The General Services Administration’s (GSA’s) Acquisition Letter MV-22-02, Temporary Moratorium of Certain Limitations Contained in Certain GSA Economic Price Adjustment Contract Clauses (the acquisition letter), is a thoughtful effort to support stakeholders struggling to respond to the impact of inflation on the pricing and availability of commercial products and services via the Multiple Award Schedule (MAS) program. The acquisition letter streamlines processes and eliminates unnecessary “hurdles” in the Economic Price Adjustment (EPA) process. The acquisition letter supports customer agencies, GSA, and MAS contractors in addressing the inflation-driven impracticality of performance and the resulting cancellation of tens of thousands of MAS orders over the last year.
Yet, while implementation of this acquisition letter has streamlined EPA processes, it also has served to highlight unnecessary, inappropriate, and counterproductive pricing language in the MAS solicitation. As noted in two earlier blogs, the MAS solicitation includes the following price evaluation statement:
GSA seeks to obtain the offer’s best price based on its evaluation of discounts, terms, conditions, and concessions offered to commercial customers. However, offers that propose Most Favored Customer pricing that is not highly competitive will not be determined fair and reasonable and will not be accepted. (Emphasis added.)
The requirements for determining fair and reasonable pricing are clearly set forth in the Federal Acquisition Regulation (FAR) and the General Services Acquisition Regulation (GSAR). There is no reference to, or guidance in, statute or regulation regarding the use of a “highly competitive” standard in determining fair and reasonable pricing. There is, however, guidance on determining fair and reasonable pricing based on adequate competition. See FAR 15.404-1, generally. The above solicitation statement introduces an unfounded, arbitrary evaluation standard for determination of fair and reasonable pricing under the MAS program.
This “highly competitive” evaluation standard is undefined. There has been no formal, public rule-making establishing this new standard. Further, to the best of our knowledge, there is no FAS guidance to contracting officers or MAS contractors establishing the evaluation considerations and/or factors in determining whether a price is highly competitive or not. So, not only does the solicitation language lack a regulatory basis, but it is also void of any guidance to the procurement community on what it means. As such, the term constitutes a bald, new price analysis requirement that only sews confusion among stakeholders in the system, as evidenced by the lack of analytical consistency among acquisition centers in GSA. Indeed, one FAS interpretation of the solicitation language provides that GSA policy requires the comparison of more than just commercial pricing as contracting officers are to determine the pricing not only fair and reasonable but also “highly competitive” per the solicitation. What GSA policy? And what does “not only fair and reasonable but also highly competitive per the solicitation” mean?
The unintended consequences of this solicitation language are significant. The surrounding confusion regarding its meaning is creating a high rejection rate for new offers and significantly delaying contract modification processes. It increases the cancellation issue facing FAS customers and contractors, resulting in additional cancelled customer orders. It undercuts the implementation of Transactional Data Reporting (TDR). Finally, it directly impacts efforts of the Office of General Supplies and Services to improve and streamline price analysis. For all these reasons and more, the language should be deleted from the MAS solicitation.
Nothing is More “Highly Competitive” than a Competitive Award at the Order Level
Competition for agency specific requirements at the task and delivery order level drives best value and price under the MAS program. The aggregation and definitization of agency requirements at the order level signals to the MAS marketplace that an actual business opportunity exists. In response, contractors offer best value solutions and prices to compete and win the work. These streamlined task and delivery order competitions set in play competitive forces which inure to the government’s benefit, such as downward pressure on prices, performance efficiencies, and the promotion of innovative solutions that the government might not access otherwise. Plus, the solutions offered represent a real-time statement of what is available in the market at the time of the requirement, not a look back in time.
Customer agencies understand the value of task and delivery order competition for aggregated requirements. For example, over the last three fiscal years, just over 50 percent of the dollar value of purchases under the MAS program have come through Blanket Purchase Agreements (BPAs). BPAs are designed to aggregate agency requirements for competitive award under the MAS program. They are a “highly competitive,” best value tool in the acquisition toolbox for customer agencies.
MAS contracts should be awarded based on fair and reasonable pricing considering relevant terms and conditions, with customer task and delivery orders awarded based on highly competitive, best value pricing in response to agency specific requirements. That guarantees the government a market driven, best-in-class MAS pricing environment.
We were denied a material price increase AND a labor price increase because of this “Most Favored Customer pricing that is not highly competitive will not be determined fair and reasonable and will not be accepted. (Emphasis added.)” If this continues we will need to cancel the MAS contract… We have proprietary software that only our company can install. GSA would not give us their price analysis.