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GSA forms panel to review pricing policies
Facing complaints about its pricing policies and oversight, the General Services Administration announced on April 17 that they have formed an advisory panel to review policies for its Multiple Award Schedule contracts.
"Our multiple award schedules program faces challenges," said GSA Administrator Lurita Doan. "Oftentimes the government is simply not a very good customer. Our guidelines are confusing and sometimes so are our standards... As a result, companies across the country report they are growing increasingly frustrated." I believe the time is now for GSA to face this challenge and do something to address it."
The Multiple Award Schedules are indefinite delivery, indefinite quantity contracts negotiated by GSA for commercial products and services. GSA awards the contracts for a base period of five years, plus three five-year options. The federal government and other authorized users issue task and delivery orders against the contracts. State and local governments also can use many of the contracts.
But recently, companies have expressed frustration with the myriad rules and pricing regulations associated with the contracts. Last year Sun Microsystems, EMC Corp. and Canon USA chose not to renew their GSA schedule contracts because of increased scrutiny from the agency's inspector general regarding their pricing policies. Canon officials said their reason not to renew its contracts were due to "unreasonable demands" from GSA's inspector general. The inspector general often audits companies at the time of contract renewal, a process that requires companies to prove that the government is paying the most competitive price.
GSA formed the panel on March 26, appointing 15 members -- 11 from government (including five from GSA) and four from industry. Elliot Branch from the Defense Department will chair the panel, which has a two-year charter, although Doan said its actual life could be shorter.
GSA said it did not form the panel because of declining purchases on the schedules, pointing out that sales increased 1.6 percent in the first quarter of fiscal 2008 compared with the same quarter the previous year. "What we're looking for is to simply do a better job," said Jim Williams, commissioner for GSA's Federal Acquisition Service. "The schedules are enormously popular, doing about $36 billion in business annually. ... We are looking at things that haven't been looked at in a while."
Among the issues that Doan said the panel would examine is pricing reduction clauses, which are triggered when an agency's purchase meets a certain volume. "We've had a growing frustration among our industry partners because there is some confusion over the auditing process and what will cause the pricing reduction clause to be triggered, when, why and how. For us to be good clients, we must be able to provide clear guidance on what we need, when we need it and where we need it."
The Competition in Contracting Act requires that schedule contracts and orders result in the lowest overall cost alternative to the government. Historically, to meet the requirement, the goal of the schedule price negotiation has been to obtain government prices that are comparable to the firm's "most favored commercial customer." Before awarding the contract, the schedule contracting officer must determine that the negotiated prices are fair and reasonable. After the award, if the contractor reduces its prices to commercial customers, the government also may be entitled to similar reduced prices.
The panel will hold its first public meeting in Washington on May 5. The hearings will be open to the public.
Doan said she anticipated the first set of recommendations in a few months, which will be distributed to industry, Capitol Hill and GSA's federal government customers. The panel then will make additional changes. Doan said she hoped the process would be completed by the early part of fiscal 2009.
MAS Advisory Panel Members:
- Elliott Branch, MAS Advisory Panel Chairman, Defense Department
- Debra Sonderman, Interior Department
- Thomas Essig, Homeland Security Department
- Glenn Perry, Education Department
- Thomas Sharpe, Treasury Department
- Lesa Scott, General Services Administration
- Jacqueline Jones, General Services Administration
- Judith Nelson, General Services Administration
- Alan Chvotkin, Professional Services Council
- Larry Allen, Coalition for Government Procurement
- Donald Erickson, Security Industry Association
- Jeffrey Johnson, International Facility Management Association
- April Stephenson, Defense Department
- Thedlus Thompson, General Services Administration
- David Drabkin, General Services Administration
COMMENTS
- The panel must address the GSA contracting officers' and Office of Inspector General's misconceptions that fair and reasonable pricing can only be established by obtaining Most Favored Customer (MFC) prices. Many contract negotiations have been delayed and ultimately died as a result of the Government demanding that a contractor provide MFC pricing with no consideration given to the fact that GSA schedule prices are base prices and subject to further discounting through subsequent competition of orders and Blanket Purchase Agreements (BPA), temporary price reductions and guidance provided to buying agencies to seek further discounts pursuant to the Maximum Order Limitation (MOL) clause. This is just one of many potential areas in which pricing provisions within the schedule program can be amended to achieve the potential mutual benefits associated with Multiple Award, ID/IQ commercial item procurements Sajeev Malaveetil Posted April 23, 2008 10:48 PM
- The MAS program model is/was based on selling products, then along came the idea of service schedules. The only problem, the model didn't change. As you know, the more product you produce, the cheaper each the product gets i.e. the last item produced costs less than the first. This is not the case with labor. Employees will not reduce there salary/wage for each additional hour worked. However, this is what is expected under the service schedules, because we are following the clause language/pricing model that was written for products. Gen X'r Posted April 22, 2008 11:12 AM
- There are more reasons for the high price of oil. First everyone else in the world, like China, Inida, the Mid East is using it so much more than they used to, and that has drivien the price of crude up. The price of Diesl, has gone up because lack of available Refining capacity relative to demand. The refiners are not making any money on gas. They are selling it wholesale for not much more than the cost of Crude, and in some cases less. A big part of our gasoline comes from overseas, where they have excess gasoline production. We import enough Gasoline to keep it's price down, but not enough diesl to keep the price of diesl down. But wait, we are about to go into the summer blend season. That will require a change in formulations and the imported gasoline isn't going to help as much as it has. So gas prices and Diesl will be much closer in the future. And by the way, the oil buisness is like farming. When crop prices are high, farmers do well. When Prices are lower, they do less well. Same with oil companies and the price of oil. And but the way, in the last 25 years, the return on capital (the ratio of how much you earn to the amount of investments you've made) for the Oil Companies has exceeded the industrial average only 4 times. (That means for 21 years it was less than average). Old Geezer Paper Pusher Posted April 22, 2008 10:50 AM
CORRECTION: The original version of this story contained the following quotation from GSA Administrator Lurita Doan: "Often the government isn't a good customer, and the guidelines and rules are tough..." The quotation should have read: "Oftentimes the government is simply not a very good customer. Our guidelines are confusing and sometimes so are our standards... As a result, companies across the country report they are growing increasingly frustrated." Also, the original version stated that GSA said schedule sales had increased 6 percent in the first quarter of fiscal 2008 compared with the same quarter the previous year. The correct figure is 1.6 percent. The story has been updated to correct the errors.
