What does FAS mean by “leveraging the federal government’s collective purchasing power?”

The General Services Acquisition Regulation (GSAR) and Federal Acquisition Regulation (FAR) set forth policies and procedures for evaluating and negotiating “fair and reasonable” pricing at the contract level under the Federal Supply Schedule (FSS) program. GSAR addresses the negotiation of FSS pricing based on the submission of a supplier’s Commercial Sales Practices (CSP) and alternatively suppliers who have elected to report transaction data (TDR) where no CSP is required. The GSAR guidance contains specific references to, and incorporation of, the FAR’s guidance on the factors to be considered in analyzing and determining “fair and reasonable” pricing for FSS contracts. Both GSAR and FAR were subject to the transparent rulemaking process where the public was given the opportunity to review and provide comments on proposed rules.

Sometime in 2021, the Federal Acquisition Service (FAS) issued “FAS Policy and Procedure (PAP) 2021-05, Evaluation of FSS Program Pricing.” The specific date the PAP was issued is unclear because the PAP was not subject to the transparent rulemaking process. The PAP essentially “supplements” the GSAR and FAR by providing FSS contracting officers with additional guidance regarding the analysis and negotiation of contract-level pricing. The PAP contains a number of new directives, including establishing a new data request pricing policy and adding new responsibilities for FSS contractors negotiating pricing at the contract level. In some cases, these directives are inconsistent with the FAR and/or GSAR guidelines. In other cases, they go well beyond the FAR/GSAR and impose new requirements that have not been reviewed through the public rulemaking process.

For example, the PAP’s executive directive tells FSS contracting officers to “leverage the federal government’s collective purchasing power” when negotiating contract-level pricing. However, the PAP does not define or instruct contracting officers on what it means to exercise collective purchasing power. Additionally, the terminology “leveraging the collective purchasing power of the federal government” does not appear in the GSAR or FAR. Leveraging collective purchasing power to obtain lower prices is fundamentally dependent on the terms of the proposed contract (eg, volume commitments, mandatory use, and limited contract pool). Below is a table that sets forth (1) the key contract features necessary to utilize collective purchasing; and (2) the key features of the FSS program:

Key characteristics for “harnessing collective purchasing power”:	Key features of the FSS program:
Compulsory source of supply. The contracts contain terms promising that the buyer will purchase from the contractor for all items covered by the contract.	The Federal Supply Schedule is not a mandatory source of supply. See FAR 8.001. Agencies can use any number of pre-existing contract vehicles in addition to FSS or they can create their own contracts.
Limited number of contracts (e.g. single source of supply) creates a closed market which limits the choice of the purchasing organizations.	There are 13,000 active contracts, which together contain millions of commercial products and services. The FSS program has continuous open seasons for receiving new offers and negotiating contracts. There are hundreds, even thousands, of contractors offering the same or similar products and services that mirror the commercial market, providing competition and choice for client agencies.
Significant volume commitments based on collective requirements (eg 100,000 widgets, $250,000 minimum guaranteed).	$2,500 guaranteed minimum over the potential 20-year life of a contract with the ability to compete for task and supply orders in accordance with the FAR and agency supplemental regulations.
Operating rules that prioritize or drive purchases through the mandatory contracts.	FAR 8.4 competitive procurement procedures for task and supply orders and framework purchase agreements (BPAs) among the 13,000 contractors.
Business IT systems that restrict and/or prohibit purchases from non-mandatory sources. IT systems linked to the single source supplier.	GSA E-Systems (e-buy, GSA Advantage, Catalog Platform) facilitates order-level competition that complies with FAR 8.4.
Price protection – most favored nation clauses.	The price reduction clause (PRC) is found in contracts where prices are negotiated based on CSP. China violates FAR 8.4 competitive procurement procedures while restricting competition in the commercial market.

The FSS program is not designed to “leverage the collective purchasing power of the federal government” at the contract level. Rather, the FSS program is designed to provide client agencies with transparent and efficient access to the commercial marketplace, thereby increasing competition, choice and innovation at the order level. Most importantly, the ordering procedures and E-systems enable client agencies to leverage and compete with their specific order-level requirements. It should be noted that Congress mandated the order-level competition requirements consistent with the understanding that order-level competition for agency-specific requirements is what drives price and value. In summary, the key features of the FSS program reflect the time, talent, and treasure that GSA has invested in developing a strategic, commercial marketplace that promotes price, value, and quality competition at the order level. The success of the FSS program is the direct result of these investments.

As the chart shows, the PAP’s “leverage” directive is fundamentally inconsistent with the structure of the FSS program and is inconsistent with the FAR. As a result, FSS contractors and tenderers/contractors are in an untenable position. How do contracting officers exploit what isn’t there? How do suppliers provide pricing in response to FAS requirements when there are no leverage requirements at the contract level? GSA and its contracting officers do not have the authority to design FSS policy and contract terms consistent with the key characteristics of leveraging collective purchasing power.

For regulatory/policy transparency and consistency, FAS should rescind the PAP, meet with all stakeholders to discuss the key features of the negotiation process and, to the extent necessary, develop draft pricing guidance and provide an opportunity for public review and comment. One place to start this process would be for FAS to review and respond to the feedback coalition members have already provided.

Carnevalestoricocivitonico

What does FAS mean by “leveraging the federal government’s collective purchasing power?”

Kaneb

Kaneb

Related Posts