Don’t say they didn’t warn you. Contractors are on notice that the General Services Administration’s Schedules programs will be under examination next year. It’s all outlined in the 2025 plan of the GSA inspector general. What to do with this information?  The Federal Drive with Tom Temin turned to federal sales and marketing consultant Larry Allen.

Interview transcript:

Larry Allen The audit report says exactly where the GSA IG is going to look. And as you alluded to, there are several parts of the multiple award schedule program that are going to be under the lens. This isn’t too surprising because the schedules program is kind of a perennial favorite of the IG to look at. So for this year, they’re going to look at one of our old favorites, the Trade Agreements Act. Should not be any surprise to companies, Tom, that with all of the emphasis being placed on secure supply chains and on supply chain management, trade agreements act issues about where companies get their things from, where they are substantially transformed, that continues to be second only to price reductions issues in the multiple award schedules program, Compliance Hall of Fame. So if you’re selling products or even if you’re selling services and you’re not sure where those are coming from, if you’ve subcontracted out some services, for example, if you know that the IG is going to be looking at TAA, you know your contracting officer is going to be looking at that, and proceed accordingly.

Tom Temin So the content of what it is you’re selling, you have to be able to justify that under the Trade Agreements Act. But under price changes up or down, that has ebbed and flowed over the years. There was a time when that was a huge issue on the schedule, and then the schedules tried to get a little bit more market oriented, I think in the late 90s, maybe early 2000s. And so what should companies do on the pricing front to maintain what it is GSA wants as, I guess, the best customer?

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Larry Allen Well, Tom, for 2025, the GSA IG has said they’re going to specifically look at the schedules, economic price adjustment clause and how that’s being implemented. And of course, GSA giveth with one hand and taketh away with the other in this case. And what I mean by that is that you have the GSA Office of Acquisition Policy this year that came out with some pretty common sense changes designed to make it easier for companies to obtain economic price adjustments when they are justified in seeking them, setting up a standard by which contracting officers and contractors can go through that process. And then the IG sees that simplification comes along and says, You know what, we’re going to study economic price adjustment clauses in FY 25, which really I think is going to have the net effect for contractors of having just to provide more and more data anytime they seek a price adjustment. You’re in the better case if you are trying to seek one now, so those who can justify it. What you don’t want to do is get to the point where you haven’t had one for 2 or 3 years, and now all of a sudden you want to catch up. Even with the new flexibilities, Tom, I think that’s going to be a pretty steep hill to climb. So while it may be difficult to get a price adjustment now because you’re going to have to provide that in different ways. You’re still better off keeping those prices up to date.

Tom Temin And will the IG be looking at contractor pricing or will they be looking at their own contracting officers oversight of contractor pricing?

Larry Allen Well, IG always look somewhat at pricing, Tom. So I would never say that pricing is off the table. They are, for example, going to continue to do pre-award audits that make specific pricing recommendations when contractors are seeking contract modifications, new contracts, things of that nature. But notably, the IG is actually going to audit what I call, and many others call the Small A auditors. These are the contracting personnel inside GSA that perform these contractor assessment visits that aren’t technically an audit, but they are something that contractors need to take seriously. Get these about every other year. And the IG is going to come in and audit the industrial operations analysts that conduct these reviews to make sure they’re gathering the data correctly, and that they’re analyzing the data correctly. It’s always been an irony, Tom, that a contractor can get done by getting a negative report card for one of these reviews, but it doesn’t get any positive upside if it actually gets an A on the report card. And this is kind of a continuation of that theme.

Tom Temin We’re speaking with Larry Allen, president of Allen Federal Business Partners. And one other question on the whole auditing IG plan, mentor protege is something that I think we’ve talked about before, that is coming under scrutiny because the government somehow seems to think they’re too darn successful.

Larry Allen And so this is definitely going to be an area that the GSA IG weighs in on, and it’s mentor proteges and JV’s (Joint Ventures). What they’re looking for is to make sure that each part of those agreements is actually bringing something to the table, and not just bringing something to the table, but actually performing. So what they’re trying to get away from is people who are storefronts, conduits through which a larger company can improperly claim some sort of socioeconomic status. They’re also going to be looking at whether or not some of these companies are actually controlled by one another. Are they really separate entities or are they different sides of the same coin? So again, the GSA IG is not alone in this. SBA has made this a high priority area, and I suspect that the VA will as well. So if you’re in one of these JVs or mentor protege agreements, you really want to make sure that you got the paperwork done correctly before the government comes knocking on your door.

Tom Temin You and I both had our eyes caught by an article in one of the major papers, The Wall Street Journal, that reported 40% of the market capitalization of the Standard&Poor 500 are under investigation by the Justice Department. And this could include some of the federal contractors who have the double burden of general economic regulation and federal specific contracting regulation.

Larry Allen Well, Tom, we know well that government contractors are the targets of audits. We just were talking about the GSA IG, but it’s not just the inspector general that can come and look at you as a contractor. Many contractors have found out the hard way that the Department of Justice can come looking at their books during a False Claims Act investigation. So too can the Department of Labor for various labor and employment related issues. The EPA can come in and look, the Small Business Administration can come and look at your small business subcontracting plans. That’s just a handful of the alphabet soup here. And I think what was interesting about this article is it shows that whether or not you’re a government contractor, industry generally speaking, is under the microscope for being successful. And people want to understand what is it that makes you successful and are you ripping off the government? Are you ripping off your commercial customers in the offing? If you’re a company, particularly a larger company, but not just the larger companies, Tom. You really need to make sure that you’ve got your back office in order because people are looking, you’re not being paranoid. They are actually taking a look at what you’re doing. And if you’re a contractor, that doesn’t always translate into how you’re performing on an actual contract, It can be some of these other issues as well. So don’t go gently out into that world of business, with success comes scrutiny.

Tom Temin Sure. And tomorrow, we’re going to be hearing from one of the attorneys at the Center Law Group on just the extent of false claims investigations that have been launched by Justice. And it’s really record numbers now.

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Larry Allen Right. And any time that people see, just to be honest, any time you can see that you have a career advancement by pursuing a contractor for a high monetary settlement, that’s going to be a strong incentive for any young DOJ attorney.

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