COMMENTARY

Why industry should welcome GSA's new pricing policy

An intended move by the General Services Administration could shift the focus in federal procurement from contract-level pricing to order-level competition – a change that could increase efficiency and reduce the time it takes to get products on contract.

On Aug. 19, GSA issued an Advanced Notice of Proposed Rulemaking for Section 876 of the 2019 National Defense Authorization Act (Pub. L. 115-232), which allows GSA to implement “unpriced schedules.” The agency followed this on Oct. 20 with the first of five industry “listening sessions” to educate itself on how to best implement its new statutory authority. 

As it stands now, before awarding a GSA Schedule contract, GSA contracting officers determine that the prices of supplies, fixed-price services and rates for services offered at hourly rates are fair and reasonable. COs consider multiple factors in making this determination, with negotiation ensuing once offerors submit various data, information and documentation in support of their proposed pricing.

Many in industry have long questioned whether it is reasonable to expect contractors to provide their best prices and discounts for a quantity of one to be published in a public forum, with no purchase commitment or defined opportunity. In this respect, contract-level pricing is often like the rate on the back of a hotel room door – the price no one ever pays.

Of course, the Federal Property and Administrative Services Act of 1949, which established the GSA, seems to require GSA to obtain the “lowest available cost alternative” at both the contract and order level. Thus, a change to GSA’s statutory authority might have been needed for unpriced schedules to be permitted.

Enter Section 876. Under this authority, a CO need not consider price as an evaluation factor – and the price to the government shall be considered in conjunction with the issuance of a task or delivery order resulting from the solicitation – under these circumstances:

  1. An agency issues a solicitation for one or more contracts to be acquired on an hourly rate basis
  2. The agency intends to make a contract award to each qualifying offeror
  3. The contracts will feature individually competed task or delivery orders

Thus, an unpriced schedule is just like it sounds. It is a contract where price is not considered as an evaluation factor in the award and, therefore, no prices are negotiated or published at the contract level. Instead, the award is made based on contractor qualifications and pricing is negotiated at the time of order.

Although Section 876 seems to currently authorize only “contracts for services to be acquired on an hourly rate basis,” it was clear on the first listening session that GSA has already started thinking about its application to products and “solutions” (i.e., products together with services) as well. 

A move to unpriced schedules would significantly enhance GSA’s ability to deliver on its mission. GSA’s value lies in ensuring the following:

  1. Pre-screened contractors financially and otherwise capable of performing
  2. An up-to-date catalog of products
  3. Pre-negotiated terms and conditions
  4. A framework for order-level competition

As mentioned at the outset here, shifting the focus from contract-level pricing to order-level competition would both increase efficiency and greatly reduce the time it takes to get products on contract.

By eliminating the time spent analyzing and negotiating contract-level pricing, GSA would speed up the capability to get the latest technology on contract – technology such as critical, in-demand cybersecurity solutions needed by its government customers. It would also allow GSA to keep its catalogs current and accurate and free up contracting officers from analyzing and negotiating pricing for millions of items.

Driving price to the order level also would eliminate inconsistency. COs often differ in their opinions on what constitutes fair and reasonable pricing for the same items. It is not unheard of for a contracting officer to request lower pricing for Schedule A than the same item already on Schedule B.

Order-level competition drives prices down and keeps those prices low. This was GSA’s realization and justification for the Transactional Data Reporting Rule back in 2016. The realization was that order-level competition, not artificial mechanisms like the Price Reduction Clause or Commercial Sales Practice Disclosures, result in competitive (low) prices. After all, the task or delivery order is where the actual requirements are defined and the spending takes place.

Indeed, GWACs like NASA’s SEWP already drive competition to the order level. While they still price products at the contract level, they do so quickly and efficiently by allowing commercial MSRP, with some exceptions. Likewise, with the schedules program, items do not necessarily need to be "unpriced," rather, they could be added at MSRP.

In short, consistent with its new statutory authority, and after continuing to follow the formal rule-making process, GSA should soon be able to place items on contract quickly and drive competition and negotiation to the order level where it belongs. And that could be a blessing for vendors, agencies and COs alike.

About the Author

Jeff Ellinport is division counsel at immixGroup, an Arrow Electronics company. He can be reached at jeff_ellinport@immixgroup.com.

Reader Comments

Wed, Nov 25, 2020 Brent Lillard Charlottesville, VA

This is a great change to eliminate the arbitrary pricing competitions that result in honest bidders being left out in the cold on large LPTA multi-year contracts. I made a cartoon explaining the whole situation and it directly applies to this article. Price should only be considered at the task order level where it actually counts. https://youtu.be/WkMMvTnYxfM

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