GSA finalizes major update to acquisition policy

Nearly a decade after a panel of experts recommended major changes to the way the government buys services, the General Services Administration is going through with two significant updates.

GSA released the final data transaction reporting rule June 23 creating a requirement for government contractors to submit information about transactions through the schedule contracts and those governmentwide acquisition contracts run by the agency.

The agency says transactional data refers to the information generated when the government purchases goods or services from a vendor. It includes specific details such as descriptions, part numbers, quantities and prices paid for the items purchased.

In that final rule, which has been in the works for more than a year and has been drawn the ire of many vendors, GSA says “vendors will no longer be subject to the existing requirements for Commercial Sales Practices (CSP) disclosures and Price Reductions clause (PRC) basis of award monitoring, resulting in a substantial burden reduction.”

The Commercial Sales Practices regulation requires contractors to disclose to GSA details of any discounts vendors offer to commercial customers for similar products and services. The Price Reduction Clause requires contractors to monitor their pricing over the life of the contract and provide the government with the same price reductions that they give to commercial customers.

The PRC has been at the center of most of government contracting-based False Claims Act whistleblower cases and settlements over the past decade. For much of the past decade, vendors have called on GSA to change the PRC because it doesn’t match up with how agencies buy or how contractors sell anymore.

“Accordingly, the rule provides for a measured and managed phase-out of disclosures and tracking currently required by the Commercial Sales Practices (CSP) format and the Price Reductions clause (PRC), and the associated practice of negotiating pricing based on a model where the government strives to secure the vendor’s most favored pricing and maintain this position for the life of the contract,” the final rule stated. “Instead, GSA is adopting a more dynamic market driven pricing model, where vendors submit prices paid by government customers through a new Transactional Data Reporting clause and the government uses this data, along with other pricing information, to ensure a vendor’s offered price is competitive relative to other vendors selling the same or similar items or services.”

GSA listened to industry

Roger Waldron, the president of the Coalition for Government Procurement and a former member of the Acquisition Advisory Panel, said the removal of the CSP requirement is a huge change for vendors.

“Changing or eliminating the CSP disclosure requirement is a good example where GSA listened to feedback they got from public about that aspect of the proposed rule,” Waldron said. “In the proposed rule, GSA maintained the CSP and stated that they could ask for updates at any time for CSP, which essentially made that akin to potential liability under PRC and could’ve even expanded the compliance burden. So that’s why this is a positive change.”

Waldron, like many associations, still was digesting the 185-page final rule. The Coalition was one of more than two dozen commenters on the proposed rule.

GSA said it took “extensive steps” in considering feedback on the March 2015 proposed rule.

A GSA spokesperson said GSA held the first public meeting on an agency acquisition regulation in 20 years in spring 2015, and heard from nearly 200 companies, organizations, government agencies and interest groups GSA also received 26 comment letters in response to the proposed rule and held two rounds of public comment before issuing the final rule.

GSA made several changes since it released the proposed rule beyond the CSP and PRC.

One of those changes is giving vendors more time — 30 days instead of 15 days — to report the previous month’s transactions.

GSA also said it relooked at how it calculated the burden of the proposed rule and refined its methodology. The agency said with the changes to the PRC and CSP, contractors should see a net reduction of burden of $29 million. But contractors on GWACs could see an increased burden of $3 million.

Trey Hodgkins, the senior vice president for the IT Alliance for Public Sector, said looking at GSA’s revised burden estimates still leaves too many questions.

“GSA is making presumptions about how easy it is to collect the data. I’m not sure our member companies agree with that,” he said. “It shifts burden, but I’m not sure if lessens the burden.”

But GSA’s spokesperson said the agency believes some of the higher industry burden projections are unrealistic.

“They do not account for lower-sales contractors and efficiencies achieved through automation,” the spokesperson said. “In contrast, GSA’s projections acknowledge vendors with higher contract revenue will be more likely to adopt automated reporting systems, which will require large upfront investments. In return, automation will allow those vendors to minimize the recurring monthly reporting burden. Some vendors with a moderate amount of sales may not make large upfront investments in automation, and will instead opt to absorb a higher recurring monthly reporting burden. Vendors with low/no sales will not make upfront investments in automation because their reporting burden will be low regardless.”

GSA also said the higher burden estimates still pale in comparison to the current burdens imposed by the PRC and CSP disclosure requirements, which industry frequently acknowledges as burdensome.

Alan Chvotkin, the senior vice president and counsel for the Professional Services Council, said while his members are glad to see the change in the CSP, there is plenty in the rule that worries him.

“While there is a phase out of the PRC and change in the CSP, they still exist and the agency’s inspector general in their last report still raises concerns that this rule gives away too much. I think we still have a disagreement about the continued value of PRC and how much is changing,” Chvotkin said. “Our concern is that the PRC is only for the schedules program and this will apply beyond the schedules, and the PRC will still matter during its phase out for some time. I’m worried about the effectiveness of this policy.”

Larry Allen, the president of Allen Federal Business Partners and an expert on schedule contracts, said while GSA’s intent is good to remove the CSP, it’s unclear as to whether it’s a permanent change.

“GSA still leaves the door open, however, to collect commercial pricing information from contractors if price reasonableness cannot be determined by preferred methods such as similar pricing on schedule, transactional database prices, market research, or commercial data sources,” he said. “My concern is that a generation of contracting officers used to getting CSP data will run right to what is intended to be the method of last resort and make it the method they use because it is what they are used to seeing and less burdensome on them because they don’t have to do data collection and pricing analysis from other sources. My hope is that GSA trains contracting officers not to do this, but only time will tell.”

Rule implemented in a series of pilots

In fact, several industry experts said the final rule is murky in some major areas, including the PRC, how GSA will ensure contracting officers use the data to make good decisions and why the government needs to collect this data in the first place.

Hodgkins said the burden of the data collection and setting up systems remains on the vendors.

“This is data the government already possess or should easily be able to capture, and they should not make the contractor incur the extra burden,” Hodgkins said. “I don’t agree with the fact that they are asking for the data in the first place. This is really a technical issue. They have the systems and are aware of the information, but the systems are not configured to capture the data. We do not object to the end use of the data as it makes sense to try and find best value for taxpayer. But these are technical changes they could make.”

Allen added that he’s also concerned that the database that is supposed to collect all this transactions data will be unworkable in terms of drawing accurate comparisons.

“Industry has tried to make clear that pricing decisions are made by an almost infinite number of variables. I think there’s a tendency to look at Schedule transactions as if they all took place in a Home Depot environment where actual products are picked off the shelf at identified prices,” he said. “For the vast majority of schedule transactions, though, a more accurate comparison would be the Dow Jones Industrial Average where prices go up and down both during the day, the week, month, and year depending on many factors. As such, I am not sure that the information on the database will become a major factor in helping agencies get lower prices. In fact, I think it could have the opposite effect. Now industry knows that each and every deep discount will become viewable on a database accessible by all federal agencies. As a result, I expect contractors to be more careful about when they offer discounts and how deep those discounts are. Spot pricing, which has been allowed on the Schedules program for 25 years, has worked well in that ‘spot’ prices are just that — good discounts available to a specific customer. Expect to see far fewer deep discounts on Schedule if ‘spot’ no longer means ‘spot,’ but rather a price to which every customer is entitled.”

GSA plans on implementing the rule over the next year in a series of pilots beginning in August. The spokesperson said the final rule will be phased in over a three-year period.

“GSA has established clear policy, effective training, and user-friendly tools to ensure successful implementation. In addition, GSA will conduct change management and knowledge-sharing activities with category managers, GSA COs, and federal buyers to fully harness the power of the transactional data collected through the pilot,” the spokesperson said. “Training will be provided via live webinars. Webinar recordings will be available for on-demand viewing from the Vendor Support Center website. Initially, any new offer on the pilot Schedules will be required to agree to the TDR requirement. GSA will invite existing contractors to accept the TDR requirement, which removes the CSP and PRC requirements. GSA may require existing contractors to accept the TDR requirement over time.”

GSA also already has developed and tested a new reporting interface to accept contractor data.

Chvotkin said while the final rule is much better than the proposed rule, PSC is interested in learning more from GSA about implementation.

“I would’ve preferred they issue this as rule only covering the pilot activities and really test it out,” he said. “We are not pleased that professional services are a part of the pilot. It’s harder to do this transaction reporting around services, which is just what we argued during acquisition panel. It would be easier to phase in the changes on commodities.”

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