MAS pricing puzzles

Last week, this blog highlighted key questions surrounding MAS FSS price analysis and GSA’s defaulting to a Low Price Regardless of Context (LPRC) scheme. This week, we continue the discussion with observations regarding puzzling aspects of the MAS FSS price analysis. Among the “puzzlers” shaping MAS FSS price analysis are the laser focus on low prices absent a review of the terms, conditions and other ecosystem drivers of those prices (e.g. country of origin); the lack of transparency around operational policy guidance; the repetitive, ongoing renegotiation of contract pricing; and the inconsistency in the application of rules governing pricing analysis. Here are just some of the puzzlers:

• What about country of origin? Country of origin is a significant cost/price differentiator.  Yet there appears to be no operational practice or policy guidance addressing the consideration of country of origin when analyzing price. GSA’s pricing tools pull pool product pricing from commercial websites without regard to country of origin. As such, the pricing of products made in China, which are not eligible for purchase under the MAS program, is likely being compared to pricing for Trade Agreements Act (TAA) compliant products offered in response to the FSS solicitation. This result is unfair to offerors (especially small businesses), and it undermines our industrial base and that of our Allies who have signed onto the TAA.
• What about compliance overhead? MAS contractors must invest in compliance training, systems and management to meet contract requirements. It is fundamental to doing business in the federal market. TAA compliance is but one example of the compliance costs associated with MAS contracts. Contractors invest in systems and oversight to ensure they are providing the government customer with TAA compliant products and services. The increase of Federal Acquisition Regulation (FAR) clauses applicable to commercial item contracts has only served to increase compliance costs for MAS contractors. These compliance costs are well beyond what companies face in the private sector.
• What about transparency for operational guidance? Over the years, the Federal Acquisition Service (FAS) has issued internal operational policy guidance for use by contracting officers in the administration and management of MAS contracts. This guidance is not publicly available.  As we understand it, the guidance also generally addresses price analysis, pricing information and the negotiation of MAS contracts. Offerors are often told by MAS contracting officers that the internal operational policy guidance requires that they provide certain pricing for purposes of negotiating the contract. Yet, those offerors are not allowed to see the guidance. As the guidance directly impacts contractors, the lack of transparency is inconsistent with the “rule-making process.” To the extent the guidance requires offerors/contractors across the MAS program to collect, review and submit additional pricing information, the guidance should be subject to review by the public as a de facto paperwork burden. Moreover, sharing guidance publicly promotes accountability. Stakeholders across the federal market would be able to review the guidance, assessing the paperwork burden and whether the guidance is consistent with statute and regulation.
• Where is the consistency? Consistency in the interpretation and application of the rules and regulations governing the negotiation, administration and management of MAS contracts continues to be a long-standing challenge faced by offerors/contractors. Interpretations of the applicable acquisition rules and regulations vary across acquisition centers and contracting officers. Indeed, contracting officers in the same acquisition center can have 180-degree different interpretation of the regulations. This lack of consistency increases costs, undermining the incentive for contractors to participate in the government market and, consequently, inhibiting access to the commercial market for GSA and customer agencies.  Inconsistency translates into uncertainty. It is almost axiomatic: Uncertainty undermines the business environment for customer agencies and contractors. Consistency will enhance the efficiency and effectiveness of the MAS market.
• When is a MAS contract not a MAS contract? The current internal operational guidance, as we understand it, provides that MAS contracting officers cannot rely on previous price reasonableness determinations. As a result, the bargained exchange between an MAS contractor and GSA is largely illusory. For example, when MAS contractors submit modifications to add products or increase pricing due to inflation, often contracting officers require the re-negotiation of the entire contract, even for items that are not within the scope of the modification! Compounding this fundamental uncertainty is that when contracting officers seek to renegotiate, they often look to GSA databases containing aged, out of date pricing that is irrelevant to today’s market. Contracts are fundamental to conducting business, as they set the rules of the road for the business relationship. If a contractor cannot ever rely on the agreed terms of the contract, then the business environment supporting customer agency missions is undermined.

The goal of the MAS program is to provide an efficient, effective market for customer agencies and commercial firms to execute orders and BPAs that meet mission needs on behalf of the American people at fair and reasonable prices. The negotiation and award of MAS contracts is the fundamental first step in providing customer agencies with access to commercial products, services and solutions.  Fair and reasonable pricing grounded in the reality of the marketplace, not LPRC, however, is critical, especially if the government is to maintain an open, competitive and innovative MAS program that provides sound business opportunities for contractors that deliver best value solutions for customer agencies. In next week’s blog, we will expand on this point by focusing on positive suggestions to address LPRC and the puzzlers identified here.

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