The Labor Day weekend marks the end of summer and the beginning of fall and the school year. The Coalition hopes that everyone had a wonderful summer!
This week also marks the beginning of a busy fall calendar for the Coalition. At the center is our Fall Conference scheduled for October 30th at the Fairview Park Marriott. We are looking forward to hearing from the Honorable Frank Kendall, Under Secretary of Defense (Acquisition, Technology & Logistics) and Major General Wendy Masiello, Deputy Assistant Secretary for Contracting, Office of the Assistant Secretary of the Air Force for Acquisition. The Fall Conference agenda and listing of other confirmed speakers can be found here.
This first “Friday Flash” after Labor Day also marks the beginning of a new name for the “Comment of the Week.” From this point forward the Friday Flash’s “Comment of the Week” will be referred to as the “FAR and Beyond” keeping in step with our internet presence via the “Far and Beyond” blog. So with the marketing portion of this week’s “FAR and Beyond” done; it is now time to turn to an issue of significant policy interest regarding GSA’s Multiple Award Schedule (MAS) program.
The Federal Acquisition Service’s (FAS’s) treatment of subcontracts under federal prime contracts as a commercial transaction for Price Reduction Clause (PRC) purposes continues to raise significant procurement and economic policy concerns for customer agencies and MAS contractors. At an operational level, FAS continues to insist that subcontracts under federal prime contracts be considered “commercial transactions” and subject to the PRC. As the Coalition discussed in its “FAR and Beyond” blog of January 28, 2011 (yes—2011), this practice restricts competition for customer agency open market procurements. As such, this FAS practice prevents agencies from achieving greater competition, obtaining lower prices, and securing better value for commercial services, solutions and products. Ultimately, the practice increases total acquisition costs for the American people.
A year and a half later, FAS confirmed the Coalition’s concerns regarding the treatment of subcontracts under open market federal prime contracts. On September 7, 2012, FAS waived the application of the PRC for purposes of the Air Force’s open market procurement for commercial office furniture. Under the Air Force’s proposed two-tier procurement strategy, furniture manufacturers are essentially subcontractors to small business dealer prime contractors located across the country. The two-tier subcontract structure immediately raised concerns among manufacturers regarding the application of the PRC. In sum, many in industry were concerned that by offering a price reduction as a subcontractor to a small business prime contractor in order to compete for an Air Force requirement, the PRC would be triggered under their MAS contracts. This issue was subsequently raised in a Government Accountability Office (GAO) protest by Herman Miller. However, the FAS waiver of the application of PRC for the Air Force procurement rendered the issue moot. The Coalition also discussed the waiver of the PRC in its November 5, 2012 and April 3, 2013 “FAR and Beyond” blogs.
FAS’s class waiver of the PRC is unprecedented. It validates the real, practical restriction on competition for customer agencies that is inherent in applying the PRC to subcontracts under federal prime contracts. At the same time FAS continues the practice of treating subcontracts under federal prime contracts as commercial transactions for purposes of the PRC. There is a profound disconnect between the waiver and current practice; a disconnect that costs customer agencies and the taxpayer.
On April 3, 2013, the Coalition wrote a letter to FAS regarding the significant procurement policy and public questions raised by the waiver of the PRC. The letter and the Coalition’s position regarding the PRC can be found here.
To date the Coalition has not received a formal response to our letter.
Roger Waldron
President