The continuing resolution makes things seem normal until at least the middle of January. But contractors should take note. The CR is less than it seems in terms of opportunities. For insight, the Federal Drive with Tom Temin spoke with federal sales and marketing consultant Larry Allen.
Tom Temin Larry, before we get to that, I wanted to ask you about a resolution of sorts, not a resolution. And that is the way in which Congress could change the venerable multiple awards schedule system by changing the pricing basis of it. And you’re writing about that this week and that that seems like a big sea change for something that contractors have butted heads over with [General Services Administration (GSA)] for decades.
Larry Allen Tom, it’s kind of difficult to see what’s here. I think the primary reason that GSA is moving forward with requesting a change, and we’re talking here about requesting a change to the Competition and Contracting Act, a law that’s been on the books since the mid 1980s. And the specific part of the Competition and Contracting Act is the portion that says using multiple award schedule contracts meets the definition of the Competition and Contracting Act. When doing so results in the lowest overall cost alternative to the government. And that’s a big statement. It’s traditionally been read to include things like the time and overhead it takes an agency to stand up a new acquisition. So it gets cost and other factors, not just the bottom line price you pay. Increasingly, though, I think GSA is inspector general. Other customers and even some contracting officers inside GSA don’t really understand that they look at their lowest overall cost alternative to mean lowest cost period. And that was really never the intention. So what GSA is trying to do is ask Congress to say, hey, let’s change this to really what it should have reflected in the first place, which is it results in the best value. We want to have the best value in government acquisition. Certainly there is a place in some acquisitions for a low price technically acceptable. But Tom, you and I have talked previously about where that concept has been over applied to the detriment of government and its missions. So I think what GSA is trying to do here by injecting the best value language into the Competition and Contracting Act definition is get it more attuned with reality and back to where Congress and everybody originally understood it to be, which is, look, the schedules program is a great value program and it does save agencies time and money from standing up their own contracts or conducting their own acquisitions. So I think this is a common sense move. What it means in terms of GSA schedule prices, is difficult to say. There are always crosswinds on that topic Tom. If you look here, you could say best value might result in better pricing for contractors at the contract level. Ultimately, every contractor is still going to have to be competitive. And at the same time, we have the administration’s better buying initiative. One of its key planks is to lower contract level pricing. So you really do have that crosscurrents working.
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Tom Temin But this is progress in terms of what you and I can both remember from maybe 25, 27, 30 years ago, when GSA schedule prices were supposed to be the lowest prices, not value, but prices to anyone. And if Boeing so sold something to the GSA schedule for dollar 42 and somebody found it, if they sold it somewhere else for $1.29, that connector part. Then they were in trouble with GSA. Those days are long gone.
Larry Allen Those days are gone for the most part, Tom. And that’s probably a good thing. And I think really what we’re talking about in the current marketplace where there’s so much pricing visibility, not just on the schedules, but anywhere you go, if you think about how you buy in your own life, over the weekend I was doing some price comparison, so I looked at a specific industry website for what I was buying, and I looked at Amazon and then I looked at some specific OEMs. And all that pricing information was immediately available to me. That’s the type of thing that’s immediately available to government buyers, too Tom. Whereas 25 years ago really wasn’t. So allowing for best value description for schedule items I think makes sense and honors the reality of what’s going on. And it still shows that GSA schedule contracts have an excellent place and they are competitive way of acquisition.
Tom Temin We’re speaking with Larry Allen, president of Allen Federal Business Partners, and the matter at hand now is the continuing resolution, which has varying run out dates for different agencies. You’re saying, well, this is better than nothing, but it’s not really the best deal for contractors. And don’t take it as we’re anywhere near back to normal.
Larry Allen Right. I think that contractors need to understand that we are not operating under normal situations, even normal situations that traditionally come with operating under a CR, Tom. We’re talking here about, really the first time in my memory and maybe the first time ever that we’ve had kind of a two step CR that is, some federal agencies are funded through Jan.19, while others, the big ones, like the Department of Defense, Department of Homeland Security, are funded through Feb. 4th. I think that gives Congress maybe an artificial feeling that it doesn’t have to focus on these issues right now. And indeed, we’ve already seen congressional attention focus itself onto foreign aid supplemental bills, things that would help Israel and Ukraine, all of which are important things to do and they need to get done. But what that means, Tom, for appropriations is they get pushed off probably into the next calendar year, which gives us precious little time. And of course, what happens if things get pushed off into the calendar year is you could potentially be looking at a 1% across the board cut in discretionary spending. Congress put that 1% cut in the agreement that it reached when it passed the budget ceiling deal earlier this year. So we didn’t get our appropriations done by the start of the calendar year. And automatic 1% across the board cut would kick in. Well, now it looks like that’s going to happen. Now, Congress did this, so Congress can also undo it if they so choose. But at least right now, that’s what we’re looking at. So if you’re a contractor or a government agency, you have to consider not only can you not start new projects now that require appropriated dollars, you may have actually less money for a part of the year moving forward than you have now and less money than you had last year to do either more or at least the same amount of things you are doing. That’s a real challenge. It’s a real challenge for government agencies, in terms of meeting their missions. That’s a challenge for contractors, in terms of how do I make sure that government business makes sense for my company.
Tom Temin So in many ways, that 1%, the threat of that 1% reduction in discretionary almost has the effect of making government buyers fear being in a anti Deficiency Act situation. Only takes 1% and if you’re spending more 1% more than you’ve got, then you’re legally liable.
Larry Allen Right. And that’s an important consideration when we’re talking about here, and the Anti Deficiency Act is the government can’t commit money that the government may not have to commit. So this could be something that on existing projects, the types of projects that contractors are using to keep their doors open and lights on right now, those could even be somewhat jeopardized. I think this is an issue, Tom, that’s going through the discussions in lots of not just contracting, but general counsel’s offices throughout government, probably attributes to or helps contribute rather, to some of the slower pace of business that maybe some contractors are seeing. Because if you’re in government, you have to address this issue of a sequestration and what it means and what it means not only for future things, but what you’re already doing. You want to make sure you’re staying inside the lines. Contractors understand, hopefully their compliance requirements, but they may not always know that their colleagues in government have the same compliance risks as well.
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