GSA finally pushing price competition to where it belongs: At the task order level

Emily Murphy, the General Services Administration’s administrator, uttered her “famous” words during her nomination hearing before the Senate Homeland Security and Governmental Affairs Committee in October 2017: “We are trying to make sure GSA’s contracting officers and our policies support really vigorous competition at the task order level because that is the amount we actually are going to spend so we want to get the best deal there, the most competition we can there.”

She offered experience, understanding and hope where only previous administrators’ words offered hallowed general concepts before.

If anyone understood the ridiculousness of asking a vendor’s price for something they haven’t seen the requirements for, it was Murphy.

And when Congress blessed the concept of creating an “unpriced multiple award contract” where costs only mattered at each individual task order level in the 2018 National Defense Authorization Act, many in the acquisition community — including myself — thought the clarion call finally has been heard.

It took almost two years since the provision became law, but GSA’s release of the ASTRO solicitation for manned, unmanned and robotic platforms finally is putting the stake in the ground that “price” as an evaluation factor for large multiple-award contracts is no longer relevant.

GSA Administrator Emily Murphy.

“While ASTRO will be the first contract vehicle to use the Section 876 authority, GSA anticipates that more will follow,” Murphy said in an email to Federal News Network. “Having ASTRO lead the way made sense for two reasons. First, ASTRO will be an assisted acquisition on behalf of the Department of Defense without any of the direct order components commonly found on other GSA governmentwide acquisition contracts (GWACs) and multi-agency contracts (MACs). This means GSA can closely monitor competition at the task order level and ensure in particular we see that competition in pricing.  Second, ASTRO will serve as an opportunity to refine best practices for use of the Section 876 authority while the advance notice of proposed rulemaking (published on August 19, 2020)  to use Section 876 authority in the Federal Supply Schedule program proceeds.”

In fact, GSA is considering using the Section 876 authority for its new small business GWAC. Officials said Thursday during an industry day that that the “unpriced master contract” approach was one of several on the table as it developed the new acquisition strategy.

In the ASTRO solicitation GSA wrote, “Because services are diverse within the scope of the master contract, the master contract provides the [contracting officer] the flexibility and authority to determine fair and reasonable pricing tailored to the individual task order requirement, including the task order statement of work or objectives, risks, uncertainties, complexity, urgency, contract type, and competition. Accordingly, the master contract does not predetermine cost and price reasonableness or fair and reasonable labor rates for services performed at the task order level. The master contract does not establish prices for any supply or service at the task order level; therefore, the [contracting officer] shall establish cost and price reasonableness for each task order using the policies and methods in FAR Subpart 15.4, internal policies, and other applicable regulatory supplements.”

And just like that, one of the biggest problems with large-scale, winter-take all multiple award contracts is solved.

OK, it’s not solved. But this is a huge step in the right direction to stop the inevitable award-protest-award-protest cycle that so many GWACs from Alliant to Alliant 2 small business to OASIS to a host of agency specific multiple award contracts have been thrust into in part because agencies required price as an evaluation factor, which limited who was deemed qualified and therefore awarded a spot on these five-to-10 year contracts.

Theoretically speaking under ASTRO, GSA could let every qualified vendor on the contract and let the chips fall where they may for each task order.

Ending of the rate card game?

Tim Cooke, president and CEO of ASIGovernment, said this approach may just put an end to the game nearly every vendor plays with its rate card game. It’s one which no one likes, either.

“It depends on how you evaluate price, typically, but let’s say there are 10 labor categories and your company only intends to use six of them, you chose the number so government weights the labor rates based on the hours they give you so your weighted average rate that is lower than otherwise it would be,” he said. “Companies don’t put ‘real’ rates down for every labor category. They assume they can substitute people. Four of them that you will not use will be lower, and the other six will be a little higher and then the company will shift people up and down labor categories so they will still make money, but still have a lower evaluated rate.”

Cooke said this “game” is well known among pricing shops across federal contractors.

So by requiring price only at the task order level, Cooke and other experts say agencies will get better competition and face fewer contract administrative burdens.

Roger Waldron, the president of the Coalition for Government Procurement, has been pushing GSA to use the 876 authority for the last two years.

He said the “unpriced master contract” approach should reduce barriers to entry for all companies.

“ASTRO talks about bringing in the highest-rated companies so now, more than ever, the focus should be on the technical side or capability side. That is the entry point,” he said. “The contract creates a greater emphasis on technical because it’s not a trade-off determination.”

The decision to use ASTRO to test out this approach can be traced to several factors.

First, GSA is building on its efforts from the OASIS professional services GWAC to rethink how it evaluates proposals where it first used a self-scoring evaluation approach.

“It is meaningless to do cost-price trade off at the multiple award level when pricing doesn’t mean much,” said Jim Williams, former acting GSA administrator and former head of the Federal Acquisition Service. “When it means something is when you have real requirements and you look at not only labor prices, but the labor mix because that is what you are proposing to meet the government’s needs. The other thing it gets away from is the government trying to drive down labor pricing. When a company is competing in the labor market and when competing against commercial interests, it’s about getting the best solution at a reasonable cost. I like this approach very much. There is so much good about it and I think it will be a success and it will spread.”

ASTRO is a good test case

Second, manned, unamend and robotic platforms are more research and development than commodity technology.

ASIGovernment’s Cooke said in many ways ASTRO is a research and development contract.

“R&D is typically just cost-plus type contracts. ASTRO is labor hour only so only time and materials type of contracts. It’s not that different from cost plus,” he said. DoD and GSA want to attract as many non-traditional and traditional providers of this technology, especially in this R&D arena. Commercial companies are not used to a two-step competition where price is evaluated at both steps.”

But unlike traditional R&D, the “unpriced master contract” isn’t abandoning price altogether, just pushing it down where it matters most.

Dave Zvenyach, a former head of 18F and assistant commissioner of the Office of Systems Management at GSA and now a consultant and director Hangar, said it’s good to see GSA continue to push the acquisition innovation envelope.

“It’s important to step back and keep in mind there is technical trade off with cost and quality, and GSA is signaling that quality is the main factor,” he said. “This is different because GSA is not considering reasonable pricing, but the idea of focusing on technical quality at beginning and dealing with price at the back end is an important next step in the ongoing conversation about getting the best quality solutions.”

This idea of an “unpriced master contract” is not a new one. The Navy with Seaport-3 and the Air Force with NetCents tested out this approach, and the 2007 Service Acquisition Reform Act (SARA) panel recommended the creation of a schedule that didn’t require upfront pricing.

Benefits for agencies, industry

Williams said one of the biggest challenges for GSA to get this idea off the ground has been the focus of its inspector general on enforcing the price reduction clause under schedule contracts.

“People like the IG have been opposed to this concept in the schedules arena because the PRC allows them to examine contractors’ books to see if they are giving the government their most favored pricing so the auditors haven’t been supportive of getting rid of price,” he said. “But when you are buying services, the PRC shouldn’t matter because price at the master contract level is meaningless.”

CGP’s Waldron said one thing to watch for is how agencies respond to this change. He said GSA will have to do a fair amount of training to get contracting officers comfortable with how ASTRO will work.

GSA Administrator Murphy said the approach to ASTRO will benefit everyone involved.

“Section 876 authority allows the acquisition workforce to focus on vendor qualifications in the first round of the procurement and should result in awards to vendors with a high caliber of technical expertise. Once this pool of highly capable vendors is selected these vendors will compete on specific highly technical requirements and pricing at the task order level,” she said. “This approach will also help vendors — especially small businesses — by saving on bid and proposal costs up front. For example, vendors will spend less time and effort bidding on Contract Line Item Numbers (CLINs) that are never used. Simultaneously, it will liberate contracting officers from having to perform pricing analysis on those CLINs – and focus efforts on pricing analysis at the task order. Finally, this approach will benefit customer agencies by lowering barriers to entry for vendors and increasing the pool of vendors at the IDIQ stage. Further, enhanced price competition at the task order level will result in better value and savings for our customers and ultimately the taxpayer.”

Let’s also hope the “unpriced master contract” approach will mark the beginning of the end for what many believe is the no-longer viable process to compete and award multiple award contracts.