On August 18, 2011, the General Services Administration (GSA) issued its “Final Plan for Retrospective Analysis of Existing Rules.” The review plan responds to Executive Order 13563 which, as discussed in last week’s Comment, requires agencies to conduct reviews to identify and address obsolete, unnecessary, unjustified, excessively burdensome, or counterproductive regulations. Interestingly, the GSA plan identifies the Price Reduction Clause (PRC) (GSAR 552.238-75) for an information collection review in an attempt to assess the paperwork burden and whether it can be reduced. The review plan states the PRC information collection review will be published in the Federal Register for public comment at some point.
The review plan sets forth GSA’s current view of the paperwork burden and the role of the PRC as follows:
Because the pricing clause (Price Reductions Clause) is a mechanism GSA uses to ensure the government is getting at least as a good a price as a contractor’s private-sector clients, it is not feasible to change the collection process. At the conclusion of negotiations, the CO and the vendor concedes that the government has received the best value and most favorable discount at time of award. Rarely does this relationship change due to the government’s buying power. Additionally, the clause is difficult to apply to service contracts as services vary considerably unlike commodities and products. However in those rare instances when the pricing/discount relationship does change vendors must offer the government equal discounts and/or concessions. Due to the rarity of such instances, the estimated respondents and the number of burden hours has been reduced…
The review plan goes on to estimate a “burden hours” reduction for the PRC of 72,000 hours to 9,000 hours. The review plan also proposes a reduction in the number of PRC respondents from 18,000 to 4,500. As such, the review plan appears to set forth GSA’s position in support of maintaining the PRC as part of the Multiple Award Schedule (MAS) program contracts.
Ironically, the review plan makes a profound statement in favor of eliminating the clause. GSA states the pricing relationship between a MAS contractor’s commercial clients and the government rarely changes due to the Government’s buying power. GSA states that the PRC is difficult to apply to services contracts as they can vary considerably. Finally, GSA states that “in those rare instances” when the PRC is triggered the MAS contractor must offer the Government equal discounts/concessions.
GSA’s position that the PRC rarely comes into play supports elimination of the clause as an excessively burdensome and counterproductive regulation. Although not addressed by the review plan, the PRC fundamentally increases costs to Government and industry. Millions of dollars are spent each year monitoring and complying with the clause. MAS contractors collectively spend millions, if not tens of millions, of dollars in compliance staff and systems just to ensure compliance with the PRC. Why? Because noncompliance can lead to a host of bad outcomes—most notably potential civil False Claims Act liability. These structural compliance costs especially impact small business concerns under the MAS program.
So GSA’s review plan begs the question, if the PRC is triggered rarely, why maintain a clause that costs Government and industry millions of dollars each year? This question is especially timely today given the new FAR 8.4 competitive ordering procedures for MAS orders exceeding $150,000. Under the FAR 8.4, competition at the order level is the regulatory driver of price for the government. One can at least hope that given the language used in the review plan, perhaps GSA is setting the stage for elimination of the PRC for services.
There are so many other aspects of the review plan’s PRC analysis that merit comment. However, additional comments will be saved for the Coalition’s response to GSA’s Federal Register notice for public comment for PRC burden assessment. We look forward to working with our members and GSA on those comments.
