Jun 20, 2013


Barbara S. Kinosky, Esq.

It’s been a stormy and now hot month in DC with what seems like an endless wave of rainy and sometimes nasty weather.  Unfortunately, that weather parallel seems to have descended (again) on GSA.  Just a short while ago acting GSA Administrator, Tangherlini, was heralding the re-tooling he has implemented at the agency.  GSA seemed posed to spread a positive message of the legitimate high value propositions that GSA has to offer to the federal marketplace.  But now another large black cloud has dropped down and pessimism is once more in the air.  And many in the federal contracting community fear that this particular black cloud may cause long term damage.

The newest derecho (a storm I didn’t know about until we got hit in the DC area) is a recent report by the GSA Office of Inspector General (OIG) finding that a division director with GSA’s Office of IT Acquisition improperly intervened in contract negotiations with several prominent IT 70 Schedule holders.  The intervention allegedly may have prejudiced the interests of the Government.  For those that have missed the report it can be found here. The OIG Report also has been widely discussed in press accounts and the blogosphere, including this recent account. Per the report the director in question on at least one occasion bypassed the GSA contracting officer assigned to and charged with conducting contract negotiations and then completed negotiations with the vendors without the participation of the contracting officer. The report also refers to other instances where contracts were re-assigned to new contracting officers to avert or resolve impasses with vendors on contract negotiations, resulting in negotiation outcomes that the OIG believes were not favorable to the Government. Certainly the OIG findings portray a series of practices that do not favorably credit GSA and, per the above referenced media report, the division director in question has now been placed on administrative leave.

Unfortunately that is not the end of the story but merely the prelude to more concerns.  What concerns you might ask?  Simply the fear that experienced GSA managers will refrain from providing their advice and assistance in resolving disagreements on difficult Schedule negotiations.

GSA Schedule negotiations are often highly complex and challenging. We can attest to this fact because we practice in this arena every day. Many commentators to this story have said GSA contracting officers are often not well trained to meet the challenges of Schedule contracting.  But those comments themselves understate the actual problem – which is that these negotiations are often so complex that even perfectly competent contracts professionals will be challenged in conducting them. The Schedule 70 program is truly massive in scope, encompassing high-end technology products, complex professional services, intricate software licenses and maintenance terms, telecommunications products and service plans, electronic commerce solutions, and electronic credentialing capabilities and solutions.

These challenges are compounded by the fact that the negotiations are conducted in an environment where GSA has an objective of obtaining the vendor’s “most favored customer” (MFC) price as the Schedule price but Schedule vendors face the market reality that they will need to further discount below their GSA pricing to actually win business. These different objectives and realities create a high potential for disagreements on what is a reasonable GSA Schedule price. When those disagreements become impasses there needs to be a basis for resolving the impasse through the advice and assistance of senior and highly experienced GSA managers. Should such managers respond to the OIG report by declining to provide their advice and experienced assistance then the Schedules program will inevitably suffer.

Now some may say so what? If vendors want the Schedule contract then they need to be prepared to accept the position of the GSA contracting officer, even when that position is a hard-line position.  Not so fast.  First there is a rule in federal contracting that the Government may not engage in disparate treatment of offerors in evaluating and awarding contracts. Some GSA contracting officers require MFC pricing but others recognize that MFC pricing is not always appropriate. Second GSA’s own pricing disclosure form (the Commercial Sales Practices disclosure form) gives the vendor the option of whether or not to offer GSA MFC pricing.  It is problematic to say that a contracting officer may demand MFC pricing when the offering documents themselves give the vendor the option of saying “no” to that proposition.  Third vendors have choices and GSA is not the only game in town. NASA and the National Institutes of Health also manage Government-wide contracts for IT products or services. And some of those contracts are in the re-compete process today. If Schedule vendors have no effective means for resolving difficult contract negotiations with GSA, they may and often should take their business elsewhere.

Let’s hope that GSA Administrator Tangherlini and his management team recognize the need to address this fear and loathing by putting out concrete guidance stating that GSA managers have an appropriate role in weighing in on and helping the parties to conclude difficult negotiation. Otherwise the black clouds may be here to stay.

PS – the media report referenced above also reveals the identity of the GSA division director who has been placed on administrative leave as a result of the OIG report.  We would feel remiss in discussing this topic if we neglected to attest that our experiences with this individual have reflected nothing but positive credit upon both this individual and GSA.  While we have not always agreed with him, or achieved the outcomes we desired, we have come away from our interactions with him and his team of contracting officers with the strong sense that he is a well-intentioned and effective government representative. These observations are not offered to diminish the legitimate concerns report in the OIG report, but to reflect our appreciation of his positive contributions to Schedules contracting.

Derecho storm image courtesy of http://www.spc.ncep.noaa.gov/misc/AbtDerechos/derechofacts.htm


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