Is GSA Schedule Broken

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Is the GSA Schedule Broken?An Overview of the
GSA Multiple Award Schedule Program A NCMA
Boston Chapter Discussion led by Mark Tremblay,
Abt Associates, Inc. Gary Campbell, McCarter
English, LLP October 15, 2008
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Topics

• GSA Program Overview
• Advisory Panel
• Key Schedule Contract Concepts and Provisions
• What price is GSA entitled to?
• What is required to be disclosed in the
  Commercial Sales Practices Disclosure?
• How does the Price Reductions Clause work?
• How is the Industrial Funding Fee calculated?
• Other GSA Requirements?

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GSA Program Overview

• GSA Schedule is currently a 36 billion program
• Over 65 of schedule sales are for services
• 70-75 of all GSA contracts are held by small
  businesses
• Over 30 of schedule sales are to small
  businesses
• Change in SDB Certification
• Products and services must meet definition of
  Commercial Item
• There are exceptions!

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GSA Program Overview

• 5-year contract with 3, 5-year options
• Exercise of options takes considerable effort
• A Schedule lists a contractors goods and
  services available for sale at a pre-negotiated
  price to authorized customers
• Open-ended, Indefinite Quantity, Indefinite
  Delivery Contracts
• Agencies may conduct mini-competitions
• Required to do so for services that require a SOW
• A hunting license for Federal Government business
• Pharmaceutical and Medical Equipment Schedules
  are administered by the VA

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Overview Whats for Sale

• 58 I Professional Audio/Video and Security
  Solutions
• 66 II J Test Measurement Equipment
• 66 II N Lab Instruments and Services
• 70 IT Products and Services
• 71 Office Furniture
• 75 Office Products

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Overview Whats for Sale (continued)

• 84 Total Solutions for Law Enforcement
• 541 Advertising/Public Relation Services
• 871 Professional Engineering Services
• 874 Management and Organizational Business -
  Improvement Services (MOBIS)
• 899 Environmental Services
• Each Schedule contains multiple Special Item
  Numbers (SINs)

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Overview Who Can Buy?

• See GSA Order ADM 4800.2E (Tab B)
• Executive agencies
• District of Columbia
• Wholly-owned Government corps
• Government contractors when authorized
• State and local governments (IT Schedule (70) and
  Law Enforcement (84) only)
• Many others

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Overview How to Apply for a GSA Schedule
Contract

• Determine appropriate GSA Schedule
• Market Research/Consultant
• Complete and submit proposal
• http//www.gsaelibrary.gsa.gov/ElibMain/ScheduleLi
  st
• Determine if commitment makes sense for your
  company
• Clarification Stage
• Could be multiple rounds of clarification
• Negotiate terms, conditions, and pricing
• Basis of Award letter

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Overview Renewal of Your GSA Contract

• Follows same basic process as new awards
• Need to get renewal package in early
• Pre-award audit may serve as post-award audit
• Expect the Unexpected
• Financials
• Mapping personnel to Schedule categories
• New procedure for modifications

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Overview Benefits

• It helps to have a contract vehicle in place to
  expedite sales
• Reduces administrative burden and cost of
  preparing multiple proposals
• GSA Schedules are the primary contract vehicle
• Lends instant credibility in the federal
  marketplace
• GSA Schedules may set price baseline for both
  Government and non-Government negotiations

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Overview Risks

• Obligations under the Price Reductions Clause
• Obligations under the Industrial Funding Fee
  Clause
• Defective pricing
• Other Government Contract compliance issues
• GSA Schedules may set price baseline for both
  Government and non-Government negotiations

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Overview MAS Advisory Panel

• Established in March 2008
• Authorized for up to 2 years
• Initial recommendations expected in Nov 2008
• Seeking to fix GSA Schedule
• Defections of Sun and EMC
• Looking at
• Price Reductions Clause
• Doesnt work for Services

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Overview MAS Advisory Panel

• Also looking at
• Most Favored Customer Pricing
• Lack of significant pre-award audits
• Government not obtaining MFC
• Agencies tend to rely on it
• Further competition necessary
• What might we see?
• Split MAS Program for Products and Services
• Pre-qualification instead of pricing mechanism

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Key Schedule Contract Concepts and Provisions
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What Price is GSA Entitled to?

• GSA has right to know your best price, but not
  necessarily pay that price
• GSA will demand most favored customer pricing
  but, no legal requirement to offer MFC price
• Be prepared to justify proposed GSA prices that
  are higher than MFC prices
• Sell the GSA price position you have developed
  demonstrate differences between the Government
  and MFC

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What is the Commercial Sales Practices (CSP) Form?

• Goal Complete an accurate pricing disclosure
  while putting yourself in best position to
  negotiate
• CSP data must be current, accurate, and
  complete
• Comparison of proposed GSA prices to most
  favored customer prices
• Must include all customers that get a price equal
  to or better than the price offered to GSA
• Use narrative footnotes wherever possible

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• (3) Based on your written discounting policies
  (standard commercial sales practices in the event
  you do not have written discounting policies),
  are the discounts and any concessions which you
  offer the Government equal to or better than your
  best price (discount and concessions in any
  combination) offered to any customer acquiring
  the same items regardless of quantity or terms
  and conditions? YES ____ NO _____. (See
  definition of "concession" and "discount" in
  552.212-70.)

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CSP Form

• Discount Discounts include, but are not
  limited to, rebates, quantity discounts, purchase
  option credits, and any other terms or conditions
  which reduce the amount of money a customer pays
  for goods and services ordered or received.
• Concession Concession means a benefit,
  enhancement or privilege (other than a discount),
  which either reduces the overall costs of a
  customers acquisition or encourages a customer
  to consummate a purchase. Concessions include,
  but are not limited to, freight allowance,
  extended warranty, extended price guarantees,
  free installation and bonus goods.

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CSP Time Period

• Pricing contained in contracts/agreements
• Agreements in effect on the date of the offer
• Pricing not contained or reflected in
  contracts/agreements
• Recommended stated period prior to date of offer
• Six months or one year
• Obligation to update information

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CSP Discounting Policies vs. Deviations

• Provide CSP data based on discounting policies
• But, deviations from these policies must be
  disclosed (see CSP form 4(b)) provide
  information regarding
• Circumstances
• Frequency of occurrence
• 4(b) - Do any deviations from your written
  policies or standard commercial sales practices
  disclosed in the above chart ever result in
  better discounts (lower prices) or concessions
  than indicated? YES ____ NO_____. If YES,
  explain deviations in accordance with the
  instructions at Figure 515.4-2, which is provided
  in this solicitation for your convenience.

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CSP Completing the Chart

• Feel free to use your own form of spreadsheet
• Need to at least group by SIN
• Depending on pricing structure, may need to
  provide more detail by product
• Can state discounts by customer or category of
  customer, i.e., National Accounts, OEMs,
  Hospitals

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CSP Completing the Chart (continued)

• Add notes to explain any complexities or special
  circumstances
• Disclaimer regarding concessions
• Information to sell proposed GSA pricing
• Easier to explain differing terms and conditions
  in negotiations than after audit

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How Does the Price Reductions Clause Work?
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Price Reductions Clause

• Clause GSAR 552.238-75 Price Reductions
• Three triggers for price reduction
• Revision to commercial pricelist to reduce prices
• More favorable discounts or terms and conditions
  than those contained in the commercial pricelist
• Price reduction to the tracking customer (if
  price/discount relationship is disturbed)

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Price Reductions Clause (continued)

• No price reduction for
• Sales to Federal agencies
• Firm fixed price commercial orders gt Maximum
  Order Limitation
• Billing errors
• Notice 15 days after effective date
• Price reduction to government has same effective
  date and terms as the price reduction that
  triggers it
• No exception to triggering of clause unless
  negotiated up front

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Tracking Customer Price Relationship

• Tracking customer (or category of customer) is
  agreed upon prior to award
• MFC Category is GSAs first position
• GSA may accept tracking customer that resembles
  group of GSA purchasers
• May have different tracking customers for
  different products

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Tracking Customer Price Relationship (continued)

• Need to sell preferred tracking customer
  approach
• Considerations
• Impact of future discounts
• Administrative burden
• Acceptability to GSA

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Tracking Customer Price Relationship (continued)

• Example of Standard Operation of Price Reductions
  Clause
• Tracking Customer Price of Product X 10
• GSA Price of Product X 8
• If Tracking Customer Price is reduced 10 --
  i.e., from 10 to 9, then
• GSA price must also be reduced 10 -- from 8 to
  7.20.

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Industrial Funding Fee
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GSA Quarterly Sales Reports

• GSAR 552.238-74 Contractors Report of Sales
• May complete and pay online
• http//72a.gsa.gov/
• Separate entry for each SIN
• Due 30 days after end of each calendar quarter
• Need to be able to identify Govt Sales
• GSAR 552.238-76 Industrial Funding Fee
• Amount 0.75
• Can be
• embedded i.e., added to GSA negotiated price
  or
• absorbed out of contractors pocket

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Penalties for Non-compliance

• False Claims Act, False Statements Act
• Treble damages
• 10,000 per claim
• Potential criminal penalties
• Whistleblower (qui tam) suits
• Contract termination
• Suspension and debarment

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Other GSA Requirements
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Other GSA Requirements

• Commercial Item Terms and Conditions (FAR
  52.212-4)
• Certain provisions may be tailored to commercial
  standards (i.e., warranty, limitation of
  liability, patent indemnity)
• What can be purchased on a GSA order?
• Non-Schedule products can be included in order IF
  identified and authorized
• Country of Origin Requirements
• Trade Agreement Act applies (FAR 52.225-5)
• Products must be substantially transformed in a
  designated country

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Other GSA Requirements

• Socio-economic requirements
• Small Business Subcontracting Plan (FAR 52.219-9)
• Requires annual plan and reporting
• Equal Opportunity clauses (FAR 52.222-26, 35, 36,
  37)
• Requires non discrimination, filings, and
  affirmative action plan (if thresholds met)
• Price increases
• GSAR 552.216-70, places restrictions on price
  increases
• GSA Price Lists
• GSAR 552.238-71
• Changes must be submitted to and approved by the
  CO

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Audit and Record Retention

• Three types of record retention/audit
  requirements in GSA solicitation
• Agency pre-award audit
• Agency post-award price reductions audit
• Comptroller General post-award audit
• Record retention requirements implicit in audit
  clauses
• Records books, documents, and other data in
  any form (hard copy and computer files)

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Pre-Award Audit

• Clause FAR 52.215-20
• Audit period prior to award
• To determine reasonableness of offer
• Issues examined
• Are the proposal and supporting data current,
  accurate, and complete?
• Is the contractor offering the government MFC
  pricing?
• No true document retention requirements audit
  is of records relevant to CSP submission

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Post-Award Price Reductions Audit

• GSA issued notice on Mar. 11, 2005 that it is
  moving toward conducting more audits
• GSAR 552.215-71
• Audit/retention period three years after final
  payment on contract (including options)
• GSAR 552.215-72 allows for price adjustment

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Post-Award Price Reductions Audit (continued)

• To check for over billings, billing errors,
  compliance with Price Reduction clause and
  compliance with the Industrial Funding Fee
  clause
• Auditors will examine records relating to sales
  after award changes in price lists
• Additionally, contractors can expect annual
  Contractor Assistance Visits, which are a
  review of the contractors Schedule and
  non-Schedule sales

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Comptroller General (GAO) Audit

• Clause FAR 52.215-2
• Audit/retention period three years after final
  payment under the contract
• Includes option periods
• If claims, appeals, or litigation ongoing, retain
  until claims, appeals, or litigation disposed of
• Covers any directly pertinent records involving
  transactions related to this Contract

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Penalties Recent Settlements

• Snap-on Industrial paid 10 million to resolve
  allegations that it failed to pass on to the
  Government discounts under its GSA Schedule
  contracts offered to its commercial customers
• Polaroid paid 3.2 million to resolve a qui tam
  lawsuit that alleged that Polaroid provided false
  pricing information during negotiation of two
  separate GSA Schedule contracts, and failed to
  report discounts.
• Johnson Johnson paid 3.9 million to settle
  civil claims that it overcharged the VA by
  failing to provide accurate pricing information
  during negotiation of its GSA Schedule Contract.
• Oracle paid 98.5 million to settle civil claims
  that PeopleSoft provided defective pricing during
  its GSA Schedule Negotiations.

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Q A