Trends in GSA contracts

The first change relates to the proposal instructions: they have become more complex, especially with the seemingly constant evolution of eOffer. The second relates to pricing. In brief, GSA has redefined “fair and reasonable pricing” in a way that gives the government additional leverage in pricing negotiations.

Despite these changes, the basic advantages of these task order contracts remain the same. They have broad scopes of work, can be used by all federal government departments and agencies, and contain no ceilings. Firms can submit proposals for these contracts at any time, and do not have to demonstrate prior experience with government clients. The RFPs are “standing:” they have no closing dates, and firms can submit proposals at any time. Once issued, a contract is good for a 5-year base period, and contains options for 15 more years.

Sales under GSA Schedule contracts remain strong. In 2013 alone, firms booked revenues of $2.8 billion, $450 million, and $4.4 billion, respectively, under their GSA Schedule contracts for environmental services, engineering services, and planning and management consulting services.

1. Instructions are much more complex, especially with the continuing evolution of eOffer.
Solicitation packages for GSA’s Schedules program used to be relatively straightforward. The main document in the package, the RFP, was self-contained. For some sections of the proposal, the RFP referenced stand-alone guidance documents, but the latter were tightly integrated with the former.

The popularity of GSA Schedules program resulted in a vast growth in the number of firms that submitted proposals, and GSA wisely decided to develop a Web-based portal, named “eOffer.” In many respects, eOffer is remarkably robust, and has introduced efficiencies for offerors and GSA alike. Virtually all GSA proposals are now submitted via eOffer, avoiding the need to duplicate, bind, send, and manage hard copies.

In many respects, however, the switch to eOffer is still in a transitional phase. New modules are being added fairly frequently, and these changes are not always well described—or even mentioned—in the formal RFPs, even though the latter are periodically updated.

Also, as eOffer is expanded, GSA’s goal is to make it easier for offerors, by having them enter data directly into screens in eOffer rather than by creating and uploading stand-alone documents. But these changes can be confusing. For example, the written instructions for virtually all GSA Schedules for professional services state that an offeror can use one project description to illustrate the firm’s experience in more than one Special Item Number (SIN). But eOffer has recently changed, and offerors are now required to enter project descriptions into text boxes in eOffer; and this change has not been implemented in a way that makes it easy to handle project descriptions that correspond to multiple SINs.

In the transitional period, the written RFP instructions are not keeping pace with the additions to eOffer.

The challenges that this presents can be subtle. The online instructions and definitions of terms in eOffer do not always match their counterparts in the RFP and the stand-alone guidance documents. And in some cases, neither eOffer nor the main text of the RFP match instructions embedded in the “templates,” checklists, and standard-format summary documents, which are also provided in the solicitation package.

Many other aspects of the proposal process have been transitioned to other websites. To submit a GSA proposal, proposers now have to successfully interact not only with eOffer, but also with other websites related to representations and certifications, various certificates, past performance reviews, “readiness assessments,” and basic business information (e.g., the firm’s official name and address, which can only be changed via a Web-based system administered by Dun and Bradstreet).

None of these websites in and of themselves are terribly hard to navigate. There are many interactions among the websites, however, creating interdependence and sequencing issues that can be difficult offerors to handle.

2. Pricing negotiations are tougher.
There have been virtually no changes to the types of pricing information that firms are required to include in their proposals. But GSA has made a policy change regarding how Contracting Officers evaluate this information, and this has given the agency substantial new leverage in pricing negotiations.

In its proposal, a firm has to disclose its standard commercial pricing for products and services it is offering, and also whether it provides discounts to any individual customer or class of customers. In broad strokes, until fairly recently GSA typically would find a firm’s proposed pricing for its GSA contract to be “fair and reasonable” if a firm proposed fixed hourly rates (for services) or unit prices (for products) that were lower than the prices that the firm offered to a relevant class of commercial “most favored customers” (MFCs).

If a firm offered a bigger discount to GSA than it offered to its (the firm’s) relevant MFCs, GSA typically would find that proposed pricing to be “fair and reasonable.” To be sure, GSA would often try to negotiate a larger discount—and would sometimes push for this on the basis that a firm’s proposed GSA prices for a particular labor category or product were far above the “average” GSA price for that labor category or product.

But it was considered to be unremarkable that for professional services, GSA would award some contracts that had hourly rates that were higher—and in some cases, far higher—than rates for similar labor categories in other firms’ GSA contracts. GSA contracts are considered to be “commercial contracts,” and price variation epitomizes the commercial market for services. For many types of professional services, different firms are able to obtain different hourly rates based in large part on how commercial customers evaluate the quality, responsiveness, and timeliness of different firms’ services, the quality and expertise of their staff members, and other factors (e.g., regional variations in labor markets).

Fairly recently, however, GSA announced a new definition of “fair and reasonable pricing,” in a new statement that appears near the beginning of most of its RFPs for Schedule contracts, for services and products: “To determine fair and reasonable pricing, the GSA Contracting Officer may consider many factors, including pricing on competitor contracts…. Offers which provide Most Favored Customer pricing, but which are not highly competitive will not be found fair and reasonable and will not be accepted” (emphasis added).

This policy is relatively easy to understand for GSA Schedule contracts for products—i.e., in cases where different GSA contractors are offering virtually identical products, on identical terms, under their GSA contracts.

It is less clear, however, how this policy will be consistently implemented for GSA Schedule contracts for professional services. It is now a common practice for a GSA Contracting Officer to invoke the “highly competitive” standard in pricing negotiations. That is, even if a firm offers GSA hourly prices that are at a discount to its MFC pricing for each labor category, the GSA negotiator might insist on even lower pricing based on the “highly competitive” policy, even though the commercial market clearly values the firm’s services at relatively high hourly rates.

Pricing negotiations for GSA Schedule contracts now can be especially challenging for firms that compete on service and not on price. It is important ensure that their proposals fully reflect the unique value propositions associated with their professional labor categories. In brief, a firm has to articulate the characteristics, strengths, and special qualifications that are associated with each labor category, and must be prepared to proactively define relevant comparisons with selected other contractors—i.e., other contractors that truly form the basis for apples-to-apples comparisons of labor prices.

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For many firms GSA Schedule contracts continue to be excellent parts of their portfolios. But there are two key trends in GSA contracts that can complicate the process of obtaining one. As GSA continues to modernize its approach, offerors face various challenges during the transitional period. In addition, GSA has adopted a new approach for negotiating pricing, which can be challenging for firms, especially those offering professional services.

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