GSA’s TDR rule changes EVERYTHING

Just over a month ago, GSA published the final Transactional Data Reporting (TDR) rule designed to expunge the Pride Reduction Clause (PRC), Most Favored Customer (MFC), and the Commercial Sales Practices. Starting 22 August, new Schedule awardees whose contract is part of the pilot roll-out will be evaluated against the TDR. Existing contract holders will be allowed to opt in, but it is a voluntary, bi-lateral move.

According to GSA, “This rule asks contractors to electronically report key procurement data; including prices paid, quantity, standard part number and product description for all purchases through GSA contract vehicles. The information collected through the TDR will help contracting officers make smarter purchasing decisions and provide data to assist in negotiating future contracts.”

The upside for vendors taking on this additional burden is that they will be spared from having to worry about violating the PRC, which states that if your commercial MFC price drops below the basis of award rates, an automatic price reduction is triggered. Failing to implement this price reduction may subject the vendor to the False Claims Act, under which they can be sued for fraud. This had been one of the leading complaints from contractors. And while there are new concerns accompanying this rule, it does seek to address a the difficulty of maintaining pricing compliance.

The TDR will require an entirely new way of dealing with GSA pricing and has some significant future effects. EZGSA is developing a white paper concerning the TDR and will post it’s link here in the next week.

Pricing Your Pricing in Your Proposal

Pricing can be the biggest stumbling block for businesses applying for GSA schedule contracts. The notion that the government expects the absolute lowest price in the world, plus the fear of triggering the Price Reduction Clause, lead some to conclude that it’s just not worth the hassle and risk for such low margins.

It is tempting to automatically set your price as low as possible, especially when selling products. Here are three pieces of information that may cause you to reconsider how to structure your GSA Schedule pricing proposal.

Similar Terms, Quantities, and Conditions

The misunderstanding out there is that you need to give GSA the lowest price you’ve given anyone. The truth is that you need to give GSA the lowest price you’ve given to anyone with similar terms, quantities, and conditions.

This is a big difference. Let’s imagine that you give your distributer a 40 percent discount, but only on purchases over $250,000; this distributer takes the risk holding high volumes of your product, promotes and sells your product, represents your brand, and has their cousin Jeff drive down to the warehouse monthly to save on shipping. The government may want that 40 percent discount, but because the terms, conditions, and quantities are not similar, should they actually get it?

If you can establish that the federal government is more similar to a customer that gets a lower discount, you may be able to establish a higher GSA ceiling price.

GSA is going to negotiate during your proposal process

Before your Final Proposal Revisions are signed, your GSA Contracting Officer is going to negotiate. A CO may take the stance that your items are too expensive, no matter how slim the margins. Your company can do better.

COs are required to push that discount rate as high as possible so they can get the best deal for the government, and ergo the taxpayer. S/he will most likely push back on your proffered discount rates. If these rates are already at your limit, you may not be able to successfully negotiate during the proposal process.

Purchasing agencies are required to ask for additional discounts

Your GSA price is a ceiling price, meaning you can’t charge the government a higher rate. But you can always go lower.

“The GSA Schedule CO determines the prices of supplies and fixed-price services, and rates for services offered at hourly rates, to be fair and reasonable prior to contract award. However, ordering activities are always encouraged – and, in some cases, required – to seek additional discounts (i.e., price reductions) prior to award of Schedule orders and Blanket Purchase Agreements (BPAs).”

In order to be competitive, it may behoove you to keep prices high. You may then have room to discount individual orders from agencies.

Can Business Partners Put Your GSA Schedule At Risk?

It goes without saying that the GSA Schedule contract is between the listed business and the government. However, in reality, there are other parties who, while not held to the terms of the contract, still have a significant impact on the ability for a business to execute their contract. Suppliers or manufactures, for example, can change their rates; but it is incumbent upon each contract holder to adjust their commercial pricelist and avoid overcharging the government.

Even seemingly small changes by business partners can have serious repercussions.  This week an EZGSA client presented this problem: their major supplier, Motorola, was removing the MRSP from vendor pricing sheets. The cost to the vendor didn’t change, but there would no longer be a listed price. Yet because our client’s GSA prices were based off of a discount to the MSRP, the old GSA prices were now rendered null and void.

To continue selling to the government without addressing this would violate at least the Price Reductions Clause, and probably the False Claims Act, both of which subject the offending company to numerous penalties. And those penalties can compound the longer they are left unaddressed. Thankfully, we were able to identify the issue promptly and work with the Contracting Officer to create a new basis of award for the client.

Be aware of any changes made by the companies with which you do business. If you see something that seems out of the ordinary, ask for help. Price changes may be the result of manufacturing changes, which may indicate that the Country of Origin has changed. A new price list may require a new letter of supply. Any number of changes to how businesses choose to work with you may result in your needing to change the GSA Schedule terms and rates.

For more information or assistance, contact EZGSA at Iwohner@EZGSA.com or 301-913-5000.