Navigating GSA Audits: Compliance Strategies and Best Practices

By Global Services on February 1, 2024

Navigating GSA Audits: Compliance Strategies and Best Practices

For contractors on the U.S. General Services Administration (“GSA”) Schedule, the GSA auditing process can be confusing to navigate, especially for small businesses. However, understanding GSA audits is crucial for successful contractors to maintain compliance and thrive in the federal marketplace. So, what is a GSA audit, and how should your company report its sales?

The GSA Audit

The GSA audit exists for the government to verify that a contractor is offering its very best price (the most valued customer price) on a supply or service. GSA has pre-award and post-award audit authority through two FAR clauses in order to determine not just the fairness or reasonableness of a price, but also to ensure it is meeting all lowest price promises under a company’s GSA Schedule. In FAR 52.215-20, the contractor authorizes the agency to examine its records before award, to determine the pricing, sales, and other data related to the proposed supplies or services. On the other hand, GSAR 552.238-83 dictates that the GSA shall have access to examine a contractor’s records for billing errors on the Schedule contract for up to three years after the government’s final payment. It is also important to note that most audits occur against firms using the traditional Commercial Sales Practices (“CSP”) GSA Schedule contracts, not the newer Transactional Data Reporting (“TDR”). Generally, CSP Schedules are those where companies had to show their own past commercial sales to validate pricing on the GSA Schedule. Most schedules currently are of this type and so the following applies to those Schedules.
In a pre-award audit, the GSA will request records to ensure that the contractor’s information is current, accurate, and complete. In a GSA pre-award audit, the selection process is based on risk assessment and the projected contract size. However, VA pre-award audits are mandatory over certain thresholds, such as contracts over $3M. In a pre-award audit, contractors should expect the agency to request the following materials, which are typically due within 2 months:

  • 12 months of transactional sales data
  • Recently audited financial statements
  • Detailed information on how CSP disclosures were compiled
  • Discounting policies, procedures, and marketing practices
  • Copies of commercial agreements
  • Segment line, product line, and service offering descriptions

In a post-award audit, the agency will request records for various reasons – to review whether there was a violation of the Price Reduction Clause, to verify mandatory disclosure data, or to check for suspected over-billing or defective pricing. Often, these potential issues are identified during pre-award reviews or annual assessments. In the event a violation is found, there is the potential for refunds, penalties, or referrals to the Department of Justice. However, sometimes these audits are merely requested by contracting officers without evidence of any misconduct by the contractor. Thus, not all post-award audits mean the contractor has a target on their back from the IG or DOJ, but it is important to note that the auditors are likely digging for some form of claw-back and will likely find some reason to demand some amount of repayment or reduction in rates (that’s why these audits occur and more often than not they happen to find what they want).

Best Practices for the GSA Audit

Contractors should ensure they are taking the best steps to effectively prepare for and manage the GSA audit. To prepare for the audit, contractors should keep the following tips in mind:

  • Ask for the agency’s information requests ASAP to perform an internal, pre-audit to identify potential issues and attempt to address any issues before starting fieldwork
  • Have the requested documentation pulled and ready for review (and make copies!)
  • Prepare your management team for their involvement

To manage the audit, contractors should abide by these recommended best practices:

  • Request an entrance conference to agree upon audit scope and objectives, establish your company’s “request” protocol, and introduce the team
  • Control your communications by designating a single point of contact to provide regular status updates (be responsive to the agency!)
  • Ensure the required documents are available, and save communications
  • Prepare your team for employee interviews
  • Request an exit conference to formally close out the audit and review process, and determine when your audit report will be issued

After the audit, the government may not present your company with a draft audit report for some time – you can request a copy, but if it was a pre-award audit the government may choose to not provide one. It is also recommended to respond to findings in a timely fashion. Following the audit, ensure that you perform periodic internal reviews to mitigate future compliance risks, or that you develop a corrective action plan in the event of a post-award audit.

GSA audits can be tricky, but careful attention to the government’s requests and adherence to best practices can help your company successfully navigate its way through.