Buy Lines: What's your basis of award?

Steve Charles

The most recent example was this summer. GSA insisted, under threat of termination, on major price reductions for Sun Microsystems Inc. products across multiple schedule contracts. But other audits are quietly working through the discovery and settlement process, which involves an analysis of every order and price a company charged for goods and services to federal and nonfederal customers.

Some common questions I hear are:

  • How can the government demand this information when my company sells commercial items?

  • Didn't procurement reform eliminate the need to provide cost or pricing data to the government?

  • Why can GSA's inspector general demand to see pricing data before renewal of an option period, and then use that information to demand lower prices?

  • Why can the government claim I overcharged them for the past five years, if the pricing in my new five-year schedule contract is more favorable?

The answers lie in the fact that multiple-award schedule contracts are awarded without competition. The "competition" component is the offerer's track record in the U.S. market combined with the GSA contracting officer's authority to seek most favored customer pricing.

The contractor then promises that the pricing will remain competitive relative to certain nonfederal customers or categories of customers as designated in the contract award documents.

GSA's inspector general has the authority to ensure that pricing structure is maintained throughout the life of the contract.

If irregularities are discovered, auditors will look back to previous contract periods. Because few companies keep records designed to maintain pricing relationships among types of customers, auditors often -- as much as 84 percent of the time -- find overcharges to the government. GSA then threatens termination until the alleged overcharges are paid.

On July 26, the GSA inspector general, along with a representative from Veterans Affairs Department, asked a Senate Homeland Security subcommittee on federal financial management, government information and international security for greater authority to conduct post-award audits. VA said that its post-award audit authority, with the threat of criminal charges and treble damages, has saved the government millions of dollars.

Industry has been voicing its opposition to an advance notice of proposed rulemaking that wants to bring back full post-award authority for GSA multiple-award schedule contracts. This authority lets auditors see pre-award sales data any time up to three years after the final payment has been made under a five-year option period.

Industry has argued that GSA does not have the authority to apply these kinds of cost or pricing data requirements on commercial items. The GSA inspector general argues that they have found that commercial contracts have similar most favored pricing clauses and that the deterrent of post-award audits is needed to remind industry how the contract works.

Companies should take seriously the data system requirements of holding a schedule regardless of how the proposed rule fares in coming months. Such a system of records is required to comply with the contract's price reductions clause and the examination of records clause as they stand today.

I recently showed a marketing person a pre-award audit data request letter from the GSA inspector general. The marketing person said, "I wish we had this kind of data."

Don't let a GSA auditor hear you say that.

Steve Charles is cofounder of immixGroup, a government business-consulting company in McLean, Va. Steve welcomes your comments at steve_charles@immixgroup.com.

About the Author

For the past two decades Mr. Charles has helped hundreds of technology manufacturers succeed in the government marketplace. His breadth and depth of expertise on every dimension of the government technology ecosystem provide technology manufacturers with a strategy and clear focus for the greatest success. Mr. Charles is adept at mapping technology product lifecycles and revenue models with appropriate channel and contract vehicle strategies in light of current procurement law, regulations and policy. He receives glowing reviews from the training workshops he facilitates to help sales teams understand the sales tactics needed to address each step in the government acquisition process. Mr. Charles is actively involved in government-industry associations including TechAmerica, ACT-IAC, Coalition for Government Procurement, and the National Contract Management Association. He meets regularly with leaders in government and industry to increase understanding and positive action. Mr. Charles co-authored The Inside Guide to the Federal IT Market, a how-to book for technology companies selling to the government. He is regular contributor to Washington Technology.

Reader Comments

Please post your comments here. Comments are moderated, so they may not appear immediately after submitting. We will not post comments that we consider abusive or off-topic.

Please type the letters/numbers you see above

What is your e-mail address?

My e-mail address is:

Do you have a password?

Forgot your password? Click here
close
SEARCH
 Top 100 Slideshow
contracts DB

Trending

  • Dive into our Contract Award database

    In an exclusive for WT Insider members, we are collecting all of the contract awards we cover into a database that you can sort by contractor, agency, value and other parameters. You can also download it into a spreadsheet. Read More

  • Is SBA MIA on contractor fraud? Nick Wakeman

    Editor Nick Wakeman explores the puzzle of why SBA has been so silent on the latest contractor fraud scandal when it has been so quick to act in other cases. Read More

Webcasts