Urban Myths: Are GSA’s Prices Fair and Reasonable?
Over the years, some have questioned whether GSA Schedule prices are fair and reasonable, and such concerns have led to GSA launching efforts, such as Transactional Data Reporting and horizontal pricing analysis, to demonstrate that it is dedicated to offering its customers “competitive” (however defined) prices. Now comes an MBA Professional Report published by the Naval Postgraduate School, which provides a business case analysis comparing GSA Advantage to Amazon Business from the standpoint of prices and processes. The study was completed in response to a request from the Air Force, which is considering entering into a pilot with Amazon Business in order to strategically source micro-purchases using an on-line platform.
The results of the study may be surprising in light of the recent legislative activity and discussions surrounding on-line acquisition options for government. They also might inform those who cast a skeptical eye toward the value and vitality of the GSA Schedules Program. The authors gathered data on the top 60 commercially available items purchased by the Air Force using government purchase cards (GPCs) and compared the acquisition outcomes on GSA Advantage and Amazon Business. They found that:
- Prices were lower on GSA Advantage more than 80 percent of the time.
- Although both platforms offered quantity discounts, prices on GSA Advantage were still lower than those on Amazon Business after applying the discounts.
- Shipping was both cheaper and faster on GSA Advantage than on Amazon’s platform (an average of 5.45 days with free shipping on GSA Advantage versus an average of 9.25 days at an average cost of $2.33 on Amazon).
- Every item the study reviewed was sold by at least one small business on GSA Advantage. By comparison, only 35 percent of the items were sold by a small business on Amazon. In addition, the authors had difficulty identifying the small business status of suppliers on the Amazon Business platform.
Despite the benefits that the report identifies, GSA Advantage still has areas that could be improved:
- The authors surveyed GPC holders and found that 70 percent preferred the Amazon platform to other platforms.
- Minimum order requirements on GSA Advantage were unpopular among government buyers, and survey respondents felt that GSA Advantage’s search function was misleading because the minimum order requirements were not displayed in the search results.
- Despite results that indicated the prices are lower on GSA Advantage─
- More than 64 percent of buyers surveyed believe that prices on Amazon.com are lower than other online ordering websites.
- Only 10 percent of survey respondents believed that GSA Advantage’s prices were lower than other online ordering sites.
- More than 90 percent of the buyers surveyed believed that product reviews are important when making purchasing decisions. GSA Advantage affords limited, if any, access to product reviews, but such reviews are widely available on Amazon.
A key take-away here is that, notwithstanding demonstrated benefits of GSA Advantage, user experience is very important. Thus, at a minimum, GSA should review the results of the report and work to improve its platform by updating the user experience and improving the search function. Likewise, a thorough review of the minimum order requirements on Schedules also may be in order. At the very least, GSA might consider displaying the minimum order requirements within the search function to provide clarity for government users. GSA should also engage in an outreach and education program among GPC holders, and seek to clarify misconceptions about GSA Advantage; particularly in light of the report’s findings regarding pricing.
Ultimately, this report addresses some perhaps unfair urban myths about the GSA Schedules, and it is great news for GSA. It highlights the value of the Schedules program, which negotiates with industry to ensure that products that meet the Trade Agreements Act, small business, AbilityOne, and other government requirements are available on GSA Advantage at “competitive” prices. Moreover, taken with the Order Level Materials Rule that was finalized this week, it shows that the Schedules program still is a relevant and viable channel, through which, the agencies may meet their needs safely and effectively. FAS Commissioner Alan Thomas stated during the Section 846 public meeting earlier this month that GSA is not standing still as it continues to look for ways to improve its programs. Here, it appears that GSA is starting from a position of strength as it moves forward.
Finally, it is important to note that the Federal Government spent more than $28 billion using GPCs during 2017. Given the size of this purchasing activity, there must be careful and thoughtful consideration of the approach to on-line acquisition moving forward, as the decision here could have a significant impact on the market. For instance, if these purchases are strategically sourced through a single e-commerce platform, rather than multiple portal solutions/providers, transaction fees alone could represent a windfall, if not a subsidy, to a vendor and thereby impact competition, small business participation, fairness, and, potentially, the government’s access to innovation.
The Coalition recommends this study to all stakeholders for their consideration. As we continue to assess the findings, we expect more issues to arise, and if they do, we will address them in future blogs.
Join the Member Dialogue with GSA Administrator Murphy, Feb. 14
The Coalition for Government Procurement will be hosting an all-member meeting with the new Administrator of the General Services Administration (GSA), Emily Murphy, on Wednesday, February 14, 2018 from 9:30-10:30 AM.
Members will have the opportunity to engage in a constructive and collaborative dialogue with Administrator Murphy that will particularly focus on her goals and priorities as the new leader of GSA. The meeting will be in Washington, DC.
Seating is limited and available on a first-come first-served basis. To RSVP, please contact Jason Baccus at email@example.com.
If members have any questions, please contact Andrew Sisti at ASisti@thecgp.org.
Following a busy 2017, the General Services Administration (GSA) appears to be bound for an even more eventful 2018 according to recent article published by FedTech. Indeed, as we begin the new year, it appears that GSA will be focused on a variety of major IT agenda items, including supporting agency modernization efforts, transferring modernization projects from the drawing board to reality, and overseeing the Federal transition to Enterprise Infrastructure Solutions (EIS) vehicles.
One agenda item of particular importance to GSA in the new year will be its new Centers of Excellence (CoE) Initiative. The CoE model, which was first introduced last month by the White House, will be piloted by the Department of Agriculture (USDA). According to Stephen Censky, the Deputy Secretary of USDA, the goal of this pilot is to transform the Department into, “the most effective, efficient, customer-focused department in all the Federal Government.”
To support such a lofty goal, GSA’s Technology Transformation Service (TTS) will create CoE teams, each of which will be focused around on of five areas; cloud adoption, IT infrastructure optimization, customer experience, service delivery analytics, and contract centers. After implementing the CoE teams, the first phase of the pilot will focus on strategy development and planning processes, which is anticipated to take about 6-months. The second phase will focus on supporting implementation as USDA begins purchasing IT technology and services.
Upcoming Refresh for Schedule 51V
Last week, the General Services Administration (GSA) announced that it is planning a refresh and corresponding mass modification for Schedule 51V to incorporate Special Item Number (SIN) enhancements and consolidations. According to GSA, the refresh and modification are tentatively planned for January 2018.
For more details regarding the enhanced SIN structure and consolidated SINs for Schedule 51V (Hardware Superstore), see GSA’s Interact post.
Coalition Streamlining Recommendations for TRICARE
Earlier this week, the Coalition submitted comments to the Department of Defense (DoD) Regulatory Reform Task Force’s Defense Health Agency (DHA) subgroup regarding opportunities to “repeal, replace, or modify” sections of the TRICARE regulation at 32 CFR part 199. Specifically, the Coalition made recommendations on a variety of aspects of the TRICARE regulation, including:
- Disputes, Interest, Payment, and Administrative Fees
- Pay Level Discrepancies
- 340B Dispute Process
In addition, the Coalition requested that the DHA subgroup continue its outreach efforts through the establishment of an Operations Working Group that would address the issues and concerns of manufacturers. The comments are posted on the Coalition’s policy documents page.
Last week, the Defense Innovation Board, a Federal advisory committee of experts in academia, technology and business, approved two new recommendations for improving innovation in the Department of Defense (DoD). The Board’s first recommendation was to create an innovation, science, technology, engineering, and mathematics (I-STEM) career field for DoD employees. The second recommendation was to create a technology and innovation training program for senior DoD leaders.
The Board was established in 2016 by then-Defense Secretary Ash Carter to strengthen innovation at the Department and help maintain the military’s technological edge.
The Board’s members include Eric Schmidt, chairman of Alphabet (Google’s parent company); Reid Hoffman, co-founder of LinkedIn; Jeff Bezos, founder, and chief executive of Amazon; Harvard’s Robert Walmsley University Professor Cass Sunstein; and well-known astrophysicist and cosmologist, Neil deGrasse Tyson.
The Board’s previous recommendations include:
- Appoint a chief innovation officer and build innovation capacity in the workforce;
- Embed computer science as a core competency of the department through recruiting and training;
- Embrace a culture of experimentation;
- Assess cybersecurity vulnerabilities of advanced weapons;
- Catalyze innovations in artificial intelligence and machine learning;
- Expand use of available acquisition waivers and exemptions;
- Increase investment in new approaches to innovation;
- Improve DoD access to code;
- Establish software development teams at each major command;
- Make computing and bandwidth abundant;
- Reward bureaucracy busting; and
- Lower barriers to innovation.
Order Level Materials: Connecting Contract Requirements with Contract Execution
This week, the General Services Administration (GSA) published its final rule incorporating “Order Level Materials” (OLMs), also known as “Other Direct Costs” (ODCs), into Multiple Award Schedule (MAS) service contracts and task orders. The Coalition commends GSA for finalizing this rule, which will help to further streamline the Schedules program, reduce incentives for agencies to establish duplicative contracts, and minimize burdens for Government and industry. As many of you know, the Coalition has been a longstanding advocate for the inclusion of ODCs into the MAS Program. Below is our analysis of the rule, the potential value of incorporating OLM/ODC functionality into the MAS program, and what contractors should anticipate moving forward.
The Final Rule
The final rule incorporates OLM/ODC functionality through the establishment of a new clause in the General Services Administration Acquisition Regulation (GSAR) that governs how they may be procured. In particular, the final rule establishes:
A Definition of OLMs/ODCs – OLMs/ODCs are defined as those supplies and/or services that are acquired to directly support a singular task or delivery order through an MAS contract or Blanket Purchase Agreement.
A Separate OLM/ODC Special Item Numbers (SINs) – The rule provides that OLMs/ODCs are to be included and priced at the order level through the establishment of new SINs under Schedules authorized to allow for OLMs/ODCs.
A Limitation on OLMs/ODCs Inclusion – No more than 33% of an order’s overall value can be derived from OLMs/ODCs. Further, the rule instructs contracting officers (COs) to make fair and reasonable price determinations for all OLMs/ODCs included in the order.
For those who have been following Federal regulations in recent years, these changes should seem rather familiar, as they were all included in a proposed rule that GSA published in September 2016. There are, however, a few critical differences between the final rule and GSA’s 2016 proposed rule.
For instance, similar to the proposed rule, the final rule seeks to support the ordering activity CO’s fair and reasonable price determination by requiring MAS contractors to provide a minimum of three quotes for each OLM/ODC included. The threshold for requiring three quotes, however, was increased from the micro-purchase threshold in the proposed rule, to the simplified acquisition threshold (SAT) in the final rule. If MAS contractors are unable to provide three quotes, they must produce a rationale explaining why it is not possible to do so. Pursuant to the final rule, however, “Contractors with an approved purchasing system per FAR 44.3 are exempt from the three quote requirement,” which helps to further streamline the MAS program, as well as reduce burdensome and unnecessary requirements.
Another critical change in the final rule is the empowerment of customer agencies with the discretionary authority to allow for indirect costs to be included at the order level in a manner that is consistent with FAR 52.212-4 Alternate I (i) (1) (ii) (D) (2). Contractors do not include general and administrative costs associated with acquiring OLMs/ODCs in their fully burdened GSA rates, and thus, would not be able to break even when providing OLMs/ODCs without consideration for indirect costs. By allowing for the consideration of indirect costs, GSA is recognizing the many general and administrative costs required of successful offerors, including but not limited to, the execution of purchase orders, tracking of delivery, receipt/validation of invoices from suppliers, and execution of payment to suppliers.
The Value of OLMs/ODCs
By incorporating OLMs/ODCs into the MAS program, GSA will enhance the program’s overall efficiency and effectiveness by providing the necessary flexibility to deliver best value solutions to customer agencies, while simultaneously reducing duplicative efforts and administrative burden for both Government and industry. By increasing the ability of customer agencies and MAS contractors to seek, compete, award, and perform commercial-based solutions that meet agency mission requirements, GSA can transform the MAS program into a channel for government access to commercial market competition and innovation.
According to the rule, its changes are effective as of its date of publication in the Federal Register. GSA plans to issue internal policy to the acquisition workforce regarding proper implementation, including a list of Schedules the will initially have OLM authority, and it will issue 30-day advance solicitation notices for those Schedules. The Coalition looks forward to working with GSA, as well as all other relevant stakeholders, to incorporate these significant and positive changes that will enhance the MAS program.
Shortage of Supplies Might Have Delayed Medical Procedures at VAMCs
U.S. Medicine published an article this week highlighting the need for a more robust formulary to ensure an adequate supply of medical and surgical products at medical centers operated by the Department of Veterans Affairs (VA). In particular, the article focuses on comments about the Medical/Surgical Prime Vendor program from members of the House Committee on Veterans’ Affairs, findings from a 2017 Government Accountability Office (GAO) report, and the need for a greater role for clinicians in the program. To read the article, click here.
The Government Accountability Office (GAO) has published a report detailing its recent review of past and current efforts underway at the Department of Veterans Affairs (VA) to modernize the Veterans Health Information Systems and Technology Architecture (VistA). In particular, the report focuses on the four separate initiatives that the VA has implemented since 2001– HealtheVet, the integrated Electronic Health Record Modernization (iEHR), VistA Evolution, and the Electronic Health Record Modernization (EHRM).
Of these initiatives, VA was only able to provide GAO with contracting data for work performed on iEHR and VistA Evolution. Between fiscal years 2011 and 2016, VA obligated approximately $1.1 billion, of which $793 million was funded to contractors performing work on these systems. Notably, GAO determined that $741 million – or 93% – of this funding was directed to the top 15 contractors who worked on the two initiatives.
Looking ahead, GAO noted that VA has begun planning for its transition from VistA Evolution to EHRM, with final plans for the new initiative anticipated within 90 days of awarding the EHRM contract.
Updated Section 508 Requirements
Last week, Fedscoop reported on the new Section 508 standards, which went into effect on Thursday, January 18, requiring agencies to ensure their electronics and information technology are accessible to people with disabilities. The updates include additional interoperability requirements, such as Braille displays and screen magnification software. The updated Section 508 standards have also adopted the World Wide Web Consortium’s Web Content Accessibility Guidelines (WCAG) 2.0 criteria for websites.
Proposed Rule: Revise and Streamline VA Acquisition Regulation (VAAR)
The VA is proposing to update the VA Acquisition Regulation (VAAR) consistent with current FAR regulations, to remove procedural guidance internal to VA, and to incorporate new VA regulations and policy. Updates to the VAAR will be made in phases. In the January 11, 2018 proposed rule, the VA is addressing:
- VAAR Part 812—Acquisition of Commercial Items
- VAAR Part 813—Simplified Acquisition Procedures
- VAAR Part 852—Solicitation Provisions and Contract Clauses
Comments in response to the proposed rule are due on March 12, 2018. The Coalition is interested in hearing whether members would like us to submit comments. Members who are interested or have specific feedback on the rule please contact Aubrey Woolley at firstname.lastname@example.org.
Notice: New Prompt Payment Interest Rate
On Monday, January 22, the Department of the Treasury’s Bureau of the Fiscal Service published a notice in the Federal Register announcing a change in the prompt payment interest rate. Specifically, the notice, which is effective as of January 1, 2018 until June 30, 2018, provides that the prompt payment interest rate is 25/8 per centum annum.
Pursuant to the Contract Disputes Act and the Prompt Payment Act, when a Federal agency has acquired a solution from a contractor and fails to produce payment for that solution by the agreed upon payment date stipulated in the contract, the agency is required to pay an interest penalty to the contractor. This penalty must be paid regardless of whether the contractor seeks compensation.
Final Rule: New TAA Thresholds
This week, the Department of Defense (DoD), the General Services Administration (GSA), and the National Aeronautics and Space Administration (NASA) published a final rule in the Federal Register implementing new procurement thresholds for the Trade Agreements Act (TAA). The new thresholds are effective as of January 1, 2018. The new thresholds are as follows:
|Trade Agreement||Supply Contract (equal to or exceeding)||Service Contracts (equal to or exceeding)||Construction Contract (equal to or exceeding)|
|Israeli Trade Act||$50,000|
Coalition Webinar on Cybersecurity and Federal Contracting, Feb. 2
Please join the Coalition for Government Procurement as we welcome two presenters from EY, Andrew Artz and Michael Tomaselli. Andrew and Michael will focus on both immediate and ongoing compliance requirements as well as a future outlook on Cybersecurity requirements in Federal contracting. Register Here!
- System security plans
- Remediation plans (POAMs)
- Subcontractor flowdown
- Incident reporting
Ongoing Compliance and Future Outlook
- Control validation/testing
2. Reporting considerations and communication
3. Subcontractor monitoring
4. Enforcement actions
6. Future state considerations
Andrew Artz is a Principal in EY’s Government Contract Services (GCS) with over 15 years of experience in government contracting. As the GCS cybersecurity lead he’s assisted numerous clients with interpreting regulatory requirements and assessing internal controls for contractual compliance efforts.
Michael Tomaselli is a Manager with EY’s GCS practice with over 10 years of experience working with contractors and their internal and external legal counsel on a wide range of compliance matters. Over the past 18 months, Michael has been focused on assisting clients with developing tailored approaches to compliance with DFARS 252.204-7012.
Keystone Member: Complimentary
Executive Member/Strategic Partner: Complimentary
Premier Member: Complimentary
Standard/Affiliate Member: $50
Government (with ID): Complimentary
General/Office Products Meeting, Feb. 14
The Coalition’s General/Office Products Committee will be meeting via teleconference on Wednesday, February 14, at 1:30 PM. Below is a draft agenda for the meeting:
- Next-generation Maintenance, Repair, & Operations (MRO) Solution
- Re-opening of Schedule 75
- Section 846 e-Commerce Program Update
- General/Office Products Committee Priorities and Goals for 2018
To attend the meeting, please RSVP to Andrew Sisti at ASisti@thecgp.org. Dial-in information for the meeting will be circulated with participants one-week in advance.
GWAC Committee Meeting, Feb. 20
The Coalition’s next GWAC/MAC Committee Meeting will be on Tuesday, February 20 at 3:00 PM at CGI Federal at 12601 Fair Lakes Circle, Fairfax VA. The speaker for the meeting will be Tiffany Hixson, FAS Assistant Commissioner for Professional Services and Human Capital Categories. The meeting will focus on GSA’s plans for OASIS and the Professional Services Schedule. Members are asked to submit any specific questions or topics they have to Sean Nulty (email@example.com) by COB on Friday, February 2
Please note that the meeting is at a different time than our regularly scheduled GWAC/MAC meetings.