Commentary

GSA moves forward with a new EPA, consistency is the next opportunity

Major issues with GSA’s implementation of EPAs on MAS were first flagged in 2021 as U.S. inflation spiked to levels unseen in over a decade.

Roger Waldron

September 6, 2024 1:40 pm

4 min read

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.

On August 5, 2024, the General Services Administration (GSA) took a step forward by publishing a final rule to “standardize and simplify the Multiple Award Schedule (MAS) clauses for economic price adjustments.” The final rule consolidated procedures spread across four MAS Economic Price Adjustment (EPA) clauses into a single, more reasonable clause. This step forward embodies lessons learned from the Covid-19 pandemic and the unprecedented inflation which followed. The Coalition for Government Procurement (CGP) commends GSA for promulgating the EPA rule. However, implementation of the final rule will be heavily influenced by opaque trainings and internal policy memos. This lack of transparency echoes FAS Policy and Procedure (PAP) 2021-05 , threatening the uniformity, accuracy, and fairness of GSA procedures.

EPAs are mechanisms built into contracts to increase or decrease stated contract prices of goods or services, generally contingent on market conditions. Within the MAS program, EPAs have long played a key role ensuring contractors receive fair and reasonable compensation. The GSAR, as currently written, limits when, how often, and by what percentages prices can be adjusted. These limits exist to ensure contractors do not abuse their EPA request privileges.

Major issues with GSA’s implementation of EPAs on MAS were first flagged in 2021 as U.S. inflation spiked to levels unseen in over a decade. Rapidly rising input prices paired with massive workforce disruptions squeezed margins. Contractors rapidly found that their MAS offerings were no longer economically feasible and began removing important goods and services from their contracts. To alleviate the strain on industry and contracting officers GSA published Acquisition Letter MV-22-02 on March 17, 2022. This letter temporarily removed limits regarding how often and how many times a contractor could request EPA increases. It also lowered the approval threshold for EPA increase requests and allowed for the removal and re-addition of contract items at higher, renegotiated prices. A supplement made all EPA requests, including those above the EPA ceiling percentage, approvable by the assigned contracting officer. Three further supplements have extended these policies until December 31, 2024. These actions gave GSA the time it needed to complete the rulemaking process.

GSA published its EPA proposed rule, GSAR Case 2020-G510, Federal Supply Schedule Economic Price Adjustment, on November 16, 2023. This proposed rule adopted the changes made by Acquisition Letter MV-22-02. The Coalition strongly supported the proposed rule and commended GSA’s initiative. The Coalition saw a further opportunity to improve the EPA process within this new, single clause framework. We called for language clarifying the necessity of market research, using market indexes, and identifying time limits for EPA reviews and negotiations. These suggestions arose from member concerns regarding differences across contracting officer implementation of Acquisition Letter MV-22-02. Over the multi-year “trial period” provided by the Acquisition Letters, member companies observed significant discrepancies around the levels of market research requested and the time taken to complete EPAs. In many cases, requests validated by commercial price lists or market indicators were re-validated utilizing market research. These discrepancies delayed EPA adjustments to MAS prices while introducing unnecessary burdens for both GSA and industry. Furthermore, divergences between EPA approval timelines unfairly impacted the MAS suppliers who faced longer wait times to receive pricing relief.

The Final Rule only included minor formatting changes. GSA did not include our recommendations in the Final Rule. In the Analysis of Public Comments, GSA stated that it “will consider their [The Coalition’s] recommendations within the update of Schedule EPA Guidance.” But the problem with guidance, as opposed to rulemaking, is that it is done internally without public comment or input from the stakeholders in industry subject to the guidance. Development of such guidance is limited to input solely from internal stakeholders even where it imposes new processes, data requests, and, ultimately, costs on private firms.

As we have explained with respect to GSA’s internal guidance on pricing, the FAS Policy and Procedure (PAP) 2021-05 authorized contracting officers to utilize varying pricing methods within the MAS program. Due to the nonpublic nature of the pricing guidance, companies went into MAS negotiations without a proper understanding of the negotiation process or how products and services would be ultimately priced based on the whims of a particular contracting officer. These unknown pricing methodologies discouraged potential new entrants to the MAS program, wasted the resources of industry and government, and led to expensive uncertainties for companies in the MAS program. While training and internal guidance are valuable tools, the rules for the EPA negotiation process need to be consistent and transparent to industry. Transparency in the rulemaking process ensures companies come prepared, limits inequity across participants, and encourages a culture of healthy partnership between government and industry.