Friday Flash, 03.20.15

FAR and Beyond Blog

In just 5 short weeks…….

The Coalition 2015 Spring Training Conference titled The Business of Government will take place on April 28th at the Fairview Park Marriott in Falls Church, VA. The roster includes speakers from GSA, the Department of Veterans Affairs, Small Business Administration, Department of Homeland Security, and the Department of Defense.

Keynote Speaker Denise Turner Roth,  Acting Administrator for the U.S. General Services Administration will kick off the morning sessions.   Acting Administrator Roth will be discussing Managing the Business of Government – GSA’s Role, and we are looking forward to her remarks as this will be the first time she has had the opportunity to address the Coalition.

Looking to increase your market share?  A panel discussion, Ten Tips for Capturing The Federal Market 2015 And Beyond moderated by Bill Gormley, President of the Gormley Group, will include Ray Bjorklund, President, BirchGrove Consulting; Cameron Leuthy, Senior Budget Analyst, Bloomberg Government; and Wendy Frieman, Principal Consultant, Lohfeld Consulting Group.

Next up, John Shoraka, Associate Administrator of Government Contracting and Business Development, Small Business Administration, will discuss The Impact of Small Business Policy on The Federal Market with moderator Angela Styles, Partner, Crowell & Moring.

Legal questions?  The panel discussion titled From Risks to Rewards – Strategies for Managing Liabilities of your Federal Contract led by Jonathan Aronie, Partner, Sheppard Mullin; David Dowd, Partner, Mayer Brown; and Jason Workmaster, Partner, McKenna Long & Aldridge will provide insight.

Our luncheon speaker will be Kevin Youel Page, Deputy Commissioner, Federal Acquisition Service, GSA, who will be sharing his thoughts on The Status of MAS Reform – Update on GSA Initiatives and what they Mean for your Business.

The afternoon Myth Busters Breakout Sessions will include government speakers discussing the following topics:

  • The Ultimate Helpdesk – SAM, GSA Advantage And eBuy
  • Early Adopters of Strategic Solutions – What’s Working, What’s Not, and What’s Ahead?
  • The Future Of Sustainable Government—From Ecolabels To Green Buildings
  • How Contractors Can Improve the Audit Process – The Government’s Perspective
  • Cybersecurity: What Change Should Federal Contractors Anticipate?
  • GSA Technology Contracts
  • Government Wide Acquisition of Professional Services
  • GSA, Federal Acquisition Service, General Supplies and Services (GSS) Business line Update

For the full agenda click here

We will conclude our Spring Training Conference with a networking reception in the ballroom foyer and outside deck!

To register for the Spring Training Conference click here.

We look forward to seeing you all there and continuing the Mythbusters dialogue.

 

Roger Waldron

President

 

GSA OIG on MAS Preaward Audit Findings

The GSA Inspector General released a report last Friday titled “Major Issues from Multiple Award Schedule Preaward Audits.”  The report covered issues that the Office of Inspector General (OIG) identified in preaward audits from FY 2013.  The report recommended that GSA management attend to the following issues:

  1. More than 75% of the audited contracts provided Commercial Sales Practices (CSPs) that were not current, accurate and/or complete.
  2. Half of audited contractors supplied labor that did not meet the minimum education and/or experience qualifications required by their GSA contracts.
  3. More than one third of audited contractors did not have adequate systems to accumulate and report schedule sales, and many improperly calculated their Industrial Funding Fee (IFF).
  4. Contracting Officers are not fully achieving cost avoidances identified in pre-award audits.

Finding 1

table 1

The report found that more than 75 percent of contracts have inaccurate or out-of-date CSP’s. The OIG report estimated that if contracts were designed with accurate information then there could be an estimated $895 million in savings.

Finding 2

table2

About half of services contracts reviewed for the report were found to be using unqualified labor, either by not meeting the minimum education requirements or by not meeting the minimum experience requirements.

 Finding 3

table3

About 40 percent of the contracts audited did not maintain systems to accumulate and report schedule sales. The Industrial Funding Fee (IFF), which GSA charges as reimbursement for administering the schedules program, is inaccurate without this information.

 Finding 4

table4

Finally the report found that GSA contracting officers were implementing about 67 percent of the pre-award cost avoidances recommended by the Inspector General. The GSA IG noted however that, “this savings is despite agreeing with 100 percent of our recommended cost avoidances” from the MAS Major Issues memoranda from FY 2011 and FY 2012.

To access the full report, visit www.gsaig.gov/?LinkServID=CACC0D9C-B669-0F58-CAA73F583A8382BC&showMeta=0.

 

Meet the VA’s George Szwarcman, March 26

combo1
George L. Szwarcman, Associate Executive Director of the VA’s Office of Facilities Acquisition will address Coalition members at the Federal Buildings Committee on March 26th.  All members are welcome to attend. During the meeting, George Szwarcman will address the current vision for VA facilities under the leadership of VA Secretary Robert McDonald and the VA’s partnership with other agencies like GSA and the Army Corps of Engineers to reach their mission to support veterans.

The meeting will be at 2pm on Thurs., March 26 at Mayer Brown (1999 K St NW, Washington, DC 20006). To attend or dial-in, please RSVP to Jason Baccus at jbaccus@thecgp.org.

 

GSA Releases 2 FSSI Draft RFPs: HCaTS and BMO

This week, GSA released draft RFPs for two upcoming Federal Strategic Sourcing Initiatives (FSSI) contract vehicles—Human Capital and Training Solutions (HCaTS) and Building Maintenance and Operations.  GSA plans to release the Final RFPs for both FSSI contracts in May 2015. For more information about the draft RFPs visit the GSA Interact posts below:

  1. HCaTS Unrestricted and HCaTS Small Business Draft RFPs Release on Fed BizOpps
  2. Draft RFP posted for BMO Services government-wide strategic sourcing solution

Please note that the HCaTS Working Group will be meeting next Wednesday, March 25th at 12pm at Deloitte in Arlington, VA to formulate a response to GSA. Members interested in participating, please contact Aubrey Woolley at awoolley@thecgp.org.

 

White House Releases New Sustainability Executive Order

The Administration released a new Executive Order (EO) on Thursday titled Planning for Federal Sustainability in the Next Decade.  A major objective of the EO is to cut the Federal Government’s greenhouse gas (GHG) emissions by 40 percent over the next decade from 2008 levels and increase the share of electricity the Federal government consumes from renewable resources to 30 percent.  The EO directs Federal agencies to take a number of actions to improve the sustainable performance of Federal buildings and increase sustainable acquisition.  The Coalition is in the process of reviewing the order and will be providing more details on the specifics in these areas of interest to members.

 

With the release of the EO, the White House also published a new scored card (below) which shows “self-reported emissions disclosure and progress for all major Federal suppliers, who together represent more than $187 billion in Federal spending and account for more than 40 percent of all Federal contract dollars.”

big chart1

big chart2

Based on publicly available information regarding company disclosure and targets.
FY 2014 contract spending from the Federal Procurement Data System Next Generation (FPDS-NG), as of March 10, 2015.

*  Reflects acquisition of URS by AECOM
**  Reflects merger of Orbital Sciences Corporation and ATK

 

Source: Council on Environmental Quality, www.whitehouse.gov/administration/eop/ceq/initiatives/sustainability/supplier-GHG

 

In support of the EO, GSA also announced yesterday that a new Supply Chain GHG Reporting Pilot is being launched.  Beginning next week, GSA will invite approximately 120 companies to participate in the program with CDP Supply Chain, a third-party carbon reporting system.  According to the GSA blog, participation in the pilot is voluntary and participation will not affect the award of GSA contracts.  GSA has recently been incorporating carbon disclosure goals into specific contracts.  The OASIS contract for complex professional services is an example.

 

Members interested in learning more about the impact of the Executive Order on Federal contractors and customer agencies are encouraged to attend “The Future of Sustainable Government—From Ecolabels to Green Buildings” breakout session at the 2015 Spring Conference.  Dana Arnold with the FAS Office of Acquisition Management and a representative from the EPA Office of Environmental Preferable Purchasing will brief members on the latest on the Executive Order and the use of ecolabels in Federal procurement. To get involved in the Coalition’s Green Committee and activities, contact Aubrey Woolley at awoolley@thecgp.org.

 

All Members: Take the Transactional Data Survey

GSA issued a proposed regulation which requires GSA Schedule and GWAC contractors to report transactional data monthly on all actions under the contract.  Contractors are also required to report and pay an Industrial Funding Fee (IFF) or Contractor Access Fee (CAF) quarterly.  A summary of the rule is here.  GSA estimates that the additional reporting requirements will have little impact on industry.  It is important that we get an accurate assessment of the cost of the rule on industry. Consequently, we ask that you respond to this brief survey.

Take the Member Survey on Transactional Data Reporting:

https://www.surveymonkey.com/r/G76FRPZ

The survey will be open through March 27, 2015. Survey responses will be used to develop the Coalition’s comments in response to the proposed rule. All individual responses will remain confidential.

 

Army Signs OASIS MOU

On March 16th, the Army and GSA signed a memorandum of understanding with new incentives for the service to use the OASIS professional services contract. The Army will commit to spending $500 million on OASIS per year across five main areas: program management, consulting, science, financial services and logistics. The Army is getting a significant discount on the service fee to use OASIS, 0.1%, compared to the regular 0.75% fee agencies are required to pay. Harry Hallock, the deputy assistant secretary of the Army for procurement, said that this commitment to using OASIS will help minimize duplicative contracting efforts where the risk is low, while also increasing efficiencies. The Army spent more than $3.5 billion on GSA contracts in fiscal year 2014, $1.8 billion of which was through GSA’s professional service contracts.

 

OFPP Announces Acquisition 360 Initiative

This week, Office of Federal Procurement Policy (OFPP) Administrator Anne Rung announced a new acquisition initiative called, Acquisition 360. In a blog post, Rung noted that the program directs agencies to seek feedback from vendors and internal stakeholders – such as contracting officers and program managers – on how well certain high-dollar IT acquisitions perform. The goals of Acquisition 360 are to increase the efficiency with which federal agencies execute procurements, and identify opportunities to streamline the process and save taxpayer dollars. The latest initiative is billed as an opportunity to build upon OFPP’s previous efforts concerning vendor outreach, such as Rung’s December 2014 memo on “Transforming the Marketplace” and the earlier “Myth-Busting” memos. The Administrator maintains that ineffective communication between federal agencies and vendors, amongst other complex processes, lead to unnecessary burden on vendors, higher government costs and unfavorable outcomes for taxpayers.

Acquisition 360 is a transaction-transaction based tool that allows agencies to identify strengths and weaknesses in their acquisition processes with the focus on pre-award activities, contract execution, and certain post award activities, such as debriefings. The memo contains three separate surveys as attachments:

  • Industry Feedback
    • Attachment A – Rate the Agency Survey
  • Internal Customer Satisfaction Survey
    • Attachment B – Evaluation of the Contracting Operation Survey
    • Attachment C – Evaluation of the Program Office’s Participation in the Procurement Survey

The Administrator notes that agencies must identify at least the two of their largest contracts or orders for complex IT development, systems, or services awarded within the past six months and conduct the external survey and two internal surveys retroactively for each of these awards by April 18, 2015. Agencies will then provide OFPP with an aggregate-level summary of data from these initial retroactive surveys by July 2015 or within one month of the surveys’ issuance if non-generic Paperwork Reduction Act (PRA) clearance is needed.

 

VA and DLA to Resolve IFF Issue

In a meeting with Defense Procurement and Acquisition Policy (DPAP), the Coalition learned that the differences between the Department of Veterans Affairs (VA) National Acquisition Center and the Defense Logistics Agency (DLA) concerning the applicability of the Federal Supply Schedule (FSS) Industrial Funding Fee (IFF) to acquisitions under DoD supply contracts will be resolved. The VA had taken the position that manufacturers must remit the fee due under the VA’s FSS contract when an item is purchased under a Distribution and Pricing Agreements (DAPA) contract if the item is also on the FSS and the DoD contract incorporates the FSS price for the item. In contrast, the DLA had taken the position that it need not pay the IFF to the VA when it is acquiring supplies under its own contract simply because it uses the FSS price as a benchmark. DPAP informed the Coalition that this inconsistency has been resolved. The VA and DLA have agreed in principle to resolve the issue. The IFF will not be involved and vendors will no longer have to pay the fee to the VA. The language will be officially resolved between the VA and DLA either this month or in April, with a projected implementation date set for July 1, 2015. The Coalition will continue to track this issue. Members with questions please contact Carolyn Alston at calston@thecgp.org.

 

President’s Nomination for VA Assistant Secretary for IT

Laverne Horton Council is President Barack Obama’s new appointee for Assistant Secretary for Information and Technology at the Department of Veterans Affairs.

She served as a Vice President and CIO at Johnson & Johnson, and held several executive positions at Dell. She has led her own firm, Council Advisory Services, since 2012. Additionally, Laverne Council has worked at Accenture and Ernst & Young, and had a stint in government at the Tennessee Valley Authority.

The White House announced the president’s intent to nominate Council on March 18.

 

House Passes Bill Aimed at Improving Durable Medical Equipment Acquisition

The Medicare DMEPOS Competitive Bidding Improvement Act was introduced by Congressman Pat Tiberi (R-OH) and John Larson (D-CT) this week. Both congressmen are members of the Ways of Means Committee. This new bill is designed to protect senior citizens, and those who rely on durable medical equipment (DME), prosthetic and orthotic devices, and supplies from predatory business practices. This would require companies to make bids for Centers for Medicare and Medicaid Services (CMS) DME contracts to have accountability into their bidding process. The act is designed to help senior citizens, who are Medicare beneficiaries, to have access to high quality equipment and services in their own communities.

Presently, the supplier bids that are set in place are non-binding, meaning if CMS offers a contract to a bidder; the company can accept or reject the contract. This encourages low bids because suppliers are aware that they do not have to supply products at lower bid levels. This Medicare Competitive Bidding Improvement Act would make the bids these suppliers issue binding. Tiberi and Larson said in a press release, “Our bill will increase transparency and fairness in the bidding process, while also promoting competition and ensuring that seniors have increased access to quality medical supplies.” Click here to access the full text of the bill.

 

Healthcare Spotlight

Veterans Access Choice and Accountability Act – Implications of the New Supplemental Veterans Health Care Program for Drug and Device Manufacturers

By: Donna Lee Yesner, Partner, Morgan Lewis & Bockius LLP and Stephen E. Ruscus, Partner, Morgan Lewis & Bockius LLP

In the wake of the scandal over veteran wait time for health care at certain Department of Veterans Affairs (“VA”) medical facilities, Congress acted quickly to improve the care available to veterans, including access to providers outside the VA system.  On August 7, 2014, President Obama signed into law the Veterans Access, Choice, and Accountability Act of 2014 (“Veterans Choice Act”), which authorized veterans to obtain hospital care and medical services from non-VA providers and $10 billion to pay for such care.  Prior to the enactment of the Veterans Choice Act, the VA had voluntarily adopted a policy of paying for veterans’ medical care outside the VA system under certain circumstances; however, VA approval was required for these referrals.   By contrast, the new law gives veterans greater access to the hospital care and medical services to which they are entitled under section 17 of title 38 of the United States Code.

The Veterans Access, Choice and Accountability Act – Key Provisions

The new law applies to veterans who are:

  1.  enrolled in a patient enrollment system at the VA established under 38 U.S.C. 1705 and have contacted the VA seeking an initial appointment for the receipt of hospital care or medical services; and
  2. eligible for hospital care or medical services under 38 U.S.C. 1710(e)(1)(D) and have either
    1. unsuccessfully attempted to schedule an appointment at a VA medical facility within the Veterans Health Administration wait-time goals (posted on the internet),
    2. live more than 40 miles from the closest VA medical facility,
    3. reside in a state lacking a VA hospital, emergency care and surgical care or live more than 20 miles from such a medical facility, or
    4.  live 40 miles or less from a medical facility but must travel by boat, air or ferry to reach it or travel is otherwise burdensome due to geographic challenges.

A veteran who meets any of these conditions is referred to as an “eligible veteran.”

Section 101(a) of the Veterans Choice Act requires the VA to either place an eligible veteran on an electronic waiting list for hospital care or medical services at a VA facility or, at the veteran’s election, authorize care outside the VA through agreements authorized by the statute, or any other laws, from one of four categories of care providers.  Further, the VA must inform eligible veterans of the available care and ensure the electronic waiting list is accessible in order for veterans to determine the wait time and make an informed choice.  If an eligible veteran elects to receive medical care outside the VA, he or she may obtain care from any of the following entities that have entered into agreements with the VA as described in the statute:  1) any health care provider in the private sector, including any physician, that is participating in the Medicare program; 2) any federally-qualified health center as defined in 42 U.S.C. 1396d(1)(2)(B); 3) the Department of Defense, and 4) the Indian Health Service.   To avoid affirmative action program compliance issues, the law expressly prohibits the Department of Labor, Office of Federal Contract Compliance Programs from treating an entity that signs an agreement to furnish health care to veterans as a federal contractor or subcontractor.

When entering into participation agreements under section 101(d) of the Veterans Choice Act, the VA must negotiate rates for furnishing hospital care and medical services and reimburse the entities at the negotiated rates.  In general, negotiated rates may not exceed the rates paid by the Medicare program to providers of services and suppliers as defined in sections 1861(u) and  (d) of the Social Security Act for the same care or services.    However, the VA may negotiate higher rates for care or services furnished to veterans in highly rural areas.  The law prohibits providers from collecting more than the negotiated rate and from collecting a co-payment in excess of any amount that could be collected under chapter 17 of title 38 if the veteran received care from a VA provider.

Veterans must disclose whether they are covered under a health care plan other than Medicare, Medicaid, or Tricare.  If they are covered by another plan, that plan will be primarily responsible. , for hospital care and medical services for a non-service related disability, to the extent the plan covers the care furnished. The VA will be secondarily responsible.  The provider will be responsible for seeking reimbursement first from the primary payer.  Authority to pay for hospital care and medical services through non-VA providers – as either the primary or secondary payer – has been transferred from the Veterans Integrated Service Networks and VA medical centers to the Chief Business Office of the Veterans Health Administration.   Within 90 days after the August 7, 2014 enactment date, the VA must prescribe regulations for the implementation of a system for processing claims and paying bills for authorized care and services.

Impact of Expanded Care on Drug and Device Suppliers

Furnishing medical care to veterans through non-VA providers is a positive development for suppliers of drugs and medical devices as it should increase the utilization of their products.  For example, the VA may pay for products that are manufactured in countries that are not designated countries under the Trade Agreements Act (“TAA”) without a non-availability determination, because the TAA only applies to products acquired under a federal procurement contract, not products purchased by private sector health care providers through commercial channels.  At the same time, the law authorizing access to care outside the VA system raises questions regarding reimbursement of supplies, particularly pharmaceutical and biological products, which need to be resolved, perhaps through the claim processing system regulation.   For example, the law specifies that veterans may elect to receive medical services including supplies furnished incident to a medical service from Medicare providers.  It also contemplates that VA provider agreements will cover drugs and devices covered by Medicare Part B, cap the negotiated rate paid for such supplies at the Medicare rate, and follow procedures applicable to participation agreements under the Medicare program.  What is unclear is whether the VA will pay for any drug administered by a non-VA physician and covered by Medicare, or impose its own restrictive formulary on contract providers.

Prior to the Veterans Choice Act, any drugs paid for by the VA were subject to VA formulary requirements.  Not only would it be burdensome for non-VA providers to adhere to the VA formulary as a condition of reimbursement, physicians participating in the Medicare program may be unwilling to sign agreements to treat veterans if they cannot use the same products covered by Medicare and receive the same payment.  Similarly, military treatment facilities and federally-qualified health centers will want to be reimbursed for whatever supplies they use in treating all their patients, not just veterans.  If the VA formulary restrictions do not apply to drugs administered by non-VA physicians, manufacturers of non-formulary drugs may increase utilization of their drugs in the VA market.

Another area requiring clarification concerns prescriptions written by non-VA physicians.  Although the Veterans Choice Act authorizes VA payment for supplies furnished as medical services under the Medicare program, it does not provide a pharmacy benefit outside the VA system, and does not cover drugs dispensed by private sector pharmacies.  If veterans want the VA to pay for their prescriptions, the prescriptions must be dispensed by a VA pharmacy or the agency’s mail order pharmacy.   Before enactment of the new law, prescriptions written by non-VA physicians often could not be dispensed by VA pharmacies without a VA physician first seeing the patient and approving the prescription.  In those situations, a veteran still had to wait to schedule an appointment at a VA facility to get the medication.   Hopefully, the VA will not continue that practice under the new law.

It is unclear, however, whether the VA will still require veterans to make appointments with VA doctors in order to obtain certain prescriptions.  Requiring a veteran to wait weeks for a VA appointment or drive many miles to see a VA doctor in order to receive medication, which could be prescribed outside the VA and dispensed by the VA’s mail order pharmacy, is clearly contrary to the spirit of the law.  If the VA is concerned with the expense of a drug prescribed by a non-VA doctor, a requirement for electronic or telephonic consultation between the prescribing doctor and a VA doctor should suffice.   In addition, veterans will be issued Veterans Choice cards in order to process payment claims.  Thus, it would be relatively easy for a Pharmacy Benefit Manager to manage prescriptions written by authorized non-VA doctors and dispensed by the VA’s mail order pharmacy to Veterans Choice beneficiaries, including any prior authorization requirements.

Finally, it is worth noting that if veterans elect to be treated by DoD physicians, any drugs or devices furnished to veterans at a military treatment facility will be procured by DoD at contract prices available to DoD, including prices under Blanket Purchase Agreements.  Similarly, if veterans elect to be treated at federally-qualified health centers, as defined in section 1905(1)(2)(B) of the Social Security Act, drugs used to treat the veterans will be acquired at deeply discounted prices under pricing agreements authorized by section 340B of the Public Health Service Act.  Thus, the acquisition cost for these providers is well below the Medicare rate, which, for drugs, is generally based on the weighted average sales price for the drug, exclusive of federal sales.  The Veterans Choice Act caps the negotiated reimbursement rate paid non-VA providers for medical supplies at the Medicare rate; however, the statute  does not,  prohibit the VA from negotiating prices below this amount with providers that are beneficiaries of other federal contracts or pricing agreements and have much lower acquisition costs.  Accordingly, the VA could negotiate payment terms with DoD facilities or federally-qualified health centers consisting of a service fee plus the acquisition cost of the drug.

 

Legal Corner

I’m Not Dead Yet, (or a Brief Look At The Future Of The Price Reductions Clause In Light Of GSA’s Proposed Transactional Data Reporting Rule)

By: Jonathan Aronie, Partner, Sheppard Mullin Richter & Hampton

Not enough Government Contracts blogs incorporate movie trivia.  So here’s my contribution to fill this obvious gap in the procurement blogosphere:  Is the following quotation (a) from a famous Monty Python skit or (b) from a conversation between two Government auditors discussing GSA’s recently-proposed effort to do away with (at least in part) the Price Reductions Clause?

“It’s not dead!”

“’Ere, he says it’s not dead.”

“Yes it is.”

“It’s not.”

“It isn’t.”

“Well, it will be soon, it’s very ill.”

“It’s getting better.”

“No it’s not, it’ll be stone dead in a moment.”

“Well, I can’t take it like that.  It’s against regulations . . . .”

Before giving you the answer, let me offer a bit of context for those who aren’t regular readers of the Federal Register – or regular watchers of Monty Python comedies.

As you likely know, since the 1980s, most GSA Schedule contracts have incorporated a “Price Reductions Clause.”  (GSAR 552-238-75)  The Clause, long a favorite of Inspectors General everywhere, was developed to ensure the Government receives fair and reasonable pricing throughout the term of the Schedule contract.  The Clause quickly became the bane of every Schedule vendor’s existence, causing untold heartburn among compliance officers, CFOs, sales managers, contracts administrators, and, of course, lawyers.  It is a clause that is extremely confusing, burdensome, expensive, and, frankly, nearly impossible to comply with if read literally.  Yet, try as industry might, GSA and its love affair with the Price Reductions Clause continued unabated.

On March 4, 2015, however, GSA signaled that love affair may be on the rocks with the announcement of a pilot program to do away with the Clause in limited circumstances.  (GSAR Case 2013-G504; 80 Fed. Reg. 11,619 (Mar. 4, 2015))  Well, not exactly to do away with it; more like put it aside while the Agency flirts with alternative approaches to Schedule pricing.  Dost my eyes deceive me, you say?  No they dost not.  According to GSA, the time has come to consider bidding farewell to the Price Reductions Clause for certain types of commodities, and replacing it with a new “transactional data” reporting obligation.

GSA described the forthcoming transition as a proposal

to amend the [GSAR] to include clauses that would require vendors to report transactional data from orders and prices paid by ordering activities …  The new clause will be paired with changes to the basis of award monitoring requirement of the existing price reductions clause …  (80 Fed. Reg. 11619)

The new rule would apply to GSA-awarded Government-wide non-Schedule contract holders immediately upon issuance, but would be phased in for Schedule contractors “beginning with a pilot for select products and commoditized services.”  The Schedule pilot would encompass select “commercial products and commoditized services that experience high volume of repetitive purchasing under identical or substantially similar terms and conditions.”  (80 Fed. Reg. 11624)  The proposed rule would not apply to the VA Schedule.  (The VA’s love affair with the Price Reductions Clause runs even deeper than GSA’s.)

The new transactional data reporting clause would require Schedule vendors (and other vendors holding GSA-issued, non-Schedule Government-wide contracts) to report on a monthly basis

prices paid [by ordering activities] for products and services delivered during the performance of the contract, including under orders and blanket purchase agreements (BPAs) through a user-friendly, online reporting system.

According to GSA, “the report would include transactional data elements such as unit measures, quantity of item sold, universal product code, if applicable, price paid per unit, and total price.”  (80 Fed. Reg. 11621)  While it’s against my nature, I’m going to resist for now the urge to make a flippant comment about how “user-friendly” the Government’s new online reporting system is likely to be.

I will not, however, resist the urge to make a flippant comment regarding GSA’s calculation of the burden the new collection and reporting obligation will impose.  According to GSA, the new transactional data requirement will impose upon contractors “a one-time initial set-up burden of 6 hours,” and a subsequent burden of 31 minutes per month.  I submit these figures are grossly under-estimated.  It’s as though the folks making these rules never have spent time outside the Government actually performing the tasks they impose on others . . . .

In any event, GSA intends to use the resulting data from the new “user-friendly” system to perform “horizontal pricing” analyses – that is, to compare one company’s federal prices to another’s, which GSA began doing a few years ago as part of its standard pricing analysis.  Federal purchasers would use these data to “take advantage of prices paid information and the more rigorous order level competition it generates” to reduce the prices they pay for commodity items.  In other words, or in my words at least, the new data will be used by the Government to drive prices down without regard to service, terms, conditions, or value.  As industry has seen for itself over the last few years, this is precisely how GSA’s “horizontal pricing” evaluation works in practice.

GSA promises the newly captured federal “prices paid” data will be “especially impactful when combined with the insight and expertise of category managers to provide agency buyers across government with market intelligence, expertise, and deep-dive analysis to improve supply chain management, pricing variances, innovation, redundancies, and unnecessary duplication of effort.”  The regulation does not make clear who these commercial market experts will be, what powers they will have, or how they will interact with GSA’s existing contracting officers.  Nor does the rule make clear whether the mounds of data to be turned over to the Government by vendors will be protected from disclosure under the Freedom of Information Act (“FOIA”).

In exchange for the burden (and expense) of capturing and reporting all these new federal “prices paid” data (some of which, admittedly, already must be captured by vendors holding certain GSA-issued non-Schedule contracts), participants in GSA’s pilot program would be exempt from the Basis of Award (“BOA”) tracking requirement of the Price Reductions Clause.  At first blush, this would appear to be a significant benefit.  But hold onto that thought for now.  I’ll come back to it.

The new rule seemingly is the culmination of several long-in-coming realizations by GSA.

  • GSA Realization No. 1. The current Price Reductions Clause is a HUGE burden on Schedule contractors.  Really?!  Vendors (and Government officials, in candid moments) have been saying this for years.  The Government Electronics Information Technology Association, a prominent industry group, even pushed the Office of Federal Procurement Policy to drastically restructure the Clause back in the late 1990s due, in part, to its burdensome, non-commercial nature.  More recently, in 2008, the ABA’s Public Contract Law Section revitalized that push, informing GSA’s MAS Advisory Panel the Price Reductions Clause has “created significant burden . . . for contractors and government officials alike.”  Despite hiding its head in the sand for years on the issue, GSA now concedes the Price Reductions Clause is a significant burden.  Even GSA’s FAS Commissioner Tom Sharpe described the Clause as imposing a “burdensome tracking and reporting requirement.”  Indeed, according to GSA’s own analysis, Schedule contractors spend over 860,000 hours a year (at a cost of approximately $58.5 million) on compliance with the Price Reductions Clause, and that eliminating the PRC “could reduce the annual burden on contractors by more than 85 percent . . . .”  (80 Fed. Reg. 11622)
  • GSA Realization No. 2. The current Price Reductions Clause is CONFUSING.  Another “discovery” of something vendors discovered long ago.  The Price Reductions Clause is extremely confusing, and is subject to wildly inconsistent and ever-evolving Government interpretations.  Just ask any of the many Government contracts consultants and lawyers from coast to coast who spend a good part of their lives trying to help their clients understand and comply with the Clause.  But GSA finally has come around.  According to a recent study conducted by the GSA OIG, 84% of Schedule vendors screw up their “Commercial Sales Practices Format” submission – the disclosure that ultimately guides the selection of the BOA for Price Reductions Clause purposes.  Nearly half of all Schedule vendors screw up their PRC monitoring systems.  While I suspect the Government might argue these figures reflect fraud rather than confusion, I don’t buy it.  I’ve spent my professional life working with Government contractors and can say, without hesitation, those data reveal confusion with the rules, not ignorance of the rules.
  • GSA Realization No. 3. The current Price Reductions Clause does not result in better pricing for the Government.  GSA is three for three.  Vendors (and many within Government) have recognized for years the market drives prices down, not the Price Reductions Clause.  GSA now is on board.  Indeed, the Agency recently analyzed the issue and found that “only about 3 percent of the total price reductions received under the price reductions clause were tied to the ‘tracking customer’ feature.”  (80 Fed. Reg. 11623)

These realizations, however, have not quite yet put the nail in the Price Reductions Clause coffin.  As I noted above, the new approach is only a pilot program.  “If the results of the pilot reveal that using transactional data is not an effective pricing model, contracts would revert back to using the tracking customer provisions of the price reductions clause.”  (80 Fed. Reg. 11621)

Moreover, GSA has made clear the proposed rule does not do away with the Commercial Sales Practices Format (“CSPF”).  In fact, not only is GSA maintaining its CSPF disclosure requirements – to the delight, no doubt, of relator’s counsel everywhere – but the new rule makes clear GSA will “maintain the right throughout the life of the FSS contract to ask a vendor for updates to the disclosures on its commercial sales format . . . where commercial benchmarks or other available data on commercial pricing is insufficient to establish price reasonableness.”  While the survival of the Schedule CSPF obligations has been underplayed by GSA’s pilot program promoters, vendors should not overlook the importance of this vestige.

  • First, the CSPF is as burdensome an obligation as the Price Reductions Clause.
  • Second, the CSPF is as confusing an obligation as the Price Reductions Clause.
  • Third, GSA’s reservation of its rights to require vendors to update their CSPF disclosures at GSA’s discretion maintains much of the burden and risk many had hoped would evaporate with the Price Reductions Clause.
  • Fourth, if vendors must continue tracking their commercial sales, what has the elimination of the Price Reductions Clause really bought us? Indeed, one might say the introduction of the transactional data reporting obligation along with the continuation of the CSPF obligation only has increased the burden on vendors.

In other words, a celebration of the death of the Price Reductions Clause and the arrival of reason may be premature.  Be that as it may, a select group of Schedule contractors are going to have the chance to experience life in a purportedly PRC-free world, and see for themselves whether the new rule is all that GSA is making it out to be.

Which brings us back to the main purpose of this blog post – the introduction of movie trivia into the procurement blogosphere.  Thus, without further ado, here is the answer to my trivia question:  The quotation is (with some poetic license) adapted from a wonderful little Monty Python film, as most of you probably knew.  Although, I must admit I vividly can see in my mind’s eye a group of GSA auditors conversing in hushed tones over their Diet Mountain Dews:  “It’s not dead!  Yes it is.  It isn’t.  Well, it will be soon, it’s very ill.  It’s getting better.”

Time will tell who’s right, of course.  In the meantime, if you’d like to have a say in the matter, GSA is holding a public meeting to discuss the new program on April 17, 2015.

Jonathan is the co-managing partner of Sheppard Mullin’s Washington, DC office, and has been practicing government contracts law since 1994. He is the co-author of the GSA Schedule Handbook (West Publishing), teaches on a variety of Government Contracts topics across the country, is a frequent speaker at Coalition events, and is a Monty Python fan. When not reading, writing, speaking about, or practicing Government Contracts law, he often can be found in New Orleans where he was appointed by the United States District Court for the Eastern District of Louisiana as the federal monitor over the New Orleans Police Department pursuant to a Consent Decree with the Department of Justice.

 

Support the Coalition for Government Procurement Endowed Scholarship Fund!

In recognition of the 35th anniversary of The Coalition for Government Procurement (“the Coalition”), The George Washington Law School and the Coalition have established The Coalition for Government Procurement Endowed Scholarship Fund.

The fund will support scholarships to assist qualified veterans enrolled in The George Washington University in pursuing a graduate degree with a concentration in the field of U.S. government procurement.  The Coalition has been a long-time supporter of organizations that assist returning warriors and veterans.  George Washington University is unique in its offering of Masters level programs covering federal procurement.

Endowed scholarships create a lasting legacy of support by providing funds for financial aid in perpetuity.  Please join us in this campaign to honor the 35 years of work of the Coalition for Government Procurement and to support our veterans seeking to focus their professional careers in the field of US government procurement. Donate here today!

Final Determination Concerning Notebook Computer’s Country of Origin

Customs and Border Patrol (CBP) released a notice of final determination in the Federal Register this week concerning whether notebook computers manufactured in a non-designated country are “substantially transformed” by the addition of an operating system or software from a designated country.

An article is a product of a country or instrumentality only if (i) it is wholly the growth, product, or manufacture of that country or instrumentality, or (ii) in the case of an article which consists in whole or in part of materials from another country or instrumentality, it has been substantially transformed into a new and different article of commerce with a name, character, or use distinct from that of the article or articles from which it was so transformed.

In its determination, CBP found that downloading an operating system and/or software from a designated country does not amount to a substantial transformation for purposes of U.S. Government procurement. CBP explained that since, “most of the major components are sourced in [the non-TAA country],” the computer was not transformed by the addition of an operating system.

 

Roger Waldron this Week on Federal News Radio

On Federal Drive

The General Services Administration is suspending for three months online meetings it’s been having with vendors. They’re aimed at helping the agency develop a procurement strategy for the replacement version of its popular Alliant acquisition vehicles. For the time being, the agency says it wants to have face-to-face meetings. The virtual meetings have been convened by the Coalition for Government Procurement. How do they work and what happens? Coalition president Roger Waldron joined Tom Temin on the Federal Drive to explain.

On In Depth

The potential new rule from the General Services Administration for contractors to report their Schedules transaction data could be redundant. Roger Waldron is President of the Coalition for Government Procurement. On In Depth with Francis Rose, he said GSA is asking contractors to report data it already has, and says the rule proposal raises five important questions.

 

Easter Seals Advocacy Awards Banquet & Dinner, May 13

The 2015 Easter Seals Advocacy Awards Banquet and Dinner is almost here! The Awards Banquet and Dinner on May 13 is a great way to advance opportunities for children and adults with disabilities, as well as military families with special needs. Beginning in 2004, the Advocacy Awards have been attended by leaders in business, government relations, and professional services have joined military and government dignitaries.  The 2015 Dinner will highlight Easter Seals’ services, which include Child Development, Respite, Caregiver Training, Adult Day Services, the Veteran Staffing Network, and Homeless Veterans Reintegration. Please see the Advocacy Information Package  for additional information.

 

Department of Energy Extends Commercial Item Test Program

In December 2014, the Civilian Agency Acquisition Council (CAAC) issued a memorandum advising agencies to permanently extend the Commercial Item Test Program in FAR subpart 13.5. Earlier this month the Department of Energy (DoE) issued its class deviation officially extending the program.

This test program allows for simplified procedures for commercial items in amounts greater than the simplified acquisition threshold but less than $6.5 million.  According to the DoE, the program gives contracting officers more flexibility and allows for a more efficient acquisition process.