Aronson GSA Schedule Consulting Practice consultants Jennifer Aubel and Jacelyn Ferriell recently presented a webinar The 10 Commandments of GSA Schedule Compliance. The audience had a ton of questions that others may have too. Below is the Q&A recap from the event.
Question: What is the relationship between the Maximum Order Threshold and Price Reduction Clause?
Answer: Each Special Item Number (SIN) on the GSA Schedules has a Maximum Order Threshold (MOT). The MOT is the dollar value for an order at which agencies are instructed to seek deeper discounts from the contractor. As such, GSA assumes that your commercial customers may also be receiving better discounts at this point. Firm, fixed price commercial orders with definite quantities and delivery are exempt from triggering price reductions.
When negotiating your contract, you should identify commercial sales exceeding the MOT and disclose any additional discounts or concessions extended to those customers in your Commercial Sales Practices (CSP). As a best practice, you should continue to monitor your sales practices after contract award and update your CSP to incorporate any new discounting practices, whether or not they are associated with the MOT.
Question: Our company is under GSA IT 70. If our GSA schedule that was done years ago did not include any terms about experience or education substitution (more specifically, all the categories requires Bachelor + Experience), is it possible to renegotiate and modify our schedule so it can include the substitution terms?
Answer: Yes, you can request to modify the awarded labor categories on your contract. In our experience, some GSA contracting officers will not allow you to add substitutions because they view this as diminishing the value of the category. You are more likely to be successful if you can demonstrate that your company uses experience or education substitutions commercially. Consult your GSA contracting officer to determine the type of modification you should submit.
Question: Could you please provide an example for an exception that could be proposed in the CSP?
Answer: While there are broad categories of exceptions to the price reductions clause; ultimately, exceptions need to be tailored to the contractor’s unique business practices, and terms and conditions with their customers. Each contractor should perform an in-depth analysis of its sales practices when negotiating the initial GSA contract and conduct internal reviews at regular intervals after award to ensure the CSP remains current, accurate, and complete. During this process, exceptions should be identified and disclosed.
One example from the webinar was special consideration given to resellers. Resellers typically offer the contractor additional value that justifies a reduction in the sales price. For example, they may market your products, reducing your overhead costs. GSA would never market a company’s products; therefore, GSA should not receive the same level of discount. We recommend you consult with someone who has an in-depth understanding of CSPs to assist in identifying what exceptions may apply to your company.
Question: What happens if you quote GSA pricing, but do not include the contract number?
Answer: Quoting GSA prices alone will not automatically make this a GSA sale, although the burden of proof will be on you to demonstrate why it isn’t. Documentation is important so that GSA does not see that you quoted the customer GSA rates and assume this is a GSA sale. The contract number or solicitation number that was utilized should be included on your quote and invoice. Be sure to properly document when a federal sale is a non-GSA sale on future orders to maintain compliance and avoid the risk of owing IFF on orders that do not utilize your GSA schedule.
Question: If we put a bid in as FFP and use, at least partially, folks that do not meet labor category definitions – but do use some folks that meet them, are we in violation since there is no T&M element and possibly no labor build?
Answer: This is a very complex issue. In an audit, GSA would look to the Firm-Fixed Price (FFP) proposal to see how your pricing was quoted to the customer. If you include a labor breakdown that shows each category and a proposed number of hours to arrive at the total contract price, GSA would expect the employees staffed to be qualified personnel. When labor categories on a proposal are mapped to an employee, the contractor should ensure that employee is qualified based on the awarded labor category descriptions.
In a recent audit we supported that included a large number of FFP orders, the auditor tried to get names and resumes for the personnel who worked on those projects. We argued that they were not entitled to that information because it was not the basis for billing the government. The auditors did not agree with our position. Ultimately, we referred the client to a GSA-focused attorney to resolve the issue.
Question: If the GSA reduces your price because of the [transactional] data, would you be able to reduce your discounts offered?
Answer: Contractors should keep Transactional Data Reporting (TDR) in mind whether it is currently applicable to their contract or not. If GSA continues with this initiative, it will have a direct impact on all contractors’ schedules in the future. TDR will attempt to capture a contractor’s GSA sales data down to the specific product/service purchased and the unit price the customer paid. Because many contractors offer spot discounts at the order level, we assume GSA contracting officers may begin using this data as the basis to renegotiate a contractor’s ceiling rates. Should GSA request a reduction in your prices based solely on the data they see from TDR, your basic discount to GSA customers will increase. This may have implications on the spot discounts you would be able to offer your GSA customers going forward. You would be able to reduce spot discounts on new orders.
Question: Is travel considered an open market item?
Answer: Yes, travel is considered open market and is specifically classified under Other Direct Cost (ODC). As such, travel is not considered part of the GSA sale and should not be reported. Further, the agency does not pay Industrial Funding Fee (IFF) on travel, so you should not include travel when calculating your IFF on a given order.
If you missed the event, watch a recording here. Be sure to subscribe to Aronson’s FedPoint blog to get notifications whenever new information like this is posted. For more information, contact Jacelyn Ferriell at 240.364.2715 or firstname.lastname@example.org.