The Coalition for Government Procurement

 

For this week’s comment I wanted to share with you a blog post first published on the Federal Times’ Acquisition Blog (www.federaltimes.com). The post discusses GSA Advantage, DPAP, and the confusing FAR 8.4 deviation.

On March 13, 2014, Defense Procurement and Acquisition Policy (DPAP) issued a class deviation to FAR 8.404(d). This deviation directed that ordering activity contracting officers are responsible for making a determination of fair and reasonable pricing when using GSA’s Federal Supply Schedules (FSS). The deviation essentially incorporates complex FAR 15.404-1 price analysis techniques into the streamlined FSS ordering procedures with the vague caveat that the complexity and circumstances of each acquisition should determine the level of detail of the analysis required.

In discussing the rationale for this deviation, DPAP has consistently focused on the variation in pricing across the FSS program. In particular, the example of a $29 stapler listed on an FSS contract has been cited by DPAP as creating a “significant” risk that Department of Defense (DoD) contracting officers will simply order the $29 stapler rather than search for a cheaper stapler on another FSS contract. For those of us of a certain age, the use of this example reminds one of the $600 toilet seat reportedly purchased by the DoD back in the 1980s. Like the toilet seat purchase, however, there is greater context that undercuts the stapler example cited by DPAP.

Putting aside the contract vehicle and accounting rules associated with the toilet seat, here, that context is the information available, the transparency of that information, and the search capabilities of GSA’s FSS electronic catalog, GSA Advantage. Recently, in an effort to reduce the ambiguity surrounding this issue, I decided to use GSA Advantage to research DPAP’s $29 stapler example. In a matter of minutes, I was able to conduct market research obtaining relative pricing information for a variety of staplers. Here is how, in three easy steps:

  1. First, I searched for “GSA Advantage,” landing on GSA Advantage’s front page, which includes a product search bar.
  2. Then, I typed in “staplers” and hit enter. Up popped a listing of general stapler models with associated pricing, pictures, and descriptions.
  3. Next, I clicked on a particular model. GSA Advantage then loaded a page that listed all the FSS contractors with that model in their contracts, along with the associated price, delivery time, minimum order quantity and shipping terms (e.g. FOB origin or destination).

GSA Advantage also provides the capability to limit the search based on price (e.g.search for all staplers less than $10) or by key word or term.

Most importantly, however, the staplers are listed in descending order, from the lowest priced, to the highest priced stapler. In other words, the first contractor item listed is the lowest price for that particular stapler under a schedule contract.

Can it be any simpler?

Interestingly, in this case, GSA Advantage also lists the GSA Global Supply Requisition Staplers first, regardless of its price. The Global Supply price is generally higher than the schedule contract prices because it includes a mark up to cover the costs for GSA management of its supply and depot programs. To improve the clarity of the price list, GSA should treat its own programs as it does its contractors and list the Global Supply stapler price relative to where it falls within the overall price list. Other than the Global Supply stapler, the contractor staplers are listed starting with the lowest priced stapler first, which was, at the time of my research, $4.15, not $29.00.

The information contained in GSA Advantage effectively addresses DPAP’s concerns regarding the $29 stapler by making comparative pricing information easily and readily available for review and consideration by DoD contracting officers. GSA Advantage’s depth and breadth is remarkable; there are over 47 million products and services listed and available for review by contracting officers. Moreover, GSA Advantage is supplemented by GSA’s eBuy electronic quote system, which provides all contracting officers with the ability to seek competitive quotes for task and delivery orders among all FSS contractors capable of meeting the requirement. Last fiscal year alone, over 72,000 quotes were posted on eBuy.

To the extent DPAP’s concern focuses on so called “price variability” across the FSS program, the program reflects the commercial market with its myriad of competitive pricing strategies cutting across small, medium, and large businesses. It reflects the overarching market where American citizens navigate the internet conducting market research and making millions of personal buying decisions. GSA Advantage brings that electronic market to contracting officers across government, including DoD. I am confident that when using GSA Advantage and, as appropriate, eBuy, contracting officers can make sound, best value buying decisions. Perhaps DPAP’s deviation is a teaching moment where more training and focus on the electronic tools currently available can further enhance competition and best value outcomes when using the FSS program. Training on use of these electronic tools can have a much greater impact on delivering best value for customer agencies than adding additional regulatory complexity.

Finally, continued investment in GSA Advantage, eBuy, and associated training is vital to the long term future success of the FSS program in delivering best value to customer agencies. These electronic tools provide operational capabilities reflecting GSA’s unique statutory role in providing acquisition support across the federal enterprise to both civilian agencies and the DoD. For this reason, some are concerned with what appears to be the potential erosion of GSA’s operational and strategic control of GSA Advantage and eBuy by the DoD’s FedMall project. The FedMall project essentially envisions a government-wide portal for companies seeking to do business with the Federal government, and, based on the forgoing, its procurement policy and operational implications go well beyond DoD. DoD’s mission is not GSA’s. GSA’s role in supporting the entire federal enterprise (both DoD and civilian agencies) makes it uniquely positioned, informed, and qualified to manage the strategic direction of its government programs and electronic tools.

Roger Waldron

President

President Obama recently received a briefing from GSA’s Federal Acquisition Service (FAS) on category management and the Common Acquisition Platform (CAP).  The briefing is a very significant symbol of GSA’s important role in government management.  It highlights GSA’s central role in providing procurement services and programs that support customer agency missions across the federal enterprise.  As a former GSA employee it was great to see the White House focus on the important, unsung work GSA does day and day out on behalf of the American people.

Strategically, category management and the CAP have the potential to improve GSA’s delivery of best value commercial products, services and solutions to customer agencies.   As you know, FAS has reorganized around market sectors or industry categories to better focus on market trends and customer requirements.  Category management has the potential to improve FAS’s management of its contracting programs through increased understanding of customer mission requirements and commercial market trends.  The CAP has the potential to provide the federal enterprise with transparent, competitive information regarding already existing contracting programs, best procurement practices and market trends.  The CAP can address contract duplication and provide federal market information that can further assist customer agencies in making sound, best value procurement decisions.

Make no mistake; category management and the CAP are important management initiatives for FAS.  However, the success of these management initiatives is dependent on the effectiveness of the contracting vehicles that FAS manages. In particular, the efficiency and effectiveness of GSA’s $38 billion Federal Supply Schedules (FSS) program is the foundation for any success FAS hopes to achieve through category management and/or the CAP.   The FSS program accounts for roughly 75% of the dollar volume of all purchases made through FAS.  Historically, the FSS program has provided customer agencies with access to millions of commercial products and services—essentially creating a federal marketplace where commercial firms and government contracting activities come together to conduct streamlined procurement transactions/competitions to support agency mission requirements.

However, the full potential of the FSS program remains untapped. Key contracting reforms that would bring the program into the 21st century have not been made.  Aside from the Professional Services Schedule Consolidation effort, FSS contractors have seen little or no progress in addressing outdated, unbalanced FSS contract terms, conditions and structures.  At the same time, FSS contractors have seen the implementation of new burdensome data reporting, performance and compliance requirements across the program.

Data is not a free good.  The increased data reporting requirements being implemented across the FSS program increase contractor costs and create additional barriers to entry.  Infrastructure costs associated with date reporting are inevitably passed on to customer agencies through higher prices and reduced access to best value solutions.  GSA should take a step back from its data reporting regime and engage in a Myth-Busters dialogue with its industry partners regarding the goals, best practices and impacts.  Such a dialogue would be consistent with the Office of Federal Procurement Policy’s (OFPP’s) December 4, 2014 Memorandum “Transforming the Marketplace: Simplifying Federal Procurement to Improve Performance, Drive Innovation, and Increasing Savings.”   OFPP’s December 4th memorandum sends a strong, thoughtful and common sense message regarding the need to simplify acquisition policy, procedures and regulations. So in the spirit of OFPP’s memorandum, once again, here are two key reforms that would increase competition, enhance best value, and provide greater access to commercial innovation and total solutions via the FSS program.

  1. Incorporate “Other Direct Costs (ODCs)” capability in FSS contracts

Authorizing the acquisition of ODCs/materials at cost under FSS contracts would enhance access to best value commercial solutions for customer agencies.  Moreover, ODCs can reduce costly contract duplication.  Currently, customer agencies cannot acquire the total solutions they seek through the FSS program due to the lack of ODCs.  As a result these customers create duplicative contract vehicles for the same or similar commercial products and services.  The irony here is that for over six years the Federal Acquisition Regulation (FAR) has included a commercial item clause that authorizes ODCs and materials under commercial item contracts like the FSS program.

Interestingly, many, if not all, FSS contracts already include the necessary commercial item FAR clause for implementing ODCs.  Yet customer agencies are still prohibited from accessing a standard FAR contracting capability when using the FSS program.  This issue is amongst the highest priorities for FSS service contractors as it would improve efficiency and effectiveness in competing for and providing total solutions to meet customer agency mission requirements.  Over three years ago the Coalition provided FAS with a white paper recommending a methodology for implementing ODCs/materials.  Yet, to date, the only overt step taken by GSA was a 2013 Federal Register notice seeking input from the public regarding implementation of ODCs on FSS contracts—a Federal Register notice that ignored the fact that the applicable FAR commercial item clause has already gone through public comment and rule making!!!

  1. Reform the FSS pricing policies and procedures—eliminate the Price Reduction Clause (PRC)

The PRC is a burdensome oversight pricing mechanism that increases costs/prices for contractors and customers.  Compliance with the PRC collectively costs FSS contractors, tens, if not hundreds, of millions of dollars annually.  Compliance costs come in the form of training for employees, business systems and personnel to track, manage and report pricing for purposes of the clause.  Over time these compliance costs far exceed any government return on PRC enforcement.  The PRC also increases costs and negatively impacts jobs by restricting the ability of an FSS contractor to compete independently in the commercial market place. Compliance risk associated with the PRC also limits innovation and best value solutions.  Due to pricing variability and associated risk under the PRC, commercial firms will not offer their latest technologies and solutions via the FSS program (e.g., cloud services and solutions).

The PRC is unnecessary.  It reflects a 1980’s FSS contract structure that  is fundamentally different than today’s FSS market place.  The 1980’s FSS included a much smaller contract base numbering in the hundreds of contractors and contracts.  Today, the FSS includes over 18,000 contracts and tens of millions of items.  The 1980’s FSS was a mandatory source—government was required to use it.  Today the FSS is a non-mandatory source.  The 1980’s FSS had a limited open season for submission of offers.  Today, the FSS essentially has a continuous open season allowing for the submission of commercial offers every business day of the year.  The 1980’s FSS did not have electronic tools like GSA Advantage and eBuy for market research and posting competitive requirements.

Finally, and most importantly, the 1980’s FSS did not require competition at the order level. Today, pursuant to statute and regulation, some enhanced competition essentially is required for all orders exceeding the micro-purchase threshold.  For FSS orders exceeding the simplified acquisition threshold ($150,000), a contracting officer is required to provide notice and an opportunity to compete to all FSS contractors capable of meeting the requirement.   As such, price and value under the FSS program are driven by competition at the task order level not the PRC.  GSA Advantage and eBuy enhance that competition providing a platform for market research and solicitation of competitive quotes. The competitive FSS market included thousands of contractors and millions of products and services.  It is time for the PRC to go!

Already we have seen at least two major commercial firms leave the FSS program due to the burdensome contract paperwork and compliance requirements.  If nothing is done to streamline and reduce overregulation, more are sure to follow.   Here’s hoping that the next time FAS briefs the White House, it can talk about the implementation of acquisition reforms that ensure the FSS program of the 21st century provides a dynamic, robust commercial market place for customer agencies and contractors.  After all, category management and CAP will only be as successful as their underlying contracts.

P.S.:  I never thought I would be writing an article that includes references to President Obama, ODCs and the PRC!

 

Roger Waldron

President

Supporting our nation’s veterans has always been a passion of the Coalition and we were fortunate to be able to share that passion yesterday at our event, Hiring Veterans: A Training Program for Employers. Thank you to Booz Allen Hamilton for hosting the veterans hiring training and allowing us to use the beautiful Newman Auditorium for this important event.

During breakfast, mid-morning, and again at the conclusion of the event, we had five non-profit organizations set up tables to exchange ideas and information with attendees regarding veteran hiring.  Thank you to the following participating organizations: Operation Second Chance, National Industries for the Blind (NIB) Wounded Warrior Program, Hope for the Warriors, and Easter Seals.

An Air Force Honor Guard officially kicked off the morning with the presentation of colors, followed by opening remarks and a welcome from Ken Mills, Senior Vice President at Booz Allen Hamilton.

Our note speaker, Commissioner John Newby, Virginia Department of Veterans Services, traveled up from Richmond and delivered a thoughtful, passionate address on Virginia commitment to veterans and veterans hiring and support programs.   Commissioner Newby talked about various resources in Virginia that companies could utilize to optimize the opportunities from hiring veterans. Commissioner Newby also stressed the critical importance of continued support for veterans once they are on the job.

Our first panel discussion of the morning, Programs Every Veterans Hiring Advocate Needs to Know, was presented by David Pennington (Navy Safe Harbor); John Chavis (US Marine Corps Wounded Warrior Regiment); Jim Thur (Employer Support of the Guard & Reserve); and Cy Shearer (Wounded Warrior Mentor Program).  Each shared valuable insight into their respective program and generated numerous questions from the audience on ways to engage these types of organizations for the betterment of their company, and also the lives of veterans and their caretakers.  A highlight of this discussion was when Cory Gritter, Managing Partner of Gritter-Francona Inc. and wounded veteran who spent more than three years at Bethesda/Walter Reed, spoke about his personal experience with the Wounded Warrior Mentor Program and how it helped him form the successful veteran owned small business he runs today.

Our second panel, The Path to Developing a Successful Veterans Hiring Program, was comprised of companies who wanted to share their insights, best practices, and lessons learned in setting up their internal veteran hiring programs.  Christine Rath (Booz Allen Hamilton), Brian Harris (L-3), Karen Stang (Northrop Grumman), and David Ralston (CGI) shared valuable thoughts on what it takes to create a successful program.  With nearly 30 minutes of questions from the audience, it was clear their presentations were thought provoking and valuable for all attendees.

Thank you to all participants and attendees for making this such a successful, knowledge sharing event.  We can all make a difference when it comes to supporting our nation’s veterans and the Coalition is pleased to continue its efforts in this very important area.  For anyone who was unable to attend, here are the event materials with resources, contacts and best practices information on veterans hiring.

Roger Waldron

President

As promised, some thoughts on “Evergreen” contracting.  The original concept behind “Evergreen” contracting at GSA was to establish Multiple Award Schedule contracts that were not limited by a contract term.  Rather, the contracts included a base period of five years followed by subsequent five year option periods with no outer contract period limit.  The theory was that such an approach would reduce administrative costs for GSA, customer agencies and industry while ensuring long term stability and access to the commercial marketplace.  “Evergreen” contracting as described above is still an idea worth exploring with GSA.  At the same time, there are other challenges relating to the contract term and impending expiration of current schedule contracts.  We will include these additional challenges as part of our “Evergreen” Working Group’s agenda.

As you know, the current term of GSA Schedule contracts is set at 20 years—structured as four five year option periods.  The 20 year contract term was implemented in the mid to late 1990’s and as such, we are now seeing GSA Schedule contracts reaching their end date.  The cost, time and uncertainty associated with the closeout of one or several GSA schedule contracts and submission of new offers is a challenge for both GSA and its schedule contractors.  There is a significant risk that delays in negotiating new contracts to replace expiring ones will create gaps and limit access to best value solutions for customer agencies.  To date, GSA has not adequately addressed the status of pre-existing orders and Blanket Purchase Agreements (BPAs) under GSA schedule contracts that are approaching their expiration date.  Customer agencies and contractors in a procurement limbo—can they continue to utilize BPAS and task orders or must they re-compete?

The Coalition’s Evergreen Working Group will be examining these issues and identifying potential strategies, procedures and best practices to smooth the transition to new contracts for customer agencies, GSA and schedule contractors.  At a fundamental level, to the extent a BPA or order has been effectively competed and awarded under a schedule contract—it should remain in place for the effective period of the BPA or task order.  In our view such an approach is consistent with and honors the underlying competition that resulted in the BPA or task order.  Moreover, it makes good business sense for customer agencies and the American taxpayer.

With regard the submission of new offers by schedule contractors whose current contracts are set to expire, the Coalition strongly believes that the evaluation and negotiation process should take into consideration a contractor’s successful performance of its schedule contracts over the previous 20 year life.  The Competition in Contracting Act, (CICA) does not require that each offeror be treated equally regardless of circumstances.  Rather, all contractors must be treated fairly—depending on the circumstances surrounding each offer.  Consideration of successful past performance over a 20 year period should count for something.  GSA should consider a streamlined evaluation process for such schedule contractors.  Finally, the Coalition Evergreen Working Group will also address true Evergreen Contracting that will ensure the issues described above are resolved for all time.

If you are interested in participating in our Evergreen Working Group please contact Roy Dicharry at (202) 331-0975 or rdicharry@thecgp.org.  See the Evergreen Working Group article below for information about our first meeting next week.

Roger Waldron

President

As you know, GSA is undertaking an initiative to modernize the GSA Schedules Program.  GSA has contracted with the Mitre Corporation to conduct a “white space” study of the GSA Schedules Program.  The Coalition was invited and has participated in discussions with GSA and Mitre regarding the study.  In doing so the Coalition was asked for feedback on the form and content of a Schedule contractor survey prepared by Mitre.  As GSA and Mitre continue their review of the program it is vitally important for members to respond to the survey which can be found here.  To GSA’s credit, it is seeking your feedback on the program and potential improvements—let’s all continue the dialogue with GSA!

In some ways GSA has already launched elements of a modernization effort.  For example, the Professional Services Schedule Consolidation Initiative will allow contractors to consolidate their offering under a single professional services schedule contract.  This initiative has great potential for reducing administrative and overhead costs for government and industry, increasing transparency and competition for customer agencies, and increasing access to commercial innovation and best value solutions across a spectrum of professional services.  Consolidation provides opportunities for improved efficiency and savings for customer agencies seeking, and schedule contractors offering, cross-cutting commercial service solutions to meet customer agency needs.

The Coalition has supported and continues to support consolidation.   Indeed, the Coalition has been a leader in promoting schedule consolidation. Starting in 2011 we identified and consistently discussed with GSA the reinvigoration of “corporate” or consolidated schedules as a key pillar in modernizing the GSA schedules program.  Here are just a couple of examples from 2011 and 2012 of our thoughts regarding schedules consolidation.  Since that time, the Coalition, at the invitation of GSA, has provided additional thoughts regarding the overall modernization of the GSA Schedules Program including, among other documents, our:

Consolidation of the Professionals Services Schedule provides a wonderful platform for implementing the recommendations contained in these papers.  Importantly, the Professional Services Schedule Consolidation also provides an important opportunity to address evergreen contracting—contract close out for current 20 year contracts and the submission of new offers by incumbent contractors who are approaching the end of their current 20 year contracts.  The Coalition is establishing an Evergreen Working Group to make recommendations on this very issue (see article below).  It is time to work together for a set of policies and procedures that foster efficiency, competition and certainty for customer agencies and contractors.  It is time to revisit evergreen contracting!  More on this in next week’s blog!

Roger Waldron

President

As you know, the Coalition for Government (the Coalition) is committed to supporting Veterans transitioning to the civilian workforce.  Over the last four years our charity golf tournament, the Joseph P. Caggiano Memorial Golf Tournament, has raised over $75,000 to support veteran’s organizations and to begin funding the Coalition for Government Procurement Endowed Scholarship at the George Washington University (GWU) to support eligible veterans seeking a law or master’s degree in U.S. Government Procurement.

To further expand our outreach and support for veterans, on February 12th the Coalition and Booz Allen Hamilton will host a morning forum, “Veterans Hiring: A Training Program for Employers.”  This forum will bring together key veteran’s support programs from across the Department of Defense, including the U.S. Marine Crops Wounded Warrior Regiment and Navy Safe Harbor on our government panel.  Our Keynote Speaker is Commissioner John Newby, Virginia Department of Veterans Services who will provide his insights, experiences and initiatives supporting veteran’s transition to the civilian workforce.    In addition to the government panel, the forum includes an industry panel that will share best practices for hiring, supporting, and developing veterans in the workforce.  Thank you to Booz Allen Hamilton, Northrop Grumman, L-3 and CGI Federal for participating on this “best practices” panel.

The forum will include networking breaks that foster exchange between government and industry.  In addition, the Coalition has invited several veterans organizations to participate in the networking event to share information about their efforts and how we can support them.  The invited veterans organizations include Easter Seals, Operation Second Chance, and Hope for the Warriors.  The full agenda for the forum can be found here.

In the coming days Coalition staff will reach out to our members seeking your strong attendance and participation at this important event.  In the meantime, please share the agenda with your respective Veterans Hiring Offices!  We look forward to seeing you there!

Supporting our veterans is good business—more importantly it is the right thing to do for those who have given so much to keep us safe and defend our freedom.

Roger Waldron

President

On January 7th, GSA’s 18F organization issued a Request for Information (RFI) seeking information about the agile delivery capabilities of vendors under the GSA IT Schedule 70 SIN 132-51.  According to the RFI, the information gathered will assist GSA with developing an acquisition strategy for a potential “Multiple Award Blanket Purchase Agreement under FAR 8.4.”  The RFI can be found here.

18F’s use of Blanket Purchase Agreements (BPAs) under the GSA Schedules program is just the latest example of a government organization turning to the program to accomplish key mission objectives.  Time and time again across multiple Administrations, key procurement programs have been launched, nurtured, and implemented through the GSA Schedules program. BPAs have been used to support government financial asset management in the wake of the Great Recession.  BPAs are now being used by DHS to support cyber security efforts.  Here is just a partial list of governmentwide BPAs that are supporting agency missions:

  • Domestic Delivery BPAs
  • SmartBuy Software BPAs
  • Wireless BPAs
  • Continuous Diagnostics and Mitigation BPAs
  • Cloud Services BPAs
    • EaaS
    • IaaS
  • Strategic Sourcing BPAs
    • Office Supplies
    • JAN/SAN
    • MRO
    • Managed Print Services
    • Numerous Agency Specific BPAs
  • Pharmaceutical BPAs

This partial list does not include the thousands of GSA Schedule BPAs that have been established by customer agencies.   The procurement community may have concerns with the unintended consequences of some of these initiatives (e.g., see strategic sourcing) but one cannot realistically argue that GSA Schedule BPAs are not a leading procurement tool to meet key program objectives including agency strategic sourcing.   The inherent flexibility and streamlined nature of the competitive BPA process saves time and money for both government and industry.  At the same time, it is important to remember that regardless of the procurement tool—sound requirements development and communication between government and industry are critical to success.  BPAs under the GSA Schedules Program provide a “Keystone” framework where agencies can focus on requirements rather than burdensome contracting processes.  FAR Part 15 does not apply!  BPAs provide the overall flexibility and efficiencies of which deliver significant operational benefits for agencies seeking mission support through the GSA Schedules program.

Imitation is the sincerest form of flattery—and we see it with the IT GWACs seeking to use BPAs under their contract programs as well as the OASIS program using GSA Interact to craft a message that you can structure orders in a manner similar to a Schedule BPA.  What greater endorsement of GSA Schedule BPAs than these efforts to embrace similar tools.  BPAs are a “best value” operational feature of the GSA Schedules Program.

BPAs are a vital tool in the GSA Schedule toolbox—at the same time there is always room for improvement on behalf of agency customers and the American people.   GSA is to be commended for conducting a study (headed up by MITRE Corporation) of the GSA Schedule Program.  The Coalition is very appreciative of the dialogue/engagement with MITRE regarding the study.  As part of this study, MITRE is conducting a survey of Schedule contractors, the Coalition urges each member to respond to the survey and address the vital role of BPAs and areas where the BPA process can be improved to further increase access to the commercial marketplace and innovation.

As you know, the Coalition has provided a series of analyses, white papers and comments that include recommendations for improving the GSA Schedules program.  Given the vital role that the program plays in satisfying mission critical requirements, we believe it is important to continue the dialogue with GSA.

Roger Waldron

President

As GSA’s Federal Acquisition Service (FAS) continues to explore creating a separate “cloud” special item number (SIN) on its IT Schedule 70 contracts, it has issued a working draft cloud terms and conditions for review and comment by industry.  The comments on the draft are due on January 15th.  FAS’s engagement with industry and issuance of a draft set of terms and conditions for cloud is a positive step towards creating a comprehensive, innovative procurement channel for cloud services government-wide.  The draft terms and conditions can be found here.

Significantly, the draft terms and conditions include pricing language that makes clear that the PRC is an inappropriate, counter-productive pricing mechanism for cloud services.  The draft terms and conditions state in part that:

“As commercial cloud computing services have various pricing models with limited standardization across industry, the primary requirement for cloud computing services is alignment with NIST essential characteristics.  All pricing models must have core capability to meet the NIST Essential Cloud Characteristics, particularly with respect to on-demand self-service, while allowing alternate variations at the task order level at agency discretion, pursuant to the guidance on NIST Essential Characteristics.” [Emphasis added.]

This statement reflects reality in the commercial cloud services market.  There is great variability in commercial pricing models, standardization along with the need to tailor or customize solutions to meet unique customer requirements.  It is a commercial market and service delivery model that is fundamentally inconsistent with the application of the PRC.

As this blog has observed many times, the PRC ignores the unique quality of service solutions in the commercial and federal market places.  These variations mean that mechanical, apples-to-apples comparisons for the PRC are difficult, if not impossible, for both the government and industry.  There is just too much gray in service solution delivery based on customer unique requirements.  This uncertainty will result in unnecessary compliance costs for both government and industry—costs and risks that will limit flexibility, innovation and best value cloud solutions via IT Schedule 70. These costs are unnecessary because as the pricing note above makes clear—pricing varies by solutions and by allowing alternative variations at the task order level at agency discretion—pricing will be driven by task order competition for agency specific requirements!

There is a solution within the context of IT Schedule 70.  There is clear regulatory flexibility to address the anti-competitive, anti-innovation application of the PRC. Under General Services Regulation (GASR) 501.404(a)(2), the FAS Commissioner can submit a class deviation for the GSAR’s PRC to the Senior Procurement Executive for approval.  The deviation could waive applicability of the PRC to the cloud services SIN thus reducing overhead and compliance costs while increasing access to the latest commercial cloud services. Competition at the task order stage will assure that agencies receive fair and reasonable pricing.  As observed in this blog previously, there is precedent for waiver of applicability of the PRC.  In 2013, FAS waived applicability of the clause to certain transactions to allow MAS furniture contractors to compete for a series of open market Air Force furniture procurements.  A copy of that waiver can be found here.

Finally, the deviation makes sense as GSA explores alternative pricing initiatives to the PRC.  As Administrator Tangherlini noted in his December 12th response to the Coalition’s “quick fixes” recommendation that the Maximum Order Threshold (MOT) to the Simplified Acquisition Threshold:

“GSA acknowledges industry’s concerns regarding the MOT as it relates to compliance costs and liability under the Price Reductions clause.  GSA has several pricing initiatives underway that will include an opportunity for public comment regarding this clause in coming months.  GSA looks forward to further discussion with industry on these issues as GSA’s pricing initiatives move forward.”

The Administrator’s complete response can be found here.

Roger Waldron

President

On December 4, 2014, Anne Rung, Administrator of Federal Procurement Policy, Office of Federal Procurement  Policy (OFPP) at the Office of Management and Budget (OMB) issued a memorandum for all Chief Acquisition Officers and Senior Procurement Executives entitled “Transforming the Marketplace: Simplifying Federal Procurement to Improve Performance, Drive Innovation and Increase Savings.”   The memorandum sets forth the Administrator’s vision for improving performance outcomes of the procurement system.  Although there are concerns across the procurement community regarding the viability of government-wide adoption of “Category Management,” there is much in the memorandum that has the potential to foster improvement in the procurement system.  In particular, the focus on the acquisition workforce and building stronger vendor relationships is welcomed.

It is a timely and encouraging memorandum.  Timely, as across the procurement community there is a growing consensus that the procurement system must be modified or “reformed” to increase efficiency and effectiveness in delivering best value outcomes to support customer agency missions.  Encouraging, as the approach reflects much of what the Coalition for Common Sense in Government Procurement (the Coalition) has called for over the last three years:

  • Embrace simplification in processes and procedures
  • Put “commercial” back in commercial item contracting
  • Conduct a retrospective review of procurement regulations
  • Embrace robust dialogue between government and industry
  • Reduce contract duplication
  • Address barriers to entry and promote innovation
  • Incorporate “materials” (i.e. ODCs) capability in Multiple Award Schedule (MAS) contracts
  • Improve the negotiation software licensing in MAS contracts
  • Reform MAS pricing policy

These themes are reflected throughout the “FAR & Beyond” Blogs and in our white papers and policy statements addressing key procurement trends, issues and challenges.  Here is a list of links to some relevant FAR & Beyond blogs and/or Coalition policy documents:

The December 4th memorandum includes common sense procurement themes that Coalition members support.  Here is a sampling:

  • “Simplifying the Federal Contracting space is critical to driving greater innovation and creatively and improved performance.” See Page 1 of the Memorandum.
  • … [U}nnecessary duplication imposes significant costs on contractors and agencies.” See Page 2 of the Memorandum.
  • “Early, frequent, and constructive engagement with industry leads to better outcomes.” See Page 4 of the Memorandum.
  • “[G]reater attention must be paid to regulations relating to procurements of commercial products and services, as the Government is typically not a market driver in these cases and the burden of Government-unique practices and reporting requirements can be particularly problematic, especially for small business . . .” See Page 5 of the Memorandum.

The December 4th memorandum highlights the results of the Open Dialogue stating in part that “[t]he Open Dialogue, which drew nearly 500 participants, was an important first step in helping agency managers to better understand both industry concerns and the processes and practices that will better enable companies to consistently do their best work and delivery optimal value to the taxpayer.”  See Page 6 of the Memorandum. The memorandum instructs GSA to identify steps to reduce burdens and barriers to entry for contractors and to improve the efficiency and effectiveness of the MAS program, including steps to improve the acquisition of materials (i.e. ODCs) and negotiation of end-user licensing agreements.

As you recall, the Coalition submitted a set of recommendations to the Open Dialogue.  Seven Coalition recommendations made the top ten in votes from the public.  We look forward to working with OFPP, GSA, the FAR Council and the entire procurement community on making these recommendations a reality!

Roger Waldron

President

 

For this week’s comment I wanted to share with you a blog post first published on the Federal Times’ Acquisition Blog (www.federaltimes.com). The post highlights the government’s challenge to employ sound data management policies specifically, with regard to price.

Driving the federal government towards a Low Price Regardless (LPR) contracting model

As part of the Federal Strategic Sourcing Initiative (FSSI), the Office of Management and Budget and the General Services Administration have created a Prices Paid Portal. The goal of the Prices Paid tool is to reduce total cost of ownership for goods and services by providing greater visibility on the prices agencies have paid for them.

The Prices Paid Portal is part of an ongoing effort to collect transactional data across the government. The challenge in managing pricing data is to ensure it is used to identify contracting strategies and/or terms (like volume commitments) that increase competition and deliver greater value to the American people. Unfortunately, current data management practices will likely reduce competition and value over the long term.

Sound management of pricing and procurement data requires discipline, sophistication, and, most significantly, an understanding of markets and how companies respond to competitive dynamics. Moreover, price alone is incomplete data. In order to effectively understand pricing, one must have access to and understand the underlying terms and conditions, contract commitments, market and economic forces that drive pricing. Price is only one data point in determining “total cost of ownership.” An accurate measure of “total cost of ownership” includes much more than just price. It also includes acquisition cost (i.e. how much did it cost to conduct the procurement), operational costs, maintenance costs, and disposal costs. The emphasis solely on prices paid data ignores these fundamental cost elements.

To date, the experiences with FSSI and GSA regarding the prices paid data is that of an agency seeking to drive down prices “at all costs.” It is the implementation of a new Low Price Regardless (LPR) model—(i.e. give us the lowest reported price regardless of the associated terms and conditions, volume commitments, market and economic conditions). For example, GSA is using historical, horizontal price comparisons to drive down pricing in the Multiple Award Schedules (MAS). Price comparisons that too often ignore differing terms and conditions, commitment and market conditions—even ignoring such basic price drivers as unit of issue!! It is LPR on steroids.

This LPR model is fundamentally inconsistent with the Federal Acquisition Regulation (FAR). FAR guidance on fair and reasonable price determinations looks first to adequate price competition—and direct competition takes place at the order level under the MAS program as it does under contracts like NASA SEWP, NIH CIO-SP3, OASIS, Alliant, and any other multiple award IDIQ contract. Significantly, FAR guidance regarding comparison of proposed prices to historical prices paid directly contradicts the LPR model. The FAR provides that any prior price must be adjusted to account for materially differing terms and conditions, quantities and market and economic factors!

Will the prices paid portal include sufficient information for contracting officers to comply with the above guidance? Are contracting officers sufficiently trained to identify, understand and reasonably consider and adjust prior prices based on materially different terms, quantities, and market and economic factors?

The LPR model has grave implications for the federal government. Traditional commercial firms, already burdened by the voluminous and costly government-unique requirements, are reexamining their commitment to the federal market. These firms are already dealing with LPR. It is a recipe for long term contraction of the supply chain. Supplier suppression will drive innovative commercial firms out of the federal market. It will reduce opportunities for small businesses. It will reduce access to best value products, services and solutions to support agency missions on behalf of the American people.

LPR and supplier suppression are driving the federal market towards a limited subset of firms that are willing to do business with the federal government. It reminds me of the late 1980’s and early 1990’s when I entered government service. At that time GSA more often than not dealt with a limited number of contractors whose only focus was the federal market. In terms of quality, performance and value—the products and services these firms provided were not comparable to similar products and services available in the commercial market. It took the Federal Acquisition Streamlining Act to bring the quality and best value of the commercial marketplace to the federal government. Unless the federal government rethinks its current approach to price and value, we will continue to move towards a procurement system with limited commercial competition, value, performance and innovation.

Roger Waldron

President

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