There is a maxim of business that an organization cannot manage what it does not measure. At a basic level, this maxim recognizes the importance of data, like information surrounding performance, production activities, and distribution, to the success of a business. Given that competitive markets are dynamic, accessing such data and understanding it allows businesses to respond to market changes by adjusting various inputs to meet them. Readers will recall recent FAR & Beyond blogs (here and here) where the Coalition discussed the evolution and utility of Transactional Data Reporting (TDR) and where we noted, in part, that TDR “focuses on transactions at the order level, the most relevant, actionable data for GSA, customer agencies, and MAS contractors.” In this blog, we delve into this point to discuss the important role TDR plays in providing the General Services Administration (GSA) relevant data to improve contract performance continuously.
Under TDR, in addition to contract identifier information, contractors are required to provide, among other things, a description of deliverables, including part numbers and units delivered, along with the quantity of items sold, the price paid per unit, and the total price paid. By providing such information, contractors can avoid current program requirements, including the reporting of Commercial Sales Practices (CSP), the establishment of Most Favored Customer (MFC) commercial pricing/Basis of Award (BOA) customer benchmarks and pricing, tracking and aligning BOA/MFC pricing with prices given to GSA, and compliance with the Price Reductions Clause based on that tracking, where a price reduction for GSA could be triggered when BOA/MFC pricing and GSA prices are out of an agreed-to alignment.
At first glance, one immediately sees a critical distinction between the use of TDR and the use of BOA/MFC benchmarking and pricing: data quality. Even under the best of circumstances, the use of BOA/MFC benchmarking involves referencing old data based on old variables. TDR, in contrast, utilizes data that is updated frequently, reflecting changes in the market for the goods and services involved. Further, because BOA/MFC benchmarks are set at a given point in time, they take on an almost hypothetical quality, leaving the Government to validate its price reasonableness with low data quality audits somewhat detached from market realities. In effect, instead of leveraging updated data for management purposes, the focus of government and contractor administrative activity, which can be significant, changes from an analysis of price reasonableness to a simple analysis of compliance with a potentially stale benchmark.
In addition, the benefits of Government access to real-time data under TDR are significant. Aside from improved data quality, the Government receives important market intelligence. It can see which products are being used by which customer agencies, how they are being purchased, and, importantly, whether changes are taking place in the commercial market, and how any such changes are affecting product availability and pricing. At a time when supply chains remain strained, this data can help guide purchasing decisions by driving improved efficiency in product purchases or investigations into alternative sources of supply.
In addition to supporting improved buying decisions, the use of TDR reduces administrative time and cost, which is especially important for small businesses. TDR use streamlines the reporting process for those businesses by eliminating the need for the development of costly regimes to facilitate BOA/MFC benchmark compliance. By so doing, it helps facilitate the Administration’s goal of increasing procurement spending with small businesses, and it comes none-too-soon. As we have said,
… [A]ccording to the SBA, the number of small business prime contractors decreased by 6%, from 69,400 in 2020, to 65,428 in 2021. Further, there is data from GAO and others indicating that, from FY2011 to FY2020, the number of small businesses receiving DoD contract awards decreased by 43% (dropping from 42,723 to 24,296). During that same period, GDP grew by 34% from 2011 ($15.6 T) to 2020 ($20.9 T), and the total number of businesses in the U.S. economy also grew, increasing 7% from 2010 to 2019 (U.S. Census Bureau, 2021).
The benefits of the use of TDR are not hypothetical. In a blog discussing the expansion of TDR’s use, GSA’s Senior Procurement Executive, Office of Government-wide Policy, Jeff Koses pointed out:
Looking at historical data, the pilot’s overall performance based upon a documented evaluation plan showed steady progress. This includes:
- FY 18 results revealed that overall price position was maintained, and burden lowered. However, data remained questionable, and no buying strategies resulted.
- FY 19 results revealed substantial improvement in data completeness and in small business performance. However, we saw that the data hadn’t been used and data policy gaps existed.
- FY 20 results revealed that data completeness, contract-level pricing, and small business metrics all exceeded targets.
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Since FY 19, performance on all nine-evaluation metrics was maintained or showed improvement. Most importantly:
- For three years in a row, contract-level pricing was better when TDR was used than it was when under Most Favored Customer (MFC) Pricing.
- Small businesses participating with TDR generate much stronger sales growth than small businesses under the MFC pricing.
- The data is now 98 percent complete making it even more actionable; and
- Contracting officer usage of transactional data is improving, but there is more opportunity here to improve.
Last Fall, GSA’s Commissioner of the Federal Acquisition Service, Sonny Hashmi, pointed out that,
The future of how we buy in government is going to require real time data, and the price reduction clause, which served a particular purpose a decade ago, two decades ago, isn’t good enough. We have to rethink how […] we buy products and services in government. And programs like the TDR are the way forward[.]
We agree. As set forth above, the use of TDR provides Government data that is more reflective of market realities than the benchmarking measures of the past, as it derives from transactions at the order level. The government can leverage this quality data to measure and facilitate its contracting and program management. So too, the use of TDR reduces the administrative burden, especially for small businesses, and by so doing, removes a significant and costly market entry burden for firms. All told, market and management imperatives support expanding TDR across the MAS program. It is time to afford all MAS contractors with the option of moving to TDR, and the Coalition stands ready to assist the agency in such efforts.