Contracting

The benefits of ‘best value’ for small businesses in the federal market

GSA’s best value legislative proposal will allow GSA to craft policies and procedures that more closely align with the commercial market.

Roger Waldron

May 17, 2024 12:46 pm

4 min read

As discussed previously in this FAR and Beyond blog, the General Services Administration (GSA) has proposed to amend the Competition in Contracting Act (CICA) of 1984 to adjust the statutory authority for the Federal Supply Schedule (Schedule) program by clarifying what constitutes “competitive procedures” under the law. Currently, the Schedule program is deemed a competitive procedure if participation is open to all responsible sources and orders and contracts under the program result in the lowest overall cost alternative to meet the government’s needs. Under GSA’s proposed legislation, the Schedule program authority would retain the requirement that it be open to all responsible sources, but would change the requirement that awards result in the “lowest cost alternative” to a requirement that awards result in “best value” for the Federal Government. The proposed change will benefit both businesses and customer agencies, and will be particularly beneficial to small businesses and new entrants, including small disadvantaged, service-disabled veteran-owned, women-owned, and HUBZone small business concerns.

The number of small businesses participating in the Federal market has plummeted in the last decade, and this downward trend continued in 2023. There are many factors: e.g., unintended consequences of category management, increased regulatory compliance, and instability in the market due to continuing resolutions and recurring threats of government shutdowns. In addition, the one governmentwide contracting program created to attract commercial firms to the Federal market, which also represents the single, largest contracting program for small businesses, the Schedule, is not reflecting commercial practices due to recent policy changes. Unfortunately, Schedule contractors now face a long, painful slog negotiating contract pricing at the contract level, instead of relying on competition at the task or delivery order level to provide fair and reasonable pricing. The Schedule solicitation asks offerors to provide pricing that is lower than the price offered to their best commercial customer, in exchange for a paltry minimum guarantee of only $2,500, with the expressed intent to push for additional discounts at the order level. The price reduction clause, which requires contractors to monitor commercial pricing to ensure that the government is not being charged more than an agreed upon reference pricing for a good or service, is not a commercial practice and exposes prospective contractors to burdensome record-keeping requirements and potential criminal and civil liability.

There is also a lack of consistency in how laws, regulations, and policies are applied to Schedule offerors and contractors by individual contracting officers. For example, in contract negotiation some contracting officers request invoices for every item, requiring offerors to provide invoices for millions of products. Providing invoices for thousands or millions of items to establish pricing defies logic when it is highly unlikely the contracting officer will have the time or expertise to review them. Further, the invoice requirement is a roadblock for small businesses offering new technologies and products, as those businesses may not have the resources necessary to monitor pricing effectively. Some contracting officers attempt to renegotiate already approved prices when modifications are requested for an unrelated item or service. It is well settled that the requirement for award to small businesses at fair market prices does not equate to lowest possible price. This understanding must be embraced if we want to attract new entrants and the best technology and innovation to the Federal market through the Schedule program.

Given this backdrop, it is not surprising that Other Transaction Authority spending has exploded; it allows the Government to quickly buy the best innovative goods and services from small firms that are unwilling to deal with FAR clauses, oppressive contract negotiation and reporting requirements, or bid protests and associated delays. If we want small businesses and new entrants to enter the Federal market and stay in it, the Schedule needs to return to its roots as a convenient, easy tool for customer agencies to acquire the best commercial goods and services.

GSA’s best value legislative proposal will allow GSA to craft policies and procedures that more closely align with the commercial market, eliminating costly, overly burdensome contract negotiation, reporting, and administration processes that serve as barriers to entry for small businesses. The result will be more opportunity for small businesses offering innovative, best value solutions to meet customer agency requirements. If the best and most innovative firms are enticed to participate in the Federal market through the Schedule, competition at the order level, which includes price, will result in best value for customer agencies, and ultimately, the taxpayer.