Transactional Data Reporting (TDR): A customary commercial practice?
This blog marks the first in a series of blogs focusing on the General Services Administration’s (GSA’s) Transactional Data Reporting (TDR) rule. As you know, the “final” rule was issued on June 23rd, and it implements TDR across the Federal Supply Schedule (FSS) program, the largest, most successful commercial item contracting program in government. Interestingly, the designation of the rule as “final” appears premature, as it implements a pilot program that is subject to change!
Over the course of reviewing GSA’s analysis, explanations, and discussion of the rule, it becomes increasingly clear that GSA’s primary focus was on addressing the concerns raised regarding the burden associated with implementing and complying with the rule. In any case, GSA’s discussion of key policy and operational issues, as well as its responses to public comments, raises significant issues/questions for the procurement community.
A key threshold question is whether the mandated terms of the TDR are consistent with customary commercial practices, as required by the Federal Acquisition Streamlining Act (FASA) and the implementing rules applicable to commercial item procurements set forth in Federal Acquisition Regulation (FAR) Part 12. FAR 12.301(a)(2) requires that contracts for the acquisition of commercial items “shall, to the maximum extent practicable, include those clauses …[d]etermined to be consistent with commercial practice.” FAR 10.002(b) requires that agency market research address, among other things, customary practices regarding the acquisition of commercial items. Finally, FAR 13.302(c) prohibits a contracting officer from tailoring any clause or otherwise including any additional terms or conditions in a solicitation or contract for commercial items in a manner that is inconsistent with customary commercial practice unless a waiver is approved in accordance with agency procedures.
Over the last four years, we have seen the United States Court of Appeals for the Federal Circuit reaffirm the statutory proscriptions regarding the use of customary commercial practices for commercial item acquisitions. See Verizon Wireless, B-406854, September 17, 2012 and CGI Federal Inc. v. United States, March 10, 2015. In both these cases, solicitation terms were struck down as inconsistent with customary commercial practices. Likewise, earlier this year, the GAO sustained a protest against the terms of a solicitation for commercial waste management services issued pursuant to FAR Part 12 where the agency’s market research failed to reasonably support the agency determination that the solicitation’s pricing terms were consistent with customary commercial practice. See Red River Waste Solutions, LP, B-411760.2, January 20, 2016; Denial of Reconsideration, B-41170.3, June 15, 2016.
The Coalition raised the question of the TDR terms versus customary commercial practice in its comments on the proposed rule. GSA’s responded as follows:
Comment: One commenter stated this rule is inconsistent with the Federal Acquisition Streamlining Act of 1994 (FASA) and the subsequent procedures in FAR Part 12, which aims to ‘‘establish policies more closely resembling those of the commercial marketplace.’’
Response: GSA’s intention is to further align itself with commercial buying practices. Horizontal price analysis is a common technique used by commercial firms and individual citizens, and one that GSA plans to further leverage through the use of transactional data. To the contrary, the removal of CSP disclosures and the PRC tracking customer provision, which both predate FASA, are an attempt, in conjunction with horizontal pricing techniques, to harmonize GSA policies with the FAR and commercial buying practices.
See General Services Administration Acquisition Regulation (GSAR); Transactional Data Reporting, 81 Fed. Reg. 41124 (June 23, 2016)
GSA’s response misses the point. The Coalition’s FASA/FAR Part 12 “comment” was not directed at the practice of horizontal price analysis. Such analysis should have been a component of government market research and competitive activities all along, consistent with The Competition in Contracting Act. Rather, the Coalition’s comment pointed out that the terms of the TDR mandating monthly transactional data reporting by contractors are not consistent with customary commercial practices, as required by law and regulation. Indeed, nothing in the record and nothing we have received from our members indicates that the requirements of the TDR are customary commercial practices. Thus, the contracting community is in a quandary as to how to come to an amicable balance between the stated needs driving the rule and the law.
The Coalition supports the Administration’s desire to remove regulatory barriers to innovation like the Price Reduction Clause. To that end, the Coalition proposes another look at alternatives. Earlier this year, the Coalition articulated the belief that DoD’s automated capture of data could be a step on the path addressing the need for internal procurement data collection. For this reason, we proposed exploring the creation of a Category Management Data Working Group led by DoD and GSA, with a charter of identifying strategies/opportunities to facilitate/implement improved internal collection and management of procurement data by the government. As part of its responsibilities, the working group would also conduct market research on pre-existing commercial sources of market data, as well as commercial best practices for the internal management and reporting of transactional data.
In light of the potential obstacles identified above, the Coalition offers its assistance. Specifically, in an effort to support GSA in our common mission of improving the procurement system, the Coalition restates its offer to work with its members to identify commercial best practices for the internal management of procurement data and thereby avoid the challenges that exist with the implementation of the TDR.
Attention members! The Coalition would like to alert you to some new, and exciting enhancements you will see regarding your interactions with our organization. This Monday, July 11, the Coalition launched both a new member management tool and a new website. The Coalition will continue to provide members with updates, as well as helpful “how-to” guides to assist with the transition. Here’s what you need to know about both enhancements:
Member Management Tool
- Allows the Coalition to better capture our communications with you as members, as well as better track your participation with the Coalition
- Allows member company administrators the ability to better track their roster, easily add employees to particular committee lists, and simply make changes when employees join/leave the company
- Allows a more streamlined way to renew your current membership and register for events and trainings (including automatically offering any discounts or complimentary registrations that may be available to your membership tier)
- Content adjusts appropriately to any size screen or device you are viewing the Coalition website on (i.e. desktop, laptop, iPad, smart phone, etc.)
- Modern, efficient navigational panels and search function
- Your username will continue to be your email address, but everyone will have to reset their password in order to access the “members only” section of our website, register for events, etc.
These changes reflect our continued commitment to always improving your member experience with the Coalition and we are looking forward to your feedback. If you have any questions or concerns in the interim, please do not hesitate to reach out to Matt Cahill (email@example.com or 202-315-1054) or Jason Baccus (firstname.lastname@example.org or 202-331-0975). We are looking forward to these improvements and thank you for your continued support of the Coalition!
Logging-In: A How to Guide
In order to login to the Member Portal you will need to reset your password. To do this, follow these simple steps:
- Visit out new website at http://www.thecgp.org (same web address).
- Using the left hand navigational bar, click on “Login in to Member Portal” OR on the right hand side, just above Roger’s Far And Beyond Blog links, click on “Member Portal”
- Below the username and password text boxes, click on “Forgot my password”
- Enter your company email address as your username and click submit
- A link to create a new password should be immediately sent to your inbox
- If you have any difficulties resetting your password, please contact Jason Baccus for assistance at 202-331-0975 or email@example.com.
On July 14, the Coalition hosted the Transactional Data Reporting Webinar, with featured speakers Jonathan Aronie, Partner, Sheppard Mullin; and Lorraine Campos, Partner, Crowell & Moring. This timely and informative session provided participants with a detailed analysis of the changes GSA has made to the final rule based on comments from industry the anticipated impact of the rule’s implementation, and the challenges that contractors may face moving forward. To view the webinar, members must sign in on the Coalition’s website and click “Committee Resources” on the upper right hand side. Please note that the Coalition has a new website. If you have not already logged in this week, simply enter your email into the “username” field and select, “Forgot my password” below. If members have an questions, please contact Jason Baccus at JasonBaccus@thecgp.org.
The General Services Administration (GSA) has issued a notice in the Federal Register regarding the public release of data collected through its recently issued Transactional Data Reporting rule. Specifically, GSA is seeking comments regarding which of the various collected transactional data elements are releasable under the Freedom of Information Act (FOIA). Comments are due by August 29, 2016.
Issued June 23, the final Transactional Data Reporting rule requires GSA FSS contractor holders, GWAC contract holders, and Government-wide IDIQ contract holders to submit various transactional data points to GSA on a monthly basis. To compensate for the additional burden of reporting these various data points, the final rule eliminates the Commercial Sales Practice (CSP) disclosure and the Price Reduction Clause (PRC) basis of award tracking customer requirement. To learn more about the final rule, please visit the Coalition’s “Transactional Data Reporting” webpage.
GSA’s notice about the public release of Transactional Data lists the exemption status of each data element according to GSA. Note that GSA considers “price paid per unit” as exempt, but not the total price of the order. GSA also considers the quantity of item sold as exempt given that it could be used to determine the unit price.
GSA intends to share the transactional data with the public to the “maximum extent allowable.” GSA believes that it will provide “valuable market intelligence that can be used by vendors for crafting more efficient, targeted business development strategies that incur lower administrative costs”, and that it will be particularly helpful to small businesses.
The Coalition plans to submit comments in response to the notice, due August 29. We ask that members please contact Aubrey Woolley at firstname.lastname@example.org or 202-315-1053 with their concerns and questions about the notice so that they can be incorporated into the Coalition’s response.
On Friday, July 8, the House Oversight & Government Reform committee heard testimony regarding how the Federal government can more efficiently and appropriately leverage the private sector for goods and services. Particular attention was focused on public-private competitions, which have been suspended under the A-76 Moratorium since Fiscal Year (FY) 2008, and how the process may be able to provide enhanced efficiencies and reduced costs for the Federal government.
Those testifying before the committee included: Angela B. Styles, Partner, Crowell & Moring; John Palatiello, President, Business Coalition for Fair Contracting; Maurice McTigue, Vice President of Outreach, Mercatus Center; and Donald Kettl, Professor, University of Maryland, School of Public Policy.
In his opening statement, Chairmen Mark Meadows (R-NC) stressed the importance of determining the right balance between insourcing and outsourcing within the government in meeting its needs. The Chairmen noted that it is only through the right balance in sourcing products and services, that the government will be able to maximize cost savings for the American taxpayer.
Generally, the witnesses agreed that enhanced competition between the private and public sectors could boost performance and lower costs for the government and the American taxpayer. In her testimony, Ms. Styles highlighted the many efficiencies provided by competition, as well as the A-76 process, and how recent actions taken by the government has resulted in lower performance and higher costs. In addition, she detailed how reversing these actions to reemphasize competition would not be overly difficult, as the processes are already in place and would only require Congress to allow and encourage their use.
To watch the hearing, or access the witness testimony, click here.
The General Services Administration’s (GSA) 18F has issued a Request for Proposals (RFP) seeking vendors to assist in building-out its single citizen login project, login.gov. FedScoop first reported the news on July 8, on what will be 18F’s second solicitation issued under its agile delivery services Blanket Purchase Agreement (BPA).
The login.gov platform will be a shared, consumer facing authentication platform that will be available for use government-wide. Awardees will have a performance period of three-months, with a three-month extension option, to assist 18F with integrating the platform across Federal agencies.
The Treasury Department released a proposed rule on Tuesday, July 12, which would amend the Department of the Treasury Acquisition Regulation (DTAR) to allow for the partial funding of specific contracts during a continuing resolution (CR). Specifically, the proposed rule would allow for incremental funding of fixed price, time-and-material, and labor-hour contracts during the period of a CR. Comments regarding the proposed rule are due by September 12, 2016.
Pursuant to the Anti-Deficiency Act, the government is prohibited from creating or authorizing obligations that either: exceed available funds, or precede appropriations. When operating under a CR, agencies are provided with funding for the continuation of projects or activities that were conducted in the previous fiscal year. The Treasury asserts that during the period of a CR, the funding provided is frequently insufficient to support contract actions that may be required. Further, the Treasury finds that alternatives, such as short-term awards, present inefficient and unfavorable strategies that hurt its ability to effectively execute contractual actions during a CR.
If implemented, the proposed rule would allow the Treasury to incrementally fund both entire orders or limited to individual lines when operating under a CR. For non-severable services or supplies, the contracting officer would be required to complete a risk analysis regarding the implications for the government if the funding were not fully obligated. In addition, after the CR period ends, all incrementally funded orders will become fully funded.
Pre-Proposal Conference for Alliant 2SB
The General Services Administration (GSA) published a notice on July 7 announcing an additional pre-proposal conference for the Alliant 2 Small Business (SB) contract. The virtual conference will be on July 18 at 1:00 pm CDT for those who were unable to attend the previous conferences. For information about how to attend, please click here.
GSA issued the final Request for Proposals (RFPs) for Alliant 2 Unrestricted and Alliant 2 SB on June 24. Links to both RFPs can be found below:
GSA plans to issue 60 awards for Alliant 2 Unrestricted and 80 awards for Alliant 2 SB. Responses to the RFPs are due August 29, 2016, with awards anticipated for 2017.
GSA to Host Industry Day for Government Shared Services
In a July 13 notice in the Federal Register, the General Services Administration (GSA) announced that its Unified Shared Service Management office will be hosting a meeting on Monday, August 22, 2016, to discuss how shared services are evolving in the Federal government. GSA is seeking feedback from industry regarding best practices that the government can leverage to improve efficiency. Industry partners that offer services and/or systems for the migration, and/or modernization, and/or operations and maintenance of mission support functions in the public and private sectors, are invited to attend.
FPI Blanket Waiver Threshold Increasing
A final rule published July 14, will raise the blanket waiver threshold for small dollar-value purchases from the Federal Prison Industries. Effective August 15, 2016, Federal agencies will not be required to obtain a waiver for purchasing from alternative sources for procurements below $3,500, an increase from the previous $3,000 threshold.
On July 11, Federal Computer Week reported that the Department of Veterans Affairs (VA) has selected the National Institutes of Health’s (NIH) Information Technology Acquisition and Assessment Center (NITAAC) contract vehicle for its cloud modernization project. The VA will look to leverage the NITAAC’s vendor list for future cloud procurements as it looks to move its enterprise to a cloud enabled state.
NITAAC’s primary cloud services contract, CIO Commodities and Solutions (CIO-CS), offers pre-competed contracts for IT products and services. The contract is a five-year, Indefinite-Delivery, Indefinite-Quantity (IDIQ) contract with a single option period of five-years.
Price Reductions Are Dead; Long Live Price Reductions
By Jonathan S. Aronie, Sheppard Mullin
You no doubt have heard by now about GSA’s 23 June effort to “embrace modern technology while moving away from outmoded practices” – specifically, its implementation of the new Transactional Data Reporting Rule (“TDR Rule”) and its concurrent elimination of the Price Reductions Clause (“PRC”) and the Commercial Sales Practices Format (“CSPF”). See 81 Fed. Reg. 41104 (June 23, 2016). The new rule covers certain GSA Multiple Award Schedules as well as the Agency’s GWAC and IDIQ contracts. As it represents the most significant change to the GSA MAS program since 1994 (when GSA removed federal sales as a PRC trigger), the new rule has the potential to change significantly the way Schedule contractors (and others) do business; hence, my willingness to interrupt your otherwise enjoyable day with a treatise on GSA Schedule contracting.
Speaking generally, the Final Rule, effective 60 days after 23 June, reflects a trade with industry. In exchange for your willingness to accept the increased burden of tracking and reporting detailed transaction-level federal sales data, GSA will eliminate the PRC and CSPF – and the complexity, burden, and risk that comes with those two much-maligned provisions – from your contract. So, as my grandmother used to say, what’s not to like?
Well, quite a bit apparently. Let’s start with the PRC/CSPF side of the proposed contractual trade.
The PRC and the CSPF Sleep With The Fishes
Most within industry (and some within Government) have been complaining about the PRC and the CSPF for years. Both provisions have been attacked time and again as overly complex, extremely burdensome, and substantively unnecessary. In 2010, the Government’s own MAS Advisory Panel joined the attack by recognizing the burden and complexity of the PRC and recommending its removal from the Schedules Program. And now GSA itself seems to have seen the light as well. According to GSA, the new Final Rule will do away with “the complex CSP and PRC pricing disclosure requirements.” (Id. at 41120).
When this bargain first was presented to contractors in the Proposed Rule, commentators (including yours truly) challenged it as an illusory deal. While the Proposed Rule did do away with the PRC, it left the CSPF in place. In fact, it not only left it in place, it increased its scope by allowing Contracting Officers (“COs”) to request an updated CSPF at their discretion. (For more on this, see my prior article titled “I’m Not Dead Yet,” posted here.)
The Final Rule, in contrast, actually eliminates both the PRC and the CSPF. The Rule announces this change as a “substantial burden reduction,” which it most certainly is. (Id. at 41104).
Under the new rule, instead of submitting a CSPF, presumably you will need to submit only your proposed Schedule pricing to your CO. GSA then will look into its magical TDR box and use the aggregated transactional data it finds there (described below) to evaluate whether your proposed prices are fair and reasonable. GSA’s COs also will use these data to evaluate “requests to adjust pricing and add new items to current contracts” without the submission of a CSPF. (Id. at 41113). Where GSA believes the transactional data at its disposal are inadequate to evaluate the fairness and reasonableness of pricing, the CO retains the discretion to request additional data from the offeror, including “information other than cost or pricing data.” GSA says it will be rolling out additional guidance to COs that establishes the following order of evaluation priority:
- Using data that are readily available, in accordance with FAR 15.404 . . . including prices paid information on contracts for the same or similar items, contract-level prices on other FSS contracts or Governmentwide contracts for the same or similar items, and commercial data sources providing publicly available pricing information.
- Performing market research to compare prices for the same or similar items in accordance with FAR 15.404 . . . .
- Requesting additional pricing information such as ‘‘data other than certified cost or pricing data’’ (as defined at FAR 2.101) . . . from the offeror in accordance with FAR 15.404 . . . when the offered prices cannot be determined to be fair and reasonable based on the data found from other sources.
GSA explains that this guidance will help align GSA’s procedures with the FAR. (81 Fed. Reg. 41114). The FAR, in turn, establishes the following order of preference for price evaluations:
- Other pricing data available within the Government,
- Pricing data obtained from sources other than the offeror,
- Additional pricing data obtained from the offeror, and, as a last resort,
- Cost data.
Notwithstanding GSA’s prioritized list of price evaluation techniques, which does admittedly come close to the FAR’s own prioritized list, I suspect in practice COs will look for CSPF-like submissions where they have inadequate transactional data. While they likely won’t call it a CSPF, it won’t surprise me one bit if the requests call for the same or similar vertical pricing details embraced by the current CSPF.
It also won’t surprise me if COs consistently forget the mandate of FAR Part 15.4 that they may “obtain the type and quantity of data necessary to establish a fair and reasonable price, but not more data than is necessary.”
Regardless of the price evaluation technique applied, without the CSPF, there will be no negotiation of a Basis of Award customer, which, of course, makes sense since there will be no PRC either. Well, at least there won’t be the current version of the PRC. While this is very good news, it is not all roses. In the place of today’s highly complex and burdensome PRC, the new PRC provides that
the Government may request from the Contractor, and the Contractor may provide to the Government, a temporary or permanent price reduction at any time during the contract period.” (81 Fed. Reg. 41139).
What this new language suggests to me is that any time a GSA CO sees lower pricing in her Magic TDR Box, she can ping the vendor and say “lower your Schedule pricing now.” In other words, I’m not quite sure “request” really means “request” here. Or, in the words of the great Inigo Montoya, I do not think that word means what you think it means.
Ironically, this unfettered discretion actually moves us closer to the pre-1994 PRC when sales to federal customers had to be tracked because they could trigger the PRC. While the parallel is not perfect – since (i) it’s no longer the contractor’s obligation to identify such sales as PRC triggers and (ii) the failure to identify and report such sales won’t lead to a Government charge of fraud – it now is more likely that sales to federal customers will have a price-reducing implication for vendors.
All in all, though, the elimination of the PRC and the CSPF is a good thing. But to meaningfully evaluate its worth, one first must examine the flip side of the bilateral coin. So let’s now take a look at what GSA has to say about its benefit of the proposed bargain.
Transactional Data Reporting
In exchange for the elimination of the PRC and the CSPF, GSA’s new rule requires Schedule holders (and other GSA contractors) to accept a new clause: GSAR 552.238-75 (Transactional Data Reporting). The new clause requires contractors to track and report to GSA the following federal sales details at the line-item level:
- Contract or BPA Number
- Order Number
- Non Federal Entity (The rule is not clear what this one means, but it probably refers to authorized, non-federal purchasers like prime contractors and/or states and localities)
- Description of Deliverable
- Manufacturer Name
- Manufacturer Part Number
- Unit of Measure
- Universal Product Code
- Price per Unit
- Total Price
COs can add other data elements to this list, but only with specified management approval.
Upon gathering these data, vendors must report them to GSA on a monthly basis. Reports must be made thirty days following the end of the month through a new GSA portal. (IFF payments, however, still are made quarterly, adding some further complexity into the mix.) These data then will be aggregated with other vendors’ data to provide an extensive new cache of business intelligence for GSA Schedule COs and government purchasers. According to GSA, its COs will take these data “into consideration when awarding FSS contracts and evaluating requests to adjust pricing and add new items to current contracts.” (81 Fed. Reg. 41113). Ordering activities likewise will be asked to consider transactional data in negotiating their task orders, delivery orders, and BPAs.
I have two primary problems with the collection and use of transactional data:
First, industry should be concerned over the cost of implementing and administering the new rule. GSA’s initial burden estimate for the TDR aspect of the rule was 6 hours to set up a compliance system and 2 minutes to 4 hours per month to administer. Industry rightly viewed this estimate as wholly inadequate. To its credit, GSA upped its estimate in the Final Rule. Now GSA posits the average vendor will have to spend 8 hours setting up a manual system and 240 hours setting up an automated system; and from 15 minutes to 48 hours per month in administration time. Frankly, I have no idea whether GSA’s estimate is accurate or not; but I know of several companies who think GSA’s guess still is too low. Whether it’s accurate or not, however, I’m confident the cost of maintaining a TDR reporting system will turn out to be less expensive than the cost of maintaining a PRC/CSPF compliance system.
Second, industry should be extremely concerned that GSA will use its new data to drive prices down to irrational levels by making apples-to-oranges pricing comparisons. Since this concern is a big one, let me illustrate the risk with four scenarios:
- Scenario One: You sell a high quality, US-made hammer for $50. The GSA CO looks in her magic TDR data box and finds a lesser quality, foreign-made hammer for $25. The CO then demands you either reduce the price of your hammer or take it off Schedule.
- Scenario Two: You sell a software product for $500 that you fully support with a strong warranty, multiple customer support vehicles, and an industry-leading maintenance program. A competitor sells software with similar basic functionality, but with a far less robust warranty, no meaningful customer support, and no maintenance plan. The CO demands you either reduce the Schedule price of your software or remove it from the Schedule.
- Scenario Three: You sell a computer system on Schedule for $5,000. You also hold a Schedule BPA and offer that same system through that BPA for $4,500 – a 10% discount. Your (and your competitors’) discounted BPA sales find their way into GSA’s magic TDR box and into the hands of your GSA CO. The CO demands you either reduce the Schedule price of your computer or remove it from the Schedule. A reduction of your Schedule price, however, will prompt a further reduction to your BPA price, which, in turn, will prompt . . . . Well, you get the idea.
- Scenario Four: You manufacture a cutting-edge security product tailored specifically for the Government’s use, and offer it on Schedule for $50,000. The product is a commercial item, but there are no comparable tailored products in the marketplace. Your GSA CO finds something he/she believes to be roughly comparable in the transactional data at a lower price. The CO demands you either reduce the price of your product or remove it from the Schedule.
While these all are hypothetical scenarios, they are not spun from whole cloth. GSA readily concedes in the Final Rule that its COs will be using the new data to draw imperfect comparisons. According to the Final Rule, “while transactional data is most useful for price analysis when comparing like items, it does not mean the data is not useful when perfect comparisons cannot be made.” (Id. at 41112).
GSA clearly is sensitive to this concern. Indeed, one might say GSA is a little too sensitive. The Final Rule repeatedly tries to assuage industry’s fear that COs will turn the MAS program into an LPTA (low price / technically acceptable) program, where price is king and value is marginalized if not abandoned. Here are just a few examples of GSA’s efforts to assure industry this fear will not be realized:
- “However, transactional data does not transform the federal acquisition system into a lowest-price procurement model.” ( at 41108).
- “The Government’s preference will continue to be ‘best value’ . . .” Id.
- “Transactional data is viewed in the context of each procurement, taking into account desired terms and conditions, performance levels, past customer satisfaction, and other relevant information.” Id.
- “Training and guidance deployed in connection with this rule emphasizes the importance of considering the best overall value (not just unit price) for each procurement, taking into account desired terms and conditions, performance levels, past customer satisfaction, and other relevant information.” ( at 41113).
- “Contracting officers are encouraged to discuss with the offeror perceived variances between offered prices, transactional data, and existing contract-level prices, in order to evaluate whether other attributes (g., superior warranties, quantity discounts, etc.) justify awarding higher prices.” (Id. at 41114).
- “The GSAM guidance for FSS contracts, which will be viewable on gov, instructs FSS contracting officers to make fair and reasonable, not lowest-price-regardless, determinations.” (Id. at 41117).
- “FSS contracting officers will be instructed to evaluate the data in the context of each offer, taking into account not only cost and quality discounts, but desired terms and conditions, unique attributes, socio-economic considerations, and other relevant information.” ( at 41120)
And this is a just a partial list. I can’t help feeling the vehemence of GSA’s defense underlies an inherent realization that industry’s concerns are not overblown. GSA, thou dost protest too much.
GSA’s defensiveness and industry’s concerns come with good cause. After all, industry had similar fears when GSA rolled out its horizontal pricing evaluation plan (i.e., its plan to evaluate an offeror’s prices by comparing them to other offerors’ prices), and those fears were realized. COs have been making apples-to-oranges comparisons and pressuring contractors to reduce their prices in precisely this fashion since horizontal pricing came online. And remember, GSA will be relying on its horizontal pricing tool even more than ever as it accumulates more and more purportedly comparable transactional data.
Against this background, all Schedule holders will have to weigh the benefit that comes from the elimination of the PRC/CSPF – in terms of compliance costs and compliance risk – against the likelihood that prices will be driven further down under the new rule.
So What Should You Do?
First, you need to figure out if the new rule applies to you. If you are a GSA GWAC or IDIQ contract holder, the new rule will apply to you right away. For Schedule holders, however, the rule is being implemented in phases as a pilot program. The new clause will not apply to all Schedule holders in the first instance. By its terms, the rule applies only to the following Schedules:
- Schedule 58 I, Professional Audio/Video, Telemetry/Tracking, Recording/Reproducing and Signal Data Solutions: All SINs
- Schedule 72, Furnishing and Floor Coverings: All SINs
- Schedule 03FAC, Facilities Maintenance and Management: All SINs
- Schedule 51 V, Hardware Superstore: All SINs
- Schedule 75, Office Products: All SINs
- Schedule 73, Food Service, Hospitality, Cleaning Equipment and Supplies, Chemicals and Services: All SINs
- Schedule 00CORP, The Professional Services Schedule: SINs 871-1, 2, 3 ,4, 5, 6, and 7 (Professional Engineering Services)
- Schedule 70, General Purpose Information Technology Equipment, Software, and Services: SINs 132-8 (Purchase of New Equipment), 132-32, 33, and 34 (Software), and 132-54 and 55 (COMSATCOM)
If you have at least one of the covered SINs, however, then your whole Schedule is covered. On the other hand, the inclusion of one Schedule does not mean your other Schedules are covered. So, for example, if you hold a Schedule 51 and a Schedule 84, your Schedule 51 is covered by the new rule, but your Schedule 84 is not. And you are not permitted to “opt in” your Schedule 84.
Even if your Schedule is covered by the pilot, however, you still have to “opt in” – at least if you are a current Schedule holder. The new rule is optional for current MAS contractors. In other words, it will be incorporated through a bilateral modification, which you will have to agree to. If you don’t want the new rule to apply to you, in the words of the late Nancy Regan, just say no.
New Schedule contractors, on the other hand, don’t have that choice. The new clause will be incorporated into all new Solicitations and apply to all new contracts following its effective date. Presumably, contract renewals also will incorporate the new clause without the vendor being given an opt in/out option.
Second, you need to figure out whether you are better off accepting the clause now or delaying its application. This decision involves a cost/benefit analysis between (a) the cost of the new TDR in terms of implementation and price pressure and (b) the cost and risk reduction from the elimination of the PRC and CSP. While every vendor will have to balance those competing costs and benefits for themselves, do not undervalue the benefits of tossing out the two most complex and burdensome clauses of the Schedules program. But likewise do not undervalue the very real price pressure that will be put in its place.
You also should include in your deliberation the fact that you likely will be forced to accept the new rule at your next renewal anyway, so holding out may offer only a short-term benefit (if you view it as a benefit at all).
Third, you should reach out to your CO and discuss with him/her the practical issues involved in incorporating the new clause. Will your current CSPF be withdrawn? Will the CO have enough data to make a fair/reasonable assessment? If not, what additional information will she want from you? What will happen to any unique tracking/reporting structures you previously negotiated? Will those go away or linger on? These are all questions your CO should be willing to discuss with you, and they all are questions you should factor into your cost/benefit analysis. As for the timing of such a conversation, the Final Rule provides contractors will be given 30-days advance notice prior to the application of the new rule.
Fourth, if you do decide to opt in to the new regime (or if you are forced to do so because you are a new or renewing contractor), you will need to figure out how to implement a sensible data capture, tracking, and reporting process. The new rule recognizes that the extent of the program may be tied to the volume of Schedule sales (and recognizes that a manual program will work for some while an automated program may be necessary for others). Whether manual or automatic, though, you will need some process that will ensure current, accurate, and complete reports. (GSA, by the way, has made reporting instructions available at its Vendor Support Center website: https://vsc.gsa.gov.)
Fifth, if you opt in, you should spend some time preparing possible responses to COs who may try to compare apples to oranges – at the GSA, the BPA, or the order level. Keep in mind the following FAR mandate: In conducting a price evaluation, “the contracting officer shall limit requests for sales data relating to commercial items to data for the same or similar items during a relevant time period.” FAR 15.403-3. The FAR further provides “the contracting officer shall, to the maximum extent practicable, limit the scope of the request for data relating to commercial items to include only data that are in the form regularly maintained by the offeror as part of its commercial operations.” Id.
Remember, the Final Rule repeatedly says COs will be trained how to use transactional data in a way that does not convert the Schedule program into LPTA; and they will not be comparing prices where different terms and conditions justify the pricing differential. But, as suggested above, I have my doubts about the quality of that training, and about the CO community’s translation of that training into practice. I also have my doubts that GSA’s much-touted category managers – folks who will be tasked to become commodity experts in their given areas – will transition smoothly either. We’ve seen how well-intentioned training can be lost in translation before. One simply need remember that the GSAR for years has instructed COs to consider differences in the cost of doing business with the Government in evaluating proposed Schedule prices, yet GSA COs and auditors routinely ignore that requirement.
Anything Else You Need To Know?
Yes. Here are a few other things to keep on your radar screen.
Data Protection. GSA will be collecting a lot of data here. Much of these data are proprietary and confidential. While GSA claims it has systems in place to secure these data from inadvertent disclosure risk, keep in mind OPM previously gave us the same assurances with respect to its data. What possibly could go wrong here?!
Data Sharing. The Final Rule says GSA’s transactional data will be made available to GSA’s COs, GSA’s category managers, ordering activity COs, AND to the public. GSA says those data will be made available at an aggregated level so as not to disclose proprietary information in violation of FOIA, but we have yet to see how that will work in practice.
In a recent article to its members, the Coalition for Government Procurement recognized an interesting problem for GSA here. With respect to the public release issue, the Coalition astutely asks “how, under the law, GSA will consult with FSS contractors regarding whether the contractor specific data is protected from disclosure as commercial, propriety information.” That is an excellent question, which GSA has yet to answer. FAR 15.403-3 provides
Until we have an answer from GSA as to how it intends to deal with this prohibition, vendors should take the necessary steps to protect the data they submit by marking everything proprietary and confidential / not subject to FOIA.
GSA Schedule Audits. It will be quite interesting to see what sort of pre-award and post-award audits the GSA OIG will be conducting in light of the new rule. Since contractors simply will be offering a price to GSA and will be saying nothing about how that offered price relates to their other commercial pricing, it’s hard to see what the OIG really has to audit anymore. In fact, vendors in the middle of a current GSA audit should consider reaching out to their CO to ask that the audit be concluded and the CSPF be withdrawn. That being said, the new rule does not modify the OIG’s current audit clauses. Consequently, an auditor could try to demand pricing data from a contractor during an audit. An auditor also could focus on a contractor’s submission of its transactional data. It is unclear how the ensuing arguments would work themselves out, but you should keep your eyes open for audit requests that, because of the new rule, now are overly broad.
PRC Monitoring. Don’t get ahead of the new rule. Until the new clause finds its way into your particular contract – either through a bilateral modification or its incorporation into a new solicitation – you still are obligated to live up to your existing PRC and CSPF obligations.
For many contractors, the new rule will reflect a worthwhile tradeoff. The PRC and CSPF can create significant risk even to companies with well-negotiated pricing/reporting structures. But the new rule is not a blessing for everyone. The increased price pressure – coupled with the increased reporting burden and cost – could impose significant costs on some. Of course, we’re really just talking here about the timing of the change since most folks I talk to believe the pilot program is here to stay for the long-term.
Jonathan Aronie is a partner of the Sheppard Mullin Government Contracts & Internal Investigations practice group, and the co-managing partner of the firm’s DC office. Jonathan represents large and small contractors in all manner of government contracts matters including counseling, claims, bid protests, investigations, mandatory disclosures, and False Claims act matters. Jonathan is the co-author of ThompsonWest’s GSA Schedule Handbook, to which the Coalition’s Roger Waldron is a contributing author.
The Transactional Data Reporting rule (TDR or “the rule”) being piloted on selected GSA contracts will require contractors to submit monthly reports, including detailed information for all sales made under a company’s GWACs, GSA Schedule contracts, and other Governmentwide IDIQs.
Notably absent from the reporting requirement is any reference to commercial or non-federal sales of any kind. Contractors who submit this information will no longer be required to disclose their commercial sales practices on the CSP-1 Format, nor will they be subject to certain requirements under the Price Reductions clause (PRC, 552.238-75). These changes are meant to offset the costs of capturing and reporting data on a monthly basis. The government spends quite a bit of time explaining how the overall burden to contractors will decrease, though we imagine that many contractors will question the burden reduction calculations.
The rule stipulates that contractors provide 11 data elements in their monthly reports, to include:
- Contract or blanket purchase agreement (BPA) number
- Delivery/task order number/procurement instrument identifier (PIID)
- Non-federal entity
- Description of deliverable
- Manufacturer name
- Manufacturer part number
- Unit measure (each, hour, case, lot)
- Quantity of item sold
- Universal product code
- Price paid per unit
- Total price
Additional data elements (“fill ins”) may be added to the data if approved by GSA’s senior procurement executive.
The following GSA Schedules and associated SINs are a part of the pilot program:
- Schedule 03FAC, Facilities Maintenance and Management: All SINs.
- Schedule 51 V, Hardware Superstore: All SINs.
- Schedule 58 I, Professional Audio/Video, Telemetry/Tracking, Recording/Reproducing and Signal Data Solutions: All SINs.
- Schedule 72, Furnishing and Floor Coverings: All SINs.
- Schedule 73, Food Service, Hospitality, Cleaning Equipment and Supplies, Chemicals and Services: All SINs.
- Schedule 75, Office Products: All SINs.
- Schedule 00CORP, The Professional Services Schedule (PSS): Professional Engineering Services (PES) SINs.
- Schedule 70, General Purpose Information Technology Equipment, Software, and Services: SINs 132 8 (Purchase of New Equipment); 132 32, 132 33, and 132 34 (Software); and 132 54 and 132 55 (Commercial Satellite Communications (COMSATCOM)).
Initially, the pilot will be mandatory for new Schedule contracts and option exercises for existing contracts. Existing contract holders will have the option of incorporating the TDR clause  and adopting the pilot program through a bilateral contract modification. It’s important to note that contractors on either Schedule 00CORP or Schedule 70 that have contracts with the affected SINs will be required to report transactional sales for all SINs under those Schedules. It’s not abundantly clear whether those contractors would receive the potential benefits of not preparing a CSP and not being subjected to the tracking requirements of the PRC for other SINs under those contracts.
Below are a few additional details regarding the pilot rollout:
- Begins no less than 60 days from the rules’ publication date (June 23, 2016) and will be deployed on a rolling basis across the identified Schedules and SINs.
- Contractors will receive notice at least 30 days prior to the pilot being applied to a specific contract and SIN.
- Set to run for at least one year so that GSA can assess its effectiveness.
- A transactional data reporting clause  is also available for immediate use in GWACs and government wide IDIQs, and is meant to drive some consistency between the various reporting requirements that contractors may be exposed to across their contract portfolios.
- Does not currently apply to contractors selling medical supplies or services through VA Federal Supply Schedules.
GSA hopes to use the additional data to make smarter buying decisions by understanding the prices paid by government buyers for similar products while taking advantage of competitive government market forces amongst (and within) contractors to achieve lower prices.
The rule explains that contracting officers (COs) will be trained and instructed to consider the terms, conditions, and special circumstances associated with the transactional data they use to make pricing/buying decisions. The data will ultimately be available to GSA COs and other COs across the government to make pricing decisions at both the Schedule and order level. Additionally, the government plans to make all “FOIA-able” data submitted under the TDR available to the public.
Despite some clear benefits, many questions remain
A brave new world for pricing under GSA Schedule contracts
This rule has the potential to fundamentally change the way GSA negotiates its Schedule contracts, and the way that ordering activities use those contracts to make purchases. Before TDR, the vast majority of GSA Schedule contract pricing was predicated on a company’s commercial sales practices, with GSA looking to achieve pricing that was favorable when compared to the prices that a company achieved in the commercial marketplace (a “vertical” pricing approach).
In many ways this makes sense, as one would assume that the free markets would efficiently assign value to a specific company’s goods and services, recognizing the subtle differences that might make one company’s offerings more valuable than the offerings of other companies. The pre-TDR disclosure rules, forms, and instructions had plenty of drawbacks, too—they may not have been clear, companies may have had a difficult time understanding them, and government procurement officials may have had trouble using the CSP information effectively—but one could understand the theory behind it.
Under TDR, GSA plans to base its pricing objectives on how the government buys the same or similar items in a portion of the government marketplace (a “horizontal” pricing approach). The shift in the overall contract model may not come as a surprise to many products or services contractors who have recently been subjected to horizontal pricing analyses, and those familiar with horizontal pricing may have some reservations about how the data will be used.
In our experience, GSA COs have frequently had difficulty accepting the notion that many important terms and conditions, specific to an individual sale, can cause a contractor to offer pricing that it would not extend to other customers, under different terms and conditions. While many contractors will cheer the removal of the CSP disclosure requirement and the significant level of effort and risk associated with it (for good reason), the effectiveness and reason with which transactional data will be employed during pricing negotiations, at both the Schedule and order level, remains a big question mark.
It is also unclear how contracts will be priced if no (or limited) transactional sales data for GSA Schedules, GWACs, or government IDIQs exists. This could be the case for new or innovative products or services, or simply for new entrants to the federal marketplace. It could also be the case for companies with significant sales that are faced with a CO or auditor who is having trouble interpreting the transactional data or accepting it as a basis for pricing.
The text of the TDR indicates that GSA or ordering activity COs should follow the instructions in FAR 15.404 under these circumstances. Contractors could then be required to provide uncertified pricing data similar to that which is currently required in a CSP, or even uncertified cost data. If there is uncertainty and inconsistency in how companies disclose their practices, and in how GSA negotiates pricing under the current regime, the increased potential for requests of other than certified cost or pricing data would only seem to increase the level of uncertainty for contractors and the inconsistency in how fair and reasonable determinations are being made. It will be interesting to see how frequently this occurs, and as a result, if contractors end up incurring a level of expense and risk under the TDR that is comparable to what they currently experience when preparing CSP disclosures (in addition to the expense incurred preparing monthly transactional data reports).
GSA OIG’s role
Eliminating the CSP and BOA monitoring requirements from GSA Schedule contracts may change the landscape for OIG’s involvement in negotiating and auditing contracts, but exactly how it will change is less than certain. The rule doesn’t mention any changes to the clauses in GSA Schedule contracts that provide the government with its audit rights.
Those audit rights currently stem from:
- FAR clause 52.215-20, which grants the government the right to examine “pertinent records to verify the pricing, sales, and other data to related to the supplies or services proposed in order to determine the reasonableness of price(s).”, and;
- GSAR clause 552.215-71, which allows GSA or any duly authorized representative the right to access all records related to the GSA Schedule contract during the period of performance and for three years after final payment.
It is possible that the OIG could still request commercial pricing data during their pre-award audits and assess the government’s offered pricing in comparison to the prices a contractor offers in the commercial market. If a contractor has not provided that type of information previously, they may escape risks associated with defective pricing and the Price Adjustment clause (GSAR 552.215-72). But, they could have trouble meeting their pricing objectives if they haven’t taken some care in managing their commercial sales practices and in considering how those practices relate to their government pricing practices. If they did provide this kind of information to support a CO’s FAR 15.4 style price analysis, and the information they provided is found to be inaccurate, they could still be exposed to some of these risks.
In addition to the pricing risks that may remain under an audit, or if a CO requests other than certified cost or pricing data during negotiations, it appears that the transactional data reported under the TDR is something that could be audited. In fact, during the public meeting to discuss the proposed rule, GSA OIG representatives indicated that they likely would review this data. Contractors will need to take care when preparing and reporting this data to ensure that it is current, accurate and complete, and prepared in a careful and thoughtful manner that supports their pricing objectives.
Public availability of transactional data
One additional aspect of the TDR that could significantly impact contractors is GSA’s intent to make the transactional data available to the public. During the public comment period for the proposed rule, multiple contractors raised concerns about how the transactional data would be shared with government users and with other vendors, particularly given the proprietary nature of some of the data. GSA indicates that the details of the public data extract are forthcoming, but what does seem apparent is that anyone, including other vendors, would have access to purchase price information for products sold under the FSS contracts.
Recommendations for contractors impacted by TDR
Better the devil you know or the one you don’t
Contractors will need to quickly determine if they hold one of the impacted contracts or SINs. If the answer is yes, they’ll need to decide whether or not to accept a bilateral modification to accept the TDR or stick with the current structure. There is likely no right answer, as the facts and circumstances influencing this decision could vary from company to company. New proposals and option exercises under these contracts and SINs will not have a choice as they will be subject to the TDR.
Contractors who accept the rule or engage in a contract action that will subject them to the rule need to prepare for it. In addition to preparing to report the required data, they should communicate with their CO to determine what information, if any, will be necessary to negotiate GSA prices in order to avoid any surprises. Will their CO ask for commercial pricing data? Will they ask for cost data? Would any additional fields in the transactional data be helpful to support negotiations?
Complying with the TDR
Contractors subject to the TDR should:
- Ensure that they have the systems and processes in place to timely and accurately create monthly reports that include the 11 required data fields.
- Think strategically about what this means, what contracts will require reporting, and whether their current GSA Schedule pricing structure and systems are set up in a manner that will facilitate reporting and best position them to achieve their pricing objectives.
- Identify the system (or systems) they will rely upon to capture the necessary data and establish policies and procedures to make the process as efficient as possible, while ensuring integrity in the reported data.
- This data could be scrutinized by both the CO and government auditors. Some portions of it will also be made available on a public website, so contractors need to take care to ensure it is accurate and complete.
- Continue to be mindful of pricing practices, both to government customers and commercial customers.
- Discounted government sales at low prices may cause GSA to push for lower baseline contract prices, either during contract performance or during negotiations at the next option period. The same discounted government sales could also lead to tough negotiations and lower prices at the order level.
- Consider putting policies in place to control government pricing in order to avoid unnecessary deterioration of profits.
- This does not necessarily release the shackles from commercial sales and discounting policies. As noted previously, the FAR Part 15 analysis that COs can still perform under the TDR, and the audit rights afforded to GSA through FAR 52.215-20, may result in GSA, GSA OIG, or ordering agency COs continuing to rely on commercial prices (or cost) as part of their negotiation calculus. To prepare for this, contractors may be wise to continue to monitor and control their commercial pricing practices.
It remains to be seen exactly how the transactional data that companies report under this rule will be used, and whether any other data will be relied upon to negotiate prices at the Schedule or order level. There are a number of additional questions about the TDR—if/how companies will be audited, what data will be made available publicly, whether the rule will achieve the desired results for the government, and a host of other things.
At this point in time, a lot of uncertainty exists and it would seem that the rule could lead to more inconsistency in the Schedules program for contractors and government buyers alike. Contractors would be wise to approach the new rule and its requirements with caution.
- Take the time to understand obligations under the rule
- Think carefully about how offerings are priced in both the government and commercial marketplace
- Be certain that all of the requirements (including TDR) under all contracts are understood
- Ensure that systems, policies, and procedures are in place to meet those requirements.
For more information on this topic, or to learn how Baker Tilly government contractor specialists can help, contact our team.
 GSAR Alternate I, 552.238-74 Industrial Funding Fee and Sales Reporting
 GSAR 552.216-75 Transactional Data Reporting
This Week on Off The Shelf: GSA’s Transactional Data Reporting Rule
This week on “Off the Shelf”, Jonathan Aronie, partner at Sheppard Mullin, joins host Roger Waldron to discuss the General Services Administration’s (GSA) recently issued Transactional Data Reporting final rule. Mr. Aronie shares his insights, observations, and predictions, as well as recommended actions for contractors responding to the rule.
To listen to the show, click here!
July ABA Webinars on Small Business
The Coalition will be co-sponsoring two upcoming webinars with the American Bar Association in July. Coalition members will receive the discounted ABA price (sponsor rate) of $95 at registration.
July 19 from 12:00PM – 1:30PM: Recent Developments Impacting the Small Business Government Contracting Requirements
July 21 from 12:00PM – 1:30PM: Recent Developments in Bid Protests
The Federal Acquisition Institute (FAI) invites you to join them for an exciting, FREE Acquisition Seminar webcast, “Lifting the Curtain: Past Performance” on Wednesday, August 10, 2016 from 1:00PM to 3:00PM (EDT) on the FAI Training Webcast Channel.
This seminar will offer valuable insight and useful information on the purpose, selection, and evaluation of past performance information that is beneficial and applicable to both government and industry acquisition professionals.
A panel of subject matter experts from government and industry will unveil best practices, techniques, and “tips of the trade” about past performance information and address questions that you have probably asked yourself at one time or another, including:
- What is the Government’s objective in soliciting past performance information on a contractor?
- How does industry choose the projects it wishes to present as examples of past performance?
- Is there an issue in presenting the same past performance examples across multiple projects?
- Is past performance effective as everyone presents projects that “receive an A”?
- What other sources does Government use or should use in assessing past performance?
- Do past performance examples in the management and/or technical volumes have a positive effect on the evaluation?
- Is there a better way for Government to assess past performance?
For those interested, use the following link to register: Industry Participants Click Here to Register
The General Services Administration is hosting several Webinars throughout the month of July to help inform industry partners on the latest in policy and compliance for the Trade Agreements Act (TAA) and the Formatted Product Tool (FPT) rollout. Members who are interested in the remaining sessions can find the dates, times, and links for registration below.
TAA Vendor Training Session #2
Date: July 26, 2016
Time: 1-3 pm ET
To register click here.
FPT Vendor Training Session #2
Date: July 27, 2016
Time: 1-3 pm ET
To register click here.
Nominations are now open for the Coalition’s 17th annual Excellence in Partnership (EIP) Awards, which will be taking place on the evening of November 16 at The Westin Tysons Corner. This special event honors federal and contractor organizations, individuals, and acquisition officials who have made significant strides in promoting and utilizing multiple award contracting vehicles and supporting the evolving needs of government. In addition to a list of last year’s winners, full category descriptions for 2016 can be seen and nominations made by clicking here. Nominations for the following awards will be accepted through October 14:
- Lifetime Acquisition Excellence Award
- Government Savings Award
- Myth-Busters Award
- Best Veteran Hiring Award
- Green Excellence in Partnership Award
This charity tournament is to honor our good friend and colleague, Joe Caggiano, who was not only a 23-year veteran of the federal contracting marketplace but a naval veteran as well. Once again, this year’s tournament proceeds are going to support the Coalition’s endowment for a qualified veteran concentrating their studies in the field of US Government procurement and pursuing the JD/LLM degree or the interdisciplinary Masters degree at The George Washington University. Joe would be so proud of this endowment as we encourage the next generation of skilled professionals to lead this critically important sector of the US economy.
This year’s tournament will once again be held at the beautiful Whiskey Creek Golf Course in Ijamsville, MD. We have several exciting sponsorships available including title sponsors, beverage cart sponsors, hole sponsors, and many more with all budgets in mind. Please click here to review sponsorship opportunities and contact Matt Cahill at email@example.com or 202-315-1054 with any questions or commitments. Registration will open next week and we look forward to your support!