. Premium Access Members receive special reports, exclusive interviews, articles and research each day. - - - Reforming GPO: A Multi-Billion Dollar Opportunity On May 2, 2002, The Office of Management and Budget (OMB) sent a memo to federal agencies boldly announcing a new direction for the outsourcing of print. The plan would allow government agencies to bypass the Government Printing Office (GPO) and seek bids directly from printers. The Bush administration says this policy will affect over $500 million in print work. Several sources we spoke with say that the policy change actually exempts $2 to $3 billion in print work from current regulations. Bypassing GPO is a common practice and -leakage- increases each year. Some agencies already avoid GPO by seeking waivers or buying a high volume production machine like a Xerox Docutech. Mitch Daniels, Budget Director at the OMB and author of the memo, estimates that the government will save up to $70 million a year with the new program. Currently, the GPO brokers many print jobs out for federal agencies and has to charge special fees to cover their expenses. Under the new plan, private companies AND the GPO could bid for the work. The administration argues that in 1996, the Department of Justice’s Office of Legal Counsel issued an opinion concluding that Congress could not constitutionally obligate Executive Branch departments and agencies to utilize GPO. According to the memo, “To date the Executive Branch has taken no actions to introduce competition into Executive Branch printing. The time has come for the Executive Branch to liberate its agencies from a monopoly that unfairly penalizes both taxpayers and efficient would-be competitors.” So, what does this mean for printers? Isn’t more competition a good thing for the government? Is it time to pack the bags and head to Washington to cherry pick the print work you want? A Little History Ben Cooper, Executive Vice President for Public Affairs at the Printing Industries of America (PIA), says GPO is really a publisher. “The GPO is more than a printer. The office outsources most of the work to private contractors, and handles the archiving and publishing functions that printers are not usually involved in.” According to information provided to WhatTheyThink.com, the GPO has over 3,000 employees nationwide. Most are based at GPO’s central office facility in the Nation’s Capital. It has a printing plant in Denver, 20 regional and satellite procurement offices, a distribution facility in Pueblo, CO, and several bookstores. GPO operates like a private business in many ways. While it does receive funding from Congress, a majority of the work is paid for by the agencies or by the general public who purchase public documents from GPO bookstores or web site. Between 75% and 85% (depending on the source) of GPO’s printing revenue is from agencies for work procured by GPO from the private sector printing industry. GPO competitively buys products and services from thousands of private sector printers nationwide. GPO disseminates the largest volume of U.S. Government publications and information in the world: more than 30.1 million printed publications were distributed in fiscal year 2001, and there were more than 355 million downloads of Government online information from GPO Access. The official title of the head of the GPO is the "Public Printer." The agency is unique in that the Public Printer is nominated by the President, must be confirmed by the Senate, and when confirmed becomes an employee of Congress. This unusual arrangement has created difficulties for the agency in recent years. In March, President Bush announced his “intention to nominate” Bruce James as the next Public Printer of the United States. James has worked with PIA and is well respected in the printing community. PIA’s board recently endorsed his nomination with glowing praise. The new policy change should not affect the nomination process, but could lessen the Public Printer’s role in outsourcing print. A Battle on the Horizon Many industry watchers and printers who print for GPO are not really worried about the policy change. They have seen it before and Congress always prevents the directives from moving too much power away from GPO. But some say there is unprecedented momentum this time. One source points to the “perfect timing” of this reform - saying the policy change could gain more traction while Bruce James is awaiting confirmation. And with a Republican administration, there could be more propensity for change than ever before. Ben Cooper of the PIA and the industry’s lead lobbyist says many of the concerns surrounding costs have been building for some time. GPO charges a 7% premium above the cost of private printing to their agency customers. The figure increases to 14% if the lead-time is 10 or fewer days. When GPO performs the work in-house, it charges government agencies a 35% premium if the lead-time is 10 days or less. Another item pointed out in the OMB’s memo is that GPO retains all discounts (usually 5% according to OMB) for prompt payment offered by private printers, rather than passing the savings on to the government agency. Andrew Sherman, a GPO spokesman, said such a move would increase the cost of printing because agencies wouldn’t be able to negotiate the same low prices. He predicted that the proposal would increase costs by 50% because printers would spend more money chasing government contracts. He also effectively refutes the potential savings and overall statistics declared in OMB’s memo. Industry sources say the most important case “for” GPO is their publishing function as the official distributor of free information required by law. If government buyers bypass GPO, there would be less incentive for federal agencies to make sure the document is deposited into federal records. Said one industry source, “The rate of missing documents is already on the rise because employees are not using GPO and they forget to follow procedures to get the document in the public domain. The (Bush) administration will have to deal with this. This alone will derail their plan, not to mention the lack of vision clearly shown in the OMB memo.” To be fair, OMB’s memo says that more information about specific procedures will be forthcoming. Will the new policy really save the government money? The printers we spoke with who do work for GPO say there won’t be much change in pricing and therefore the only savings would be in reducing the amount GPO “marks up” to the end user. Vertis, a leading print and publishing firm based in Maryland, sells millions of dollars of print annually to the government. Jim Mattia and Bob Rudderow say GPO is similar to the postal system. “It's very easy to criticize the cost of mail delivery to a highly populated area and argue for privatization. However, there is no better, fairer or less expensive way for the mail to be delivered. GPO can be criticized too. But, it's the best way for buying printing fairly, and competitively than how these professionals (Bush administration) are presently assuring us.” Bob Neubauer, Editor of In-Plant Graphics, has written about GPO on several occasions. He told us that OMB's claims that these changes would reduce taxpayer expense are not correct. “The premiums charged by GPO for procured printing, which OMB alludes to as potential recovered costs under its proposal, would still have to be paid by agencies procuring their own printing. In fact, the fees and premiums would be even higher, as would the cost of printing, since those agencies would not have the sophisticated procurement system in place that GPO has. They could not maintain the same competition among outside printers that GPO achieves, and with reduced competition would come increased prices.” The OMB plan would torpedo GPO’s cost structure by reducing volume on a massive scale. And there appears to have been little thought, at least in the OMB memo, of these ramifications. Neubauer explains, “If carried out, this plan would inflate GPO costs for the printing it handles in-house. Half of GPO’s in-house printing is Executive Branch work, like the Federal Register. Without it, the cost of the remaining Congressional work would rise. Plus, it would be nearly impossible for a commercial printer to handle this printing, since the size of these publications can vary dramatically from day to day.” Neubauer says that such a printer would have to maintain a staff large enough to handle these big jobs, but still be able to support the staff on days when the publication runs are very small. The Fairness Factor Ben Cooper of PIA says printers generally support the existing system, because GPO ensures that printing firms throughout the country have a fair chance to compete for the government’s business. “GPO has many problems that should be addressed immediately. However, we should not reduce the fairness that is available in the current system that allows printers of all sizes to compete for printing from our government.” Neubauer agrees, “Commercial printers don't seem to want this change and more than three quarters of the printers doing GPO work are small operations who stand to lose this work if executive branch agencies take over procurement.” Other industry leaders are counseling patience. William A. Gindlesperger, Chairman and CEO of e-LYNXX Corporation, the nation's largest GPO bid solicitation service and one of the leading sellers of electronic print procurement systems, believes that there is the real possibility that more work will be outsourced to the private sector, as agencies are required to reassess their use of in-house printing and duplicating operations based upon a full accounting of all costs involved in those operations. According to Gindlesperger, "There is nothing in the OMB announcement that suggests printers will be unable to obtain bid solicitations issued directly by the agencies themselves. To the contrary, Director Daniels explicitly endorsed the use of open and competitive procedures and limiting agency in-plant operations to a minimum." Gindlesperger added that, while "it is true current executive branch regulations do not require full and open competition for most small purchases, it is also likely that the Administration would promulgate such a policy for printing" during the regulatory amendment process called for in the OMB policy memorandum. If so, then Gindlesperger believes that "not only would all printers be able to compete for these government contracts, but many agencies would probably continue using GPO as well." A Solution is Out There Government print buyers we spoke to want service. They want to physically go to a “press check.” They want a five-day turnaround time and yes, they still want to save money on the job. But the facts are clear. GPO is losing volume every year because of waivers, customer service perceptions and copier placement loopholes. A solution is out there. But any policy change must maintain fairness and equal opportunity for print jobs and not hinder the free availability of information into the public domain. Sometimes we forget that what happens in Washington always makes it back to the printer’s wallet one way or another. With all the technology and smart minds in this industry, we should be a part of the solution in PERMANENTLY fixing this multi-billion dollar opportunity. - - - Printers - Citizens, Pay Attention to GPO Reform Efforts Bob Neubauer, Editor of In-Plant Graphics Magazine I see no advantage for the printing industry in this proposal, except perhaps for very large commercial printers, who would end up with much of the work. Executive branch printing costs would certainly increase. Access to government publications would be reduced, despite the footnote in the OMB memo requiring agencies to continue making publications available to the depository library program. Already there's a high rate of documents that are not sent to the libraries as they are required to be. Many of these are jobs that were not procured through GPO. When this task is left up to the agencies, its prompt fulfillment will inevitably become a low priority. This should be a big concern to all citizens. As for creating a new plan requiring GPO to digitize these documents, keep in mind that many documents are stored in the library in paper format, not only digital. National park maps and brochures, for example, are mostly used by citizens in their paper forms. The agencies procuring the printing would still be required to have extra documents printed and then send them to the depository libraries. GPO has a lot more facts at its disposal than OMB, which reportedly did not even consult with GPO before sending its memo. I think GPO can make a clear case that putting print procurement on the shoulders of Executive Branch agencies will increase costs and harm the smaller commercial printers who rely on GPO work. Still, my GPO sources are a little unnerved by this memo, which by the very nature of its secret creation and dissemination, seems a bit sneaky. Facilities management firms employ similar tactics in the in-plant world. They sneak into an in-plant manager's boss' office, without consulting the in-plant, and convince the boss that the in-plant is losing money, without presenting any data to prove this. Often the boss makes the decision to close down the in-plant before even talking to the manager. OMB seems to have done exactly this--tried to get the first word in before talking to GPO, hoping its memo would make up a few minds before people had a chance to really look at the facts. Thanks for this opportunity. Bob Neubauer is the editor of In-Plant Graphics magazine - a NAPCO publication. He has written extensively about GPO. The magazine named GPO the top in-plant operation in the country in 1998, 1999, 2000 and 2001. He was very kind in offering his thoughts for our report. Contact Bob at [email protected] http://ipgonline.com What Does the War on Terrorism Have to Do with GPO? On May 6th - Ben Cooper, chief lobbyist for PIA told us that many on Capitol Hill would wrap the GPO debate around the “privatize everything banner” without considering all the intricate details. He was right, but Citizens Against Government Waste (CAGW) has taken it a step further by bringing the war on terrorism into the debate. As GPO reform news spread through Washington last week, CAGW went on the offensive to support the Bush plan. "Breaking up stultified government monopolies to provide better services at lower cost is exactly the right approach. The GPO, the classic bureaucratic middleman, will have to compete with private companies for government agencies' business, thereby improving service and creating cost savings," said CAGW President Tom Schatz. Their take on the small, if any savings of GPO reform? "This is the typical response of an agency that fears reform. Once the reforms are implemented, the savings will likely be substantial. Besides, whatever the final number is, in this era of battling terrorism, when resources are precious, every dollar that can be saved should be." Of course, CAGW is a well-known watchdog organization. Their entire livelihood is based on sniffing out potential budget cuts - in many cases, a noble cause. From their press release, GPO is a small part of their overall agenda. "The GPO is a good start; we hope the Post Office, Amtrak, Fannie Mae, and Freddie Mac will be next on the Bush Administration's privatization list." A Possible Solution: The Outsourcer Plan In researching this story, there were many alternatives tossed our way to the current proposal by OMB. One counter-plan was offered by a forms broker who asked that we not reveal his name. When we explained the issues to be covered in this story, he presented -- The Outsourcer Plan. He knows this example is oversimplified, overlooks major political hurdles and ignores years of experience GPO has in obtaining low prices for print. However, it is a reasonable idea that could be considered (among others) by industry and government leaders in an effort to fix the problem. He says “outsourcing is an art” and since he spent so much time thinking about this -- we felt it was an idea that warranted publishing. "The Outsourcer Plan would have GPO continue in their function of publisher, in-plant printer and archiver of the public’s information - but allow a private firm to handle the outsourcing aspect of print to private industry. "This proposal would keep “essential press capacity” for GPO to be a vibrant in-plant for timely and sensitive documents like the Federal Register or the Congressional Record. But the main role of GPO would be to manage the core activities associated with depositing information into the public domain. During the slow periods, GPO could bid on work generated by The Outsourcer to keep their presses running. "The private company who takes the new role of The Outsourcer would handle most every job that is created by government agencies. The Outsourcer would be responsible for the quality, speed and price of the product and use the same printer qualification standards set by GPO now. "Under this plan, Congress would allocate funding to GPO only for the expenses associated with archiving and printing the necessary documents. GPO’s role would be clear: archive, disseminate to the libraries, print key sensitive documents like the Congressional Record and bid on other jobs when press capacity allows. "It would work like this: A document is prepared by a buyer - sent to The Outsourcer - The Outsourcer bids the job to qualified printers - The job is printed and delivered. The Outsourcer then sends the document to the archiving department of GPO. "The Outsourcer Plan maintains the fairness and availability of government print work and allows GPO to focus on archiving information and continue printing. Most importantly, it hones in on the expense of managing the job (those mark-up charges) and brings a customer service component and free-market competition to the process. "Private contractors would bid to be The Outsourcer which right now costs government agencies between $35 and $70 million annually. (depending on your source for the numbers.) "Is it possible to manage $500 million in print for say... $20 million?"