This week’s blog is the third in a series focusing on the puzzling approach to MAS FSS price analysis issues and the default to a Low Price Regardless of Context (LPRC) analytical scheme exercised by the General Services Administration. Last week, our discussion reviewed some puzzling aspects of the MAS FSS price analysis. Specifically, what Professor Steve Schooner has long called, “the tyranny of low price,” i.e., the obsession with low prices absent a review of the terms, conditions and other drivers of those prices; unclear operational policy guidance; repeated renegotiation of downward contract pricing; and inconsistent application of rules governing pricing analysis. This week, we drill down into GSA’s rules, tools and practices that highlight the puzzling nature of GSA’s approach to pricing analysis.

We begin with the solicitation instructions to offerors that outline the administrative, technical and pricing elements that are required when offerors submit proposals. Regarding price proposals, GSA continues to state its:

“pricing goal … is to obtain equal to or better than the offeror’s Most Favored Customer (MFC) pricing under the same or similar terms and conditions. GSA seeks to obtain the offeror’s best price based on its evaluation of discounts, terms, conditions and concessions offered to commercial customers. However, offers that propose Most Favored Customer pricing that is not highly competitive will not be determined fair and reasonable and will not be accepted. The U.S. Government Accountability Office has specifically recommended that the price analysis GSA does to establish the government’s MAS negotiation objective should start with the best discount given to any of the vendor’s customers (Emphasis added).”

We commented on this language almost a year-and-a-half ago. Among other things, we noted in part that the language:

“essentially inserts a new price analysis requirement that the negotiated prices must be ‘highly competitive’ to be fair and reasonable. To the best of our knowledge, there is no regulatory definition of ‘highly competitive,’ but in any case, pursuing this goal is especially challenging when MAS contracts only provide a $2,500 guaranteed minimum with the subsequent opportunity to compete for work at the task order level.”

The ”highly competitive” language is arbitrary.  It has no basis in statute or regulation. Moreover, to the best of our knowledge, there is no public rationale or guidance from the FAS operational policy justifying or explaining the use of this standard. A year and a half ago, we wrote that GSA should “revise and clarify this language” because it is confusing and contradictory, so much so that the MAS process has been criticized for lacking consistency among acquisition centers, “and even from contracting officer to contracting officer within an acquisition center.” In the time since the writing of that blog, GSA has not responded with a clarification or retraction of this language in price analysis. That the language remains in solicitation instructions perpetuates the confusion surrounding MAS price analysis and manifests GSA’s ongoing obsession with LPRC. Finally, as previously noted, the language is inconsistent with statute and regulation, further validating the need for transparency and accountability through the public release of all internal FAS operational policy guidance.

This LPRC obsession is driving odd behavior across the program and driving small business contractors away from GSA. This is best evidenced by recent anecdotes regarding GSA’s approach to price analysis. MAS contractors are reporting instances of Economic Price Adjustment (EPA) requests that are being rejected by FAS due to comparisons with their own current contract price for items that are the subject of the EPA request! Apparently, the rejections stem from the application of the GSA price analysis tool, the Price Point Plus Portal (4P) tool. The tool listing and utilizing the contractor’s existing contract price (i.e., the price for which the EPA was being sought) in their pricing comparison for the EPA. This illogical, “system driven” approach ensures that no EPA will be accepted as the proposed EPA price is found unreasonable as compared to the current price of the item for which the EPA is being requested. It is confounding to see how the circular application of the 4P tool is distorting price analysis for the EPAs.

The negative impact of the pricing puzzlers and drive for LPRC on MAS operations and customer agencies is real. MAS customer agencies are continuing to experience unfulfilled or cancelled MAS orders as MAS contractors struggle to maintain their federal business (especially small businesses). Orders are unfulfilled as contractors, not seeing any movement on their EPA requests, cannot sell at a loss, regardless of who the customer is.

How do we put the MAS price analysis puzzle back together to deliver for customer agencies? As a threshold matter, this is a collective effort with FAS and industry working together towards a balanced, sound approach to MAS contract negotiation and management. Here are some suggestions:

• FAS pricing training should include business economics, (e.g. how companies go to market, respond to competition, assess and price terms and conditions) and focus on commercial market dynamics. This training would include “reverse industry days” where companies and subject matter experts address business operations and commercial market drivers. This training would also address the Trade Agreements Act (TAA) as a key term and condition driving contractor decision making.
• The 4P tool should be modified to directly address the age of historical pricing. This step acknowledges the ongoing impact of inflation on market pricing. Further, to the extent FAS’s pricing tools are scraping commercial websites for pricing, the data collected should include key terms and conditions such as delivery and country of origin.
• To ensure a balanced, accountable approach to MAS price negotiations, all internal FAS policy guidance should be released to the public for review and comment.
• FAS should revisit the application of Section 876 which removes a program barrier to entry by eliminating the requirement to negotiate service rates at the contract level. The transactional data clearly demonstrates competition, value and price are driven at the order level. Thus, by doing so, Section 876 breaks down a barrier to innovation and small business participation.
• Identify and address stovepipes in the management of the MAS program. This will enhance consistency and improve efficiency to deliver the best value for customer agencies, FAS and its industry partners.
• Invest in the MAS Program Management Office to address consistency and efficiency across the MAS acquisition workforce. Continuous assessment and identification of measures to increase efficiency and effectiveness in MAS operations would be part of its tasking, along with the resources to drive continuous improvements.

These suggestions are an effort to open the conversation on keys to delivering for the American people. Coalition members stand ready to work with FAS and all stakeholders to ensure the MAS program delivers best value solutions to meet customer agency mission requirements. Continuous improvement in the MAS policies, procedures and workforce training will enhance delivery of best value solutions for customer agencies through sound business opportunities for MAS contractors.

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