GSA forms panel to review pricing policies

Group to examine schedules' rules governing prices in wake of industry criticism about oversight.

Facing complaints about its pricing policies and oversight, the General Services Administration announced on April 17 that they have formed an advisory panel to review policies for its Multiple Award Schedule contracts.

Comment on this article in The Forum."Our multiple award schedules program faces challenges," said GSA Administrator Lurita Doan. "Often the government isn't a good customer, and the guidelines and rules are tough. As a result, companies across the country report they are growing increasingly frustrated. I believe the time is now for GSA to face this challenge and do something to address it."

The Multiple Award Schedules are indefinite delivery, indefinite quantity contracts negotiated by GSA for commercial products and services. GSA awards the contracts for a base period of five years, plus three five-year options. The federal government and other authorized users issue task and delivery orders against the contracts. State and local governments also can use many of the contracts.

But recently, companies have expressed frustration with the myriad rules and pricing regulations associated with the contracts. Last year Sun Microsystems, EMC Corp. and Canon USA chose not to renew their GSA schedule contracts because of increased scrutiny from the agency's inspector general regarding their pricing policies. Canon officials said their reason not torenew its contracts were due to "unreasonable demands" fromGSA's inspector general. The inspector general often audits companies at the time of contract renewal, a process that requires companies to prove that the government is paying the most competitive price.

GSA formed the panel on March 26, appointing 15 members -- 11 from government (including five from GSA) and four from industry. Elliot Branch from the Defense Department will chair the panel, whichhas a two-year charter, although Doan said its actual life could be shorter.

GSA said it did not form the panel because of declining purchases on the schedules, pointing out that sales increased 6 percent in the first quarter of fiscal 2008 compared with the same quarter the previous year. "What we're looking for is to simply do a better job," said Jim Williams, commissioner for GSA's Federal Acquisition Service. "The schedules are enormously popular, doing about $36 billion in business annually. … We are looking at things that haven't been looked at in a while."

Among the issues that Doan said the panel would examine is pricing reduction clauses, which are triggered when an agency's purchase meets a certain volume. "We've had a growing frustration among our industry partners because there is some confusion over the auditing process and what will cause the pricing reduction clause to be triggered, when, why and how. For us to be good clients, we must be able to provide clear guidance on what we need, when we need it and where we need it."

The Competition in Contracting Act requires that schedule contracts and orders result in the lowest overall cost alternative to the government. Historically, to meet the requirement, the goal of the schedule price negotiation has been to obtain government prices that are comparable to the firm's "most favored commercial customer." Before awarding the contract, the schedule contracting officer must determine that the negotiated prices are fair and reasonable. After the award, if the contractor reduces its prices to commercial customers, the government also may be entitled to similar reduced prices.

The panel will hold its first public meeting in Washington on May 5. The hearings will be open to the public.

Doan said she anticipated the first set of recommendations in a few months, which will be distributed to industry, Capitol Hill and GSA's federal government customers. The panel then willmake additional changes. Doan said she hoped the process would be completed by the early part of fiscal 2009.

MAS Advisory Panel Members:

Elliott Branch

MAS Advisory Panel Chairman, Defense Department

Debra Sonderman

Interior Department

Thomas Essig

Homeland Security Department

Glenn Perry

Education Department

Thomas Sharpe

Treasury Department

Lesa Scott

General Services Administration

Jacqueline Jones

General Services Administration

Judith Nelson

General Services Administration

Alan Chvotkin

Professional Services Council

Larry Allen

Coalition for Government Procurement

Donald Erickson

Security Industry Association

Jeffrey Johnson

International Facility Management Association

April Stephenson

Defense Department

Thedlus Thompson

General Services Administration

David Drabkin

General Services Administration

Debra Sonderman

Interior Department