The General Services Administration (GSA) is working overtime to get new pricing tools for buying goods and services in the hands of government contracting officers. That sounds like a great plan, but the Project On Government Oversight is pushing back on one of GSA’s proposals.
The proposal—which POGO, the GSA Inspector General (IG), and contractors have opposed—would scrap pricing protections and rely instead on prices previously paid by the government. The plan would essentially lock the government into buying commercially available goods and services at government prices rather than genuine market prices, which contractors would no longer have to disclose.
Our opposition mirrors that of the IG and is based on the fact that removing the price reduction clause, which requires contractors to automatically provide the government with discounts offered to the contractor’s “most favored customer,” will result in lost savings. Currently, the price reduction clause forces contractors to lower their prices to ensure that the government is getting the best prices available. The proposed rule will remove pricing safeguards and only require that contractors to disclose what another federal agency paid for the item or service; they would no longer have to report how much they sold that item or service for in the commercial market.
According to GSA, “[t]he current lack of transparency on prices paid by government customers has led to significant price variation, sometimes 300 percent or more, for identical purchases by federal agencies from the same commercial vendor as well as the unnecessary duplication of contract vehicles.”
Although POGO fully understands GSA’s attempt to share transactional data to rein in price variations on Schedule contracts, removing commercial market pricing safeguards will prevent the government from getting the best possible deal.
That said, GSA has taken a positive step to bring some transparency to fully loaded labor rates for services on GSA Schedule contracts. Just this week, GSA rolled out a web-based Calculated-Award Labor Category (CALC) system. The agency’s launch of CALC refers to the system as “a powerful new labor category and pricing research tool to help the federal contracting community make smarter, faster buying decisions.” Moreover, it “allows contracting officers to conduct market research and price analysis for professional labor categories across a database of contract awarded prices for 48,000 labor categories from more than 5,000 recent GSA contracts.”
The system is searchable and allows contracting officers and the public to see the full labor rates offered (not paid) to the government on Schedule contracts. Those rates are the highest rates that the government is allowed to pay for services, so they provide a nice start for negotiating lower labor prices. Combined with government prices-paid information in the GSA proposal above, and collection of actual commercial pricing data (if the GSA can be persuaded to keep requiring contractors to report this valuable piece of information), CALC could become a powerful tool for the government to get the best prices available and save billions of dollars annually.
In the past, government officials or the public had to jump around Schedule by Schedule and contract by contract to find labor costs and then compare that data; this unwieldy process was a huge burden. Now, CALC allows the user to search by labor categories and to filter by education level, experience, working at a government or contractor worksite, size of the business, and Schedule to obtain ceiling prices for the work. This move to a fully searchable electronic system will provide labor pricing ranges and specific prices for services on the Schedules. If this sounds familiar, you might recall that the final report of the Multiple Award Schedule Advisory Panel made a similar recommendation (recommendations 9, 10, and 11) in February 2010.
CALC does not provide government prices paid, so seeing any discount from the listed ceiling prices isn’t possible. But if GSA moves forward with its proposal to collect prices-paid data from contractors, we might be close to having a good system that will help contracting officers in their job. If the GSA adds in links to the Schedules, the contractors’ Schedule contract, and the contractors’ System for Award Management page, then contracting officers will have a tremendous tool that will speed up buying and result in real savings. And if the GSA went another step further by adding commercial pricing data, it would hit a grand slam: the government would then be in a good position to get the best deals possible and to better leverage its buying power.