GSA’s Proposed Rule Change to Acquisition Regulations Causes A Stir
On Wednesday, March 4, 2015, the General Services Administration (GSA) released a long anticipated, proposed rule change to the Price Reduction Clause for vendor acquisitions. If the proposed rule is finalized, GSA will begin collecting transactional data on all GSA government-wide non-Federal Supply Schedule (FSS) vehicles where transaction data is not already being captured. For FSS vehicles, the changes would be implemented in phases, beginning with a pilot program for selected products and services. FSS customers will be able to take advantage of the opportunity to have price-paid information from vendors when competing for pricing, and vendors will not be subject to the “tracking customer” provisions of the price reductions clause, which requires that they monitor their pricing.
How the Rule Change will be Implemented
The data generated from this pilot program will help set benchmarks for pricing and quality metrics, generate improved innovation, increase market intelligence, improve supply chain management, and ultimately provide the best value for taxpayers. According to Anne Rung, the Office of Federal Procurement Policy’s Administrator, “the proposed rule is going to be a pilot … designed to help streamline the regulation.” After results of the pilot program are analyzed, GSA will determine, in consultation with the Office of Management and Budget (OMB), whether the use of this new clause will be kept or contracts will revert back to using the tracking customer provision of the original price reduction clause.
Currently, the price reduction clause helps to ensure that vendors abide by the rule that the government receives the vendor’s best price for goods and services. If the vendor does not abide by this rule and offers different prices for the same goods and services to other organizations or companies, then a whistleblower, agency inspector, or the Department of Justice can file a False Claims Act lawsuit against the vendor. Last year alone, the DOJ won more than $24 billion in settlements from such cases.
Unfortunately, many vendors have not been able to comply with the price reduction clause because they have grown too large, or simply have not been able to track unit pricing at the contract level. GSA’s proposed rule change would require vendors to report transactional data, such as unit pricing, quantities of items sold, and product codes, etc. This data would be used to curb the (often significant) pricing variations amongst vendors and unnecessary duplication of contract vehicles. It will allow GSA’s customers to compare prices before placing orders and allow contractors to report prices paid for their goods and services using a user-friendly, online reporting system. Additionally, these rule changes are intended to integrate with and support the government-wide category management system. To learn more about category management, view the BH Sky February 2015 blog.
According to vendors, the proposed rule includes a number of troubling statements, assumptions, and rationale regarding implementation of transactional reporting. It raises significant concerns regarding competition and the operational burdens placed on business in general, and small business in particular. Moreover, the combination of transactional data reporting and horizontal pricing will serve as a framework to control wages and prices through a constant drive to lower prices regardless. A system that seeks to drive down prices through constant comparisons of individual transactions leads to a downward spiral in pricing that is inconsistent with the dynamics of a free market and can ultimately lead to a negative impact on the U.S. economy.
The comment period for the proposed rule change remains open until May 4, 2015. To submit your comments, click here. Further details regarding the pilot program are available on the GSA Interact platform.
About BH Sky
BH Sky Associates, based in Princeton, New Jersey, and Washington, D.C., helps clients identify, negotiate, secure, market and manage procurement opportunities and contracts at federal, state, and local levels of government. It is New Jersey’s only company specializing in GSA/VA Schedule Contracts and Government Market Intelligence. BH Sky offers professional consulting services to small and mid-size companies in a wide range of industries seeking to do business with the government. For more information, view our videos or contact us directly by phone 866.468.7420 or email.