Procurement flow-downs can’t be one-sided

Flow-down requirements are a unique, yet ubiquitous, feature of the federal acquisition system.

Flow-down requirements are a unique, yet ubiquitous, feature of the federal acquisition system. Flow-down requirements impact prime contractors, subcontractors, customer agencies, contracting activities, and contracting officers.

The Federal Acquisition Regulation (FAR) includes a host of contract clauses that must be flowed down to subcontractors. Moreover, given the procurement system’s focus on regulatory and performance compliance, prime contractors are incentivized to flow down as many clauses as possible beyond those mandatory flow-downs. Some of these additional flow-downs can be central to contract performance, like the Trade Agreement Act (TAA). The government expects, in the normal course of business, that prime contractors and subcontractors effectively address flow-down requirements to ensure contract compliance.

Similarly, procurement policies and procedures flow down to the acquisition workforce through the FAR, General Services Acquisition Regulation (GSAR), acquisition letters, and other management guidance. These regulations and associated guidance address a host of contracting officer responsibilities, including but not limited to, proposal evaluation, negotiations, price and/or cost analysis, data rights, and foreign acquisition (e.g., TAA).

For this reason, procurement policy flow-downs cannot be one-sided. The government rightly expects compliance from its industry partners regarding contract clause flow-down requirements. Likewise, industry partners and the public have a right to expect sound, effective flow down of acquisition policies to the federal acquisition workforce. Unfortunately, the record is this regard is mixed, at best, and the General Service Administration’s (GSA’s) Multiple Award Schedule (MAS) program serves as a case in point.

MAS contractors continue to experience challenges regarding the negotiation and administration of MAS contracts. These challenges often reflect unsound, ineffective flow-down of key policy guidance to the workforce. Many MAS contract negotiations are premised on positions and analysis that are inconsistent with the GSAR and FAR. As a result, contractors and offerors are being asked to make untenable business decisions in order to receive a MAS contract or have an option exercised. This result is especially problematic for small business concerns and, ironically, occurs at a time when the Administration and Administrator Carnahan are focused on supporting small business concerns entering the federal market.

Investments in training, in-person and virtual, can help address the gap in knowledge (contractors report some contracting officers are unfamiliar with the MAS pricing policies.) This training should include a focus on commercial business practices and incorporate reverse industry days. Additionally, sound procurement management, consistent with the Senior Procurement Executive’s memorandum on the appropriate role of management in the GSA acquisition process (See SPE Memo SPE-2022-03), is vital to consistent, balanced application of the rules. The memo should be included in any GSA-specific acquisition training.  Finally, FAS Policy and Procedure Memorandum 2021-05 (the PAP) should be rescinded, so as to allow contracting officers to rely on the guidance contained in the GSAR and the FAR when conducting MAS contract negotiations.

The PAP and a new request for information

The PAP includes guidance that is inconsistent with the underlying GSAR pricing policies and the FAR. Some of this inconsistent guidance is punitive in nature (e.g., “all commercial customers” as the Basis of Award (BOA) tracking customer), especially negatively impacting small businesses. It also imposes, for all intents and purposes, new data collection requirements on contractors and offerors that are not in the GSAR. The (hopefully) unintended consequence of the PAP is to establish a new and different negotiation regulatory framework for contracting officers and contractors without the benefit of public notice and the opportunity to comment.

In September 2023, the Coalition provided comments on the PAP to the Federal Acquisition Service (FAS). Subsequently, the Coalition has had the opportunity to engage with FAS regarding the PAP. FAS’s willingness to discuss the PAP is greatly appreciated and consistent with need for transparency in policy making. Unfortunately, little has changed over the last eight months to address the significant policy questions raised by the PAP. In this regard, just this week FAS released a Request for Information (RFI) seeking feedback on “GSA FAS – MAS Pricing Practices – Market Research.”

While GSA’s industry partners appreciate the opportunity to provide feedback and GSA’s apparent willingness to consider such feedback, the RFI is disappointing. It asks for information from industry without the appropriate context, specifically reference to the PAP. Without the context of the PAP, the public will not be able to provide effective feedback and/or useful information to FAS. The PAP text should be included as part of the RFI with specific questions tailored to those parts of the PAP where FAS is seeking feedback/information. This step towards greater transparency is in the public interest.

The RFI questions/data requests, in some cases, make troubling assumptions regarding the validity of certain “policy positions” taken in the PAP. One regards what seems to be a standard policy view that invoices and other documentation are required as a part of an offer. The GSAR does not reflect this view. A second, significant view is the RFI’s endorsement of the use “all commercial customers” as the BOA customer for contractors with limited commercial sales. This position is fundamentally inconsistent with the GSAR.  In the RFI, FAS even goes so far as to say that use of “all commercial customers” as the BOA “provides the government with the best price protection.” It does not.

Competition at the task and delivery order level provides the best price protection for the government because it the point at which requirements are definitized, and thus vendors are incented to offer their best solutions. Further, the use of “all commercial customers” is a profoundly anti-competitive measure, as it restricts the ability of contractors to compete in the commercial marketplace independently and effectively. This measure is especially punitive to small businesses seeking to grow their federal and commercial business. It is shocking that FAS continues to impose this anti-small business policy on firms, as it is fundamentally at odds with the Administration’s efforts to reduce barriers and increase opportunities for small businesses.

Based on the foregoing, the RFI should be rescinded, revised, and republished with the PAP. Alternatively, if the PAP is itself rescinded, the RFI could reference the GSAR, as appropriate. These actions would provide the public with a fully transparent opportunity to provide useful feedback to FAS. To this end, the Coalition stands ready to work with all stakeholders on training for the acquisition workforce, including participation in reverse industry days.

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