For contractors, a lot to ponder five months into the fiscal year

Things are moving fast on the federal procurement front. New small business rules, GSA data gathering to club contractors with, all while appropriations seem to be forever in the future. For a perspective, the Federal Drive with Tom Temin spoke with federal sales and marketing consultant Larry Allen.

Interview Transcript: 

Tom Temin  Larry, let’s start with the small business rules or the rules that are coming from the Office of Federal Procurement Policy to change how the IDIQs work for small business. What’s your take?

Larry Allen Tom, I think that the change coming from the Office of Management and Budget, where they are going to implement the rule of two for task orders against all multiple award IDIQ contracts except the GSA schedules, is potentially a big deal depending on the size of your company. On the face of it, it’s obviously a big deal for small businesses because now if you’re on one of these multiple award IQ contracts, the onus is going to be on the buying agency to come up with justifications to not give you task orders up to the simplified acquisition threshold, currently $250,000. If you’re a very large business, this is probably going to have very much of an impact on you because your typical task order is always going to be way above $250,000. If though you are one of these middle-sized contractors, your kind of not well-defined term, particularly one selling commercial items. This rule change could very well have a significant impact on your business. So, think about companies on NASA SEWP. This could be a big impact on some NASA SEWP contractors. This could be a big issue for CIOS-P4 if that contract ever gets into place, but especially the next iteration of what will be the product-based CIO CS contract. So, it could potentially have a very big impact. This was come up, kind of came out of OFPP in discussions between themselves and the Small Business Administration, and there just wasn’t a lot of advance notice, like surprise. Here we are. This is what we’re going to do. We’re going to do a rulemaking. But before the rulemaking, the agency still has the directive to act in this way.

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Tom Temin So basically, then the mid-tier people that compete with official, quote unquote, small businesses, and if there are two of them in the rule of two comes in, then you’re out of luck, basically.

Larry Allen Well, and if talking the conversations, I’ve had with, my contacts in the Office of Procurement Policy, Tom. That’s not supposed to be the intent of the directive. However, there certainly is case law in place already that suggests just that. It says that small businesses are presumed to be able to meet the government’s needs if they have already been awarded the base IDIQ contract. And I suspect that, protest lawyers will follow through on that. And if, agencies go in a different direction.

Tom Temin Or agencies, if they want somebody, they can maybe tailor the requirements such that the rule of two doesn’t come into play I suppose.

Larry Allen Agencies are given some latitude under this. So, it’s not automatic. It’s not meant to be automatic. I think how it’s implemented. You know, this is brand new. The memo just came out a few days ago, so it’s going to take a while to see how it’s implemented it. It’ll probably be implemented in different ways by different agencies. But it’s not intended to be an automatic stop on, awarding task orders to other than small businesses, but it is definitely intended to switch the balance of power so that the presumption going in is in favor of small businesses.

Tom Temin And will this possible memo, or what could become a rule, have a different affect, whether you’re selling services versus whether you’re selling commodity type products? Because I think the product vendors are the ones that might be more severely affected here.

Larry Allen Tom, I think that’s exactly right. I think that the nature of service buyers, typically, they’re going to be over the simplified acquisition threshold, for all but the most modest types of programs. But if you’re selling, say, IT hardware and software, if you’re selling, solutions that are through an IDIQ contract that is not a GSA schedule, you need to take a look at the OMB directive and strongly consider participating in the rulemaking comment process so that you’re you understand what the impact of this rule is on your business. Regardless. Whether or not whether you’re small, medium or even a little larger than medium.

Tom Temin And you recently attended a webinar, I presume was online, held by the GSA that’s gathering all sorts of information on contracting, especially in the schedules area. And people are wondering what they are gathering for information. And sounds like you were surprised at how much they do collect.

Larry Allen Well, Tom, GSA has talked about collecting data on transactional sales for a long time in one way or other. The idea being that they would actually use that information to look at driving lower day to day pricing on the schedules program. And we’re kind of here. We’re at that juncture right now where GSA, whether it’s through their transactional data reporting system, whether it’s through, other elements of data gathering that they do through their 4P pricing tool. GSA people are gathering a lot of information on what things actually sell for through the schedules program, and that’s generally a good thing, so long as we can make apples to apples comparisons. But if you’re a contractor, you need to be aware that if GSA is going to have a lot of data on its side when you’re asking for that price increase, when you’re asking for that contract modification, you’re going to want to have a lot of data on your side, too, so that, you can show why you believe your pricing offer is justified.

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Tom Temin Yes. In other words, they’re trying to create some kind of objective way, which they guess they’ve been doing in some way for decades of figuring out fair market value prices in an age when there’s so much more data than there was in the 90s or 80s.

Larry Allen Right. And, you know, I we’ve seen I think the schedules program, Tom, is a big schedules program. We’ve already seen the use of this data have an impact in ways that are both positive and, frankly, not so positive. I mentioned a moment ago that you want to make sure you’re doing apples to apples comparisons. On things before you say that somebody’s prices are too high or your price is too high, you can’t have this item on schedule. Or conversely, this item that you already have on schedule, which we deemed to be a fair and reasonable price two years ago, we’re not so sure it’s fair and reasonable now. And if you want to keep it on schedule, you have to lower your price. You know, that’s some of the stuff that’s coming into contractors. They’re like, well, wait a minute, we had a deal and now we don’t have a deal. And, you know, if you’re a federal buyer and if you’re a taxpayer, you certainly want the GSA to do its due diligence to drive down pricing. That’s a good impact of this program. On the other hand, you know, any tool can be used in a way that it is not intended. Just ask me.

Tom Temin Yeah. Well, yeah, it’s an old story. And all of this is happening in the backdrop of the clock once again ticking away toward a funding deadline. Now that we are, you know, a month away from the next one. I mean, these it seems like they’re all far off when Congress actually passes each CR, but they creep up fast, especially with Congress not around that much in the next month.

Larry Allen That’s exactly right, Tom. I was actually kind of surprised, even though I followed this issue closely, to see last week you had major senators, saying that they weren’t sure if they had enough time to do all 12, FY 24 appropriations bills by the new early March deadlines. And in fact, if you look at the calendar, you can see why they feel that. You know, first of all, the House of Representatives was out all last week. So that week was gone in terms of trying to negotiate things. And then they’re going to both chambers are going to be out for close to ten days around the President’s Day holiday in the middle of February. The net of that is that we just don’t have a ton of time for Congress to reach agreements and then work to pass all 12 appropriations bills on their own, which is something the House leaders have said that they very much would like to do. Throw into this the discussion debate over the southern border, whether or not the plan coming out of the Senate is acceptable to the House. And that’s tied into this appropriations process as well, right now. You have a lot of doubt. A lot of clouds are still on the horizon even at this late part of the fiscal year.

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