Surprisingly the answer is in the Federal Acquisition Regulations (FAR). By placing an order in accordance with FAR 8.4, the ordering agency achieves best value at the lowest overall cost alternative to meet the government’s need. Or in plain English, the system works – pricing is good – when you use it like you are supposed to, in accordance with FAR.
Some government officials rail that prices under GSA’s Multiple Award Schedule program are too high. GSA Schedule contractors on the other hand lament how difficult it is to negotiate an agreement and complain that the government’s price demands are overly aggressive; some would even say arbitrary. The dichotomy in the positions makes you wonder if these parties are all talking about the same program. So what explains the difference?
The fact is that you cannot evaluate the validity of GSA Schedule pricing by looking exclusively at the award price. The program was designed with a two-step process in mind. The first objective is to negotiate a standard set of terms and conditions that satisfy various government –wide needs. GSA negotiates a get a good upfront price under circumstances where requirements, customers and quantity are unknown; this is the initial GSA contract price. The second objective is to get a better deal at the point in time when a federal agency can further leverage the price downward with information about specific customers, volume and commitments to purchase. These additional price concessions occur at the task order stage.
The GSA Schedules program is structured to create competition and capture discounts at the task order stage. Specifically,
- Schedule contractors can voluntarily offer spot reductions to federal customers
- FAR directs agencies to ask for price reductions on specific orders
- Agencies that wish to strategically source their requirements using the GSA Schedule can solicit for Blanket Purchase Agreements that further leverage their volume and terms
- GSA’s on-line catalog and buying systems (GSA Advantage! and GSA ebuy) provide visibility to service and product availability
- Schedule contractors must extend price reductions to federal customers under certain circumstances when they reduce prices to commercial customers.
GSA officials sometimes cringe when the media reports that an agency has negotiated a 20 or 30% discount from the GSA Schedule, feeling that somehow, they left money on the table. In actuality, GSA should take credit for the system working as intended. Customer agencies received deeper discounts as anticipated by contract provisions and federal regulations. Moreover, because GSA has pre-existing contracts, customer agencies have a streamlined process for negotiating their technical requirements and associated pricing.
Perhaps the great misconception of the GSA schedule is that GSA contracting officers must negotiate a contractor’s best price. GSA’s stated objective is negotiate the same pricing that a contractor gives to its most favored commercial customer, taking into consideration any differences in the terms and conditions under which the customers buy. The term “most favored customer” no longer serves the government well. The public discourse tends to focus on the hyperbole of the objective as opposed to the reality that the government buys in a very different manner than many commercial customers. The government is indeed potentially a high volume customer. Not many commercial customers, however, insist upon a provider’s best price without known requirements or any commitments to purchase. When the government buys like a commercial customer it gets discounts equal to or better than those customers.
A discussion of MAS pricing without consideration of acquisition overall cost would be inadequate. Repetitive contracting imposes a high cost on government and industry. People, systems, time and money are all resources consumed when agencies go into the market to buy. Established government contract vehicles allow agencies to acquire items needed to satisfy critical government needs, at significantly lesser administrative costs and with dramatically reduced lead times. It simply costs less and takes less time to order from an existing contract than to establish a new contract. The GSA Schedules program has the distinction of offering so many commercially available professional services, high tech products, and commonly used supplies readily available for ordering by federal agencies.
Are GSA Schedule prices too high? I say no. Nineteen thousand contracts, millions of products, and $50 billion in annual sales, all on non-mandatory contracts. Something is working; agencies would not use the program to that extent if it were not. When we analyze the validity of pricing, I’d suggest that the analysis is not complete until we consider not only initial contract prices but also task order pricing, the overall cost of acquisition to the government, and the value proposition associated with being able to quickly satisfy the needs of government with high quality commercial solutions.
Contracting programs must be dynamic; both government and industry should look for ways to continuously improve the process. The best opportunity to improve GSA Schedule pricing requires a laser focus on use of best commercial practices, to the extent possible and communication of well-developed requirements. Developing and communicating sound requirements empowers contractors to deliver best value solutions and lower cost outcomes for the American taxpayer. The GSA Schedule program allows customer agencies and contractors to focus on requirements through streamlined task order competitions built on the foundation of the schedule contracts and GSA’s e-systems.
President, Roger Waldron
Executive Vice President & General Counsel, Carolyn Alston
Via Federal Strategic Sourcing Initiative or FSSI GSA is incrementally shutting down all competition & destroying small businesses via each schedule. A total of $50 Billion Dollars which will cost tax payers additional billions. Via this procurement program GSA will definitely pay more in the future for products & services, while simultaneously destroying small businesses, disabled veteran owned companies, ect. Over 17,000 companies will feel GSA’s wrath and 100,000’s of jobs will be lost.
FSSI eliminates virtually all competition with possible oligopoly price fixing. Keep in mind 1,000s of government buyers purchase via government purchase sites similar to amazon.com.
I wanted to summarize a 21st Century Open market solution vs FSSI.
I strongly believe GSA should modify existing software to control buyers rather than eliminating competition via the FSSI procurement program. If buyer breaks protocol hence buyer would be disciplined. This software project can be done without additional funding. GSA, DoD & NASA can prioritize this software project via existing employed Software Engineers. It takes the will and priority to make this happen.
From what I can see there are some really big holes in the procurement process.
1) Via this GAO report http://www.gao.gov/products/GAO-12-705T most purchases were made outside of GSA procurement web site http://www.gsaadvantage.gov. A solution to this problem would be take away the buyers PHYSICAL credit card and store the credit card information online via http://www.gsaadvantage.gov Again this can be done with no additional funding. Amazon.com is a perfect example. I know the government is not a company but I am certain GSA has great software engineers to accomplish this task via a top priority and no additional funding software project. For open market purchases buyer currently utilize fbo.gov and/or other existing procurement sites. The same projects can be accomplished via these sites.
2) An independent software company should be allowed to screen scrape information from gsaadvantage.gov to prove selected FSSI Vendors “DO NOT” offer the lowest prices/ best quality.
3) Via Vendor uploads develop back end software to monitor and reject outrageously priced items. Example a $25,000 toilet seat or $5,000 hammer. Statistical databases exist via the free market to determine low / high prices per item hence halting outrageously priced item(s) uploaded to gsaadvantage.gov. GSA software engineers would need to create software to utilize this database.
4) I believe various government buyers have different volume purchase requirements. FSSI is not a one size fits all solution. Example many government buyers have less than a $3,000 requirement. Internet purchasing may be more advantageous for this type of purchase. Example open competition via gsaadvantage.gov
5) GSA claims its employees are overworked and can no longer handle additional and/or existing vendors. All existing employee manual operations should be analyzed via GSA’s Software Engineers to automate current manual human labor. It may be possible to handle unlimited vendors and buyers once this project is completed. Each new additional GSA Human assignment should be analyzed by software engineers for possible automation.
6) I strongly believe an independent software company should be allowed to give alternative 21st Century solutions versus FSSI.
7) There will be very little motivation for these very few FSSI vendors to vigorously compete via price / best quality. All prices are available via gsaadvantage.gov and each vendor will easily identify competitors.
8) Reduce the number of schedule solicitations. Currently GSA claims it costs $3,000 per year, per contract to maintain each contract and numerous GSA employees. There are 40 solicitations (GSA and VA). The solicitations should be consolidated down to a handful—with a goal of a single solicitation (contractors could then choose to consolidate their contracts or maintain separate contracts depending on their business models).
9) It is this writer’s belief FSSI is nothing similar to Corporate volume purchasing.
Example lets take Walmart. They currently have 66,000 vendors and counting each day. FSSI eliminates virtually all competition with possible oligopoly price fixing. Keep in mind all vendor prices are available via gsaadvantage.gov Giving very few companies exclusive selling rights via a long term contract and eliminating competition is not the answer. Why have 1,000s of existing GSA software programs go to waste monitoring a few vendors. GSA needs to enhance existing software to truly and easily maintain a vigorous open competitive market via existing web sites (gsaadvantage.gov and other existing procurement sites). Programmatically controlling the buyer via software is the 21st solution.
Thank you for posting this information, I have some points on the subject in my blog post on Changing Prices on a GSA Contract. This is an important topic, and I know for a fact that most GSA Contractors do not put the focus they should on this topic until they get an order from the GSA and realize that they are going to take a loss if they fulfill it.
Josh,
We have a GSA Schedule 70. Our rate for a Software Engineer is $96 per hour.
We have been asked to submit a bid as a sub to a partner company who has a non-GSA contract. They have asked us to provide a Software Engineer for $90 per hour, which is below our GSA Schedule 70 rate.
We have heard that this is an issue with GSA. In fact, we are hearing that if we provide a Software Engineer for $90 per hour, GSA will require us to reduce all future Software Engineers to $90 per hour and pay back all past contracts we charged $96 per hour.
Can you provide some light on this? Do you see an issue?
Thanks,
How current is the information in this post?