FAR and Beyond Blog
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 falls 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.
GSA issued a proposed regulation which requires GSA Schedule and GWAC contractors to report transactional data monthly on all actions under the contract. Contractors are also required to report and pay an Industrial Funding Fee (IFF) or Contractor Access Fee (CAF) quarterly. A summary of the rule is here. GSA estimates that the additional reporting requirements will have little impact on industry. It is important that we get an accurate assessment of the cost of the rule on industry. Consequently, we ask that you respond to this brief survey.
Take the Member Survey on Transactional Data Reporting:
The survey will be open through March 27, 2015. Survey responses will be used to develop the Coalition’s comments in response to the proposed rule. All individual responses will remain confidential.
Join the Federal Buildings Committee on March 26th for a Mythbuster’s discussion with George L. Szwarcman, Associate Executive Director of the VA’s Office of Facilities Acquisition. George Szwarcman provides policy oversight for Architect/Engineer and Major Construction contracting, Real Property contracting and ensures effective facilities acquisition procedures at the VA nationwide. During the committee meeting, George will address current initiatives within VA’s Office of Facilities Acquisition under the leadership of VA Secretary Robert McDonald.
The meeting will be at 2pm on March 26 at Mayer Brown (1999 K St NW, Washington, DC 20006). To attend or dial-in, please RSVP to Jason Baccus at firstname.lastname@example.org.
Speaking to a meeting of the National Defense Industrial Association, Department of Defense (DoD) Undersecretary of Defense for Acquisition, Technology and Logistics Frank Kendall said that in the next volume of the Performance of the Defense Acquisition System report, he intends to document policies that lead to cost and schedule growth and keep programs on track. Kendall explained that the strongest correlations hes found so far are not policy related, but instead whether DoD’s budget is growing or shrinking at any given time. Kendall found that “when budgets are tight, the programs that get approved in that environment have about 30 percent cost growth. The programs that get approved when budgets are not tight have 10 percent cost growth. It’s a factor-of-three difference. It’s not about program manager tenure, it’s not about our regulations, it’s not about the types of contracts we write.”
Kendall has assigned a team to analyze this data in hopes of determining why budget growth versus contraction creates a difference in program costs. One theory that Kendall has for why the correlation exists is that agencies do not want to cut R&D programs under tighter budgets, so they try to maintain them with less funding. This leads to higher overhead costs, less team stability, and an overall decrease in program performance. If Kendall’s team finds that there is a direct causation between lower budgets and higher cost growth, DoD’s next step would be to develop solutions to remedy this instead of increasing procurement and R&D budgets.
In a recent interview with Federal Times, Joanne Woytek provided an update on NASA’s Solutions for Enterprise Wide Procurement (SEWP) V GWAC, set to launch on May 1st. SEWP V creates more than 80 pre-competed vendor contracts along with new tools and enhancements to streamline the contracting process. Woytek’s interview discussed the new features of SEWP V and the associated benefits. Below are some highlights from the discussion.
SEWP V boasts a host of new tools and features to help procurement specialists buy what they need. Woytek notes that SEWP plans to interact with and train their customers daily. Many of the updates to SEWP V are based on customer feedback. SEWP V features a quote tool that will readily display the price, so the user will not have to open the quote to find what the price is. The user can also sort by price using an automated system.
Woytek also notes that SEWP V is not primarily a service contract. This means the contract will not offer general support services and large software development requirements. However, SEWP V will support product services, warranty, installation and training.
According to Federal News Radio, the US Army is significantly reducing its spending for service contractors. The reduction, which has already cut $2 billion dollars in logistics support contracts, is expected to double in the next 5 years. The agency-wide initiative was a topic of discussion during a Senate Appropriations hearing this week. The Army aims to ensure that contract support is used only where appropriate. The reductions have either already taken place or are set to go into effect at the Army’s headquarters organizations, on its bases, and in deployed scenarios.
Specifically, Army Chief of Staff Gen. Ray Odierno said that the Army is in the process of significantly reducing the need for contractors, by better training soldiers to use the equipment.“We’re going to continue to transition these responsibilities back to our soldiers, who I want to be experts in sustaining our equipment.” Additionally, Odierno said, the Army wants soldiers to perform more work on its bases. According to the Army Secretary John McHugh, spending on service contracts has decreased by 13 percent over the last several years. “As part of our restructuring initiative, what we’re doing at headquarters and upper levels is taking 25 percent off the administrative staff and trying to ensure that where we do use contractors, it’s justifiable, not just in terms of the mission, but in terms of dollars,” he said.
The Department of Homeland Security’s (DHS) Science and Technology (S&T) Directorate is planning to reform its contracting process after an inspector general report stated that it needs to improve its contract management. According to a recent audit conducted by the DHS Inspector General (IG), DHS may have misallocated $23 million after prematurely cancelling a contract for a biodetection system. The S&T Director informed the IG that it plans to have updated contracting documentation processes in place by summer, to ensure wasteful spending does not continue. The DHS IG notes that while DHS “properly awarded the contract with NVS Technologies, Inc., it did not properly manage the contract.” According to the report, the termination occurred in part because the S&T program office did not have the necessary standards for documenting its review and oversight of contracts.
This contract cancellation raises concerns about other contracts administered by S&T. The directorate awarded nearly 370 contracts valued at about $338 million in Fiscal Year 2013. The DHS S&T’s Finance and Budget Division plans to establish a written policy for notifying leadership before a contract is terminated. The policy is expected to be in place by the end of July.
Two high ranking technology officials are departing GSA. General Services Administration (GSA) CIO Sonny Hashmi is leaving the agency and taking a job in the private sector. Mr. Hashmi succeeded Casey Coleman in 2014 as GSA Chief Information Officer (CIO). During his tenure, Hashmi advocated for the adoption of virtual desktop interfaces that allow employees to use personal devices on GSA’s network infrastructure. David Shive, who served as the GSA Deputy CIO, will step in as the acting CIO
Additionally, the Executive Director of GSA’s 18F Greg Godbout is departing the agency as well. According to a GSA memorandum on the leadership changes, Godbout is leaving GSA in order to pursue “a new opportunity” in government. Aaron Snow, 18F’s principle deputy executive director, will take on the acting Executive Director Role.
GSA Region 10 posted a list of frequently asked questions on GSA Interact this week on the consolidation process to the One Professional Services Schedule. According to GSA’s post, they have received numerous questions about the migration process since it began last Fall. GSA’s Interact post includes a summary of the questions they have received in the past few months. GSA encourages industry to post any additional questions on Interact or email email@example.com. In addition, the next Professional Services Schedule Consolidation Monthly Webinar is scheduled for March 25th. For more information, visit https://interact.gsa.gov/event/professional-services-schedule-consolidation-monthly-webinar
The U.S. Small Business Administration (SBA) is reopening the comment period for the proposed rule published in the Federal Register on December 29, 2014. In that rule SBA proposed to implement provisions of the National Defense Authorization Act of 2013, which pertain to performance requirements applicable to small business and socioeconomic program set aside contracts and small business subcontracting. SBA also proposed to make changes to its regulations concerning the nonmanufacturer rule and affiliation rules. Further, SBA proposed to allow a joint venture to qualify as small for any government procurement as long as each partner to the joint venture qualifies individually as small under the size standard corresponding to the NAICS code assigned in the solicitation. Finally, SBA requested comments on the timeline and procedures for North American Industry Classification System code appeals. The comment period closed on February 27, 2015.
SBA is reopening the comment period in response to the significant level of interest generated by the proposed rule and at the request of multiple stakeholders. The current deadline for comments to SBA is April 6, 2015. Members who have input on this rule, please contact Carolyn Alston at firstname.lastname@example.org.
On “Off the Shelf”, Van Hitch, senior adviser with Deloitte’s Federal Consulting Practice, shares his thoughts on the key challenges in information technology acquisition and management across the federal enterprise. Hitch provides his analysis regarding the role of the chief information officer (CIO) post Federal Information Technology Acquisition Reform Act (FITARA). He also identifies key issues, opportunities and strategies around cybersecurity, the cloud, and data center consolidation. To listen to the program, visit Off the Shelf online.
Veterans Access Choice and Accountability Act – Implications of the New Supplemental Veterans Health Care Program for Drug and Device Manufacturers
By: Donna Lee Yesner, Partner, Morgan Lewis & Bockius LLP and Stephen E. Ruscus, Partner, Morgan Lewis & Bockius LLP
In the wake of the scandal over veteran wait time for health care at certain Department of Veterans Affairs (“VA”) medical facilities, Congress acted quickly to improve the care available to veterans, including access to providers outside the VA system. On August 7, 2014, President Obama signed into law the Veterans Access, Choice, and Accountability Act of 2014 (“Veterans Choice Act”), which authorized veterans to obtain hospital care and medical services from non-VA providers and $10 billion to pay for such care. Prior to the enactment of the Veterans Choice Act, the VA had voluntarily adopted a policy of paying for veterans’ medical care outside the VA system under certain circumstances; however, VA approval was required for these referrals. By contrast, the new law gives veterans greater access to the hospital care and medical services to which they are entitled under section 17 of title 38 of the United States Code.
The Veterans Access, Choice and Accountability Act – Key Provisions
The new law applies to veterans who are:
- enrolled in a patient enrollment system at the VA established under 38 U.S.C. 1705 and have contacted the VA seeking an initial appointment for the receipt of hospital care or medical services; and
- eligible for hospital care or medical services under 38 U.S.C. 1710(e)(1)(D) and have either
- unsuccessfully attempted to schedule an appointment at a VA medical facility within the Veterans Health Administration wait-time goals (posted on the internet),
- live more than 40 miles from the closest VA medical facility,
- reside in a state lacking a VA hospital, emergency care and surgical care or live more than 20 miles from such a medical facility, or
- live 40 miles or less from a medical facility but must travel by boat, air or ferry to reach it or travel is otherwise burdensome due to geographic challenges.
A veteran who meets any of these conditions is referred to as an “eligible veteran.”
Section 101(a) of the Veterans Choice Act requires the VA to either place an eligible veteran on an electronic waiting list for hospital care or medical services at a VA facility or, at the veteran’s election, authorize care outside the VA through agreements authorized by the statute, or any other laws, from one of four categories of care providers. Further, the VA must inform eligible veterans of the available care and ensure the electronic waiting list is accessible in order for veterans to determine the wait time and make an informed choice. If an eligible veteran elects to receive medical care outside the VA, he or she may obtain care from any of the following entities that have entered into agreements with the VA as described in the statute: 1) any health care provider in the private sector, including any physician, that is participating in the Medicare program; 2) any federally-qualified health center as defined in 42 U.S.C. 1396d(1)(2)(B); 3) the Department of Defense, and 4) the Indian Health Service. To avoid affirmative action program compliance issues, the law expressly prohibits the Department of Labor, Office of Federal Contract Compliance Programs from treating an entity that signs an agreement to furnish health care to veterans as a federal contractor or subcontractor.
When entering into participation agreements under section 101(d) of the Veterans Choice Act, the VA must negotiate rates for furnishing hospital care and medical services and reimburse the entities at the negotiated rates. In general, negotiated rates may not exceed the rates paid by the Medicare program to providers of services and suppliers as defined in sections 1861(u) and (d) of the Social Security Act for the same care or services. However, the VA may negotiate higher rates for care or services furnished to veterans in highly rural areas. The law prohibits providers from collecting more than the negotiated rate and from collecting a co-payment in excess of any amount that could be collected under chapter 17 of title 38 if the veteran received care from a VA provider.
Veterans must disclose whether they are covered under a health care plan other than Medicare, Medicaid, or Tricare. If they are covered by another plan, that plan will be primarily responsible. , for hospital care and medical services for a non-service related disability, to the extent the plan covers the care furnished. The VA will be secondarily responsible. The provider will be responsible for seeking reimbursement first from the primary payer. Authority to pay for hospital care and medical services through non-VA providers – as either the primary or secondary payer – has been transferred from the Veterans Integrated Service Networks and VA medical centers to the Chief Business Office of the Veterans Health Administration. Within 90 days after the August 7, 2014 enactment date, the VA must prescribe regulations for the implementation of a system for processing claims and paying bills for authorized care and services.
Impact of Expanded Care on Drug and Device Suppliers
Furnishing medical care to veterans through non-VA providers is a positive development for suppliers of drugs and medical devices as it should increase the utilization of their products. For example, the VA may pay for products that are manufactured in countries that are not designated countries under the Trade Agreements Act (“TAA”) without a non-availability determination, because the TAA only applies to products acquired under a federal procurement contract, not products purchased by private sector health care providers through commercial channels. At the same time, the law authorizing access to care outside the VA system raises questions regarding reimbursement of supplies, particularly pharmaceutical and biological products, which need to be resolved, perhaps through the claim processing system regulation. For example, the law specifies that veterans may elect to receive medical services including supplies furnished incident to a medical service from Medicare providers. It also contemplates that VA provider agreements will cover drugs and devices covered by Medicare Part B, cap the negotiated rate paid for such supplies at the Medicare rate, and follow procedures applicable to participation agreements under the Medicare program. What is unclear is whether the VA will pay for any drug administered by a non-VA physician and covered by Medicare, or impose its own restrictive formulary on contract providers.
Prior to the Veterans Choice Act, any drugs paid for by the VA were subject to VA formulary requirements. Not only would it be burdensome for non-VA providers to adhere to the VA formulary as a condition of reimbursement, physicians participating in the Medicare program may be unwilling to sign agreements to treat veterans if they cannot use the same products covered by Medicare and receive the same payment. Similarly, military treatment facilities and federally-qualified health centers will want to be reimbursed for whatever supplies they use in treating all their patients, not just veterans. If the VA formulary restrictions do not apply to drugs administered by non-VA physicians, manufacturers of non-formulary drugs may increase utilization of their drugs in the VA market.
Another area requiring clarification concerns prescriptions written by non-VA physicians. Although the Veterans Choice Act authorizes VA payment for supplies furnished as medical services under the Medicare program, it does not provide a pharmacy benefit outside the VA system, and does not cover drugs dispensed by private sector pharmacies. If veterans want the VA to pay for their prescriptions, the prescriptions must be dispensed by a VA pharmacy or the agency’s mail order pharmacy. Before enactment of the new law, prescriptions written by non-VA physicians often could not be dispensed by VA pharmacies without a VA physician first seeing the patient and approving the prescription. In those situations, a veteran still had to wait to schedule an appointment at a VA facility to get the medication. Hopefully, the VA will not continue that practice under the new law.
It is unclear, however, whether the VA will still require veterans to make appointments with VA doctors in order to obtain certain prescriptions. Requiring a veteran to wait weeks for a VA appointment or drive many miles to see a VA doctor in order to receive medication, which could be prescribed outside the VA and dispensed by the VA’s mail order pharmacy, is clearly contrary to the spirit of the law. If the VA is concerned with the expense of a drug prescribed by a non-VA doctor, a requirement for electronic or telephonic consultation between the prescribing doctor and a VA doctor should suffice. In addition, veterans will be issued Veterans Choice cards in order to process payment claims. Thus, it would be relatively easy for a Pharmacy Benefit Manager to manage prescriptions written by authorized non-VA doctors and dispensed by the VA’s mail order pharmacy to Veterans Choice beneficiaries, including any prior authorization requirements.
Finally, it is worth noting that if veterans elect to be treated by DoD physicians, any drugs or devices furnished to veterans at a military treatment facility will be procured by DoD at contract prices available to DoD, including prices under Blanket Purchase Agreements. Similarly, if veterans elect to be treated at federally-qualified health centers, as defined in section 1905(1)(2)(B) of the Social Security Act, drugs used to treat the veterans will be acquired at deeply discounted prices under pricing agreements authorized by section 340B of the Public Health Service Act. Thus, the acquisition cost for these providers is well below the Medicare rate, which, for drugs, is generally based on the weighted average sales price for the drug, exclusive of federal sales. The Veterans Choice Act caps the negotiated reimbursement rate paid non-VA providers for medical supplies at the Medicare rate; however, the statute does not, prohibit the VA from negotiating prices below this amount with providers that are beneficiaries of other federal contracts or pricing agreements and have much lower acquisition costs. Accordingly, the VA could negotiate payment terms with DoD facilities or federally-qualified health centers consisting of a service fee plus the acquisition cost of the drug.
I’m Not Dead Yet, (or a Brief Look At The Future Of The Price Reductions Clause In Light Of GSA’s Proposed Transactional Data Reporting Rule)
By: Jonathan Aronie, Partner, Sheppard Mullin Richter & Hampton
Not enough Government Contracts blogs incorporate movie trivia. So here’s my contribution to fill this obvious gap in the procurement blogosphere: Is the following quotation (a) from a famous Monty Python skit or (b) from a conversation between two Government auditors discussing GSA’s recently-proposed effort to do away with (at least in part) the Price Reductions Clause?
“It’s not dead!”
“’Ere, he says it’s not dead.”
“Yes it is.”
“Well, it will be soon, it’s very ill.”
“It’s getting better.”
“No it’s not, it’ll be stone dead in a moment.”
“Well, I can’t take it like that. It’s against regulations . . . .”
Before giving you the answer, let me offer a bit of context for those who aren’t regular readers of the Federal Register – or regular watchers of Monty Python comedies.
As you likely know, since the 1980s, most GSA Schedule contracts have incorporated a “Price Reductions Clause.” (GSAR 552-238-75) The Clause, long a favorite of Inspectors General everywhere, was developed to ensure the Government receives fair and reasonable pricing throughout the term of the Schedule contract. The Clause quickly became the bane of every Schedule vendor’s existence, causing untold heartburn among compliance officers, CFOs, sales managers, contracts administrators, and, of course, lawyers. It is a clause that is extremely confusing, burdensome, expensive, and, frankly, nearly impossible to comply with if read literally. Yet, try as industry might, GSA and its love affair with the Price Reductions Clause continued unabated.
On March 4, 2015, however, GSA signaled that love affair may be on the rocks with the announcement of a pilot program to do away with the Clause in limited circumstances. (GSAR Case 2013-G504; 80 Fed. Reg. 11,619 (Mar. 4, 2015)) Well, not exactly to do away with it; more like put it aside while the Agency flirts with alternative approaches to Schedule pricing. Dost my eyes deceive me, you say? No they dost not. According to GSA, the time has come to consider bidding farewell to the Price Reductions Clause for certain types of commodities, and replacing it with a new “transactional data” reporting obligation.
GSA described the forthcoming transition as a proposal
to amend the [GSAR] to include clauses that would require vendors to report transactional data from orders and prices paid by ordering activities … The new clause will be paired with changes to the basis of award monitoring requirement of the existing price reductions clause … (80 Fed. Reg. 11619)
The new rule would apply to GSA-awarded Government-wide non-Schedule contract holders immediately upon issuance, but would be phased in for Schedule contractors “beginning with a pilot for select products and commoditized services.” The Schedule pilot would encompass select “commercial products and commoditized services that experience high volume of repetitive purchasing under identical or substantially similar terms and conditions.” (80 Fed. Reg. 11624) The proposed rule would not apply to the VA Schedule. (The VA’s love affair with the Price Reductions Clause runs even deeper than GSA’s.)
The new transactional data reporting clause would require Schedule vendors (and other vendors holding GSA-issued, non-Schedule Government-wide contracts) to report on a monthly basis
prices paid [by ordering activities] for products and services delivered during the performance of the contract, including under orders and blanket purchase agreements (BPAs) through a user-friendly, online reporting system.
According to GSA, “the report would include transactional data elements such as unit measures, quantity of item sold, universal product code, if applicable, price paid per unit, and total price.” (80 Fed. Reg. 11621) While it’s against my nature, I’m going to resist for now the urge to make a flippant comment about how “user-friendly” the Government’s new online reporting system is likely to be.
I will not, however, resist the urge to make a flippant comment regarding GSA’s calculation of the burden the new collection and reporting obligation will impose. According to GSA, the new transactional data requirement will impose upon contractors “a one-time initial set-up burden of 6 hours,” and a subsequent burden of 31 minutes per month. I submit these figures are grossly under-estimated. It’s as though the folks making these rules never have spent time outside the Government actually performing the tasks they impose on others . . . .
In any event, GSA intends to use the resulting data from the new “user-friendly” system to perform “horizontal pricing” analyses – that is, to compare one company’s federal prices to another’s, which GSA began doing a few years ago as part of its standard pricing analysis. Federal purchasers would use these data to “take advantage of prices paid information and the more rigorous order level competition it generates” to reduce the prices they pay for commodity items. In other words, or in my words at least, the new data will be used by the Government to drive prices down without regard to service, terms, conditions, or value. As industry has seen for itself over the last few years, this is precisely how GSA’s “horizontal pricing” evaluation works in practice.
GSA promises the newly captured federal “prices paid” data will be “especially impactful when combined with the insight and expertise of category managers to provide agency buyers across government with market intelligence, expertise, and deep-dive analysis to improve supply chain management, pricing variances, innovation, redundancies, and unnecessary duplication of effort.” The regulation does not make clear who these commercial market experts will be, what powers they will have, or how they will interact with GSA’s existing contracting officers. Nor does the rule make clear whether the mounds of data to be turned over to the Government by vendors will be protected from disclosure under the Freedom of Information Act (“FOIA”).
In exchange for the burden (and expense) of capturing and reporting all these new federal “prices paid” data (some of which, admittedly, already must be captured by vendors holding certain GSA-issued non-Schedule contracts), participants in GSA’s pilot program would be exempt from the Basis of Award (“BOA”) tracking requirement of the Price Reductions Clause. At first blush, this would appear to be a significant benefit. But hold onto that thought for now. I’ll come back to it.
The new rule seemingly is the culmination of several long-in-coming realizations by GSA.
- GSA Realization No. 1. The current Price Reductions Clause is a HUGE burden on Schedule contractors. Really?! Vendors (and Government officials, in candid moments) have been saying this for years. The Government Electronics Information Technology Association, a prominent industry group, even pushed the Office of Federal Procurement Policy to drastically restructure the Clause back in the late 1990s due, in part, to its burdensome, non-commercial nature. More recently, in 2008, the ABA’s Public Contract Law Section revitalized that push, informing GSA’s MAS Advisory Panel the Price Reductions Clause has “created significant burden . . . for contractors and government officials alike.” Despite hiding its head in the sand for years on the issue, GSA now concedes the Price Reductions Clause is a significant burden. Even GSA’s FAS Commissioner Tom Sharpe described the Clause as imposing a “burdensome tracking and reporting requirement.” Indeed, according to GSA’s own analysis, Schedule contractors spend over 860,000 hours a year (at a cost of approximately $58.5 million) on compliance with the Price Reductions Clause, and that eliminating the PRC “could reduce the annual burden on contractors by more than 85 percent . . . .” (80 Fed. Reg. 11622)
- GSA Realization No. 2. The current Price Reductions Clause is CONFUSING. Another “discovery” of something vendors discovered long ago. The Price Reductions Clause is extremely confusing, and is subject to wildly inconsistent and ever-evolving Government interpretations. Just ask any of the many Government contracts consultants and lawyers from coast to coast who spend a good part of their lives trying to help their clients understand and comply with the Clause. But GSA finally has come around. According to a recent study conducted by the GSA OIG, 84% of Schedule vendors screw up their “Commercial Sales Practices Format” submission – the disclosure that ultimately guides the selection of the BOA for Price Reductions Clause purposes. Nearly half of all Schedule vendors screw up their PRC monitoring systems. While I suspect the Government might argue these figures reflect fraud rather than confusion, I don’t buy it. I’ve spent my professional life working with Government contractors and can say, without hesitation, those data reveal confusion with the rules, not ignorance of the rules.
- GSA Realization No. 3. The current Price Reductions Clause does not result in better pricing for the Government. GSA is three for three. Vendors (and many within Government) have recognized for years the market drives prices down, not the Price Reductions Clause. GSA now is on board. Indeed, the Agency recently analyzed the issue and found that “only about 3 percent of the total price reductions received under the price reductions clause were tied to the ‘tracking customer’ feature.” (80 Fed. Reg. 11623)
These realizations, however, have not quite yet put the nail in the Price Reductions Clause coffin. As I noted above, the new approach is only a pilot program. “If the results of the pilot reveal that using transactional data is not an effective pricing model, contracts would revert back to using the tracking customer provisions of the price reductions clause.” (80 Fed. Reg. 11621)
Moreover, GSA has made clear the proposed rule does not do away with the Commercial Sales Practices Format (“CSPF”). In fact, not only is GSA maintaining its CSPF disclosure requirements – to the delight, no doubt, of relator’s counsel everywhere – but the new rule makes clear GSA will “maintain the right throughout the life of the FSS contract to ask a vendor for updates to the disclosures on its commercial sales format . . . where commercial benchmarks or other available data on commercial pricing is insufficient to establish price reasonableness.” While the survival of the Schedule CSPF obligations has been underplayed by GSA’s pilot program promoters, vendors should not overlook the importance of this vestige.
- First, the CSPF is as burdensome an obligation as the Price Reductions Clause.
- Second, the CSPF is as confusing an obligation as the Price Reductions Clause.
- Third, GSA’s reservation of its rights to require vendors to update their CSPF disclosures at GSA’s discretion maintains much of the burden and risk many had hoped would evaporate with the Price Reductions Clause.
- Fourth, if vendors must continue tracking their commercial sales, what has the elimination of the Price Reductions Clause really bought us? Indeed, one might say the introduction of the transactional data reporting obligation along with the continuation of the CSPF obligation only has increased the burden on vendors.
In other words, a celebration of the death of the Price Reductions Clause and the arrival of reason may be premature. Be that as it may, a select group of Schedule contractors are going to have the chance to experience life in a purportedly PRC-free world, and see for themselves whether the new rule is all that GSA is making it out to be.
Which brings us back to the main purpose of this blog post – the introduction of movie trivia into the procurement blogosphere. Thus, without further ado, here is the answer to my trivia question: The quotation is (with some poetic license) adapted from a wonderful little Monty Python film, as most of you probably knew. Although, I must admit I vividly can see in my mind’s eye a group of GSA auditors conversing in hushed tones over their Diet Mountain Dews: “It’s not dead! Yes it is. It isn’t. Well, it will be soon, it’s very ill. It’s getting better.”
Time will tell who’s right, of course. In the meantime, if you’d like to have a say in the matter, GSA is holding a public meeting to discuss the new program on April 17, 2015.
Jonathan is the co-managing partner of Sheppard Mullin’s Washington, DC office, and has been practicing government contracts law since 1994. He is the co-author of the GSA Schedule Handbook (West Publishing), teaches on a variety of Government Contracts topics across the country, is a frequent speaker at Coalition events, and is a Monty Python fan. When not reading, writing, speaking about, or practicing Government Contracts law, he often can be found in New Orleans where he was appointed by the United States District Court for the Eastern District of Louisiana as the federal monitor over the New Orleans Police Department pursuant to a Consent Decree with the Department of Justice.
The Coalition is delighted to announce details of our 2015 Spring Training Conference titled The Business of Government. This year’s conference will be taking place on April 28th at the Fairview Park Marriott in Falls Church, VA. The focus for the Spring Training Conference will be on the General Services Administration, but we will have several other participating agencies including the Department of Veterans Affairs, Small Business Administration, Department of Homeland Security, and the Department of Defense.
We are pleased to kick off the morning with Keynote Speaker Denise Turner Roth, who was named Acting Administrator for the U.S. General Services Administration on February 23, 2015. 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.
Next we will be covering Ten Tips for Capturing The Federal Market 2015 And Beyond. This panel discussion will be moderated by Bill Gormley, President of the Gormley Group, and will include Ray Bjorklund, President, BirchGrove Consulting; Cameron Leuthy, Senior Budget Analyst, Bloomberg Government; and Wendy Frieman, Principal Consultant, Lohfeld Consulting Group.
After a short break we will continue the morning session with The Impact Of Small Business Policy On The Federal Market – A Conversation With John Shoraka, SBA. Mr. Shoraka, Associate Administrator of Government Contracting and Business Development, Small Business Administration, will be discussing this topic with moderator Angela Styles, Partner, Crowell & Moring.
Prior to lunch we will be holding a legal panel discussion titled From Risks to Rewards – Strategies for Managing Liabilities of your Federal Contract. This panel will be led by Jonathan Aronie, Partner, Sheppard Mullin; David Dowd, Partner, Mayer Brown; and Jason Workmaster, Partner, McKenna Long & Aldridge.
Our lunchtime 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 will lead us to our much anticipated Myth Busters Breakout Sessions where we will have a myriad of 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
We will conclude our Spring Training Conference with a networking reception in the ballroom foyer and outside deck – please register today!
You can view the draft agenda HERE, but please keep in mind that while we have all the morning speakers confirmed, this is a working draft agenda and is subject to change.
Coalition Events Update
The Breakfast Forum on Selling to the Federal Government Through Indirect Channels will now be taking place on the morning of Thursday, April 9th. Please note, however, there has been a change in venue and this forum will now be taking place at Baker Tilly Virchow Krause LLP, located at 8219 Leesburg Pike, Tysons Corner, VA.
To close out the quarter, on March 26th we will be having our Federal Healthcare Forum – Changing Strategies in the Acquisition of Medical Supplies, Equipment, Services, and Pharmaceuticals at McDermott Will & Emery LLP. The Department of Defense and the Department of Veterans Affairs are the key players in assuring that the nation’s war fighters and veterans receive excellent health care and this forum will offer greater industry insight into the functions and initiatives of these critical agencies. Speakers will include Col. Scott Svabek, who leads contracting activities for the Defense Health Agency and David Elizalde, who leads the Veterans Health Administration, Office of Logistics. Additionally, we have just added a new speaker to the lineup (pending his agency’s approval), Dr. George E. Jones, Jr., PharmD, M.S – Chief, Pharmacy Operations Division Defense Health Agency!
Register for these and all events on our website at http://thecgp.org/events/list!
Interested in being a sponsor? Please find a list of 2015 Event Sponsorships and benefits HERE, which includes our upcoming Spring Training Conference. We have a wide variety of sponsorship opportunities that include enough range to allow everyone to participate, from our title sponsor, to breakfast, lunch and break sponsors, to sustainability, legal sponsors, and even technology and Wi-Fi sponsorships! Contact Matt Cahill at 202-315-1054 or email@example.com with any event questions or sponsorship commitments.
Easter Seals Advocacy Awards Banquet & Dinner, May 13
The 2015 Easter Seals Advocacy Awards Banquet and Dinner is almost here! The Awards Banquet and Dinner on May 13 is a great way to advance opportunities for children and adults with disabilities, as well as military families with special needs. Beginning in 2004, the Advocacy Awards have been attended by leaders in business, government relations, and professional services have joined military and government dignitaries. The 2015 Dinner will highlight Easter Seals’ services, which include Child Development, Respite, Caregiver Training, Adult Day Services, the Veteran Staffing Network, and Homeless Veterans Reintegration. Please see the Advocacy Information Package for additional information.