The Key PRC Issue: Do the benefits outweigh the costs?

This column was originally published on Roger Waldron’s blog at The Coalition for Government Procurement and was republished here with permission from the author.

At this year’s Fall Training Conference, Coalition for Government Procurement members had the unique opportunity to hear from Administrator Emily Murphy about the General Services Administration’s 70th anniversary and how the agency is working to modernize its contracting programs, like the GSA Schedules.

Much progress is being made through GSA’s Schedules Consolidation, Contract Writing System, and Catalog Management initiatives. Over the years, the Coalition has been steadfast in its support of new ideas and initiatives that enhance the efficiency and effectiveness of the Schedules program. To the list of GSA’s modernization efforts in 2020, we would like to recommend that GSA enhance the ease of doing business with federal agencies through the Schedules program by minimizing the burdens associated with Federal Supply Schedule pricing disclosures and maximizing best value via the competitive market.

As FAR & Beyond blog readers well know, the Coalition has made the case that the Price Reductions Clause (PRC) is unnecessary, costly, and outdated in today’s competitive market. In fact, GSA recognized, in 2015, that the PRC was only effective in reducing Schedules pricing three percent of the time, and competition in the market drives lower prices for Government customers.  

In SeptemberGSA changed the regulatory classification of the PRC. As required by the Paperwork Reduction Act, Federal agencieslike GSA, need approval from the Office of Management and Budget to impose a paperwork burden and collect information from the public. After that, agencies must renew their approval with OMB every three years and submit an analysis of the cost and burden to collect that information from the public. Generally, OMB’s review looks to minimize the burden on the public and ensure that the information collected by the agencies provides utility to the government. 

GSA and OMB have followed this process since the 1980s for the Price Reductions Clause and the Commercial Sales Practice (CSP), and the CSP’s predecessor, the DSMD. Over the past decade, however, GSA’s requests to renew the PRC and CSP have prompted questions about the accuracy of the government’s estimates of the time and cost burdens on industryFor example, in 2011, GSA estimated that the burden of the PRC for the entire Schedules program was 13,500 hours annually and determined that the PRC had a minimal impact on contractors. To provide some context, the Coalition estimates that the burden of the PRC is between 9 million and 12 million hours per year and costs industry over half a billion dollars annually 

In response to industry’s feedback on the burdens of the PRC, GSA increased their time burden estimate by more than 7,700 percent since 2011. Although differences between GSA’s and industry’s estimates remain, GSA has further revised its burden estimate for the PRC and CSP to $128 million annually earlier this year. This revised estimate marks the first time that GSA’s estimate exceeded $100 million per year. 

This $100 million threshold is significant because, from a regulatory standpoint, it makes the PRC and CSP estimates “significant,” “economically significant,” and “major” regulations under a set of Executive Orders that govern agency regulatory actions, separate from the Paperwork Reduction Act. 1.

So, what does this mean for GSA? Under Executive Order 12866, GSA must calculate the costs and benefits of FSS pricing disclosures, which include the PRC and CSP. Previously, under the Paperwork Reduction Act, GSA only needed to analyze the costs of the PRC and CSP, not their benefits. Although Coalition members do not anticipate that an analysis of the PRC and CSP will demonstrate that their benefits exceed their costs, the only way to know is through their assessment. Therefore, we recommend that GSA explore alternatives, like unpriced services SINs for hourly rate services, to modernize the Schedules pricing policies in alignment with other federal contracts.

While GSA’s initiatives, like Schedules Consolidation, updated e-Tools, and a new Contract Writing System, will greatly advance the Schedules, the program will not be fully modernized until its pricing policies are reformed. GSA has a great opportunity in 2020 to streamline its program, reduce burdens on industry, and bring consistency to its contracting process. Now more than ever, GSA needs to eliminate the PRC from its Schedules contracts and fundamentally reform the CSP. The Coalition stands ready to support GSA in its efforts, and we look forward to continuing the dialogue.

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