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Tag: PRC

The Price Reduction Clause needs to go

On July 9th, the Biden administration issued the Executive Order on Promoting Competition in the American Economy. Much of the focus of the Order is on fair and open competition. One way to accomplish this is the elimination of the Price Reduction Clause (PRC). The elimination of the PRC will streamline the Federal Supply Schedule (FSS) program by removing barriers to entry into the federal marketplace. (Federal News Network July 19, 2021)

Robin Carnahan, General Services Administration Administrator, during her confirmation hearing, said, “I’ve talked to businesses that have tried to get on GSA Schedules… [T]hey’ve told me about how difficult that process is, and I’m interested in learning more about how we can streamline that.” The Price Reduction Clause elimination is a start. (ibid)

One could argue the following points to eliminate PRC:

  • The advancement of technology and the use of new purchasing practices have all but rendered the PRC obsolete.
  • The PRC can keep agencies from purchasing ground-breaking technologies from new vendors.
  • The PRC puts an undue compliance burden on small, medium, and large FSS contractors, costing them millions of dollars each year.
  • Price and value are driven by competition, at the task order level and in real-time. The PRC pre-determines contract-level pricing, often negotiating against presumed requirements from the past.
  • Compliance costs of the PRC can be detrimental to small businesses attempting to address the PRC’s complex compliance requirements.
  • The PRC is the only governmentwide contract term that can restrict contractors working with the government from competing in the commercial marketplace. This hurts jobs and economic growth. (ibid)

The elimination of the PRC will increase competition. Small businesses will more easily compete as price and value will drive task order-level competition. Without PRC’s complex compliance requirements,  small businesses will finally be able to afford to compete.

Looking to provide services to the government but the PRC has been a stumbling block? Give us a call.

 

Not everyone is sold on the Transactional Data Reporting (TDR) pilot

Almost five years ago GSA launched the Transactional Data Reporting (TDR) pilot to replace the Price Reduction Clause (PRC). GSA’s goal is to use the data received, to obtain better pricing from contractors. GSA calls TDR a success, critics are not so quick to agree. (Federal News Network May 10, 2021)

Jeff Koses, GSA’s senior procurement executive said, “GSA has successfully demonstrated the value of TDR under the existing scope of the pilot. It has shown steady progress over the past four years, met most of the pilot’s objectives in the most recent year, and has made the necessary investments to leverage TDR’s potential in the years to come. We will continue to make improvements, especially in contracting officer usage.” However, Koses made no mention of using the TDR information in 2019 or 2020 (ibid).

Some argue that TDR works on paper, but not in reality. Many contracting officers are reluctant to use the data for decision-making. One industry expert went so far as to say, “I have not experienced any negotiations based on TDR data in order to form an opinion.” Others have suggested that the data is incomplete and that GSA has no strategy to back the pilot. (ibid)

One consultant pointed out that as more companies participate in TDR, the IG’s ability to audit prices before an award is made is more difficult. She noted, “under the TDR pilot, the population of auditable contracts has ostensibly been cut in half. When you remove the major resellers and the integrators, what remains are largely professional service contractors and products companies under Schedules 84 (Law Enforcement), 71 (Furniture), and 66 (Scientific). The audit threshold for annual sales is also reduced due to the smaller pool of contracts from which the OIG is selecting. Small businesses who would never have been a blip on the OIG’s radar are now at much higher risk of pre-award audit.” (ibid)

Another complication is GSA’s move toward unpriced contracts under Section 876 of the 2018 National Defense Authorization Act. The Act makes the Price Reduction Clause as well as TDR less necessary because the burden is on vendors to provide the lowest price possible as part of contract negotiations. (ibid)

Koses said GSA will refine and consider:

  • The ability of Federal Supply Schedule contracting officers to use transactional data for price negotiations in lieu of commercial sales practices and price reduction clause disclosures
  • The impact of an expanded data collection on GSA’s ability to use the data it currently collects
  • The impact on current/future GSA schedule contract holders
  • Communication to industry partners
  • Training and tools for category managers not impacted by TDR
  • Possible impacts on other FAS initiatives such as the National Defense Authorization Act (ibid)

So when will the pilot move to production? The waters remain murky. Whether the IG will move from the production stage should be made more clear when the Inspector General report on the TDR pilot is released, in the coming weeks. Vendors should be ready to invest in systems to collect and report pricing data, should the TDR pilot go into production.

Questions concerning how to collect and report pricing data? Give us a call.