“High Risk” Areas In GSA Schedule Contracting – Checklist for Compliance

William A. Shook, Esq.G. Matthew Koehl, Esq.

November 12, 2008

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Presentation Outline Overview of GSA Multiple Award Schedule (MAS) Contract Program

High Risk Areas

1. Commercial Sales Practices (CSP) Disclosures

2. Price Reductions Clause

3. Trade Agreements Act

4. Unapproved Item Sales

5. Employee Qualifications

6. Industrial Funding Fee Tracking and Payment

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GSA MAS Contracts - Background

GSA MAS program has grown substantially since mid-90s:

Federal acquisition reform

MAS program grows to $35.8 billion in FY ’07 sales

> 18,000 GSA MAS contracts

Program under scrutiny in recent years

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GSA MAS Contracts – Background

GSA is the lead procurement agency

GSA establishes long-term “schedule” contracts with pre-negotiated prices and terms and conditions

Contracts open Government-wide (and beyond)

GSA MAS contracts are often preferred contracting vehicle

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GSA MAS Contracts – Background

Streamlined ordering process for Federal customers

GSA Schedule ordering agencies are not required to:

Seek further competition

Synopsize the requirement

Make a separate determination of fair and reasonable pricing

Consider Small Business programs

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GSA MAS Contracts – Background Below $3,000 micro-purchase threshold: place order with any GSA MAS

contractor or any other vendor

Above micro-purchase threshold: place order with the GSA MAS contractor that represents the “best value”

Consider reasonably available information on GSA Advantage! Review catalogs or pricelists of at least three schedule holders FAR 8.405-1

Additional ordering procedures for service Task Orders requiring a Statement of Work (SOW). FAR 8.405-2

No limit on size of GSA MAS orders

VERY FAST and EASY for agency buyers, even for large requirements

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GSA MAS Contracts - Background

Agencies simply issue individual Task Order (TO) or Delivery Order (DO) to the GSA MAS contractor

DO/TO must reference contractor’s GSA Contract Number

No separate negotiations of terms and conditions

OK to include additional terms in best interest of Government, so long as no conflict with GSA terms and conditions

Spot price reductions very common, even expected

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1. Commercial Sales Practices (CSP) Disclosures

The Requirement

Mandatory contractor pricing and sales/discount disclosures by customer/customer type

CSP-1 Format

Initial contract award

Each 5-year contract extension

“Current, accurate and complete” certification

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1. Commercial Sales Practices (CSP) Disclosures

Problem Areas

Incomplete research of sales practices and sales transaction data

Failure to archive research of sales practices and sales transaction data

Use of generic customer types vs. actual customer

categories employed to process orders

Undisclosed non-standard discounts

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1. Commercial Sales Practices (CSP) Disclosures

Steps to Avoid Problems

Review of internal pricing policies and procedures

Review of contracts and raw sales data

Involvement of sales and bid desk executives Archive for pre-award “due diligence” efforts

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1. Commercial Sales Practices (CSP) Disclosures Steps to Avoid Problems (cont’d)

Documented practices for standard and non-standard discounts

Conforming CSP customer designations

State that non-standard discounts are excluded from application of the Price Reductions Clause

Certify to “current” and “accurate” but not “complete”

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2. Price Reductions Clause The Requirement

Basis of award (BOA) customers or customer categories

Benchmarking commercial list price and federal customers Trigger requirement for discounts to BOA customers and

reductions to applicable commercial list pricing

Model contract clause

CSPs and Final Proposal Revision (“FPR”) letter

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2. Price Reductions Clause Problem Areas

Failure to monitor sales transactions with BOA customers

Use of generic customer category descriptions Reliance on outdated or inaccurate GSA pricelists

Untrained Sales and Bid Desk staff

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2. Price Reductions Clause

Steps to Avoid Problems

Review proposal and award documents for correct tracking customers and discounts

Negotiate realistic tracking customers

Clarify definitions of tracking customers

Alternative Price Reduction Clause compliance mechanisms (e.g., average discounts)

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2. Price Reductions Clause

Steps to Avoid Problems (cont’d)

Exclusions to PRC application (e.g., spot discounts)

Price and discount monitoring procedures for triggering events

Internal pricing policies and controls

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3. Trade Agreements Act (TAA)

The Requirement

Absolute prohibition on goods and services from non-designated countries

TAA designated country list and FAR TAA Certificate “Substantial Transformation” test

TAA applicability at contract/order level?

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3. Trade Agreements Act (TAA) Problem Areas

Place of manufacture of commercial items

Change of country of origin Multiple countries of origin for same item High risk product categories

Internal company systems lack historical information

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3. Trade Agreements Act (TAA)

Steps to Avoid Problems

Procedures that monitor and update country of origin status

Archive for historical country of origin information

Manufacturer certification and indemnification

Annual reviews

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4. Unapproved Item Sales

The Requirement

Statutory status of MAS program allows simplified ordering procedures

Standard competition requirements apply for non-MAS items and services purchased with MAS items

Contractor notice requirements for non-MAS items and services

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4. Unapproved Item Sales

Problem Areas

Sales staff unaware of current MAS-approved items

No procedures to distinguish approved vs. unapproved items

Reliance by sales staff on outdated MAS pricelists

Infrequent modification submissions

Delayed GSA approval of modifications

“Mixed” quotes and proposals

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4. Unapproved Item Sales

Steps to Avoid Problems

Internal procedures for identification of currently approved

MAS items

Regular MAS contract modifications

Procedures to identify unapproved items in quotes

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4. Unapproved Item Sales

Steps To Avoid Problems (cont’d)

Creation of automated order entry system for approved and unapproved items

Reject MAS orders that fail to identify open market items Website identification of approved and unapproved items

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5. Employee Qualifications – Professional Services

The Requirement

MAS contracts with hourly and daily service offerings

GSA-approved labor categories identify employee requirements for education, experience, etc.

Employees billed must meet labor category requirements

Compliance is regularly examined

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5. Employee Qualifications – Professional Services

Problem Areas

Failure to establish procedures to supply qualified personnel

Use of labor categories and definitions from other sources

Use of outdated and incomplete resumes

Failure to archive resumes

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5. Employee Qualifications – Professional Services

Steps to Avoid Problems

Internal procedures to verify personnel experience and labor categories

Procedures to collect, verify, update and archive employee

resumes

Regular examination and modification of labor categories

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6. Industrial Funding Fee (IFF) The Requirement

0.75% contract usage fee charged to MAS ordering agencies

IFF funds operation of MAS program

MAS contractors collect IFF from ordering entities and remit to GSA on a quarterly basis

MAS items subject to IFF; no IFF on “open market” items + travel

Regularly audited

Contractor burden to prove MAS item orders not subject to IFF

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Problem Areas

Use of commercial order entry system to identify MAS orders

Inaccurate data entry by sales and sales operations staff

3rd-party sales reports from MAS dealers and lease financing companies

Contractor Teaming Arrangements (CTAs)

MAS CTA vs. traditional Prime/Sub relationship

CTA member confusion over report and pay IFF

6. Industrial Funding Fee (IFF)

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6. Industrial Funding Fee (IFF)

Problem Areas (cont’d)

Blanket Purchase Agreements (BPAs)

“Stale” lists of agreements subject to IFF

Credit card purchases of MAS items

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6. Industrial Funding (IFF)

Steps to Avoid Problems

Systematic update of new agreements subject to IFF

Procedure for booking MAS orders with correct identifier

Procedure to obtain and verify 3rd-party MAS contract sales reports

Consistent CTA payment rules and procedures to capture CTA and BPA sales

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6. Industrial Funding Fee (IFF)

Steps To Avoid Problems (cont’d)

Procedure to capture MAS credit card orders

Quarterly review of raw sales data

Procedure to document contractual basis for non-MAS purchase of MAS items

Procedure to preserve and archive IFF calculation efforts

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QUESTIONS?