A new report from the Office of Inspector General (OIG) shows that the General Services Administration (GSA) IT Schedule program often falls short of its goal of providing the best possible pricing, leading GSA to reexamine its processes.
There is wide variation in the prices offered by different vendors on GSA Advantage!, the GSA Schedules Program’s web storefront. Among the top selling items, variation between the lowest and highest GSA prices for a given item reached up to 88%.
That variation, in itself, is not a problem. After all, GSA Schedule prices for a given item may vary if there are additional services or concessions that make up for the higher price point. But the items reviewed did not have any such additions: GSA prices varied by up to 88% for completely identical offerings.
Still more surprising, the report found that 75% of the top selling items on GSA Advantage! could be purchased commercially at a lower price.
The purpose of GSA Schedule contracts is twofold:
- First, Schedule contracts streamline the purchasing process by pre-approving vendors. The Federal Acquisition Regulations (FAR) require that the Government determine pricing to be “fair and reasonable” before purchasing a given item or service. Per FAR 8.404(d), “GSA has already determined the prices…under schedule contracts to be fair and reasonable. Therefore, ordering activities are not required to make a separate determination of fair and reasonable pricing.”
- Second, Schedule contracts are meant to guarantee that the Government receives the best possible pricing. In order to get on a GSA Schedule, a vendor must provide the GSA with equal or better prices than its Most Favored Customer receives.
The OIG findings “call into question” these basic tenets of the Schedules program. That is a problem, especially since redundant, low-performing contracts cost the Government millions: it costs GSA approximately $3000 to administer a single Schedule contract, yet only 26% of IT Schedule reseller contracts generate enough sales to offset this cost via the Industrial Funding Fee.
In order to address these issues, the report makes six key recommendations, with which GSA has concurred:
- Establish procedures to ensure that price variances for identical schedule items are supported by price analyses documenting additional concessions or services received on higher priced items. Otherwise, the identical items should not be awarded at the higher price.
- In conjunction with the FAS Office of Acquisition Management, establish performance measures for FAS IT schedule contracting staff that reinforce the objective to obtain the resellers’ most favored customer prices for schedule contract items during price negotiations.
- Improve price protection for IT schedule reseller contracts by:
- Establishing controls to ensure that contracting officers obtain accurate, current, and complete manufacturer commercial sales practices information for offered items when the resellers have low or no commercial sales. The controls should ensure that the specific items involved are not awarded until commercial sales practices information is provided; and
- Establishing controls to ensure that deviations to the Price Reductions clause do not diminish price protections and are properly approved by the Head of the Contracting Activity.
- Cancel IT schedule reseller contracts that do not meet the $25,000 minimum sales requirement of the Schedules Program, focusing initially on those with no sales; or document the contract files to support decisions to maintain the contracts.
- Consider increasing the $25,000 minimum sales threshold for IT schedule reseller contracts to a level that offsets the government’s cost to award and administer a schedule contract.
- Consider alternatives to the current $2,500 minimum payment clause in IT schedule reseller contracts.
The recommendations focus on IT product resellers, meaning service providers may not see much impact at this time. Nonetheless, it stands to reason that the results may lead to increased pricing scrutiny across the IT Schedule, especially as GSA has publicly announced its intention to “transform the [Schedules] program, reducing prices and streamlining processes.” This means it is more important than ever to offer GSA the right price.
Global Services is the leading expert on the GSA Schedules program—to learn how to navigate the complex price negotiation process, contact us today!