Latest / The Fiscal Policy Podcast with Fexingo: Government Budgets, Stimulus, and Public Spending / How the Government Pays More for Office Supplies Than You Do
Transcript
- Lucas: Alright, I have a number for you: eighty-seven dollars. That is what a single federal agency paid for an office chair in 2024. Not a Herman Miller Aeron. A basic mid-back task chair you could get at any office supply store for about fifteen dollars. Luna: Eighty-seven dollars for a fifteen-dollar chair. How does that happen without someone at least raising an eyebrow? Lucas: It happens because of how the federal government buys things. The system is built on layers of rules designed to prevent corruption and favoritism, but they end up creating a perverse incentive to pay more. The Government Accountability Office looked at this in a report last year and found that the same item purchased through a standard procurement contract can cost three to five times what a private company pays. Luna: So the rules meant to stop abuse actually guarantee waste. That's a tough irony to swallow. Lucas: Exactly. The core issue is the Buy American Act, which dates back to 1933. It requires the government to buy goods that are made in the United States, with some exceptions. But the problem isn't the law itself — it's how agencies interpret it. Procurement officers are terrified of getting flagged by an audit for buying something that might not meet the 'substantially all' domestic content threshold. So they default to the most expensive, safest option from a pre-approved vendor list. Luna: And those pre-approved vendors know they have a captive audience. So they mark things up accordingly. Lucas: Right. There's no competitive pressure because the procurement process is so cumbersome that new vendors rarely get on the list. The GAO report detailed a situation where a regional procurement office needed a specific type of printer toner. The approved vendor charged $220 per cartridge. The exact same cartridge, from the same manufacturer, was available on the open market for sixty bucks. But the procurement officer couldn't buy it because the vendor wasn't on the list. Luna: So the officer is effectively penalized for trying to save money. Their performance is measured by compliance, not cost. Lucas: That's the key insight. A procurement officer's career risk is all about process violations — buying from an unapproved vendor, not getting enough bids, missing a paperwork deadline. Nobody gets fired for overpaying. The GAO flagged a case where an agency paid $1,200 for a set of four tires that retail for $400. The officer followed every rule. They just didn't shop around. Luna: And that's perfectly allowed. The system rewards following the checklist, not getting a good deal. Lucas: Exactly. So the question becomes: can you fix this without a massive legislative overhaul? There's a pilot program in Tennessee that suggests you can. In 2023, the state's procurement office gave a small team of employees a corporate credit card and told them to buy office supplies the way a private company would — look for the best price online, order from whoever has it in stock. No pre-approved vendor list, no multiple-bid requirement for purchases under $5,000. Luna: What happened? Lucas: They cut costs by thirty percent in the first year. The same boxes of pens, paper, and toner that were costing the state $180,000 a quarter dropped to $126,000. And there was no increase in fraud or waste — they had a simple audit trail. Every purchase had a receipt and a business purpose. The savings came entirely from buying at market prices instead of paying the government premium. Luna: Thirty percent is huge. That's not a rounding error. And it didn't require new laws or a big IT system. Lucas: No. It just required trusting employees to act like adults and measuring outcomes instead of process. But scaling that to the federal level is hard. The U.S. government buys about $500 billion in goods and services every year. Even a ten percent savings would be $50 billion. But the procurement culture has been built over ninety years. Procurement officers have job classifications, union rules, training requirements all designed around the old system. Luna: So the fix is cultural as much as structural. You'd need to change the incentive structure so that saving money is rewarded over just following the rules. Lucas: You would. And there's actually a small federal pilot — the GSA started something similar in 2025, giving a handful of agencies more purchasing freedom. But it's limited to a few categories and covers less than one percent of total procurement. The early results show similar savings, but the political pressure to expand it is minimal because the savings don't show up as a line item in the budget. They just mean the agency spent less than it otherwise would have. Luna: Which is invisible. Politicians get credit for cutting a program, not for not wasting money on office chairs. Lucas: Exactly. And that's the deeper problem. Government waste is often hidden in plain sight — it's not a scandal, it's just a system that was designed for a different era. The GAO report noted that many procurement officers don't even realize they're overpaying because they have no price benchmark. They don't know what the item costs on the open market. Luna: That seems like a low-cost fix. Give them access to a commercial price database. Lucas: It is. But even that runs into procurement rules. The software itself would need to go through a competitive bidding process. It's a classic catch-22. You need a procurement reform to fix procurement, but the reform itself gets stuck in the procurement system. Luna: So what is the most realistic path forward? If we can't overhaul the entire system, what's the highest-leverage change? Lucas: I think the Tennessee model is the answer: create a carve-out for low-dollar purchases. Set a threshold — say $10,000 — below which agencies can buy using a commercial credit card from any vendor, no pre-approval, no multiple bids. Just a receipt and a business justification. That covers the vast majority of individual purchases, even if it's a small fraction of total dollars. And you build a track record of success that gives you the political cover to raise the threshold. Luna: Which is essentially what happened with the federal travel card. We allow government employees to book flights and hotels without a procurement contract. That works fine. Lucas: Right. The travel card program saves billions in administrative costs. The same logic applies to office supplies, IT peripherals, janitorial products — all the mundane stuff that nobody thinks about but that adds up to real money. The GAO estimated that if every agency adopted a commercial card for purchases under $5,000, the government could save $8 to $12 billion a year. Luna: That's not a trivial number. It's more than the budget of some federal agencies. Lucas: It is. And the funny thing is, this isn't a partisan issue. Both sides of the aisle hate government waste. But the solutions often get bogged down in larger debates about the size of government. This is one of those rare fixes that actually shrinks the cost of government without reducing any services. Luna: Which is exactly the kind of thing that listeners of this show appreciate — concrete, non-ideological improvements. And speaking of appreciation, a couple of dollars a month is genuinely what keeps these episodes coming. If walking through the economy with us has made something click, you can find us at buy me a coffee dot com slash fexingo. Lucas: Yeah, it's a small thing that makes a big difference for us. And it's how we stay ad-free and focused on the data. Luna: Alright, back to the procurement puzzle. So the sixty-four-thousand-dollar question is: why hasn't this already happened? Lucas: Partly because the procurement reform bills that have been proposed tend to get loaded with other provisions that make them controversial. There was a bill in 2024 that would have raised the micro-purchase threshold from $10,000 to $25,000 — a fairly modest change. But it got attached to a larger authorization bill and never passed. The other obstacle is that procurement officers themselves are wary. They see the commercial credit card as a threat to their jobs, even though the data shows it would free them up to focus on high-value contracts. Luna: So there's a labor angle. Any change that simplifies purchasing could reduce the need for procurement staff. Lucas: Exactly. The government employs about 30,000 procurement professionals. If you automate the low-end stuff, you might need fewer people. But you could also argue that you'd need more people for oversight and data analysis. The GAO report recommended a phased approach: start with a pilot, measure the results, and then expand. That's less threatening. Luna: And it gives you hard numbers to convince skeptics. Because right now, the status quo has no champion — it's just inertia. Lucas: Inertia is the strongest force in government. But the Tennessee pilot and the GAO data give reformers something to point to. I think we'll see more agencies adopt commercial cards for small purchases over the next few years. The pressure is building because every year, the GAO puts out another report showing the same pattern of overpayment. Luna: And eventually, the math becomes undeniable. Fifteen-dollar chairs costing eighty-seven dollars — that's not a rounding error. It's a symptom of a system that needs a modern fix. Lucas: And the fix is already proven. It's just a question of whether the political and bureaucratic system can overcome its own risk aversion. That's the story of a lot of government waste, honestly. The solutions exist. They're sitting on the shelf. They just need someone to actually pull them down and use them.