Revisited: Impact of the Price Reduction Clause

Here in DC it has been cold and snowy—and parents across the region are wondering if school is going to last through July 4th given all the cancellations. It seems that everyone in DC has lost productive time due to our winter weather. The Coalition is no exception.

Our “Fundamentals of Ethics and Compliance” webinar presented by Tom Barletta, Partner at Steptoe & Johnson, originally scheduled for January 21st has been rescheduled for February 6th. This makes the week of February 3rd “Coalition Compliance Week” as on February 5th we are excited to host Brian Miller, GSA Inspector General, and Aleksandra Doran, Assistant General Counsel to the GSA Inspector General, as well as Jonathan Aronie, Partner at Sheppard Mullin for a Myth-Busters Forum on “MAS Contract Compliance and the 5th Anniversary of the Mandatory Disclosure Rule.” For more information on these two important contract compliance events please click here.

Touching on the compliance theme, this week’s blog focuses on the impact that the Price Reduction Clause is having on GSA’s acquisition strategies for its Federal Strategic Sourcing Initiatives (FSSI). As many of you know, last Fall GSA issued a draft Statement of Work (SOW) for the establishment of Multi-Agency Multiple Award Indefinite-Delivery Indefinite Quantity (IDIQ) contracts for Office Supplies Strategic Sourcing (OS3). GSA’s previous office supply (OS1 and OS2) FSSI efforts utilized Blanket Purchase Agreements (BPAs) under the Multiple Award Schedule (MAS) program as the contracting platform. In a change of direction, the draft OS3 SOW made clear GSA’s intent to create a new contract vehicle, apart from the MAS program for office supplies. The proposed new contract vehicle will essentially duplicate the MAS program.

GSA’s MAS program was designed to be a cost effective platform that could be used across a broad spectrum of commercial services and products. If the program no longer achieves that objective, now is the time to fix the schedule rather than creating a duplicative contract that in the long term will raise costs for both contractors and customers and reduce access to the Federal market for both large and small businesses.

We have a situation where MAS contractors and customer agencies apparently agree that the PRC may play a counter-productive role in the program by driving costs and prices up. The Coalition provided GSA with insight into the costs associated with the PRC via our 2012 response to GSA’s Paperwork Reduction Act public notice seeking comment on the burdens associated with the clause. GSA’s response to our comments can be found here. The Coalition’s White Paper on MAS Pricing provides positive framework for reform. Central to the Paper are recommendations to eliminate or change application of the PRC. We look forward to a robust dialogue on reforming the pricing policies.

More immediately, GSA still has the opportunity to conduct a streamlined competition for FSSI office supply BPAs under the MAS program that will reduce transactional costs for all. I know, I know–but what about the potential for the PRC driving up costs under the resulting BPAs? GSA has options!

Last year, in order to enhance competition, GSA waived application of the PRC for the Air Force’s commercial furniture strategic sourcing procurement! If GSA can waive application of the PRC for a customer agency’s procurement why can’t it waive the clause for its own acquisition? Moreover, as authorized in the General Services Acquisition Regulation (GSAR), GSA can issue a class deviation from the PRC under the office supply schedule. As such, these two options would allow customer agencies, GSA and its MAS contractors to save time and money through a streamlined BPA competition under the MAS program. Under the circumstances, GSA’s decision to duplicate the MAS program with a new contract vehicle rather than address the underlying PRC is troubling.

Roger Waldron

President