The Coalition for Government Procurement

This week GSA’s Federal Acquisition Service (FAS) invited the Coalition to a briefing on its Multiple Award Schedule (MAS) Competitive Pricing Initiative.  The Competitive Pricing Initiative (CPI) will be launched in May and is focused on reducing “price variability” for identical items offered/listed on various MAS contracts. The CPI will include all product-based schedules and 4.5 million items have been identified for review.

Under CPI offered prices will be compared to other awarded schedule prices for the exact same item.  FAS indicated at the meeting that it recognizes that both price and non-price relate factors (such as contract terms, warranties, etc.) will play an important role in the determination of competitive pricing for all items, including identical items on schedule.  CPI’s goal is to reduce price variability for identical items on schedule by bringing outlier pricing into an acceptable range of overall pricing for the specific item.

There is a long standing focus in GSA on addressing MAS pricing for identical items under identical terms and conditions.  In fact, throughout the 1990’s into the early 2000’s GSA had internal MAS policy addressing pricing of identical items under identical terms to ensure pricing for such items on contracts was within an acceptable range.  CPI re-energizes that policy. Significantly, CPI is also based on using data that FAS already has in its possession.

This initiative is a common sense approach to addressing pricing for identical items under identical terms and conditions.  In fact, at the April 17th public meeting on GSA’s proposed Transactional Date Reporting rule, the Coalition specifically proposed that FAS address/reduce price variability for identical items as one of a series of alternatives to the transactional data pilot.  From a membership perspective, it is extremely significant that CPI is based on FAS using information that is already in its possession! Moreover, given that one of the major goals of the data reporting rule is to reduce price variability among identical items, perhaps GSA should take a step back and assess the results of CPI before embarking on a costly and burdensome contractor data reporting regime!

At the same time, the Coalition maintains its firm belief that competition at the order level for agency specific requirements drives price and value for customer agencies.  More still needs to be done across government to train contracting officers on how to effectively utilize the program.  Training on the MAS program can have an immediate return on investment by increasing best value outcomes for customer agencies using the program.  In the long term, training can reduce costs by addressing contract duplication—the more contracting officers understand and are comfortable with MAS’s streamlined, competitive ordering procedures the lower the demand/desire for duplicative agency specific contract vehicles.

I won’t be writing a typical comment today as I’ll be out of the office presenting at GSA’s public meeting in regards to amending the General Services Administration Acquisition Regulation (GSAR) to include clauses that would require vendors to report transactional data from orders and prices paid by ordering activities.  Much more on this topic to come after the conclusion of today’s meeting on the proposed rule.  In the interim, I wanted to take this opportunity to remind you that we are just over a week away from our 2015 Spring Training Conference, titled The Business Of Government.

 

On April 28th at the Fairview Park Marriott in Falls Church, we will host speakers from the General Services Administration, Department of Veterans Affairs, Small Business Administration, Department of Homeland Security, and the Department of Defense.

 

Keynote Speaker Denise Turner Roth, Acting Administrator for the U.S. General Services Administration, will kick off the morning sessions where she will be discussing Managing the Business of Government – GSA’s Role.   We are looking forward to her remarks as this will be the first time she has had the opportunity to address the Coalition.

 

The morning session will also include panel discussions with topics such as Ten Tips for Capturing The Federal Market 2015 And Beyond, The Impact of Small Business Policy on The Federal Market, and a legal panel discussing From Risks to Rewards – Strategies for Managing Liabilities of your Federal Contract.

 

During our sit down lunch, participants will have the privilege of listening to Kevin Youel Page, Deputy Commissioner, Federal Acquisition Service, GSA, share his thoughts on The Status of MAS Reform – Update on GSA Initiatives and what they Mean for your Business.

 

The afternoon will consist of two groups of Myth Buster Breakout Sessions, where everyone will have the opportunity to choose from seven different topics that include over 25 different government panelist.

 

Myth Busters Breakout Session #1

  1. The Ultimate Helpdesk – SAM, GSA Advantage And Ebuy
  2. How Contractors Can Improve The Audit Process – The Government’s Perspective
  3. Cybersecurity: What Change Should Federal Contractors Anticipate?
  4. The Future Of Sustainable Government—From Ecolabels To Green Buildings

 

Myth Busters Breakout Session #2

  1. GSA Technology Contracts
  2. Transforming GSA’s Professional Services Offerings
  3. GSA, Federal Acquisition Service, General Supplies and Services (GSS) Business line Update

 

View the full agenda here and don’t forget to register today as we need an accurate head count going into next week!  If you need any assistance with the registration process, please contact Matt Cahill at mcahill@thecgp.org or 202-315-1054 and he’ll be happy to help!

 

We are looking forward to seeing you on the 28th!

 

Roger

For this week’s FAR and Beyond Blog, I’d like to share the Coalition’s comments to GSA on NS2020:


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March 31, 2015

 

Timothy J. Horan

Contracting Officer

General Services Administration

1800 F Street NW
Washington, DC 20405

 

Subject: Comments on the Draft RFP for the NS2020 Enterprise Infrastructure Solutions (EIS) Acquisition

 

Dear Mr. Horan:

 

The Coalition for Government Procurement (“The Coalition”) is a non-profit association of firms selling commercial services and products to the Federal Government. Our members collectively account for approximately 70% of the sales generated through the GSA Multiple Award Schedules (MAS) program and about half of the commercial item solutions purchased annually by the Federal Government. Coalition members include small, medium and large information technology (IT) firms participating in the GSA Schedules program and the family of IT GWAC programs across government.  The Coalition is proud to have worked with Government officials for over 35 years towards the mutual goal of common sense acquisition.

 

The Coalition appreciates the opportunity to provide comments on the Draft RFP for the NS2020’s Enterprise Infrastructure Solutions (EIS) Acquisition. The Coalition looks forward to working with GSA to develop IT contract solutions that increase competition and access to commercial innovation while reducing costly contract duplication across the Federal enterprise. In this regard, the unintended consequences of the current EIS contract structure will have a significant negative impact on competition and innovation in the federal IT market place.  Moreover, the current EIS contract structure will increase, rather than decrease, contract duplication within the family of GSA IT contracts and across the entire federal government.

 

Background

 

In April 2014, GSA’s Integrated Technology Service (ITS) issued its NS2020 white paper, the Network Services 2020 Strategy, NS2020: Defining the future of Federal Telecommunications.   The white paper set forth the future vision for GSA’s provision of government-wide telecommunications including the proposed EIS telecommunications contract.  The white paper indicated that EIS would include a “broadly defined” scope of work enabling agencies to include ancillary or bundled information technology services in task orders that would otherwise fall into other IT program areas.  GSA also issued an RFI that provided the public with an opportunity to comment on the acquisition strategy outlined for NS2020 and EIS.  In May 2014 The Coalition provided its comments on behalf of its members.  Our primary concern was that the acquisition bundled services in such a manner as to prevent cloud service providers, call center providers and a host of equipment suppliers from competing in the government’s requirements. See attachment 1. On February 28, 2015, GSA issued the draft EIS RFP for public comment with a due date of March 31, 1015.  The draft solicitation does not address the comments and does not explain the government’s decision to bundle services in a way that excludes major industry sectors from competition.

 

The attached pricing chart found at Paragraph B.1.2.1.1, Pricing Identification Structure, of the draft RFP sets forth the services to be provided under EIS. See attachment 2.  The chart lists five mandatory telecommunications services and 25 optional services along with optional “service related equipment” and optional cable and wiring. Among the optional service areas are cloud services, data center services, COMSATCOM and wireless.  In order to be eligible for award, an offeror must propose and meet the five mandatory service area requirements.  The draft RFP contemplates a global geographic scope of performance, a potential ten year contract term and technical refresh capability to incorporate new technologies/services through the life of the contract.

 

  1. The EIS draft RFP unduly restricts competition.

 

The Competition in Contracting Act (CICA) requires that solicitations permit full and open competition and contain restrictive provisions and conditions only to the extent necessary to satisfy the needs of the agency.  Bundled or consolidated procurements combine separate, multiple requirements into one contract potentially restricting competition by excluding firms that can furnish only a portion of the requirement.  As such, the government must show a reasonable basis as to why bundling is necessary to meet the agency’s needs.

 

The bundling of the mandatory telecommunications service areas with the optional service areas, excludes commercial cloud and data center providers from the procurement.  The significant telecommunication infrastructure costs and requirements associated with the global mandatory telecommunications requirements, creates a barrier to entry and competition for the optional services included in the RFP.  As a result, the entire cloud services and data center contractor community, other than the 3-5 firms capable of meeting the telecommunications requirements, will be shut out of the EIS government-wide 15 year contract program.  Given the draft RFP’s technical refresh capability for adding new technologies and services to the contract, the draft RFP perpetuates an ongoing anti-competitive framework that limits future competition and access to new technologies/services to the limited number of companies receiving an award for the EIS mandatory telecommunication services.

 

Throughout the Myth-Busters dialogue on this procurement, GSA has maintained that bundling of the mandatory and optional services is an effort to be “flexible” by providing its customer agencies with an administratively convenient mechanism to purchase consolidated telecommunication and IT infrastructure requirements.  Administrative convenience, when weighed against full and open competition, is not a reasonable basis for bundling or consolidating requirements.  GSA should focus on solutions that increase administrative convenience without compromising the competitiveness of the acquisition.

 

  1. The EIS draft RFP duplicates services available on pre-existing IT contract vehicles.

 

As the Coalition has noted on several occasions, the scope of services envisioned under EIS duplicates pre-existing contracts across GSA and government-wide.  As currently structured, the draft RFP includes optional services that are already available on IT Schedule 70, Alliant, and Alliant SB.  With regard to cloud services in particular, there are a host of Blanket Purchase Agreements (BPAs) and agency specific contracts. Moreover, EIS includes optional services that are available under NIH’s family of IT GWAC contracts as well as NASA SEWP.  Continued contract duplication increases the complexity and costs of the acquisition process for both government and industry.  The costs are ultimately passed on to the customer in the form of higher prices.

 

Conclusion and Recommendations

 

There are alternatives that allow for robust competition across the telecommunications and IT service areas while maintaining the flexibility to meet customer agency needs. We recommend that GSA consider the following:

  • Restructure EIS to eliminate the mandatory nature of the telecommunications services thereby allowing non-telecom companies to compete in the optional areas. This approach would increase competition while still allowing customer agencies to bundle or consolidate telecommunications and IT at the task order competition level.
  • Rename the optional services as “functional areas.” This would reflect distinct “categories and subcategories of services,” and allow any qualified bidders to compete for work that is predominantly within the optional services categories or subcategories and subcontract the rest. This structure would better enable GSA to manage categories of work.
  • Include the telecommunication services on IT Schedule 70 and/or the follow-on Alliant 2 contract. By no longer requiring these services as mandatory, this approach would again maximize competition across all service areas while retaining the ability of customer agencies to consolidate requirements at the order level, as appropriate.  An additional benefit would be a reduction in contract duplication.  GSA is already moving to a set of cloud line items on IT Schedule 70.
  • Delete the optional services from EIS and look to pre-existing vehicles and the Common Acquisition Platform (CAP) Hallways to facilitate meeting customer agency requirements. This approach will also reduce duplication and overlap among contract vehicles.

Finally, NS2020 represents the fourth generation procurements for telecommunications services managed by GSA:  (1) FTS 2000; (2) FTS2001; (3) Networx; and now (4) EIS NS2020.  In each generation it appears that the transition costs and timing has become more and more challenging.  It is time to consider a GSA Schedules telecommunications solution.   The GSA Schedules provide flexibility to offer a suite of services while not limiting competition across the market.  Continuous open seasons would ensure access to the commercial telecommunication market on an ongoing basis meaning greater access to new services, products and technologies. The 20 year contract period would provide greater stability and ease concerns regarding the timing for task order competitions and transitions. Most importantly, GSA, as the statutory manager of the GSA Schedules program, has the discretion to structure a telecommunications Schedule that maximizes competition from the commercial market.

 

The Coalition appreciates the opportunity to provide our recommendations on the NS2020 draft RFP.  If there are any questions, please contact me at (202) 331-0975 or rwaldron@thecgp.org.

 

Sincerely,

Roger Waldron

President

 

Now that we’ve entered April, there are a couple things we’re very excited about here at the Coalition – warmer weather and our upcoming Spring Training Conference titled The Business Of Government.

 

This year’s Spring Training Conference will take place on April 28th at the Fairview Park Marriott in Falls Church, VA and include speakers from the General Services Administration, Department of Veterans Affairs, Small Business Administration, Department of Homeland Security, and the Department of Defense.

 

Keynote Speaker Denise Turner Roth, Acting Administrator for the U.S. General Services Administration, will kick off the morning sessions where she will be discussing Managing the Business of Government – GSA’s Role.   We are looking forward to her remarks as this will be the first time she has had the opportunity to address the Coalition.

 

The morning session will also include panel discussions with topics such as Ten Tips for Capturing The Federal Market 2015 And Beyond, The Impact of Small Business Policy on The Federal Market, and a legal panel discussing From Risks to Rewards – Strategies for Managing Liabilities of your Federal Contract.

 

During our sit down lunch, participants will have the privilege of listening to Kevin Youel Page, Deputy Commissioner, Federal Acquisition Service, GSA, share his thoughts on The Status of MAS Reform – Update on GSA Initiatives and what they Mean for your Business.

 

The afternoon will consist of two groups of Myth Buster Breakout Sessions, where everyone will have the opportunity to choose from seven different topics.  Check them all out in the agenda below, and don’t forget to register today!

 

Lastly, thank you to our current Spring Training Conference sponsors – we appreciate your support!

 

Gold: Bloomberg Government

Lunch: SheppardMullin and CACI

Refueling Station: The Gormley Group

Sustainability: Ricoh Americas Corporation

Networking Reception – Berkeley Research Group

 

There’s still time and sponsorships remaining for your company to support the Coalition’s Spring Training Conference – please contact Matt Cahill at mcahill@thecgp.org or 202-315-1054 to discuss options!

To view the conference agenda click here!

agenda 1D

agenda 2D

agenda 3D

 

 

 

 

For this week’s comment, I wanted to share with you all a letter the Coalition sent this week to OMB and GSA concerning commercial item contracting in the wake of a recent decision by the Court of Appeals for the Federal Circuit:

March 24, 2015

 

Denise Turner Roth

Administrator, General Services

1800 F Street, N.W.

Washington, D.C. 20004

 

Anne Rung

Administrator

Office of Federal Procurement Policy

Office of Management and Budget Tom Sharpe

Washington, DC 20006

 

Subject: FAR Part 12 and the Recent Court of Appeals for the Federal Circuit Decision, CGI Federal Inc. v. US (March 10 2015)

 

Dear Administrator Roth and Administrator Rung:

 

The Coalition for Government Procurement (“the Coalition”) is a non-profit association of firms selling commercial services and products to the Federal Government. Our members collectively account for approximately 70% of the sales generated through the GSA Multiple Award Schedules (MAS) program and about half of the commercial item solutions purchased annually by the Federal Government. Coalition members include small, medium, and large business concerns. The Coalition is proud to have worked with Government officials over the past 35 years towards the mutual goal of common sense acquisition.

 

Given the recent decision of the Court of Appeals for the Federal Circuit in the case, CGI Federal Inc. v. US (March 10 2015) (“the Court of Appeals decision” or  “the decision” ), the Coalition is interested in how your organization will address/implement the decision across the Federal enterprise. The Coalition believes the decision provides the government a significant opportunity to increase the efficiency and effectiveness of commercial item acquisition programs, particularly the GSA’s Multiple Award Schedules (MAS) Program.

 

As you know, the Court of Appeals concluded that the FAR Part 12 prohibition against the use of terms that are inconsistent with customary commercial practice applies to orders placed against a GSA Schedule contract.  As a result, the court found that noncommercial payment terms included in a MAS task order violated the FAR, and they were invalidated. In addition, the court held that “FAR Part 12’s proscription against terms inconsistent with customary commercial practice applies to [solicitations issued pursuant to the Financial and Business Solutions Schedule] and therefore that the [solicitations] violate that proscription.” Further, the court noted that FAR § 12.302(c)’s proscription against any “solicitations or contracts” including terms “inconsistent with customary commercial practice” applies to [RFQs issued pursuant to the Financial and Business Solutions Schedule]  because the RFQs are a “solicitation,” and the resulting order is a “contract” as those terms are defined by FAR.

 

The case reaffirmed that FAR Part 12 was created to implement the Federal Acquisition Streamlining Act of 1994 (FASA), which requires that the Federal Acquisition Regulations (“FAR”) include “a list of contract clauses to be included in contracts for the acquisition of commercial end items,” and that the list, to “the maximum extent practicable . . . shall include only those contract clauses that are . . . determined to be consistent with standard commercial practice.” Moreover, as noted by the Court of Appeals, the regulation precludes the inclusion of “any additional terms or conditions in a solicitation or contract for commercial items in a manner that is inconsistent with customary commercial practice for the item being acquired unless a waiver is approved in accordance with agency procedures.” See FAR 12.12.302(c).

 

This decision is a powerful statement of support for returning the notion of “commercial” to “commercial item” contracting across the Federal enterprise.  Focusing on commercial practices, terms, and conditions will increase government access to best value products, services, and solutions from the commercial market place.  In particular, a reinvigorated commercial item contracting paradigm will increase competition and enhance access to innovative, cutting edge commercial technologies and solutions, both key Administration procurement goals.

 

GSA’s MAS program is the largest commercial item contracting program in government.  It accounts for over $35 billion in purchases annually, and it provides thousands of commercial firms, including thousands of small businesses, access to the federal market.  The Court of Appeals decision should provide the Administration the impetus for a top-down review of MAS contracts to eliminate terms and conditions that are inconsistent with standard commercial practice.  Such a review is consistent with the vision established in OFPP’s December 4, 2014 memorandum to Chief Acquisition Officers and Senior Procurement Executives.  The letter points to the need for agencies to continually review regulations, to ensure they remain relevant to today’s buying environment.  The memo stated …  “[i]n particular, greater attention must be paid to regulations related 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 businesses.

 

In closing, the Coalition is very interested in hearing GSA’s and OFPP’s plans for addressing the court’s decision across government and within the MAS program.  We stand ready to engage in a robust “Myth-Busters” dialogue to put the “commercial” back in “commercial item” contracting.    In this regard, we look forward to inviting you to speak to our members about this important issue.

 

Sincerely,

Roger Waldron

President

In just 5 short weeks…….

The Coalition 2015 Spring Training Conference titled The Business of Government will take place on April 28th at the Fairview Park Marriott in Falls Church, VA. The roster includes speakers from GSA, the Department of Veterans Affairs, Small Business Administration, Department of Homeland Security, and the Department of Defense.

Keynote Speaker Denise Turner Roth,  Acting Administrator for the U.S. General Services Administration will kick off the morning sessions.   Acting Administrator Roth will be discussing Managing the Business of Government – GSA’s Role, and we are looking forward to her remarks as this will be the first time she has had the opportunity to address the Coalition.

Looking to increase your market share?  A panel discussion, Ten Tips for Capturing The Federal Market 2015 And Beyond moderated by Bill Gormley, President of the Gormley Group, will include Ray Bjorklund, President, BirchGrove Consulting; Cameron Leuthy, Senior Budget Analyst, Bloomberg Government; and Wendy Frieman, Principal Consultant, Lohfeld Consulting Group.

Next up, John Shoraka, Associate Administrator of Government Contracting and Business Development, Small Business Administration, will discuss The Impact of Small Business Policy on The Federal Market with moderator Angela Styles, Partner, Crowell & Moring.

Legal questions?  The panel discussion titled From Risks to Rewards – Strategies for Managing Liabilities of your Federal Contract led by Jonathan Aronie, Partner, Sheppard Mullin; David Dowd, Partner, Mayer Brown; and Jason Workmaster, Partner, McKenna Long & Aldridge will provide insight.

Our luncheon speaker will be Kevin Youel Page, Deputy Commissioner, Federal Acquisition Service, GSA, who will be sharing his thoughts on The Status of MAS Reform – Update on GSA Initiatives and what they Mean for your Business.

The afternoon Myth Busters Breakout Sessions will include government speakers discussing the following topics:

  • The Ultimate Helpdesk – SAM, GSA Advantage And eBuy
  • Early Adopters of Strategic Solutions – What’s Working, What’s Not, and What’s Ahead?
  • The Future Of Sustainable Government—From Ecolabels To Green Buildings
  • How Contractors Can Improve the Audit Process – The Government’s Perspective
  • Cybersecurity: What Change Should Federal Contractors Anticipate?
  • GSA Technology Contracts
  • Government Wide Acquisition of Professional Services
  • GSA, Federal Acquisition Service, General Supplies and Services (GSS) Business line Update

 

For the full agenda click here

We will conclude our Spring Training Conference with a networking reception in the ballroom foyer and outside deck!

To register for the Spring Training Conference click here.

We look forward to seeing you all there and continuing the Mythbusters dialogue.

This blog addresses GSA’s proposed rule seeking to implement “Data Transactional Reporting” for the GSA Schedules program, GSA IT GWACs, and other GSA contract vehicles.  In my March 6th blog, I focused on the implications associated with the “wage and price” control regime the rule would implement across the GSA Schedules.    

This blog highlights a number of questions the rule raises regarding its operational burdens, its cost impact, and the underlying assumptions upon which it was constructed.   The Coalition appreciates the opportunity for public dialogue on these and other issues at the public meeting on April 17.

  • How did GSA estimate contractor costs for collecting and reporting transactional data? In justifying the imposition of transactional data reporting requirements on vendors, GSA states that the Government would incur tens of millions of dollars in costs to update its systems, like FPDS, to handle transactional data and years to implement.  GSA estimates that the initial startup burden for contractors to implement transactional data reporting would be only six hours, and that, after initial startup, the monthly administration/management burden of this requirement would amount to only 31 minutes.  Without knowing GSA’s methodology and analysis, it is difficult to understand how a Government burden of “tens of millions of dollars” translates into such a minimal burden for the private sector.  This burden needs to be accurately identified to allow GSA to understand any barriers to market participation and, ultimately, the increased cost burden for Government.  Black letter economics demonstrate that costs to industry will be recouped through increased prices to the Government. To help inform the dialogue, the Coalition is surveying members about the impact of the rule on their operational costs.
  • Why is the Government asking contractors to report data it created and already has in its possession? All the data to be reported has its origin within the Government.  Indeed, the Government already possesses all the transactional data it seeks to have reported.  We know of no commercial equivalent to such a reporting requirement, and it is difficult to see how this approach is consistent with the guidance established through the Paperwork Reduction Act.
  • How much burden has actually been lifted from contractors? GSA’s analysis concludes that by “trading” transactional reporting for elimination of the PRC’s tracking customer, contractor burdens will be significantly reduced.  Based on contractor performance experience, however, it is highly questionable whether any burden would really be reduced.  GSA reserves the right to demand updated Commercial Sales Practices (CSP).  Thus, the PRC, other than the tracking customer requirement, essentially remains in effect for contractors.  Contractors likely will see an increased burden, as they must now constantly track all aspects of the CSP.
  • What happened to adequate price competition in determining prices fair and reasonable? The preamble to the rule states that transactional data is required for a price analysis to determine whether prices are fair and reasonable.  FAR 15.404-1(b)(1), however, states that adequate price competition provides an exemption for obtaining cost and pricing data and/or data on the prices paid for the same or similar items.  On multiple award contracts, like the GSA Schedules, competition at the task order level promotes downward pressure on prices and upward pressure on value.  The statement that transactional data must be used to conduct price analysis is contrary to the price analysis requirements found in the FAR.
  • How will GSA maintain protection of the pricing data? Under the Freedom of Information Act (FOIA), unit pricing submitted in response to a competition requirement is protectable as commercial sensitive information.  Every day FSS contractors are providing such information to customer agencies.  Without understanding the measures that will be implemented to safeguard this information (and accounting for their cost), contractors face a new risk scenario as a result of this reporting requirement.

Earlier this week, the Court of Appeals for the Federal Circuit issued a decision that bears on consideration of this proposed rule.  In CGI Federal Inc. v. US (March 10 2015), the court concluded that the FAR Part 12 prohibition against the use of terms that are inconsistent with customary commercial practice applies to orders against a GSA Schedule contract.  Applying that principle, the court found that revised payment terms used by Health and Human Service’s Centers for Medicare and Medicaid Services violated FAR Part 12.  The Coalition has observed on a number of occasions throughout the implementation of the Federal Strategic Sourcing Initiative (FSSI) that GSA and OMB have imposed ever increasing data reporting burdens on contractors that have a high cost and are inconsistent with commercial practices.  GSA’s proposed rule on reporting transactional data seems to fall within this same category.

These topics and more need to be addressed by GSA as part of the dialogue around this proposed rule.  They represent the significant concerns across industry regarding the rule’s operational costs, risks, and impact.   Most significantly, the “wage and price controls” brought on by this rule, aside from presenting a troubling perspective regarding  the commercial market, likely will result in supplier suppression, that, in the long run, will reduce competition, value, and innovation across the GSA Schedules program.

For more on the rule please take a look at Jonathan Aronie’s article under this week’s Legal Corner.

Roger Waldron

President

 

On March 4, 2015, the General Services Administration (GSA) issued a proposed rule, GSAR Case 2013-G504, Transactional Data Reporting.  The proposed rule would establish a new requirement for GSA contractors (IT GWAC contractors, Federal Supply Schedule (FSS) Schedule contractors and other GSA contract programs, as applicable) to report transactional data at the order and Blanket Purchase Agreement (BPA) level to GSA.  Note the VA Schedules are exempted. The transactional data to be reported includes the following:

  1. Contract or BPA Number;
  2. Order Number/Procurement Instrument Identifier (PIID);
  3. Non Federal Entity, if applicable;
  4. Description of Deliverable;
  5. Manufacturer Name;
  6. Manufacturer Part Number;
  7. Unit Measure (each, hour, case, lot);
  8. Quantity of Item Sold;
  9. Universal Product Code (UPC), if applicable;
  10. Price Paid per Unit; and
  11. Total Price.

The proposed rule retains the Price Reduction Clause (PRC) but deletes the requirement to monitor a tracking customer for price reductions for FSS Schedule contractors required to report transaction data.  The remainder of the PRC essentially remains in effect.  FSS Schedule contractors will still be required to submit Commercial Sales Practices (CSP) information—with the ongoing requirement to provide updates throughout the life of the contact.  In addition the rule makes clear that GSA can ask for FSS Schedule contract price reductions at any time.  Prices reduction requests will likely be based on review of transactional data.  To GSA’s credit, it is seeking a public dialogue on the proposed rule—with a public meeting scheduled for April 17th.  The Coalition supports a transparent, open public dialogue and we have already registered to attend and speak on the 17th.

The proposed rule includes a number troubling statements, assumptions and rationale regarding implementation of transactional reporting. The rule raises many questions regarding operational burdens and administrative savings, cost assumptions, and understanding and interpretations of statute and regulation.   The rule also raises significant concerns regarding potential negative impact on small business, competition, and limiting innovation across the FSS program.

At its core, the rule makes clear that transactional data reporting will support horizontal price comparison to drive down pricing.  It is telling that the statutory and regulatory requirements for competition at the task order level are never mentioned or referenced in the rule.   Rather, the use of transactional data and horizontal price comparisons establishes a framework for Wage and Price Controls in Government-wide Contracting.  Those of a certain age remember Nixonian “wage and price controls” and the negative impact it ultimately had on the US economy.  Here the combination of transactional data reporting and horizontal pricing will serve to control wages and prices through a constant drive to lower prices regardless.

We are already seeing this phenomenon in the FSS program.  FAS contracting officers are routinely demanding ever lower prices with nor requirements on FSS contracts based on comparisons to other horizontal pricing regardless of the context or underlying terms of those horizontal pricing.   The proposed rule will essentially institutionalize a management framework that will control wages and prices by constantly driving down FSS contract prices for commercial products, services and solutions.

Many might say “the government getting lower prices” why is that a bad thing?  It is not a bad thing when reduced costs and/or greater value are achieved through competition /streamlining for agency specific requirements.

However, a system that seeks to drive down pricing through constant comparison of individual transactions leads to a downward or death spiral in pricing that is inconsistent with the dynamics of the commercial market place.

The wage and price controls underpinning the proposed rule’s goals will:

  • Suppress wages of those who work for commercial firms; contradictory to the Administration’s policy goals
  • Suppress salaries of those providing professional and IT services thereby limiting the government’s access to the best and brightest via commercial service firms a current priority of the Administration
  • Limit growth and opportunity for small business concerns whose margins are always slim and who will not have resources to invest in additional systems to monitor and report transactional data
  • Drive away innovative companies both small and large who rely on and make investments in expertise and technology to deliver cutting edge solutions to protect the health and security of our Nation
  • Reduce competition across the FSS program as wage and price controls limit the ability of firms to compete on both value and price/cost
  • Undercut best value acquisitions at the task order level as companies respond to the drive to ever lower prices and rates
  • Implement a low price regardless model

These long term impacts are not in the interests of customer agencies or the American people.   We look forward to the dialogue on April 17th to find ways to reduce government spend and increase value in all acquisition transactions!

Roger Waldron

President

 

I want 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

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