Restoring integrity to GSA schedules

Buylines | Policies, strategies and trends to watch

The three whistle-blower cases the Justice
Department joined against Accenture Ltd.,
Sun Microsystems Inc. and Hewlett-
Packard Co. represent the biggest challenge
to manufacturers of commercial products
in this decade. The cases have ensnared dozens of technology
manufacturers and prime contractors.

The General Services Administration's
allegations
against Sun should sober any
product company that holds a
schedule contract. Sun's decision
to terminate its contract
because of auditor demands to
see commercial sales data illustrates
the challenge companies
face when providing the
required commercial sales
practice disclosures to GSA in
seeking an award or update of
a schedule contract.

A similar failure to disclose
forced Oracle Corp., the buyer
of PeopleSoft, to pay a record $98.5
million settlement to the government
for PeopleSoft's alleged overcharges
on sales of $204 million. Those kinds
of damages are simply unacceptable
to any company, and companies must
understand that they will be required
to defend their disclosures with sales
data to withstand a GSA inspector
general audit, whether it is pre-award
or post-award.

Most of the news reports related to
the Sun case have focused on the
sparring among the leaders of GSA,
GSA's IG and the oversight committees
on Capitol Hill. What the news
doesn't tell us is what companies
should be doing to avoid trouble with
the GSA schedule contracts ? especially
for products. We also are not
hearing why anyone should want to
hold a GSA schedule contract or why
an agency would want to order from
it.

In the past, GSA has called the
schedules its crown jewels, and we
must ensure that manufacturers and
government understand why that
remains true. It's the only vehicle in
the government that can accommodate
technology products with their
many forms of licensing and other
terms. And it is the only vehicle that
offers easy ordering requirements
with built-in reasonable prices that
allow competition to occur at the
brand level, thus avoiding limited
source justifications without having
to go through a request-forquotation
or request-for-proposal
process.

GSA should openly embrace the
unique authority granted to it by
Congress through the schedules program.
When this authority is exercised
and audited to maintain program
integrity, business transactions
can be done much more easily than
any other method in a manner that is
true to the Federal Acquisition
Regulation requirements for
competition.

GSA must rebuild integrity in a
program that only it has the authority
to run ? a program that must not be
confused with indefinite-delivery,
indefinite-quantity contracts.
Without such a rebuilding, contractors
? especially commercial product
manufacturers ? who continue to
maintain a schedule face a significant
monitoring and disclosing burden
combined with off-the-charts legal
risks but with none of the promised
benefits of streamlined ordering.

When the rules are followed, products
purchased via a GSA schedule
will be commercial items in the truest
sense of the term, pricing will be considered
competitive, and price reasonableness
will be determined so
that additional competitive procedures
and questions about whether
certified cost or pricing data is needed
at the delivery order stage are
averted. Section 1.2.2.6 of the
Defense Contract and Pricing
Reference Guide states that the
Federal Supply Schedule contracting
officer already has determined that
the prices are fair and reasonable.
Moreover, it states that the schedules
are designed to be a ready source of
market information, even when they
are not used to make a purchase.

The schedules program must be
strengthened so that the Defense
Federal Acquisition Regulation
Supplement and similar guidance can
continue to apply to the use of schedule
contracts ? at least for truly commercial
products.

Steve Charles is co-founder of
immixGroup Inc., a consulting firm. E-mail
him at steve_charles@immixgroup.com.

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