Advisory panel recommends GSA ax price reduction clause

Group studying Federal Supply Schedules program says vendors should not be obligated to offer government lowest prices.

Vendors should not be required to offer federal agencies their lowest prices, according to recommendations from an advisory panel studying the General Services Administration's Federal Supply Schedules program.

The 16-member Multiple Award Schedules Advisory Panel completed its report on June 26 with 20 recommendations for the Obama administration on improving the schedules program. GSA officials refused to comment on the report until it is released some time during the next week.

The Federal Supply Schedules are the primary contracting vehicles that agencies use to purchase commercial products and services. Former GSA Administrator Lurita A. Doan created the MAS advisory panel in March 2008 in response to industry's criticism of the program's complex pricing policies. The panel has spent the past year debating the schedules' price reduction clause, which requires companies to give the government the same price as their best commercial customer.

Panel chairman Elliot Branch acknowledged in September that "in most cases, [the government] is not the most favored customer," when the group voted to recommend eliminating the price reduction clause for services. The panel's final list of recommendations goes a step further, encouraging GSA Administrator nominee Martha Johnson to eliminate the price reduction clause altogether.

"The reality is the [price reduction clause] is not a tool people use," said Alan Chvotkin, Professional Services Council executive vice president and counsel, who was a panel member. "They are holding on to an antiquated and not very useful tool for the schedules program as they exist today. In my view, the panel adopted a series of forward-looking recommendations that should increase the transparency of schedules pricing."

The report recommends using the approach outlined in Section 803 of the 2005 Defense Authorization Act, which requires agencies using indefinite quantity-indefinite delivery contracts to obtain at least three bids or document the steps they took to achieve maximum competition. The rule also stipulates that Defense agencies can use GSA's online eBuy program to obtain bids and satisfy the requirement.

"The panel is really saying the bulk of competition takes place at the task order level, not the contract level," said a panel member who asked not to be named. "The price reduction clause is exclusively a contract-level price maintenance mechanism that the panel felt had outlived its usefulness."

The group also advised that GSA be required to disclose how contracting officers determine prices to be fair and reasonable. An industry source expressed concern that this clause might lead to the disclosure of proprietary information that could jeopardize companies' business. The recommendations specify that the GSA administrator should develop a process to prevent such an event.

The panel also recommended that GSA consult with industry to ensure the schedules' offerings are current with customers' needs and to examine the length of a schedule contract to consider reducing the current 20-year maximum.

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