On August 10, 2015, the Government Accountability Office (GAO) released Report No. GAO-15-590, FEDERAL SUPPLY SCHEDULES: More Attention Needed to Competition and Prices. The report examines (1) how and to what extent the government is using the FSS program; (2) factors influencing the degree of competition for FSS orders, and (3) the extent to which agencies examine prices to be paid for FSS orders. The language of the GAO report is both thought provoking and, in some places, perplexing.
Although not highlighted by GAO, the report actually contains some good news regarding competition rates for orders under the Federal Supply Schedule (FSS) program. According to GAO, significant competition was achieved for orders under the FSS program; in fact, based on another GAO report issued earlier this year, FSS program competition rates appear to have exceeded the competition rates under the contract vehicles of other agencies. Specifically, GAO found that 75 percent of the FSS task orders were competitive. This finding is a tremendous good news story for government-wide procurement, the FSS program, and GSA. To its credit, over the years GSA has made significant investments in training and electronic tools to enhance competition at the task order level. In particular, GSA’s electronic quote tool, eBuy, has increased competition and transparency for customer agencies and FSS contractors. The GAO Report notes the effective use of eBuy to achieve competition for agency tasks.
At the same time it highlights this good news regarding overall FSS competition rates, however, the GAO report states that “[m]ost FSS obligations were competed in fiscal year 2014, but only 40 percent of obligations were on orders for which the government received three or more quotes—a number frequently mentioned in the Federal Acquisition Regulations (FAR).” This statement is where the report is perplexing. It appears to establish or imply a new standard for competition, namely the receipt of three offers. Such a purported standard is inconsistent with statute and regulation.
Under the statutory and regulatory requirement for competition for orders exceeding the simplified acquisition threshold (SAT), a contracting activity must provide notice to all FSS contractors capable of meeting the requirement or, alternatively, provide notice to as many FSS contractors as practicable to reasonably ensure receipt of three offers. When notice is provided to all of those contractors, there is no requirement for receipt of three offers. When notice is provided to less than all of those contractors, there still is no requirement for receipt of three offers. Rather, contracting officers must document the file addressing their efforts to obtain three quotes and that no additional contractors capable of meeting the requirement could be identified despite reasonable efforts to do so.
In light of these requirements, then, it is difficult to understand the point of the GAO’s observation about obligations involving three or more quotes. As the report states, “three or more quotes” is “a number frequently mentioned in the … FAR.” It is not a statutory or regulatory mandate, nor should it be necessarily, as the decision not to offer, itself, may be a competitive decision. In any case, the key finding is that, overall, competition was achieved on 75%of the FSS task orders.
With regard to pricing, the GAO report also states that contracting officers did not consistently seek discounts (i.e., price reductions) from schedule prices, even in situations where they were required. The most perceptive assessment of this issue in the GAO report, however, came from certain contracting officials, who noted that by competing the order, they met the requirement to seek a discount. The fundamental goal of competition, including task order competition under the FSS program, is to obtain the best deal (e.g. lower price, better terms, or increased performance/value). Thus, by seeking/soliciting competition from all FSS contractors through the issuance of a Request for Quotes (RFQ) or other communication, those contracting official effectively did seek a price discount. It stands to reason, then, because the GAO report identified an overall competition rate of 75 percent for the FSS program, at least 75 percent of the time contracting officers sought price reductions. In drawing its conclusion, GAO appears to be focusing on the failure to include the words “price reduction or discount” in an RFQ.
In sum, GSA should feel good about GAO’s identification of strong competition rates for the FSS program. Although GAO identified some points of contention, GSA should stay focused on the 75% of the glass that remains full.