Contractors supplying goods or services to the government through Federal Supply Schedules should expect increased scrutiny of their pricing in the coming months. In a July 2015 report [pdf], GAO released the results of a year-long performance audit analyzing government competition and pricing practices for FSS orders. The report highlights inconsistencies across FSS procurements, including purchasers’ frequent failure to ask FSS contractors for discounts to list prices (required by FAR 8.405-4 for orders exceeding the simplified acquisition threshold).
The main issues identified in the GAO report are nothing new. GSA is already taking steps to address the inconsistent usage of the FSS system among buyers. In March 2015, GSA proposed a rule that would impose a new transactional data reporting requirement upon FSS vendors. (For an explanation of current Price Reduction Clause requirements, take a look at our discussion here.) The proposed rule is aimed at increasing transparency in pricing across government procurements, with the end goal of an overall reduction in prices paid for FSS supplies and services. While the rule is still pending, a number of the nearly three dozen comments submitted during the comment period reveal considerable opposition to the proposed changes. Regardless of whether the proposed rule is enacted, contractors can prepare to effectively contract through supply schedules in a few simple ways.
- Understand the Special Item Numbers that apply to you.
Within each schedule, similar products and services are grouped together as Special Item Numbers. SINs allow the government purchaser to more easily identify which items and vendors might be responsive to their needs. Therefore, it is important that the products or services you are offering are represented under the appropriate SIN. This will enable the “right” buyer to find you and decrease the chances of a missed bidding opportunity.
- Review your pricing strategy.
As the GAO report notes, not all FSS vendors price their offerings in the same way. For some contractors, the prices listed on the schedule are ceiling prices. For others, listed prices are the vendor’s best possible pricing. As a result, the same item may be offered at widely varying prices among vendors. When developing your pricing strategy, consider whether or how discounts may play a role. You can compare your pricing with that of your competitors through GSA Advantage to help determine your competitiveness.
- Expect one (or more!) requests for discounted pricing.
GAO’s focus on discounts suggests that FSS vendors should be prepared to receive and respond to an increased number of government requests for discounts. GAO found that contracting officers placing orders for FSS items above the simplified acquisition threshold often failed to ask for discounts, despite the FAR requirement to do so. This is a prime area for change, as the government seeks to educate its employees about the regulations applicable to FSS procurements.
Of course many COs do request discounts from suppliers on FSS orders. In fact, according to the GAO report, some COs asked for discounts more than once on the same order. FSS contractors should be aware that government buyers are often required to ask for discounted pricing, even if the contractor has already included some discount in its list price. It is up to the contractor to determine what, if any, discount to offer on schedule pricing. The GAO report points out that government requests for discounts more often than not result in discounted pricing.
The report recommends that federal agencies offer additional guidance and training to educate employees about the FSS program and requirements for its use. The Defense Procurement and Acquisition Policy has since issued a memo [pdf] providing guidance to government purchasers on how to effectively use supply schedules to obtain the best pricing available. As for DPAP’s advice to government buyers? Ask for discounts and ensure that offered prices are fair and reasonable.