XT-214: GSA Contracting: Recent Trends, Contractor Challenges and Best PracticesPresented by:

Bill Bressette, Baker Tilly/Beers + Cutler

Agenda

• Multiple Award Schedule (MAS) Contracting Overview

• Common Challenges Faced by GSA Schedule Contractors

• Recent Developments

• Government Audits

• Best Practices

• The Future of GSA Schedule Contracting

• Our Best Advice

• Questions

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MAS Contracting Background/History

• The General Services Administration (GSA) was established in the 1950s in response to increasing government procurement requirements.

• GSA negotiates long-term, indefinite delivery indefinite quantity (IDIQ) Multiple Award Schedule (MAS) contracts.

• Allows simplified acquisition of “commercial items:”

– Reduced procurement lead time

– Acts as a catalyst for federal spending

• Core objective: “to use commercial terms and conditions and the leverage of the Government’s volume buying to achieve the best possible prices and terms for both customers and taxpayers.”

– FSS Procurement Information Bulletin 04-2

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MAS Contracting Key Features

• Standing solicitations

• Evergreen contracting– Five year contract with three additional five year options

• Unique pricing disclosure requirements

• Sales reporting and the Industrial Funding Fee

• Economic Price Adjustments

• Trade Agreements Act

• Small business subcontracting requirements

• Price Reductions Clause (PRC)

• Blanket Purchase Agreements (BPA)

• Government audit rights

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GSA Schedules Today

• Currently 17,000+ contractors offer in excess of 11 million products and services across almost 40 GSA Schedules.

• In 2009 GSA reported schedule sales of over $37B.

• The expanding use of professional services under the Schedules has led to confusion regarding:

– Application of the Price Reductions Clause

– Identification of a Basis of Award customer (or group of customers)

– Determination of fair and reasonable prices

• Increased oversight in the wake of several high profile investigations:

– Office of Inspector General (OIG) audits

– Department of Justice (DOJ) referrals

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Common Challenges For GSA Schedule Contractors

• Disclosure of commercial pricing practices

• Negotiation of fair and reasonable prices

• Negotiation of the Basis of Award (BoA) customer

• Scope of contract and open market (non-schedule) items

• Compliance with the Price Reductions Clause (PRC)

• Pre and post-award audits

• Contractor assistance visits

• Industrial Funding Fee (IFF) compliance

• Compliance with Buy American Act and Trade Agreements Act

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Recent Developments - MAS Advisory Panel

• Established in March 2008 in accordance with the Federal Advisory Committee Act.

• Objective: To provide advice and recommendations to GSA on pricing and the price reduction provisions of the MAS program.

• Reported to the GSA Administrator.

• Consisted of 16 panelists from both government and industry.

• On June 26, 2009, the panel adopted its final report including 20 recommendations to increase competition and transparency in the program.

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Recent Developments - Advisory Panel Recommendations

• Key recommendations related to the PRC include:– Elimination of the PRC for services contracts and gradual elimination for

products contracts.

– Establish a requirement in place of the PRC that agencies obtain at least three vendor bids for purchases of products or services over $100,000.

– Elimination of the PRC for solutions procurements and a requirement that agencies obtain at least three vendor bids.

• Other recommendations include:– Issuance of guidance stating that the program’s price objective is to obtain fair

and reasonable prices at the time of contract formation by pursuing the lowest overall cost alternative to the government.

– GSA should review the length of Schedule contracts.

– Consider the addition of cost-type SINs for services.

– Implementation of a requirement that solutions procurements be firm-fixed-price and performance-based.

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Recent Developments - GSAM Rewrite Initiative

• GSA Acquisition Manual (GSAM)– Incorporates GSA Acquisition Regulation (GSAR)

– Incorporates internal GSA guidance/policy

• Purpose of the rewrite initiative– To maintain consistency with the Federal Acquisition Regulation (FAR)

– “To implement streamlined and innovative acquisition procedures…”

• Of particular interest to Schedule Contractors – GSAR Part 538, published in the Federal Register Vol. 74, No. 15, 1/26/2009– The addition of a CSP-2 for supplies/services without an established catalog

price

– Clarifications regarding Contractor Partnering Arrangements (CPA)

– Changes to additional contract clauses

• GSAR Part 538 rewrite is considered a long-term action, and a timetable for a final ruling has yet to be determined.

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Government Audits - Statistics

• In 2005, the Senate and GAO urged GSA to increase audits

• Stimulus package included approximately $220M for OIG

• GSA OIG semi-annual report to Congress (4/1/09 – 9/30/09):

– 98 audit reports issued

– 266 referrals for criminal prosecution, civil litigation & administrative action

– $466M in savings from audit findings, civil settlements and investigative recoveries

– 36 successful criminal prosecutions

– 122 contractors / individuals suspended and debarred

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Government Audits:GSA OIC Audit Objectives

• Majority are for contract option extensions

• Review the proposal submitted in response to a solicitation

• Assure the CSP-1 is current, accurate and complete– Full disclosure of commercial discounts and other favorable terms &

conditions

• Assess the sales reporting and billing systems

– Ensure GSA sales can be identified

– Validate Industrial Funding Fee

– Verify compliance with the price reduction provisions

• Employees are qualified for assigned labor positions

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Best Practices - Contract Compliance

• IFF Controls and Reporting– Ensure that sales to GSA eligible buyers are properly coded up front

• Required field in the order entry system to distinguish GSA from commercial sales

• Proper documentation coupled with periodic review and testing

• Price Reduction Clause Compliance– Test preventive and detective controls

• For many organizations, system controls are a must

• Review sales data for PRC triggering transactions

– Maintain robust policies and procedures• Establish policies/procedures for review of BOA sales

• Establish policies/procedures for periodic review of commercial sales practices

• Audit Program– Regularly review all areas for compliance

– Newly acquired business units may introduce risk

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Best Practices - Option Extensions

• Conduct a historical pricing review and update GSA pricing disclosures– Typically for the preceding 12 months of sales

– Update the commercial sales practice format (CSP-1)• Draft a descriptive pricing narrative to supplement the CSP-1

• Review/refresh Basis of Award strategy, if needed

• Conduct an internal pre-award audit– Review for PRC triggering sales

– Validate reported sales

– Labor category compliance

– TAA compliance

– Other contract compliance issues

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The Future of GSA Schedule Contracting

• Increased government funding for OIG will lead to more frequent and/or thorough pre-award audits.

• Increased emphasis on transparency, accountability and compliance in the federal procurement process.

• Potential policy and procedural changes resulting from GSAM rewrite and MAS Advisory Panel recommendations.

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Our Best Advice

• Understand current and historical pricing practices– Conduct historical pricing reviews

• Ensure that disclosures are current, accurate and complete– Review and update the CSP-1

• Establish a robust compliance program that encompasses all areas of risk and includes internal compliance reviews

• Ensure resources staffed to GSA Schedule projects meet labor category experience, education and technical requirements

• Know your contract terms and conditions– Create contract award briefs describing the discounting schedule and pricing

terms and conditions

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Baker Tilly

• Tony Fuller

Mr. Fuller leads Baker Tilly’s Government Contracts Consulting Group. Based in Washington, DC, he has worked with government contractors for over 16 years on a broad range of accounting, pricing, compliance, contract administration, audit and litigation related matters.

 

He has extensive experience providing government contract consulting services to contractors in many industries. His specific areas of focus include: pricing strategy and proposal preparation; contract negotiations; compliance assessments; policies and procedures development; audit support; disputes/claims; investigations; and expert testimony. He has a depth of knowledge in commercial item acquisition and GSA Schedule contracting, and he has authored many articles and speaks frequently on these topics.

Tel: (703) 923-8688, tony.fuller@bakertilly.com

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Baker Tilly

• Bill Bressette

Bill Bressette is a senior manager with more than 13 years of experience.  He focuses on assisting contractors with virtually all aspects of GSA Schedule contracting, including feasibility assessments, strategic pricing analysis, proposal preparation, contract administration, compliance and audit support.  Prior to joining Baker Tilly, Bill worked for a global consulting firm.

Bill's experience includes contract analysis and administration, rate development and analysis, development and management of contracts and compliance organizations, corporate policies and procedures, organizational risk management, cost estimating and proposal development.

Tel: (703) 923-8624, bill.bressette@bakertilly.com

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Questions?