oversight

Need To Reevaluate Packing Specifications for Cabinets, Lockers, and Wardrobes

Published by the Government Accountability Office on 1971-02-19.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

,




    Need To Reevaluate Packing
    Specifications For’ Cabinets,
    Lockers, And Wardrobes              6-760817




    General   Serwces   Admmrstratlon




    BY THE COMPTROLLER GENERAL
    OF THE UNITED STATES


                                        19x371
                   COMPTROLLER       GENERAL       OF   THE       UNITED      STATES
                                   WASHINGTON       0 C       20548




B- 160 817




To the      President          of the Senate      and the
Speaker       of the       House     of Representatives

       This   1s our report     on the need for the General        Ser-
vices Admmlstratlon        to reevaluate   packing  speclflcatlons
for cabmets,      lockers,   and wardrobes

           Our     review   was made  pursuant  to the Budget                              and Ac-
countmg          Act,   1921 (31 U S C 53), and the Accounting                                and
Auditing         Act of 1950 (31 U S C 67)

       Copies    of this          report         are being   sent to the &rector,
Offlce  of Management                and        Budget,   and to the Admmlstrator
of General    Services




                                                                           Comptroller      General
                                                                           of the United    States




                        - 50TH    ANNIVERSARY                  1921-       1971
COMPTROLLERGENERAL'S                                NEED TO REEVALUATE PACKING SPECIFICATIONS
REPORT TO THE CONGRESS                              FOR CABINETS,     LOCKERS, AND WARDROBES
                                                    General  Services    Admlnlstratlon B-160817


DIGEST
---s-n


WHY THE REVIEW WASMADE

         The General     Services      Admlnistratlon          (GSA), in provldlng         supplies         to
         Government    agencies       and other       authorized     recipients,       buys 48,000          differ-
         ent items    and stocks        them In its nationwide            system    of warehouses.
         Almost   all  items     require     some degree         of packing      so that   they will          reach
         GSA's customers       In suitable         condltlon        The cost of packing           adds      to the
         cost of the item

         GSA, beginnIng        in 1966, negotiated          amendments    to procurement     contracts
         for storage      cabinets,     clothing     lockers,      and wardrobes    to reduce     the
         damages to such items          during   shipment       and storage      The amendments        es-
         tabllshed     more costly      packing   speclf?catlons            This revJew was made to
         consider    whether      the revlslon     of the speclflcatlons         was reasonable        and
         resulted    in the most economical            packing    method.


FINDINGS AND CONCLUSIONS

         The revised      speclflcatlons          provided      for more elaborate            packing      than the
         General     Accounting       Office    (GAO) considers         necessary      and     resulted       In ad-
         dltlonal     contract       costs of $1 5 million--an             increase      of    12 percent--
         during    the first       14 months      that    the specifications          were     In use.        For
         subsequent      periods      through     June 30, 1970, GAO was unable                  to determine
         what portion       of the $14 4 mllllon              of contract      costs for        cabinets,
         lockers,     and wardrobes          was attributable         to the revised          specifications,
         however,     GAO believes         that   it was substantial              (Seepp          7and12)

         GSA had not made a cost-benefit         analysis  to determine   that  the added
         costs of the new packing    specifications       would be offset    by reduced
         damages and other benefits         (See P 7 r

         GSA surveyed        1ts warehouses     shortly       before    the speclflcatlons         were re-
         vised     and found that      the acqulsltlon         cost of damaged cabinets,             lockers,
         and wardrobes         on hand at that      time was $24,156.           The slgnlflcance           of
         the damages was not establlshed,               since      apparently     no comparison        was
         made between the cost of the damaged items                      and the total      cost of the
         cabinets,      lockers,     and wardrobes      received       during   the period      that     the
         damaged items        were accumulated          The survey         did not lndlcate       the es-
         timated      costs to repair      or replace       the damaged items          or deduct     the

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                                                                             FEB.19,1971
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    amount of damages for which        carriers            and/or   suppliers,   rather   than GSA,
    were liable   (See P 9 )
     Most of the damaged items revealed by the survey and by an lnspectlon
     of warehouse stocks made after the revlslon      of the speclflcatlons    had
     been manufactured    by one supplier  whose workmanship In packing was
     crltlclzed    by GSA inspectors  both before and after the specifications
     were revised.     (See pp 9 and 14 )

     The consensus of manufacturers      and retailers    of commercial cabinets,
     lockers,  and wardrobes visited     by GAO was that the GSA packing requlre-
     ments were not economically     practical.      (See P 15 )


RECO&lMENDA!l'IONS
                 OR SUGGESTIONS
     GSA should reevaluate     its specifications  for the packing of storage
     cab7netss clothing    lockers3 and wardrobes.     (See p. 20 )


AGENCYACTIONS AND UNRESOLVEDISSUES
                                                                                                      I
     GSA did not comment on the GAO recommendation or Indicate                that It would           ;
     make the recommended reevaluation.            GSA has stated that 1-t agrees to                  I
     the merits of the cost-benefit         approach and uses it in the development                   1
     or revision    of speclflcatlons      when the circumstances      permit      In the             I
     case of the revised specifications          for cabinets,   lockers,     and wardrobes,          I
     GSA stated that the potential         damage and loss--If     corrective     action had          /
     been delayed--outwelghed         any advantages that would have resulted          from           1
     a cost-benefit    study       (See app I.)                                                       I
                                                                                                      I
     GSA questioned    the comparison of its packing containers     with commercial                   1
     containers     GSA stated that its warehouses handled greater volumes and                        I
     more types of stock than were handled by manufacturers        and retailers.                     I
     GAO believes   that the hazards to which items are subJected during                              I
     shipment and storage generally    are not dependent on the volume or types                       ;
     of items handled      GAO points out that two large retailers      visited                       I
     during the review handle many items other than furniture           ISee P* 20 )                  i
     GSA agreed that costs increased by $1 5 million        under the amended con-
     tracts    GSA said, however, that the increases could not be proJected
     because In subsequent periods contract costs were reduced as a result
     of an increase in the volumes purchased.        GAO believes   that the revised
     packing speclflcat-tons  have resulted    in increased labor and materials
     costs to the contractors     and in higher prices than would have resulted
     under the former speclflcatlons,     even though the amount of the tn-
     creases cannot be determined       (See PP* 19 and 20.)




                                              2
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1       MATTERSFOR CONSIDERATIONBY THE CONGRESS
                 This report IS being submitted to the Congress    because of the signifi-
                 cant savings that could result from a reduction    in the packing requlre-
I                ments for cabinets,  lockers, and wardrobes



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                                                3
                             Contents
                             ------a-
                                                                      Page

DIGEST                                                                  1

CHAPTER

   1        INTRODUCTION                                                4
                GSA packing policies          and organizational
                  responsibility                                        5

   2        NEED TO REEVALUATE PACKING SPECIFICATIONS
            FOR CABINETS, LOCKERS, AND WARDROBES                        7
                Revision      to packing    specifications   prior
                   to September 1966                                    7
                September 1966 revision           to packing spec-
                   ifications                                           9
                Further      packing problems                          14
                Comparison of GSA's packing containers
                  with commercial        containers                    15
                Agency comments                                        19
                Recommendation                                         20

   3        SCOPE OF REVIEW                                            22

APPENDIX

        I   Letter   dated September 15, 1970, from the
               Administrator   of General Services to the
               General Accounting   Office                             25

   II       Principal      offlcrals     of the General Services
               Admlnistratlon        responsible    for the active-
             *ties    discussed      in this report                    26

                              ABBREVIATIONS

GAO         General   Accounting     Office

GSA         General   Services     Administration
COMPTROLLERGENERAL'S                  NEED TO REEVALUATE PACKING SPECIFICATIONS
REPORTTO THE CONGRESS                 FOR CABINETS, LOCKERS, AND WARDROBES
                                      General Services Admln~strat~on B-160817


DIGEST
------

WHYTflE REVIEW WASMADE
     The General Services Admlnlstratlon      (GSA), in provldlng    supplies to
     Government agencges and other authorized       recipients,   buys 48,000 dlffer-
     ent items and stocks them in its nationwide        system of warehouses.
     Almost all items require    some degree of packing so that they will reach
     GSA's customers in suitable    condition     The cost of packing adds to the
     cost of the item

     GSA, beginning    in 1966, negotiated     amendments to procurement contracts
     for storage cabinets,     clothing   lockers,  and wardrobes to reduce the
     damages to such items during shipment and storage             The amendments es-
     tablished    more costly packing speclflcatlons.         This review was made to
     consider whether the- r&lslon      oi the speclflcatlons      was reasonable and
     resulted   in the most economical packing method.


FINDINGS AND CONCLUSIONS
     The revised speclflcatlons      provided   for more elaborate    packing than the
     General Accounting Office (GAO) considers necessary and resulted            in ad-
     ditional   contract costs of $1 5 million--an       increase of 12 percent--
     during the first    14 months that the specifications        were in use. For
     subsequent periods through June 30, 1970, GAO was unable to determine
     what portion of the $14 4 million        of contract costs for cabinets,
     lockers3 and wardrobes was attributable        to the revised specifications,
     however, GAO believes      that it was substantial        (See PP* 7 and 12.)
     GSA had not made a cost-benefit    analysis to determine that the added
     costs of the new packing speclflcatlons     would be offset by reduced
     damages and other benefits      (See p 7.1
     GSA surveyed its warehouses shortly      before the specifications      were re-
     vised and found that the acqulsltlon      cost of damaged cabinets,       lockers,
     and wardrobes on hand at that time was $24,156         The significance       of
     the damages was not established,     since apparently   no comparison was
     made between the cost of the damaged items and the total cost of the
     cabinets,   lockers, and wardrobes received     during the period that the
     damaged items were accumulated.      The survey did not indicate       the es-
     timated costs to repair   or replace the damaged items or deduct the
    amount of     damages for      which     carriers     and/or         suppliers,    rather     than    GSA,
    were liable        (See P      9 )

    Most of the damaged items        revealed    by the survey      and by an Inspection
    of warehouse     stocks   made after     the revlslon    of the specifications          had
    been manufactured       by one supplier     whose workmanship        in packing     was
    criticized    by GSA -inspectors      both before     and after    the speclflcatlons
    were revised        (See pp 9 and 14 )

    The consensus   of manufacturers         and retailers      of commercial    cabinets,
    lockers,   and wardrobes    v~slted      by GAO was that       the GSA packing     requlre-
    ments were not economically         practical          (See P 15 )


RECOMMENDATIONS
              OR SUGGESTIONS
    GSA should      reevaluate      its    speclflcatlons          for    the    packing of     storage
    cablnets$     clothing     lockers,       and wardrobes.             (See    p. 20 )


AGENCYACTIONS AND UNRESOLVEDISSUES
    GSA did not comment on the GAO recommendation                   or indicate       that it would
    make the recommended           reevaluation         GSA has stated     that    1-t agrees to
    the merits     of the cost-benefit           approach   and uses it in the development
    or revlslon      of speclflcatlons          when the circumstances        permit       In the
    case of the revised         speclflcatlons        for cabinets,    lockers,       and wardrobes,
    GSA stated     that   the potential         damage and loss--if      corrective       action      had
    been delayed--outweighed              any advantages    that would have resulted             from
    a cost-benefit      study         (See wp       1 1

    GSA questioned         the comparison      of Its packing      containers        with commercial
    containers          GSA stated     that  Its warehouses      handled       greater     volumes   and
    more types of stock than were handled                by manufacturers           and retailers
    GAO believes        that  the hazards      to which Items      are subJected         during
    shipment      and storage      generally     are not dependent       on the volume or types
    of items      handled       GAO points     out that    two large     retailers       visited
    during     the review      handle    many items   other   than furniture             (See PO 20 )

    GSA agreed    that      costs increased         by $1 5 mllllon        under the amended con-
    tracts      GSA said,       however,     that     the Increases       could     not be projected
    because   In subsequent          periods     contract    costs were reduced             as a result
    of an increase        in the volumes        purchased         GAO believes         that   the revised
    packing   speclflcatlons            have resulted      in increased        labor     and materials
    costs to the contractors              and in higher      prices     than would have resulted
    under the former         speclflcatlons,          even though     the amount of the in-
    creases   cannot      be determtned            (See PP 19 and 20 )




                                                2
MATTERSFOR COiVSlDERATIONBY TRE CONGRESS
    This report IS being submltted to the Congress    because of the slgnlfl-
    cant savings that could result from a reduction    in the packing require-
    ments for cabinets,  lockers, and wardrobes.
                                   CHAPTER1

                                INTRODUCTION

        The General Accounting    Offlce has reviewed         the actions
taken by the General Services Administration              (GSA) to re-
duce the damages to certain       types of furniture        during   ship-
ment and storage.      The review was concerned primarily            with
revisions     to the packing specifications         for storage cabinets,
clothing    lockers,  and wardrobes;     it should not be considered
as an evaluation     of GSA's packing      specifications       for other
items.

      The scope of our review is shown on page 22.                      The prin-
cipal  officials of GSA responsible   for the activities                   dis-
cussed in this report  are listed   in appendix  II.

        The Federal     Property   and Administrative           Services Act
of 1949, as amended (40 U.S.C. 4711, made GSA primarily                        re-
sponsible     for providing      an efficient       and economical        system
for procurement        and supply of personal          property     and nonper-
sonal services       needed by Federal         agencies and Government-
related    organizations.        The Federal       Supply Service operates
GSA's supply system, under which supplies                  are made available
through    (1) a stores system, (2) Federal               Supply Schedule
contracts,      and (3) nonstores       direct    delivery      operations.
        The stores system was established          with the obJecti've
of providing         agencies with supplies    having a repetitive        de-
mand at prices lower than those that the agencies could
individually         obtain  from suppliers.    GSA stocks supplies
in 16 warehouses and 10 annexes located              throughout    the
United      States and publishes      a Stores Stock Catalog which
lists    the items available.        As of June 30, 1970, 48,000 line
items were included          in the stores system with a warehouse
inventory       valued at $253 million.       During fiscal     year 1970
sales from warehouse stocks amounted to $494 million                  and
direct      shipments of stores items from contractors           to agen-
cies amounted to $34 million.

        Many   of the supplies   needed by agencies cannot be eco-
nomically      supplied  through   the stores system.       When such
items are      available   from suppliers     through their   own dis-
tribution      systems, GSA arranges      for agencies to procure

                                         4
their  requirements     through   IndefInite       quantity   contracts
(Schedule    contracts)    that are published        by GSA in Federal
Supply Schedules.       Under such contracts,         agencies may order
their  requirements     directly    from contractors        at the prear-
ranged terms, conditions,        and prices.        Schedule contracts
cover more than 700,000 items, and purchases under such con-
tracts   amounted to $1,400 million          during fiscal     year 1970.

        GSA's nonstores     direct    delivery       operations      include
(1) procurement        of agencies'    requirements         that are In ex-
cess of the maximum order limitations                 of Schedule contracts,
(2) admlnistratlon        of contracts      under which agencies place
orders through GSA for direct            delivery,       and (3) assistance
to agencies      that do not have adequate capabilities                   for pro-
curing    items that are not available             from stores stock or
Schedule contractors.          Purchases through nonstores                direct
delivery     operations    amounted to $293 million             during      fiscal
year 1970.

GSA PACKING POLICIES AND
ORGANIZATIONAL RESPONSIBILITY

        GSA's policy      states that all supplies         shall be packed
to the degree required           to prevent  deterioration        or damage
due to the hazards to which they may be subJected                    during
shipment and storage.            GSA defines   packing as the exterior
shipping     containers;      the assembly of items or packages in
the containers;        and the necessary     blocking,      bracing,      cush-
ioning,    and weather proofing.

       The primary   responslbillty          for GSA's packing activities
1s divided    between the Office          of Standards  and Quality     Con-
trol   and the Office    of Supply        Distribution,  as described
below.

Office   of Standards  and Quality            Control
(Packaging   and Packing Branch)

       --Develops     basic    packing    specifications.

       --Maintains   knowledge        of new developments    in packing
          and ensures effective         appllcatlon   to supply programs.

       --Makes analyses   and provides    technical            advice    and as-
          sistance on packaging   problems.

                                          5
Office   of Supply Dlstrlbution
(Preservation    and Packing Operations        Branch)

     --Provides       advlce on the technrcalbaspects         of packrng,
        outloadlng       blocking and bracing,   unrtrzatron,      and
        contalnerizatlon.

     --Administers   programs for the detectron             and reporting
        of packing defrciencles,        evaluates    reported     lnade-
        quate or excessive     practices,      and lnltlates      correc-   ,
        tive action  as necessary.

     --Evaluates   the effectiveness  and the performance      of
        packaging  and packing to determine    the extent to
        which they meet establlshed   crlterla    and requirements.

     --Provrdes   representation      on Industry       and Government
        packing boards,     committees,     task groups or liaison
        teams, as directed.       Maintains     llalson    with industry
        and the Government In the development             of new or im-
        proved preservation      and packing methods, technrques,
        aids, and equipment.




                                    6
                                    CHAPTER 2

             NEED TO REEVALUATE PACKING SPECIFICATIONS

                FOR CABINETS,       LOCKERS, AND WARDROBES

        GSA revised   the packing       specifications          for certain
types of storage cabinets,           clothing      lockers,       and wardrobes,
wzthout,     in our opmion,       an adequate        evaluation       of the ne-
cessity    for the more elaborate           packing or a determination
that the resulting       benefits--     such    as reduced damages and im-
proved handling     and storage-- would offset               the increased        pro-
curement costs resulting          from the revised           specifications.
 In our opinion,    the revised        packing      specifications         provided
for more elaborate       and, therefore,         more costly         packing than
necessary.

       Our review indicated        that the problem of damages to the
above items, which was the basis for revising              the specifica-
tions,   was limited     primarily     to one supplier    whose worlcman-
 ship in packing was criticized          by GSA inspectors     both before
and after    the specifications        were revised.

       The revised    specifications,        however, were incorporated
into contracts     with several       suppliers    and resulted   in addi-
tional   contract   costs of $1.5 million          during the first   14
months that the specifications           were in use.
REVISION TO PACKING SPECIFICATIONS
PRIOR TO SEPTEMBER 1966
      GSA Central      Office    officials, who were aware that cer-
tain items of furniture          were being damaged during  shipment
and storage,      began in 1964 to accumulate     data to identify
more specifically       the items damaged and the causes of the
damages.     The data was to be obtained       by requiring  that
warehouse reports       of damages1 be forwarded     to the Central
Offxe    in Washington       for analysis.


1GSA procedures    require        that reports    be prepared         whenever
 there is a discrepancy           m a shipment of items.               The reports
 are usedfor    processing         claims against    carriers         and/or sup-
 pliers.
        Th;~s requirement     resulted    in the receipt    during calen-
dar years 1964 and 1965 of 123 reports             concerning     damage to
cabmets,       lockers,    and wardrobes.      GSA had purchased
345,000 of these items during the 2-year period;                 however,  the
reports     involved    shipments     of only 10,058 items, of which
407, or 4 percent,        were damaged.

        The Acting Director, Engrneerzng  and Storage Division,
by memorandum dated November 23, 1965, to the Director,
Qualrty    Control Div1slon, summarized furniture   damage re-
ports for the perrod January 1 through August 31, 1965, and
commented as follows:

      *'**-k This does not represent   'all   reports'    pre-
      pared III the varaous regions   but includes       only
      those covering    (1) damage to furniture,       and (2)
      where it appears that a packaging       or packing de-
      fxlency    has occurred.

      tr*** The type of deficiency       most often reported
       (percent of total  indicated)      IS, as follows:
      Improper blocking   and bracing       (50%); Overages and
      Shortages   (10%); Shiftxng    Loads (6%); and Miscel-
      laneous and Undefined      (34%)."

      Durang the period     June 1964 to July 1966, GSA made
four revisions    to the packxng speclflcations    for cabinets
and lockers    and two revisions   for wardrobes.    The net effect
of the revlslons    was to upgrade the packsng requirements.




                                     8
SEPTEMBER 1966 REVISION
To PACKING SPECIFICATIONS

        GSA continued       to experience      damages to furniture              items.
In August 1966 GSA conducted              a nationwrde       survey of its
warehouses to determine            the extent of the damage problem at
that trme for several           items of furniture,          including       cabinets,
lockers,      and wardrobes.         In September 1966 further             revi-
srons were made to the packing              specrflcations          for these
items.      The history      of damages was the primary               consideration
In arriving        at the decision      to further      revise      the speciflca-
tions,    however,      the August 1966 survey was GSA's only effort
to identify        the overall     damage problem prior           to making the
further     revisions.

        The survey indicated         that the acquisition         costs of
damaged wardrobes,        cabinets,       and lockers     on hand at that
time were $22,775,        $1,158,      and $223, respectively--a           total
of $24,156.       We found no indication           that a comparison had
been made of the cost of the damaged items with the total
cost of the cabinets,          lockers,      and wardrobes received          dur-
lng the period      that the damaged items were accumulated,                     to
determine    the srgnlficance          of the damages.        Furthermore,
the survey did not identify             the actual     loss to GSA because
it did not indicate         the estimated       costs to repair       or replace
the damaged items or deduct the amount of damages for which
carrrers    and/or    suppliers,      rather    than GSA, were liable.
In the absence of information              on the full     extent of losses
under the former specifications,               we believe     that GSA was
not In a position       to use the cost-benefit            approach because
that approach would have required               a comparrson of the estl-
mated additional       costs with the savings resulting               from the
revision.

Damage problems        with   one supplier

       Our analysis     of the data gathered             in the August 1966
survey showed that 94 percent         of the          identified    damaged
cabinets,     lockers,   and wardrobes had            been manufactured     by
one supplier,      which we shall refer     to          as supplier   A. ThlS
supplier   produced about 13 percent        of          GSA's purchases   of
these items during 1966.




                                           9
       GSA representatives         had made a number of inspections       of
packing operations        at supplier     A's plant during   the summer
of 1966, prior     to the survey.         Following  an inspection     at
the plant during       the period July 19 to 21, 1966, the Direc-
tor, Quality     Control     Dlvlsion,    In a memorandum to the Assist-
ant Commissioner,        Standards     and Quality  Control,   concluded,
in part,   that:

      '*Poor production      planning   of packing and crating
      set-up cabinets.         Improper methods being used,
      Containers      are not being sealed prior         to crating.
      Securing    of crated members is not being accom-
      plished    uniformly,     orderly  or effectively.'@

      The Director       recommended      that.

      "The Packing Specialists              should be encouraged to
      visit     the contractor's         plant   to work with the
       [quality     control     representative]         and the Contrac-
      tor's     representatives         and to familiarize        themselves
      with current        automated production           processes.       In
      this regard,        the   new   packing    requirements       has   ef-
      fected      a change over from a contractor              procuring
      a ready made wood cleated              container      to a pack he
      has to fabricate          himself     which had only increased
      the problems of controlling               quality     and has not
      achieved      the desxred results          of a better      pack."?

      GSA representatives     again visited       supplier     A's plant
during August 8 to 11,     1966,   after    which    the   Director,    Qual-
ity Control   Division,   advised the Assistant          Commissioner,
Standards   and Qualxty Control     Division,      that:               I

      g%elative     to the pack of other items of furniture
      reviewed     by our Packing Specialists,         their    obser-
      vation    appeared to support *         previously       ex-
      pressed contention       that the new crated container
      requirement     appears to be an unrealistic           require-
      ment when measured against         a manufacturer        capable
      of producinglupw8rds        of a thousand cabinets         a day
      and crating     cannot be accomplished        at this pace,
      A prefabricated      pack similar    to that utilized          on
      prior   contracts,    which appeared to be an adequate
       pack should be utilized    and if necessary,                  modified
       if better  protection   is desired."

      The Commissioner        of the Federal     Supply Service and
other GSA officials       visited      supplier  A's plant on August 19,
1966, to examine into the packing of cabinets               and wardrobes.
Subsequently,    supplier       A was instructed     to cease productlon
of these items for purchase by GSA, pending advice on a
change in packing      specifications.

         On September 20, 1966, GSA provided                 supplier      A with
 two sets of revised         packing     specifications--one            set for ward-
robes and one set for cabinets               and lockers.          The specifica-
 tions provided       for a more elaborate            pack for wardrobes;           i.e.,
an outer wood crate In addition                to the fiberboard           container.
Suppller     Ass contract       for wardrobes was amended on Octo-
ber 13, 1966, to include            the revised        packing     specificatrons
and provided      for an increase          of $5.65 In the price of a
wardrobe,     from $47.13 to $52.78.               The increase       in prrce was
for additional       labor,     materials,       freight,     overhead costs,
and the supplier's          cost to scrap the former specifrcatlons
packing components that could not be used under the new spec-
ifications.

      Supplier A's contract      for cabinets              also was amended in
October 1966 to include     revised     packing            specifications.
Changes to the specifications        Included

       --an increase      in the minimum wood dimensions   from a
          nominal  l-inch    by 3-inch to a nominal l-inch    by
          4-inch,

       --replacement     of two diagonal    l-inch by 3-inch wood
           strips  by SIX l-inch   by 6-inch cross members, and

       --addition      of strapping    around the top,            middle,     and
          bottom    portions    of the wood crate.

        The revised  packing      specifications           for cabinets    also
resulted     in the supplier's        increasing        the prices    of the cab-
inets for additional       labor,      materials,         and other costs.      A
listing    of the increases       follows.
                                               Previous         Revised
            Descrlptlon                          price           price        Increase

Comblnatlon     storage and ward-
   robe cabinet      (knockdown)                  $35,19        $38.84         $3.65
Combination     storage and ward-
   robe cabinet      (setup)                       49.96         54,61          4.65
Storage cabinet        (knockdown)                 33.59         37.24          3.65
Storage cabinet        (setup)                     48.32         52.97          4,65

         Purchases under the amended contracts         with supplier    A
totaled      $1,033,000.       Because of the revised   packing   spec-
ifications,       contract     costs increased  by $98,000--11    percent
of the orIgIna          contract    prxes.

Revised     packing  specifications
applied     to other suppliers
          At the time that GSA amended supplier                    A's contracts,
 six other suppliers            held GSA contracts           for the supply of
cabinets       and lockers;         however,     the six suppliers         were per-
mltted      to continue        packing     their    products     in accordance
with the previous            specifications         for the remaining         period
of their       contracts.         Of these six contracts,             the contract
period      for five ended on November 30, 1966, and the con-
tract period         for one ended on July 14, 1967.
          The revised       packing     specifications        were not included
initially       in the cabinet          and locker      contracts       awarded for
the period        December 1, 1966, to November 30, 1967; however,
GSA negotiated          amendments to these contracts                 to incorporate
the revised         specifications.          Purchases under the amended
contracts       totaled      $5.5 million.          The increased        costs result-
ing from the amendments totaled                    $613,000,    or 13 percent        of
the original         contract      prices.

      Similar actions   were taken for wardrobes.        Purchases
under the amended contract      for the period     December 1, 1966,
to November 30, 1967, amounted to $7.2 million.           The in-
creased costs resulting     from the amendment totaled       $831,000,
or 13 percent  of the original      contract  prices.




                                             12
         Thus on puTchases of $13.8 mullion                under the revised
 specificatrons,      the total        additional       costs for packing
amounted to about $1,5 million--an                 increase      of 12 percent
above the orlginal        contract      prices--during         the first    14
months that the specificatrons               were in use.         During sub-
 sequent contract     periods      from December 1, 1967, to June 30,
1970, GSA purchased        343,218 cabinets,            lockers,     and ward-
robes, at an estimated          cost of $14.4 million,              under the re-
vised packing     specifications.            Although      the additional      costs
for packing under these contracts                 could not be determined
from the bids or contract            prices,      we believe      that they were
substantral.


1From September 1966 to November 30, 1967, total      purchases
 under the revised     specifications amounted to $15 million;
 however, p urchases of $1.2 million    were excluded  from our
 computation    because packing costs were not separately
 identified   in the contracts.




                                        13
FWRTHER     PACKING   PROBLEMS

        A GSA packing      specralist      vrsrted   the GSA supply depot
at Middle River,         Maryland,     on February     2, 1967, to inspect
the packing       of cabinets,      lockers,     and wardrobes.       Items man-
ufactured       by six suppliers       were Inspected.       Except for sup-
plier    A's products,       which were packed under the revised
specifications,        the   items were manufactured         prior    to Decem-
ber 1966 and were packed under the previous                  specifications.

       The specialist's      report  indicated       good workmanship        and
adequate packing        of cabinets,   lockers,      and wardrobes     pur-
chased from the five suppliers           under the previous         specifi-
catrons but stated that supplier           A's packing of the items,
although    packed under the revised         specifications,        showed
evidence    of damage and poor workmanship.              The report    con-
tained   the following      comments regarding        this supplier's
packing    of the items.

       Storage    cabinet    (setup)

       "This is a new revised       pack which [Supplier       A] was
       permitted   to use.     Container      of 275 test fiber-
       board, with top cap and bottom tray.             The lumber
       looked of a poor quality,         the metal strapping     was
       loosely   applied,   and  the   stapling    of wood  members
       was very poor.      Very poor workmanship."

       Wardrobe

       "This is the new panel pack fiberboard   contarner,
       with wood frame on edges and 6 cross battens.       The
       center strap was missing  - no evidence  of having
       been applred.  Generally poor workmanshrp through-
       out. "

       Storage    cabinet    (knockdown)

       "New pack ***.       Poor workmanship    - strap not ap-
       plied   over batten,    very poor stapling,     and much
       misalignment    of battens    with end wood members."

       It   appears that    workmanship    problems with supplier           A's
packing     subsequently    were corrected     because in February          1970


                                        14
a GSA offlclal         stated   that GSA was experlenclng              no damages
to cabinets,        lockers,    and wardrobes,

COMPARISON OF GSA'S PACKING CONTAINEXS
WITH COMMERCIAL CONTAINERS

        We vlslted        SIX office      furniture     manufacturers       to obtain
 lnformatlon      about their         methods of packing cabrnets,              lockers,
and wardrobes.            We also visited         four retailers       of office
furniture--      two large and two small--to              obtain     lnformatlon
regarding      their      experience      with the packing of cabinets,
lockers,      and wardrobes.           The lnformatlon        obtained     during
these vlsrts         lndlcated      that the items delivered            to retailers
were subJected          to handling       condltlons     slmllar     to those to
which the GSA Items were subJected                    and that the packing con-
tainers      were less elaborate            than those required         by the re-
vised speclflcatlons             for the GSA items
                                                                                           .
       Representatives       of office      furniture    manufacturers      ad-
vised us that It was their            practice      to pack cabinets,     lock-
ers, and wardrobes         In fiberboard       strapped    containers,      With
regard to the use of wood strips               or wood crates required        by
GSA packing     specifications,        we were advised that wood was
considered    too costly        and therefore       not practicable    for use
under competltlve        market condltlons.

          Photographs    of GSA and commercial            packing     containers
follow.




                                            15
CKIN6FORKNOCK-DOWN
                 CABINETS
                       ANDLOCKERS

                          REAR CROSS MEMBER




                               WOOD CRATE




                             REAR CROSS MEMBER




                               FRONT THREE CROSS MEMBERS
                                       ( REMOVED)




                                     ROSS MEMBER




  ONE OF 3 METAL STRAPS
        (REMOVED)




                  16
c   WBBCABINET
       Accordrng     to GSA offrclals,      GSA's packing containers         are
more elaborate       than the commercral containers           because (1) GSA
Items are handled more often than are the commercial                  items
durrng the supply process and (2) the GSA containers                 must be
of sufflclent       strength     to permit stacking      for maximum utlll-
zatlon    of warehouse space.          GSA offrclals     considered  the fl-
berboard     containers      used by commercial      firms suitable     only
for direct     delivery      from the manufacturer       to the customer.

       Representatives       of the four retailers       that we vlslted
advlsed us that the typical          supply plpellne       for such items
as cabinets,      lockers,    and wardrobes    involved     handling    four
times-- transport       from the manufacturer,       placement     rn the
warehouse,    removal from the warehouse,          and transport      to the
customer-- the same as the typical          GSA supply pipeline.           As
at GSA, the retailer's         items were often stacked In ware-
houses.

        The retailers        stated that their      damage experience,      for
the most part,        had been mlnlmal.          The consensus of the re-
tailers    and manufacturers          was that the protection      afforded
by wood crates for cabinets,              lockers,   and wardrobes was not
economically       practical       and not necessary.
AGENCY COMMENTS

        In a letter     dated September 15, 1970, the Administrator
of GSA, commenting on a draft             of this report,        informed     us
that GSA agreed to the merits of the cost-benefit                      approach
and utilxzed       it in the developmentorrevislon               of speclfica-
tions rn all cases in which the circumstances                    permit.      He
stated,     however,    that,    If corrective     action     had been de-
layed,    the potential        damage and loss that would have oc-
curred to cabinets,          lockers,    and wardrobes      outweighed      any
advantages     that would have resulted          from a cost-benefit
study.      GSA estimated,       on the basis of the 4-percent             damage
rate derived       from an analysis       of 1964 and 1965 damage re-
ports (see p. 81, that,            of the 341,000 items received            from
September 30, 1966, to November 30, 1967, about 13,600 items
would have been damaged if the packing                specifications        had
not been revised.

       We do not agree to this estimate.           The 4-percent      damage
rate,    as noted on page 8, applied       to 10,058 cabinets,
lockers,    and wardrobes    in those shipments      during 1964 and
1965 on which damage reports        were forwarded      to Washington.
GSA drd not accumulate       any data regarding      the damages, if
any, to the balance of the 345,000 items purchased               during
1964 and 1965.       Also, the data accumulated        by GSA regarding
the 10,058 items did not show whether the 407 damaged items
were a total     loss or could be repaired       or whether the sup-
pliers    and/or the carriers     were liable    for the damages so
that the damaged items would involve          no direct    loss to the
Government.

        If the 4-percent     damage rate is projected            and if we
assume that all items damaged were total                  losses to the Gov-
ernment and that no damages occurred               after     the packing
speciflcatlons      were revised     in September 1966, the follow-
xng comparison      could be made.        During the period         Septem-
ber 30, 1966, to November 30, 1967, 341,000 items were pur-
chased at a cost of $15 million.               Four percent      of this
amount is $600,000.        The identifiable          increased    costs re-
sulting     from the revised     specifications         totaled   $1.5 million
during the period,       or about $900,000 more than the estimated
losses based on the 4-percent            damage rate.




                                        19
        Also, GSA questloned       our comparisons    of Its packing
containers     with commercial      containers   and stated that,     al-
though the handling       condltrons     may be the same (1) the vol-
ume of furniture       In GSA warehouses was far greater        than that
In commercral furniture        warehouses and (2) GSA warehouse
personnel     handled all types of stock, whereas commercial
furniture     warehouse personnel       were experrenced    In handling
furniture.

        Since the condltlons             or hazards which the items are
 subjected      to during shipment and storage generally                     are not
 dependent on the volume and types of items handled,                           we be-
 lleve   that GSA's comments are not relevant,                      In any event
 the two large retailers             that we visited          handle many items
other than furniture;             one of the retailers           handles about
 150,000 different          Items with annual sales amounting to
 $8.9 bllllon.
        The Admlnlstrator          agreed that costs increased               by
 $1.5 mlllron       under the aqended contracts.                 He stated,      how-
ever, that this was the total                 amount which could be attrib-
uted to the revised            packing     speclficatrons         and that in-
creased costs could not be projected                      into subsequent       con-
tract    periods,      inasmuch as prices           In most cases were actu-
ally reduced because of the large quantities                        purchased dur-
 ing these periods.
        We agree that the negotiated                price Increases        for the
revised     packing specifications             cannot be projected           to sub-
sequent contract          periods;      however,      this does not mean that
there have been no increased                packing costs under subsequent
contracts.        We believe       that,    regardless        of the quantltles
procured,      the revised       packing      specifications        have resulted
in increased        suppliers     1 labor and materials            costs and in
higher     contract     prices than would have resulted                 under the
former specifications.

RECOMMENDATION

       Accordingly,      we recommend to the Administrator                 of Gen-
eral Services       that GSA reevaluate   its speclflcatlons                for
the packing of storage cabinets,        clothing    lockers,              and ward-
robes.




                                          20
       The Admlnlstrator       did not comment on this         recommenda-
tion In his letter         of September    15, 1970, or indicate           that
GSA would make a reevaluation.             Our inquiry      of the Assistant
Commissioner,       Office   of Standards     and Quality     Control,       In
January   1971 with respect        to this    recommendation       indicated
that GSA had not taken any action             to reevaluate      or revise
the speclflcatlons.




                                        21
                              CHAPTER 3

                           SCOPE OF REVIEW

        We examined Into GSA's revlslon      of the packing    specs-
flcatlons     for domestic    shipment and stofage of cabinets,
lockers,     and  wardrobes   to  evaluate whether the revlslon    was
reasonable      and resulted    In the most economical  method of
packing     such products.     Our review also included    an examl-
nation    of pertinent     GSA documents and records and dlscus-
slons wrth GSA offlclals.

       The review was performed     at the GSA Central     Offlce   In
Washington,     D.C. Also, we visited     the GSA supply depot at
Middle River,     Maryland, and SIX office       furniture manufac-
turers   and four retailers   of office     furniture.




                                  22
APPENDIXES




 23
                                                                                  APPENDIX I

                                UNITED       STATES        OF   AMERICA
                        GENERAL       SERVICES             ADMINISTRATION
                                      WASHINGTON,          DC     2wo5


 SEP 15       1970

 Honorable      Elmer    B staats
 Comptroller       General    of the            Unlted           States
-General     Accounting     Offlce
 Washington,       D C     20548

Dear     Mr    Staats

We are glad        to have        the opportunity      to comment        on your proposed
report     "Cost-Benefit            Approach    Needed   in Establishing        Packing
Requirements"

The $1 5 million           figure      appears     to be reasonable.           However,     this
1s the total          amount     which    can be attrlbuted        to the increased
packaging       requirements            It cannot     be projected        into   future
contract       periods,       inasmuch     as prices     in most cases were actually
reduced      due to the large           quantities     of items      purchased       during
those     periods.

The report      correctly         states      that    10,058    items      of cabinets,        ward-
robes,   and lockers          were received            during   1964 and 1965               Of this
amount   4% or 407 were damaged                     However,       durrng      the period      when
the packaging        speclficatlons             were being      revised,         September     30,
1966,  to November          30, 1967,         approximately         341,000        Items    of ward-
robes,   lockers,        and cabinets           were received.            Applying       the same
4% of this      amount,       about      13,600     items     would have been damaged
if the packaging           speclflcatlons           had not been upgraded

With     reference          to the section        "Comparison          of GSA's Packing
Containers         with       Commercial     Containers",         while    the handling         con-
ditions        may be the same in commercial                   furniture       warehouses,       the
volume       is not           The volume     in the GSA warehouses               is far greater
than in commercial               furniture       warehouses            In addition,        GSA
warehouse         personnel         handle   all    types     of warehouse          stock,   whereas
commercial          furniture        warehouse      personnel        are experj.enced        in
handling        furniture        items.

We agree    on the merits         of cost benefit           approach       and utilize        it
in the development          or revision        of our specifications               in all
cases in which        the circumstances            permit.       However,       in this
instance    we belleve       that    the knowledge          of the potential            damage
and loss    that     would    occur    in the expanding            procurement        of the
items    if we delayed        to take     corrective        action      outweighed        any
advantages      that    would have resulted             from a cost benefit             study

 Sincerely,

                     K-l*l
RobertIt. K-i8
Administmtor                      I
                        &‘e+ FreedomJn Your Future Wtth US SavingsBonds


                                                      25
APPENDIX II


                               PRINCIPAL   OFFICIALS     OF

                         THE GENERAL SERVICES ADMINISTRATION

                          RESPONSIBLE FOR THE ACTIVITIES

                              DISCUSSED IN THIS REPORT

                                                          ,Tenure    of offlce
                                                           From                  To
                                                                                 -

ADMINISTRATOR OF GENERAL SERVICES:
    Robert L. Kunzxg                                   Mar.   1969       Present
    Lawson B. Knott, Jr.                               Nov.   1964       Feb.    1969

COMMISS1ONER, FEDERAL SUPPLY
  SERVICE:
    H. A. Abersfeller                                  Mar.   1970      Present
    Lewis E. Spangler (acting)                         Dec.   1969      Mar.          1970
    Arthur F. Sampson                                  June   1969      Dec.          1969
    Lewis E. Spangler (actlng)                         %Y     1969      June          1969
    H. A. Abersfeller                                  %Y     1964      &Y            1969




U S GAO   Wash   , D C
                                            26