Leveraging the collective buying power of the government

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.

As a best practice, commercial firms leverage their buying power when acquiring supplies and services to support business operations.  They develop acquisition strategies, sources and contract structures responsive to their operational needs and market conditions.  Similarly, the General Services Administration focuses on leveraging the government’s buying power to deliver best value mission support for customer agencies.

GSA is to be commended for the strategic investments in, and reforms to, the Multiple Award Schedule (MAS) program.  Over the years, these investments and reforms have focused on leveraging agency specific requirements through competition at the task order level.  The evolution of the MAS program is reflective of the increasing scope, complexity, depth, and breadth of the federal market and commercial markets.  The federal market includes thousands of organizations with distinct missions and tens of thousands of contracting personnel transacting business on behalf of the American people.  In turn, technology and the internet have profoundly changed the vast, dynamic commercial market, enhancing transparency, competition, choice and value.

Our December 16th blog outlined the evolution of the MAS program over the last 30 years.  In reviewing that history, the key MAS reforms and investments that today drive competition and value at the order level for customer agency requirements fall into four categories: (1) Contract Structure; (2) e-tools; (3) Ordering procedures; and (4) Training and Outreach.

1. Contract Structure

• Mandatory to Non-mandatory:  The MAS program started out as a mandatory program whereby all the government’s requirements for certain supplies had to be ordered from MAS contracts.  Subsequently, GSA converted these original “requirements contracts” to IDIQ contracts with a guaranteed minimum ($2500) as the foundational step in bringing choice and competition at the order level for customer agencies.  GSA complemented this step by establishing continuous open seasons for receipt of offers, expanding access to new offers from 1-2 months a year to 12 months a year.  This fundamentally expanded access to the commercial market.
• Reform of the Price Reduction Clause (PRC):  GSA modified the PRC to allow MAS contractors to offer price reductions/discounts from their MAS contract-level pricing in response to customer agency order level requirements. Along with the conversion of the contracts from mandatory to optional use, this reform of the PRC jump-started competition and value at the order level for customer agencies.
• More recently, GSA addressed Order Level Materials and implemented Schedules Consolidation.  These two reforms enhance choice, transparency, and competition at the order level.  Through these changes, GSA has further empowered customer agencies to leverage their requirements to acquire best value, cost effective solutions to meet mission needs.

2. E-Tools

• GSA Advantage: GSA launched GSA Advantage and GSA e-library as a first of its kind, government managed electronic catalog and e-commerce platform hosting MAS contract items, including associated pricing, delivery terms, and product descriptions. GSA Advantage provided a new, transparent channel for customer agencies conducting market research in advance of order placement.
• eBuy: Complementing GSA Advantage, GSA subsequently launched eBuy, its electronic Request for Quote (RFQ) tool. eBuy provides customer agencies with the ability to post RFQs seeking quotes from MAS contractors who can view the RFQ and respond with their quotes. GSA Advantage and eBuy significantly increased competition and transparency at the order level for customer agencies.

3. Ordering Procedures

• Task/Delivery Order Competition: Congress passed legislation mandating certain competitive notice requirements for the placement of orders under the MAS program. These competition requirements were incorporated in Federal Acquisition Regulation 8.4 as a comprehensive update to the MAS ordering procedures, promoting transparency and opportunity for MAS contractors.  Significantly, the comprehensive re-write of the order procedures specifically cited eBuy as a method for providing notice to all MAS contractors for purposes of task order competition.
• Blanket Purchase Agreements (BPAs): The comprehensive re-write also embraced competition and notice for BPAs. BPAs are a unique MAS ordering tool that allows customer agencies to leverage their government buying power to enhance competition, seek price reductions, and obtain best value pricing and solutions to meet mission needs.  BPAs account for over half (53% or $21 billion) of the dollar volume of orders under the MAS program, demonstrating customer agencies’ effectiveness in leveraging their government requirements.

4. Training and Outreach: As part of its support for customer agencies leveraging their government requirements via the MAS program, GSA has invested significant resources in training and outreach on the effective, competitive and compliant use of the MAS program to meet mission requirements. GSA conducts in-person training and webinars throughout the year to assist customers and contractors. In addition, through its Interact site, GSA publishes a host of useful MAS market, policy and program information for customers and contractors.

Against this background, Federal Acquisition Service policy guidance appears out of step, focusing on low price at the contract level while the entire program is built to leverage agency requirements at the order level.  For example, to the extent the MAS solicitation’s “highly competitive” language is also reflected in FAS pricing policy.  Now that it has been deleted from the solicitation, the corresponding step for FAS will be updates to the policy removing references to “highly competitive.”  Otherwise, the deletion from the solicitation will be meaningless for contracting officers and contractors.

Significantly, FAS policy directs contracting officers to “leverage the collective buying power of the government to obtain competitive, market-based pricing.” This directive begs a key question: How is a contracting officer to accomplish such leveraging for a prospective IDIQ contract that provides a guaranteed minimum of $2500 and the opportunity to compete for subsequent work?  Perhaps if the MAS program were mandatory, in that all customer agency requirements had to be purchased through the program, FAS policy would have a better case for seeking to “leverage the collective buying power of the government.”  Or perhaps the guaranteed minimum could be significantly increased to reflect the collective buying power of the government in order to achieve the “lower than fair and reasonable pricing” that FAS policy seeks.

The FAS pricing policy ignores the significance of the terms and conditions. Sound, effective contracts reflect a negotiation between the buyer and seller based on the terms and conditions of the deal. FAR recognizes this point by requiring consideration of terms and conditions when determining fair and reasonable pricing for purposes of contract award.

In this case, the standard MAS terms and conditions do not support a price based on leveraging the collective buying power of the federal government because MAS contracts are not requirements contracts. Collective requirements are not sought or fulfilled. Thus, under the circumstances, this policy approach puts MAS contracting officers and contractors/offerors in untenable positions when working towards a meeting of the minds on a fair and reasonable price for purposes of contract award. The unintended consequence is to undermine a program that has been structured to leverage agency requirements through competition at the task order level.

The beneficial approach of the MAS structure has been affirmed by Congress when, in enacting the Section 876 process, it recognized the role of competition at the task order level.  There, it authorized GSA to award contracts where price and value were established through competition at the task order level, rather than through contract level pricing.  It is clear where the benefits for the government lie.  Directives seeking inconsistent goals only work to erode the success of the program and restrict government access to the best that the commercial market has to offer from innovative companies, especially small businesses.

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