“High Risk” Areas In GSA Schedule Contracting – Checklist for Compliance

1. “High Risk” Areas In GSA Schedule Contracting – Checklist for Compliance William A. Shook, Esq. G. Matthew Koehl, Esq. November 12, 2008

2. Presentation Outline • Overview of GSA Multiple Award Schedule (MAS) Contract Program • High Risk Areas 1. Commercial Sales Practices (CSP) Disclosures 2. Price Reductions Clause 3. Trade Agreements Act 4. Unapproved Item Sales 5. Employee Qualifications 6. Industrial Funding Fee Tracking and Payment

3. GSA MAS Contracts - Background • GSA MAS program has grown substantially since mid-90s: • Federal acquisition reform • MAS program grows to $35.8 billion in FY ’07 sales • > 18,000 GSA MAS contracts • Program under scrutiny in recent years

4. GSA MAS Contracts – Background • GSA is the lead procurement agency • GSA establishes long-term “schedule” contracts with pre-negotiated prices and terms and conditions • Contracts open Government-wide (and beyond) • GSA MAS contracts are often preferred contracting vehicle

5. GSA MAS Contracts – Background • Streamlined ordering process for Federal customers • GSA Schedule ordering agencies are not required to: • Seek further competition • Synopsize the requirement • Make a separate determination of fair and reasonable pricing • Consider Small Business programs

6. GSA MAS Contracts – Background • Below $3,000 micro-purchase threshold: place order with any GSA MAS contractor or any other vendor • Above micro-purchase threshold: place order with the GSA MAS contractor that represents the “best value” • Consider reasonably available information on GSA Advantage! • Review catalogs or pricelists of at least three schedule holders • FAR 8.405-1 • Additional ordering procedures for service Task Orders requiring a Statement of Work (SOW). FAR 8.405-2 • No limit on size of GSA MAS orders • VERY FAST and EASY for agency buyers, even for large requirements

7. Agencies simply issue individual Task Order (TO) or Delivery Order (DO) to the GSA MAS contractor DO/TO must reference contractor’s GSA Contract Number No separate negotiations of terms and conditions OK to include additional terms in best interest of Government, so long as no conflict with GSA terms and conditions Spot price reductions very common, even expected GSA MAS Contracts - Background

8. 1. Commercial Sales Practices (CSP) Disclosures • The Requirement • Mandatory contractor pricing and sales/discount disclosures by customer/customer type • CSP-1 Format • Initial contract award • Each 5-year contract extension • “Current, accurate and complete” certification

9. 1. Commercial Sales Practices (CSP) Disclosures • Problem Areas • Incomplete research of sales practices and sales transaction data • Failure to archive research of sales practices and sales transaction data • Use of generic customer types vs. actual customer categories employed to process orders • Undisclosed non-standard discounts

10. 1. Commercial Sales Practices (CSP) Disclosures • Steps to Avoid Problems • Review of internal pricing policies and procedures • Review of contracts and raw sales data • Involvement of sales and bid desk executives • Archive for pre-award “due diligence” efforts

11. 1. Commercial Sales Practices (CSP) Disclosures • Steps to Avoid Problems (cont’d) • Documented practices for standard and non-standard discounts • Conforming CSP customer designations • State that non-standard discounts are excluded from application of the Price Reductions Clause • Certify to “current” and “accurate” but not “complete”

12. 2. Price Reductions Clause • The Requirement • Basis of award (BOA) customers or customer categories • Benchmarking commercial list price and federal customers • Trigger requirement for discounts to BOA customers and reductions to applicable commercial list pricing • Model contract clause • CSPs and Final Proposal Revision (“FPR”) letter

13. 2. Price Reductions Clause • Problem Areas • Failure to monitor sales transactions with BOA customers • Use of generic customer category descriptions • Reliance on outdated or inaccurate GSA pricelists • Untrained Sales and Bid Desk staff

14. 2. Price Reductions Clause • Steps to Avoid Problems • Review proposal and award documents for correct tracking customers and discounts • Negotiate realistic tracking customers • Clarify definitions of tracking customers • Alternative Price Reduction Clause compliance mechanisms (e.g., average discounts)

15. 2. Price Reductions Clause • Steps to Avoid Problems (cont’d) • Exclusions to PRC application (e.g., spot discounts) • Price and discount monitoring procedures for triggering events • Internal pricing policies and controls

16. 3. Trade Agreements Act (TAA) • The Requirement • Absolute prohibition on goods and services from non-designated countries • TAA designated country list and FAR TAA Certificate • “Substantial Transformation” test • TAA applicability at contract/order level?

17. 3. Trade Agreements Act (TAA) • Problem Areas • Place of manufacture of commercial items • Change of country of origin • Multiple countries of origin for same item • High risk product categories • Internal company systems lack historical information

18. 3. Trade Agreements Act (TAA) • Steps to Avoid Problems • Procedures that monitor and update country of origin status • Archive for historical country of origin information • Manufacturer certification and indemnification • Annual reviews

19. 4. Unapproved Item Sales • The Requirement • Statutory status of MAS program allows simplified ordering procedures • Standard competition requirements apply for non-MAS items and services purchased with MAS items • Contractor notice requirements for non-MAS items and services

20. 4. Unapproved Item Sales • Problem Areas • Sales staff unaware of current MAS-approved items • No procedures to distinguish approved vs. unapproved items • Reliance by sales staff on outdated MAS pricelists • Infrequent modification submissions • Delayed GSA approval of modifications • “Mixed” quotes and proposals

21. 4. Unapproved Item Sales • Steps to Avoid Problems • Internal procedures for identification of currently approved MAS items • Regular MAS contract modifications • Procedures to identify unapproved items in quotes

22. 4. Unapproved Item Sales • Steps To Avoid Problems (cont’d) • Creation of automated order entry system for approved and unapproved items • Reject MAS orders that fail to identify open market items • Website identification of approved and unapproved items

23. 5. Employee Qualifications – Professional Services • The Requirement • MAS contracts with hourly and daily service offerings • GSA-approved labor categories identify employee requirements for education, experience, etc. • Employees billed must meet labor category requirements • Compliance is regularly examined

24. 5. Employee Qualifications – Professional Services • Problem Areas • Failure to establish procedures to supply qualified personnel • Use of labor categories and definitions from other sources • Use of outdated and incomplete resumes • Failure to archive resumes

25. 5. Employee Qualifications – Professional Services • Steps to Avoid Problems • Internal procedures to verify personnel experience and labor categories • Procedures to collect, verify, update and archive employee resumes • Regular examination and modification of labor categories

26. 6. Industrial Funding Fee (IFF) • The Requirement • 0.75% contract usage fee charged to MAS ordering agencies • IFF funds operation of MAS program • MAS contractors collect IFF from ordering entities and remit to GSA on a quarterly basis • MAS items subject to IFF; no IFF on “open market” items + travel • Regularly audited • Contractor burden to prove MAS item orders not subject to IFF

27. 6. Industrial Funding Fee (IFF) • Problem Areas • Use of commercial order entry system to identify MAS orders • Inaccurate data entry by sales and sales operations staff • 3rd-party sales reports from MAS dealers and lease financing companies • Contractor Teaming Arrangements (CTAs) • MAS CTA vs. traditional Prime/Sub relationship • CTA member confusion over report and pay IFF

28. 6. Industrial Funding Fee (IFF) • Problem Areas (cont’d) • Blanket Purchase Agreements (BPAs) • “Stale” lists of agreements subject to IFF • Credit card purchases of MAS items

29. 6. Industrial Funding (IFF) • Steps to Avoid Problems • Systematic update of new agreements subject to IFF • Procedure for booking MAS orders with correct identifier • Procedure to obtain and verify 3rd-party MAS contract sales reports • Consistent CTA payment rules and procedures to capture CTA and BPA sales

30. 6. Industrial Funding Fee (IFF) • Steps To Avoid Problems (cont’d) • Procedure to capture MAS credit card orders • Quarterly review of raw sales data • Procedure to document contractual basis for non-MAS purchase of MAS items • Procedure to preserve and archive IFF calculation efforts

31. QUESTIONS?