GSA Schedules: A Primer

The confusion concerning the GSA Schedules program begins with the name; the so-called Federal Supply Schedules comprises two sets of contracts managed by separate entities:

• The Multiple Award Schedule (MAS), run by GSA’s Federal Acquisition Service, was recently transformed from a suite of discrete, haphazardly scoped contracts (e.g., Schedule 70, MOBIS) to its current singular MAS iteration, which classifies its offerings in accordance with the government’s new category management structure, and
• The VA Schedules, which the Department of Veterans Affairs operates under delegated authority from GSA for medical products and services, and which are primarily used by the VA itself.

For government buyers, the procedures to use a Schedule are streamlined and consistent. Ordering agencies can satisfy all competition requirements by posting their RFQ to eBuy and then evaluating “all responses received using the evaluation criteria provided to the schedule contractors” (FAR §8.405-2[d][2]). Most critically, Schedule buys allow the government a get-out-of-jail-free card on FAR Part 15’s arduous rules around negotiations with offerors, including the requirement to set a competitive range. This allows outside-the-box solutions, such as limiting negotiations to only the highest rated offeror.

For MAS sellers, securing a schedule begins by submitting a proposal to a GSA regional office, such as Auburn, Washington (professional services), or Crystal City (IT), and varies widely, sometimes even within offices. Companies that attempt escalating issues to GSA headquarters, and even those who diligently negotiated with regional contracting officers, have seen their contracts audited by GSA’s inspector general, and canceled. The VA side is somehow even more challenging, with an even more aggressive VA inspector general’s often conducting audits before Schedule contracts are even awarded. Consider it a welcome to a treacherous VA supply chain.

For many Schedule holders, such unexpected lawyer, consultant, and accountant expenses do not automatically flow to a reimbursed cost pool; they become evidence A of the red tape (and red numbers) that kill companies’ federal dreams.

GSA Schedules have outlasted many acquisition reforms

The Schedules, borne under President Truman, have weathered many acquisition trends over their 70+ year history:

• Competition in Contracting Act of 1984, which established full and open competition as the standard by which the government acquires goods and services. All Schedule orders are automatically conducted on a full and open basis, because regulation says so.
• FAR Part 15 rewrite in 1996, laying out a new approach for the federal bid-and-proposal process, which created a complex, confusing framework for postaward discussions with offerors, and whose procedures are often unwisely repurposed on Schedule and other procurements. The FAR states Schedule buys are specifically excepted from this revised Part 15.
• Federal Acquisition Streamlining Act of 1994, implemented at FAR Part 12, which preferences procurement of commercial over noncommercial goods and services through streamlined procedures and contract clauses. These are incorporated into the Schedules.
• Clinger-Cohen Act of 1996 established the Government-wide Acquisition Contracts (GWACs) run by OMB-designated agencies for the purchase of both commercial and noncommercial IT; these contracts are among the Federal Supply Schedules greatest competition, but GSA double-dips by offering GSA Schedules and GWACs, such as Alliant II, STARS III, and others. Critically, the GWACs’ noncommerciality allow cost-type task-orders, the life blood of defense contracting and those raised on it. DOD’s significant investment in its acquisition workforce has seeded the government with such defense-trained practitioners.

While the Schedules emerged largely unscathed from each reform, they were refashioned each time as the solution du jour: they became commercial contracts, they offered streamlined ordering procedures, and they included the largest IT contract in the world (Schedule 70, now part of MAS). Further, their long history and broad use contribute to their breadth and depth; today, a high-yield ribbon for an IBM Selectric II typewriter, introduced in 1971, is available from at least three different Schedule holders. Acquisition reforms that require no change in practice tend to take hold.

The current negotiation scheme

GSA Schedules are unique in that they are evergreen contracts—that is, always open to new offers—with pricing predicated on the offeror’s commercial sales practices. GSA considers any sale other than to the federal government, even to a federal prime contractor, as a commercial sale.

Offerors disclose their commercial pricing practices to GSA, which then uses that information to negotiate against the contractor for “most favored customer pricing,” or the lowest price the contractor has ever sold each item. This is known as vertical pricing negotiation, as fair and reasonable pricing is assured within the offerors’ sales practices only, instead of by comparing offeror pricing to competitors.

Then, GSA contractually ties a category of the offerors’ customers to its Schedule contract, so that a discount to that category of customers (also known as the basis of award) triggers an automatic discount to Schedule pricing.

This leads to an enormous compliance trap for contractors, as even one mispriced sale to the basis-of-award customer throw the contract out of compliance, triggering automatic discounts and penalties.

A change is coming?

GSA hears constant complaints from its contractor partners that the current pricing scheme is untenable. It has come up with a fix: transactional data reporting. Under TDR, pricing will be negotiated horizontally, that is, by comparing it to competitors, and offerors will report their actual sale prices quarterly for government analysis. This would drastically streamline Schedule contract awards and administration, and may be implemented within the next 18 months. Emphasis on maybe.

Do you have questions about GSA Schedules? Chaedrol can help.