Getting On a GSA Schedule       10

Doubtless you’ve already heard the oft-proclaimed notion that the path to government contracting riches is paved with a General Services Administration (GSA) multiple-award schedule (MAS) contract, also known as a Federal Supply Schedule contract.

But while it’s true schedules hold advantages for sellers and buyers alike, they also offer a far rockier road toward government business than you might expect—and there’s a chance of inadvertently being sucked into a sinkhole of spiraling price reductions along the way. Nor is there any guarantee that the road will end with you rolling in money: of the 5,400-odd companies in possession of a schedule contract for information technology products and services during federal fiscal year 2010, about 39 percent did no schedule business whatsoever. Another 17 percent didn’t do business worth more than $100,000.

Getting a schedule is no rote decision, in other words. You need to consider what you are as a company, your position in both the private- and public-sector marketplaces, and your plans for the next five years in both sectors before making decisions about your go-to-market strategy and the role of a GSA schedule contract within that strategy.

What the Schedules Are and Aren’t

Contracts awarded via the GSA’s MAS program are indefinite-delivery, indefinite-quantity (IDIQ) contract vehicles against which government buyers can place orders directly with the schedule holder for commercial products and services (including of-a-type variations) that the contractor agrees to sell at prenegotiated prices and terms and conditions. GSA puts the items, prices, and terms in an online catalog visible to all on the Internet.

Any federal agency can use a schedule to buy goods and services. Prime contractors working under cost-reimbursement or time-and-materials contracts can use schedules to purchase supplies on behalf of the government. Under authority called cooperative purchasing, state and local governments also can order products and services from certain schedules¹ (see Table 10-1). Participation in cooperative purchasing agreements is optional for companies. A common misconception is that when companies sell to federal agencies via a schedule contract, GSA is somehow involved in the transaction. It isn’t, not directly, or at least not unless it is hired by the agency via GSA’s “assisted acquisition services.” GSA’s primary responsibility is to award and administer schedule contracts, not get in the middle between an agency contracting officer and the schedule contractor. When a federal agency orders via a schedule contract, the contractual relationship is with the schedule contractor. This is known as a direct order, direct bill.²

Each schedule contract lasts for a minimum of 5 years with three 5-year option periods, for a total of 20 years—although along the way, you might find it makes more sense to negotiate a new contract rather than extend the current one for another 5 years. Since contractors are supposed to keep their contracts current by adding new products and services, deleting the old, and negotiating price adjustments for currently listed products, theoretically the five-year optional renewal should just be a formality. In truth, individual company experiences differ widely. Sometimes GSA will demand a contract overhaul at option renewal, in which case it probably makes sense to negotiate a new 20-year term, however scrupulously you may have modified your contract in the interim.

Another common misconception about schedules is that schedule catalog prices are final selling prices to the government. They aren’t. Schedule prices are ceiling prices that cannot be exceeded under any circumstances. The prices most agencies pay are less than schedule catalog list, because each order is subject to potential competition and negotiation.

GSA divides its schedules program by Federal Supply Classification (FSC) categories. GSA runs 40 different schedule contracting programs. Of particular importance to readers of this book is schedule 70 (based on FSC Group 70), for general purpose commercial information technology equipment, software, and services. Others of possible interest to technology companies are listed in Table 10-1.

Each schedule contract is further divided by special item numbers (SINs), each of which represents a subcategory of products or services, such as hardware, software, and annual maintenance. Some SINs are even further subdivided by subcategories, which go by descriptive names. For example, in schedule 70, SIN 132-32 is term software license, which has additional subcategories that include office suites, operating systems, utility software, virus detection, and others.

A basic prerequisite for getting on a schedule is having been in business for at least two years (some SINs on some schedules require longer periods of existence), as well as having sold “substantial quantities” of your product or service. GSA contracting officials can get hung up on the latter, which might require you to clarify certain points about your offering and its market size. The number of supercomputers that constitutes a substantial quantity is different from that for printers.

Schedules are considered a “government source of supply,” meaning that the Federal Acquisition Regulation (FAR) tells contracting officers to give the schedules priority over other acquisition vehicles.³ That does not mean schedules are mandatory for use by federal agencies—contracting officers do not have to order through a GSA schedule. If a schedule contract can satisfy a federal requirement, contracting officers should consider using the schedule contract ordering procedures before considering other commercial sources, but that’s all.

Table 10-1: GSA Schedules of Possible Interest and Their Total Recent Orders

Most federal agencies have their own IDIQ task or delivery order contracting vehicles featuring products and services, along with terms and conditions they say are more suited to their mission needs, even if many or most of the products and services offered on them are the same as or nearly identical to those offered on the schedule. Nonetheless, those vehicles pretty much negate the should aspect of ordering via schedule contracts, because individual agencies’ acquisition officials can easily make the argument that local contracting vehicles by definition better satisfy their requirements.

GSA has long decried the presence of these other vehicles, arguing that one of its primary missions is federal contracting and that other agencies should focus on their missions and leave everything but the most mission-specific procurement to the GSA. It’s an argument that’s failed to win many agency converts. Even other federal agencies think that GSA can be unnecessarily bureaucratic, and in any case, GSA cannot be all things to all agencies all the time. There truly are circumstances in which an agency knows better than GSA how to set up a procurement vehicle for its needs. GSA schedules capture business only to the extent agencies want to use them.

The Case For and Against a Schedule Contract

Like other IDIQs, the schedules simply provide a contractual framework for potential business, or, in one oft-repeated phrase, “a license to hunt.”

Being awarded a schedule contract is not the same as winning a winner-take-all single-award contract because the government hasn’t actually obligated any government funds. Well, actually, for reasons having to do with ensuring that schedules meet the legal definition of a contract, GSA does guarantee $2,500 worth of business to every schedule holder.⁴ To put that number in perspective, schedule holders must accrue at least $25,000 worth of schedule sales within the first 24 months of receiving one and thereafter $25,000 annually, or GSA will kick you out of the schedules program—or at least it will threaten to do so. GSA is often amenable to pleas to be left on for another year. But a few years of business below the minimum threshold will result in your dismissal. Alternatively, GSA may refuse to let you extend your contract for another five years when renewal time comes, which is tantamount to a dismissal.

Also, $2,500 is less than you’ll spend to get a schedule should you hire outside help, which we highly recommend. Choose your consultant carefully, because plenty of people know which boxes to check on the application to get a quick award but far fewer understand how to ensure your company is set up for long-term compliance and success. One broad winnowing mechanism to sort out the field might be to disqualify those who emphasize speed or ease—not because getting a GSA schedule should be agonizing or slow, but because the process requires knowledge, analysis, strategic thinking, and attention to detail both before and after award. It should be deliberative and take as much time as needed to do correctly.

The generic business case for getting a schedule contract is that schedules are the only purchasing program accessible by all federal agencies. Schedules also let contracting officers narrow the field of potential sellers, permitting them to review and evaluate a handful of quotes rather than dozens, thus speeding the procurement process—and as we’ve said before, government buying decisions tend toward the path of least resistance.

A schedule means you can sell to federal agencies without contracting officers having to spend time figuring out if you’re responsible or capable for each procurement—GSA has done that already. You can participate in schedules-restricted competitions, and because competition requirements are relatively lower for schedule purchases, also be in a position to sell directly to agencies.

And although agencies can further negotiate schedule prices down prior to placing an order, and sellers often discount below the GSA catalog price during competition, schedule prices have gained an official GSA stamp of approval as “fair and reasonable” (a concept we discussed in Chapter 5). As a result, GSA-approved schedule prices can serve as the basis for a transaction even if the buyer ultimately uses another contracting method or type.

The GSA stamp of approval can mean a lot to companies of a certain size, especially ones that don’t have a lot of name recognition within their niches. A schedule demonstrates that you have a good past performance record, that you have financial capability, and that you have processes in place to assure delivery and post-sale support. A schedule says you’re a serious business, and serious about getting government business.

But there are some circumstances under which a company might not need tacit endorsement from GSA. Some companies penetrating the federal market know from the start which agencies are likely to be their customers and that those agencies prefer their own agency-specific vehicles. (Although over time, as they expand from their initial customer base, these companies will frequently be asked if they are on a GSA schedule.)

Some product companies are big enough in the private sector that they don’t need GSA’s validation and decide they don’t want the hassle of government regulations or GSA-specific annoyances and so opt to sell to the government through resellers. Or they might be too small to easily handle the costs of compliance with schedule requirements, which are not insignificant.

Going through resellers doesn’t entirely erase the burden of compliance with federal rules, but it does lighten it. Companies dominated by finance and legal departments tend to go the indirect route, while companies dominated by their sales force tend to want a schedule. The passes from government regulations that indirect schedule holders have won’t make sense until we explain the proposal process, so we wait to do so until p. 206–207.

Services companies that don’t perform manufacture-related services don’t have the option of going through a schedule reseller. GSA takes a dim view of people reselling other people’s services on schedule.

Basic Price Considerations

When preparing your GSA price proposal, keep in mind a few things GSA will spring on you, most of them in the terms and conditions.

Terms and conditions: freight on board

The terms and conditions of the IT Schedule 70 solicitation include a provision that deliveries of goods are freight on board (FOB) delivery destination, not FOB origin.⁵ Most contracting officers understand companies’ unwillingness to eat freight costs, so the challenge becomes incorporating an invariable freight cost into your price that accounts for an average range of shipping costs. Here some contracting officers are less than understanding. Some might object that your figure is too high, since you’re presenting them with an average figure that will force some ordering agencies to subsidize the shipping costs of others. If you’re able to present skeptical contracting officers with evidence of actual shipping costs over the past 12 months across a geographically dispersed customer base, they’ll be more likely to accept a freight cost that’s at least reasonable.

The shipping problem is compounded by the geographic span of your schedule. The terms and conditions ask you to choose from one of three possible geographic scopes: domestic only, overseas only, or domestic and overseas. Domestic includes not just all 50 states, but territorial locations including far-flung Pacific Ocean outposts under American control like the Mariana Islands.

Obviously, unless you already have customers in the tropics, they won’t show up in your average freight costs of the past year, and shipping out anything that far would probably wipe out your margin and possibly more. The answer is to limit the geographic scope of your contract to the contiguous 48 states and the District of Columbia by not accepting GSA’s options as is. Redline the terms and conditions so that shipping is included in your price but orders outside the contiguous United States will have shipping added at cost to the order.

Terms and conditions: prompt payment

Contracting officers will invariably ask for a prompt payment discount, and most companies, seeing little harm in such a thing, confident that the government couldn’t succeed even if it tried, end up making it a part of their terms and conditions. Then, much to their surprise, they find out that ordering agencies routinely claim the discount even if they’ve remitted after the deadline has passed. Agencies are notorious for doing this.

Further, once having agreed to offer a prompt payment discount, you must include it in every offer, solicitation response, and invoice, something quite a few companies don’t do since it’s not their normal practice and they haven’t updated their systems accordingly. If you rely on a manual process, someone will inevitably forget to do so. What’s more, if you included the discount on an invoice but didn’t do so on your solicitation response, your invoice could be rejected as improper, since the invoice amount is different from the price in the response. Probably the earliest you’d hear about the rejection of the invoice is 37 days after you submitted it—and once you’ve explained everything, you’ll still have to grant the discount.

In addition, if you accept credit cards, the government will not unreasonably demand a prompt payment discount for every transaction made with a government charge card, thus adding the burden of a discount to a purchase already encumbered by a credit card company transaction fee. GSA schedule holders must agree to accept government credit cards for purchases worth less than the micro-purchase threshold. If you don’t accept credit cards, and don’t want to start, you can fix your schedule such that your minimum order level is worth more than the threshold. Chances are if you sell items priced less than the threshold, you probably already accept credit cards; hopefully, you’ve built the transaction fee into your prices and so won’t get a double whammy of transaction fee plus prompt payment discount every time you run a government card.

Acceptance, warranty, and damages

The schedule solicitation incorporates Part 52.212-4 of the FAR when it comes to describing terms and conditions around acceptance, warranty, and damages. As we discussed in Chapter 6, there’s a lot of language in the government boilerplate you’ll probably want to change so that it accurately describes commercial practice.

The Industrial Funding Fee

GSA charges all transactions made via schedule contracts a 0.75 percent fee it calls the industrial funding fee, or IFF. It’s the GSA equivalent of sales tax; the GSA uses the money to fund administration of the schedules program.

Naturally, the entity responsible for collecting the IFF is the vendor, which must cut a quarterly check to GSA. GSA doesn’t allow companies to add an IFF surcharge on a per-transaction basis; the fee must be built into your schedule catalog price. Companies are not meant to absorb the IFF surcharge as a kind of discount. Still, when negotiating a schedule contract, it’s a best practice to note in separate columns the offered price and the price plus the IFF.

When calculating the IFF, divide your price by 0.9925. If you merely add 0.75 percent to your price, you’re not accounting for the full amount of the fee will cost you. Here’s why, starting with an illustration of what not to do. Let’s say your negotiated price is $1,000:

$1000 + ($1000 × 0.0075) = $1007.50

If you were to list that as your catalog price, you would pay a 0.75 percent price fee on $1,007.50, and here’s what would happen:

$1007.50 – ($1007.50 × 0.0075) = $999.94

Since you don’t want to inadvertently leave money on the table, here’s how you calculate your IFF-adjusted price:

$1000 ÷ 0.9925 = $1007.56

So, when you later pay the 0.75 percent IFF to GSA, you’re back to receiving your full price of $1000:

$1007.56 – ($1007.56 × 0.0075) = $1000

At the Center of the Vortex: Most Favored Customer and the Price Reduction Clause

Two basic concepts that underscore schedules come together to form the potentially fatal downward price spiral we alluded to earlier.

The first concept is most favored customer, the price point GSA says government customers are entitled to as a matter of course. A natural reading of that phrase is that companies must propose their absolute lowest prices—an interpretation GSA encourages. That understanding might also tie into an incorrect notion that your schedule catalog prices are final—not subject to further negotiation. Both beliefs are wrong. The real meaning of most favored customer is that companies should offer the lowest price already given to commercial customers under circumstances the same or similar to that which GSA can guarantee.

If, in exchange for a discount, a commercial entity beta-tests your product, gives you a commercial endorsement, makes you its preferred or mandatory supplier, guarantees minimum volume, pays you partially in advance, promises revenue by a date certain, distributes or sells your product, strips out its installed base of your competitor’s products and commits to using your products, then the government is not entitled as a matter of course to the same price. The phrase really should be “most favored customer under similar circumstances.”

As for the idea that schedule prices aren’t further negotiable, agency contracting officers are highly encouraged to seek further discounts from GSA list prices and in some cases must do so.

The second concept is the price reduction clause, which has to do with the fair and reasonable price determination that contracting officers make when signing off on schedule list prices. Because schedules last five years per option period, GSA doesn’t want to make a one-time determination. Rather, it says that in order for the prices to continue to be fair and reasonable over the period of the contract option, they must be adjusted in line with prices given to the class or group of commercial customers that most resemble the government. Those customers are called your basis of award (BOA).⁶ If you give a deeper post-schedule discount to a BOA customer, the schedule price should go down correspondingly. The nature of that relationship, whether it’s “equal to” or “better than by x points,” is a part of schedule contract negotiations.

The price reduction clause does not apply to commercial (firm-fixed-price, definite-quantity) transactions worth more than the maximum order threshold (MOT).⁷ GSA likes to set the threshold at $500,000 for IT 70 schedule holders, although it is negotiable. Contracting officers like to keep the threshold as high as possible, although sometimes they’ll see advantage in lowering it if a company can present enough data to show that commercial sale discounts peak at a lower amount. Although commercial sales above the threshold don’t trigger the price reduction clause, government purchasers spending above it are supposed to get, and generally receive, deeper discounts.

Sales at any amount to federal agencies or state and local governments through the cooperative purchasing program also don’t trigger the price reduction clause.⁸ Neither do mistakes made in a quote or an invoice to a BOA company.⁹

The place where a downward price spiral often gets started is GSA Advantage, GSA’s equivalent of Amazon.com. GSA posts all of your schedule catalog prices there, and the website is open to the public. In fact, a healthy chunk of web traffic to GSA Advantage isn’t government customers perusing prices of possible vendors, but potential commercial customers comparing private-sector quotes to government market list prices. Should commercial customers find a lower list price on GSA Advantage, they’ll likely press for the same or better treatment.

The way the vortex gets started is a company gives a BOA customer a bigger discount in response to the customer’s having seen catalog prices on GSA Advantage. Then, the price reduction clause kicks in—the lower price given to the BOA customer causes the schedule price to go down accordingly. The new price is listed on GSA Advantage, and so on into the abyss. You could even start the spiral by simply giving a temporary sale price given to a BOA customer, since unless you’re careful, GSA will interpret the sale price to be your new BOA price.

The price reduction clause applies regardless of whether you’ve made the typically unwise decision to give GSA your absolute lowest price. Many companies believe that because the schedule price is still lower, they need not make a corresponding reduction after offering a new discount to a BOA customer—but since the price reductions clause establishes a relationship between commercial and schedule prices based on relative, not absolute, prices, companies must nonetheless reduce the schedule price yet further. What counts in the price reduction clause is maintaining an established ratio of commercial to government-sector discounts, and it doesn’t ease up just because you’ve already given the government your lowest price. The moment you lower a commercial price, GSA believes your schedule customers are entitled to the same treatment.

There are ways to avoid the spiral from occurring. In a nutshell, make a full and careful disclosure of your commercial sales practices in your schedule offer. On the surface, this might appear counterintuitive, since by disclosing everything (which is a requirement anyway, although some companies ignore it and open themselves up to False Claims Act lawsuits), you might think you’re handing a contracting officer the means to claim your absolute lowest price possible. Not so, not if you’re disclosing and explaining the circumstances under which those prices occur.

Eluding a sale-induced sinkhole scenario requires placing management controls over your commercial sales force that regulate discount amounts, business justifications, and the approval process. This, also, might feel counterintuitive, since the commercial side might have an established customer base, whereas your government sector might be new or account for a small percentage of revenue—the tail wagging the dog. Nonetheless, it’s what must occur. Your commercial side need not be blocked from offering a really good sales price ever again; it’s simply that your company’s schedule administrator must be kept in the loop to proactively deal with GSA to ensure that anomalous commercial sales don’t trigger permanent reduction of your schedule prices.

GSA enforces the conditions around which a downward price spiral can build through audits and the attendant threat of prosecution. In recent years, whistleblowers also have done their part to reinforce the high-pressure atmosphere.

Audits come in two varieties—preaward and postaward. Their names are misleading, since companies brand new to the schedules program almost never get a preaward audit. Rather, the typical time when a preaward audit might strike is before option renewal. If you’ve done at least $10 million worth of business in your previous option period, chances are even better that the GSA inspector general will conduct an preaward audit. Think of it as GSA’s way of giving you a congratulatory plaque.

Preaward audits are forward looking in that they check the validity of pricing information disclosed in a schedule proposal for the purpose of giving the contracting officer more leverage in negotiating down your price proposal. In submitting a proposal to GSA, you give the agency’s inspector general the right to look at internal pricing and sales data, although not cost or profit information (although they may ask).¹⁰

Postaward audits are backward looking and are much more invasive affairs. They examine whether you fully disclosed your commercial practices before initial contract, whether you’ve properly triggered the price reduction clause in response to lowered commercial prices, whether agencies were billed correctly, and in the case of services contracts, whether the labor supplied met minimum qualification standards—in short, the extent of your compliance with GSA and other government regulations. GSA can refer cases to the Justice Department, which tends to favor civil False Claims Act litigation for dealing with pricing discrepancies.

Schedule Proposal Nuts and Bolts

You can initiate the schedule proposal process anytime. Download a numbered schedule solicitation whenever you like and fill it out at the pace you desire. There’s no deadline. GSA accepts offers through a website it maintains called eOffer. It no longer even accepts paper proposals for IT 70. Using eOffer requires getting a digital certificate through a GSA-approved source, which takes one to two weeks after you’ve mailed the certificate authority a sheaf of notarized papers supporting your claim to being who you are.

Schedule solicitations go through periodic changes (known as refreshes). When paper copies were the rule, GSA would allow a grace period for companies to respond with proposals made under the old solicitation. Now that everything is electronic, the cut-over to a new refresh is instantaneous.

Contracting officers have a lot of autonomy, and it’s possible that you’ll draw one with whom it’ll become apparent you can’t reach an agreement. Being denied a schedule contract isn’t protestable to the Government Accountability Office (see Chapter 8), but it is possible to withdraw your schedule offer and reapply a few months later. Unfortunately, that tactic isn’t as effective as it once was, because GSA now requires a disclosure of unresolved issues from a previous attempt as a condition of refiling. Try to get the proposal right and accepted the first time.

Open Ratings

Before you submit your proposal to GSA, you must initiate a review of your past performance conducted by a company called Open Ratings, which Dun & Bradstreet bought in 2006. No doubt you remember D&B from Chapter 3 as the company that dispenses DUNS numbers. D&B, in the guise of Open Ratings, requires you to provide 4 to 20 references and will proceed to survey those references by email or phone. The more references you have, the better. Individual responses are confidential, but you will receive a copy of the Open Ratings report. D&B says it takes about 35 days on average to complete one. Let your references know in advance that Open Ratings will be contacting them so they don’t treat an Open Ratings email as spam. Also make sure they understand the ratings system; on a scale of 0 to 10, 10 is the best rating.

A bad past performance rating is bad for your application, so choose satisfied customers for your references. If you get a bad report, or maybe even an overly neutral one, consider ordering a new one using different customers—ones you know in advance will give you better grades. Reports containing negative ratings require explanation when sent to GSA, which can be difficult to provide, since individual responses are kept anonymous. How exactly you’re supposed to respond to a charge of bad service from an anonymous accuser is hard to say. Hopefully, you’ll be able to point out that the negative rating is not indicative of your overall performance, as demonstrated by other positive ratings.

Shortcuts to approval, which we don’t recommend

The length of time it takes to get a schedule depends on which schedule you’re applying for and on the complexity of your proposal. The schedule 70 group will probably tell you it takes on average about 150 days, but that average includes very small companies that have limited offerings. Larger companies with multiple product lines and hundreds—or thousands—of line items might more realistically engage in 6 to 12 months of clarifications and negotiations.

There are ways to minimize the complexity of your proposal to make the approval process go faster, some of which we think are acceptable but not necessarily wise, some of which we strongly suggest you avoid.

In the acceptable category is minimizing the number of SINs in your offer. Minimizing product lines offered is another. The argument for doing so is that each unrelated offering can require in effect a separate negotiation, and that in the interest of time to market, you should prioritize and add others later through contract modifications. The reason we don’t fully endorse this is that contract modifications for adding SINs are in effect like applying for a new schedule, and you’ll probably want to minimize the future internal administrative burden of doing so. Also, products and services on schedules don’t sell themselves; if you’re known as the company that does X and K, but later you add C and D, you’ll have to expend energy publicizing your newly available capabilities.

Rather than letting trepidation about the application process make this decision for you, follow a business strategy. If you have customers clamoring for a product or service to be on schedule, it could be in your best interest to minimize your SINs and product offerings in the interest of a speedy award. If you have a product that matches a particular SIN but don’t yet have enough commercial sales to get it through the schedule application process, you might defer that SIN until later. But generally it’s best to maintain a schedule catalog that mirrors the company’s commercial price list. If getting a schedule is important for your company, you might as well be comprehensive about it.

In the we-heavily-suggest-you-don’t-do-this category is telling GSA that you never deviate from standard commercial sales practices. GSA asks you this question in a form typically called the CSP-1. Vendors have found over the years that by answering no to the question, processing time is markedly shorter. For the vast majority of companies, however, saying no to that question is like begging for a False Claims Act lawsuit and undermines your ability to negotiate a good schedule price. Almost all companies deviate from standard practices in one way or another, and by answering no you’ve probably already submitted an inaccurate offer. We discuss disclosing commercial sales practices shortly.

Trade Agreements Act reminder

All items for sale through a GSA schedule must have as country of origin a country designated by the Trade Agreements Act (TAA). The TAA is most notable for the countries it excludes—of chief interest to information technology manufacturers, India, Thailand, Malaysia, the Philippines, and the People’s Republic of China. The TAA doesn’t prevent components made in those countries from being incorporated into final products. Usually, TAA requirements don’t apply to contracts worth less than $202,000, but GSA won’t allow any non-TAA-compliant product onto the schedules, period. See Chapter 9 for a full explanation of the TAA and domestic buying preferences.

Responsibility determination

As we mentioned in Chapter 3, contracting officers must make a determination that a prospective company is a responsible one before signing a contract, a requirement as true for schedules as for any other contract. You’ll have to provide your balance sheet and profit/loss statements for the past two years—financial health is a main component of responsibility determinations.¹¹

Also, keep in mind one wrinkle that GSA adds to responsibility determinations—its financial center in Kansas City, Missouri, might get involved in scrutiny of your financial status. If asked by the center, you’ll have to fill out GSA Form 527, which is a more detailed query about ownership, assets, liabilities, loans, and so on. More and more contracting officers automatically ask the Kansas City center to send out the form. GSA might also want a corporate guarantee if it has reason to doubt the durability of your company. Still, it’s unusual for a company to be turned down for a schedule for financial responsibility reasons alone. There was a spate of rejections during the 1990s dot-com bubble, but those were different times. Today, the primary reason for rejection is that a company estimates its future sales at a rate higher than GSA believes it can deliver given its current balance sheet. Anyone who wants to argue that business plans and profits are relics from before the paradigm shift, however, will still get a frosty reception.

Other requirements

As part of your schedule proposal, if you estimate that you’ll be doing more than $650,000 worth of business over the course of a five-year period and you’re not also a small business, you’ll have to set up a small business subcontracting plan.¹² See the next chapter for more on small businesses.

You’ll also have to submit to GSA a list of authorized negotiators. Not every one of them need necessarily be able to commit your company in writing to GSA, but GSA will want to know which are authorized. GSA won’t deal with anyone who’s not on the list. Everyone on it will receive every email sent out by GSA regarding the contract, a state of affairs that many senior company executives who at first insisted they be included on the list later find tiresome. You can change the names of authorized negotiators, postaward, by submitting a contract modification.

Negotiations

Having submitted your schedule offer, GSA will typically respond within a few weeks with an email containing a preliminary review and the name of the contracting officer (or contracting specialist, but we’ll continue to say “contracting officer”) assigned to your proposal. Where in the United States the officer might be based is luck of the draw. Most IT 70 contracting officers are in Crystal City, Virginia, across the river from Washington, D.C. But GSA also has IT 70 contracting officers in Kansas City, Missouri; Fort Worth, Texas; and Atlanta, Georgia. Call the contracting officer up and introduce yourself; everybody will appreciate starting things off on a friendly note.

Soon after, the CO will likely ask you questions he says are merely for the purpose of clarification. He might also ask for company financial information as part of the responsibility determination each contracting officer must make before signing a government contract.

Clarification questions are meant to be a lead-in to negotiations, but from a company perspective, the line between clarification and negotiation can be thin. In seeking clarification of your commercial practices, the contracting officer is looking for information that allows him to claim your lowest price possible. That’s what contracting officers do. The best practice for responding to a contracting officer’s requests for clarification is to communicate everything in writing. Even if the contracting officer asks a question over the phone and you have a conversation, summarize everything in writing.

It’s also a best practice when responding to clarification questions not to deviate from the language you’ve used in your proposal when describing your commercial practices and terms and conditions. Using different language to describe the same practice in response to a clarification question can appear to a contracting officer like you’re describing different practices. The mere fact that you phrased your responses differently can become a point of contention during negotiations—a contracting officer might ask you point-blank why you said something differently, the assumption being that you said different things in an attempt to obfuscate the truth.

During the negotiation period, you’ll have to especially remember the importance of documenting verbal transactions on paper. A contracting officer might say something in person or over the phone that she might be hesitant to express in writing; don’t forget to capture that. Also, keep in mind that contracting officers are not supposed to make counteroffers—they’ll just bring up “issues” or “concerns” that happen to coincide with a more-or-less unstated negotiating position.

The best attitude to bring to negotiations isn’t one of suspicion or willfulness. As a taxpayer, you should be glad that contracting officers seek the lowest price possible. And as a businessperson, you should have already made a determination that the government sector promises to be remunerative. You should sincerely want to give the government your lowest price possible—provided the comparison between government and private-sector prices is made under comparable circumstances. Explaining those circumstances is what disclosure and negotiation are about.

The place to set the basis for your narrative is in the written proposal. A strongly written proposal translates into a better negotiation outcome; the reverse is obviously also true. Negotiations culminate with an offeror-prepared document called a final proposal revision (FPR). The FPR is meant to delineate the result of negotiations, but concluding them often requires preparation of more than one FPR as the haggling goes on.

Taming Most Favored Customer: The CSP-1

The place where your commercial sales practice disclosure happens is the CSP-1 form, and it’s the single most important part of preparing your proposal.

A full disclosure of your commercial prices and the circumstances under which you gave them over the past 12 months is the means through which GSA tries to get your most favored customer pricing for your schedule contract price. Contracting officers look for prices you’ve given to the private sector that appear to be lower than your proposed schedule price and start demanding the same.

Luckily, disclosure is also the means through which you show the contracting officer not just your absolute lowest commercial prices, but the commercial price that’s closest to the terms of the GSA schedule contract and governments ordering conditions. Moving the contracting officer toward making the correct comparison is what takes the majority of time in negotiations, and the more comprehensive your disclosure, the more force your argument has. Disclosure is also a way to defend against any possible postaward allegations from the GSA inspector general or the Justice Department, should it come to that. Justice finds it harder to mount cases against companies that can point to evidence that the government was fully aware of their commercial practices.

Some companies mistakenly limit disclosures to what they think is relevant to establishing their GSA price. They might do so because even for companies with policies and good controls in place, it can be hard work to go back and figure out why exactly a certain customer was charged a certain price. For companies without a written policy, it can feel like torture. But there’s no option except to do it. If it turns out that there was a lower commercial price that you didn’t disclose to GSA in your CSP-1, and GSA finds out about it, the agency will argue that you’ve been overcharging government customers and demand money back. Other companies might restrict their disclosures out of fear that GSA will seize on a lower price despite that price’s obviously unique properties and demand the same. That, admittedly, is a risk, but as we’ve already noted, full disclosure is both what’s required and what’s best for you.

Putting together a complete inventory of all prices charged to commercial customers over the past year will require you to go back through your sales data and compare what happened relative to your written discounting policies. If you don’t have written policies, you’ll need them now as a matter of self-preservation before handing in your offer, at the very least in order to deal with the price reduction clause.

The real trick to disclosure, however, isn’t just divulging all your current sales practices, but anticipating possible future discounting practices, in order to prevent them from triggering the price reduction clause and inadvertently creating an unsustainable, publicly visible catalog price point.

Let’s start with current discounting practices. The detailed requirements and the format in which the CSP-1 appears vary slightly between schedule solicitations. Although we’ve taken all our direct examples from the IT 70 solicitation, the basic concepts we explain apply to all schedules. GSA classifies commercial sales practices according to two basic types: standard and nonstandard (the latter is also called deviations). For a careful company, that’s actually good, because you want the contracting officer to mentally separate the prices of exceptional transactions from your routine transactions.

GSA does not define what constitutes a standard or nonstandard transaction, leaving it up to you to make that determination. A useful dividing line is between those transactions that that require management approval and those transactions that can be processed without manual intervention. It’s a distinction supported by what the schedules are, too—a list of prices for goods and services visible to all and available for order without further negotiation. If your sales force is empowered to routinely offer certain discounts under various predetermined thresholds such as volume, disclose those prices as standard transactions. But if someone senior to a salesperson must approve or extend a discount, that should be classified as an exceptional, or nonstandard, transaction.

The place in the CSP-1 to disclose standard sales practices is in a box of rows and columns that looks like this:

The customer column is typically for listing classes of customer, rather than individual customers. Class encompasses types of customers such as original equipment manufacturers, dealers, educational institutions, national accounts, and end users. If a sale to a particular customer really stands out such that it shouldn’t be amalgamated into a class, you’re probably better off disclosing it as a deviation. Should you lack volume sales history and all you really have are discrete sales that can’t be logically aggregated, it might make sense to list customer companies by name (or some non-identifiable designator). The structure of your disclosure is up to you; just make sure it maps directly to your policies, practices, and system of controls.

In the discount column, note any reduction from the commercial list price, whether in the form of discounts, rebates, credits, or whatever else. Be comprehensive; if you offer multiple discounts to customers of the same class, note each discount individually.

Concessions are things of value that can sweeten a deal but are not discounts from list. These could include extended warranty, free shipping, bonus material, and added features. If your sales system doesn’t record concessions, you’ll have to manually hunt down the past year’s worth. FOB is freight on board; if your list price is FOB origin but you extend shipping as a concession, note that in the concession column and calculate its value in both dollars and discount from list.

Some contracting officers will also ask you to supply the percentage of business associated with each row during clarification but this is not required by the regulations as of this writing.

The rows and columns GSA provides don’t really give you space to explain the reasoning behind your commercial sales practices. Rather than saving your explanations for negotiations, footnote your discount column disclosures and write a full description of your reasoning: this discount occurred because the customer provides a guaranteed minimum order of x amount per quarter, this customer offers public training on our products, this customer gives us a commercial endorsement, etc. Don’t worry if the footnoted documentation gets long—remember that you’re assembling evidence to draw on during negotiations to justify and defend your proposed schedule catalog price. Some disclosures require hundreds of pages. If the documentation gets long, you might want to include a summary. The disclosures are considered proprietary information and should be labeled as such.

Be prepared to offer documentation for each practice you describe, especially commercial endorsements. There’s a tendency for companies to claim to have given a discount in exchange for an endorsement, since it’s something the government can never offer. As a result, there’s a lot of skepticism among GSA contracting officers whether it actually occurred, so be prepared to substantiate that endorsement actually occurred.

A class of commercial company requiring special attention in your CSP-1 is national accounts. Many contracting officers see the schedules as the equivalent of a national account, since the customer will be, after all, the national government. Negotiations often come down to the contracting officer insisting on national account pricing, with the company making the case for end user catalog pricing. You can attempt to thwart such a situation by footnoting all the conveniences and business value that national account customers offer that the government under the GSA schedule contract can’t (assuming you actually receive such conveniences and value). For example, a national account that places all orders through a single point of contact will cost far less per sale and be much easier to deal with than the government, which orders through thousands and thousands of purchasing locations spread across hundreds of federal entities across the country. Maybe your national account has a centralized shipping location or automated ordering, also things GSA cannot offer.

With your normal sales practices disclosed, it’s time to turn to the standard CSP-1 question of whether deviations from the discount practices shown in the table ever result in better discounts or concessions than indicated. The CSP-1 actually says “ever,” a word with reverberations into the infinite if there ever was one.

Most companies should take one look at that question and answer yes. Only a tiny percentage of vendors in this world can safely answer no, and that’s because they never have deviated, and never will deviate, from a set of very tightly controlled prices. Chances are that you hail from a company without such iron-clad rules. Maybe management has at some time or another approved a discount to a highly valued customer or in order to meet yearly sales projections. If you include that sale in the rows and columns for standard discounting practices, you’ve set yourself up for the contracting officer to negotiate your price downward on the grounds that it’s a standard price. True, you would list all the special circumstances around that sale in a footnote, but since GSA allows you to distinguish between standard and nonstandard sales, don’t put the wrong idea into the contracting officer’s head. That time you gave a 70 percent sale to a customer on the last day of your fiscal year to make a forecasted sales projection? That was a nonstandard situation and thus a nonstandard sales transaction.

A sale to a new class of customer is another candidate for the deviation category. You may not even know yet yourself how you’ll typically handle discounting for that class until you’ve sold to a few more customers. Rather than getting in front of your headlights, then, it might be better to treat that sale as the exception it currently is. When you modify your schedule contract either for price or new-product reasons, you’ll have to submit an updated CSP-1, at which point the deviation might have to be disclosed as part of normal sales practices if it has become standard.

Earlier we mentioned that you should use the CSP-1 to disclose possible future discounting practices, which sounds a bit like worshipping at the temple of an unknown god. The reason why is that you want to craft your nonstandard disclosure so you retain the possibility of extending those discounts without triggering the price reduction clause, especially over circumstances that the government could never match. “Exceptional discount granted for promise of revenue by date certain in order to make our revenue forecast numbers,” could be one example of a possible future practice. “Nonstandard discount granted due to acceptance of newly introduced technology contingent on systematic collection and transmission of user feedback,” might be another.

A final note on the CSP-1: it can potentially undermine your argument about pricing, via a requirement that you show your projected annual sales to government. Most companies overestimate projected sales out of a sense of optimism, particularly if salespeople make the projections, or out of a half-baked desire to impress the contracting officer. But inflated numbers that match your largest accounts—the companies to which you presumably give the largest discounts—give the contracting officer a legitimate right to ask for comparable discounts, despite the acknowledged costs of doing business with the government.

There’s no penalty for exceeding your projected sales numbers, so make the sales numbers you share realistic, or even conservative. Don’t purposely underestimate. Although there’s no penalty per se for exceeding your projected sales, a dramatic increase could draw the attention of GSA’s inspector general, triggering a time-consuming audit of your pricing policies, practices, and sales data.

Taming Most Favored Customer: The Labor Rate Matrix

IT services companies, despite having revealed all in the CSP-1, have one more pricing disclosure form to fill out, the labor category matrix. The matrix is yet another invitation to undermine your pricing argument—which it will, unless you again make a comprehensive disclosure. (The labor rate matrix is a different document than the Service Contract Act matrix included in other solicitations, which is used for purposes of SCA enforcement. We discussed the SCA in Chapter 7.)

The columns of the matrix are as follows, with the rows listing your labor categories:

The matrix instructions state that “rates offered to the government should not be higher than your best (lowest) rates under any contract shown,” which, not surprisingly, provokes disquiet in some schedule offerors. Wasn’t the whole point of the CSP-1 to build a narrative showing why the government deserves the lowest price under comparable conditions? And now GSA demands the lowest rate as a matter of course? It’s an audacious statement, but its effectiveness as anything other than an affirmation of GSA’s philosophy is undermined by two things.

First is the use of the word should rather than shall. Should represents a viewpoint; shall is a command. If this seems too fine a point to make a real-life difference, consider the difference between the statements “You should floss daily” and “You shall floss daily.” Any contracting officer conversant with the contracting regulations will be well familiar with the distinction between should and shall, since the FAR is riddled with it.

The second and more important thing is that there’s no limit to how many contract pricing examples you include—meaning you can include a full range, including more expensive rates. The matrix instructions say to include “as many of your best (lowest price) contracts, as necessary, for comparison with labor rates being offered to the government,” which is simply another variation of the same most favored customer pricing claims that GSA routinely asserts. As we’ve emphasized, most favored customer pricing is a relative figure that depends on the circumstances of the sale, not an absolute one contingent on your lowest price ever, even if GSA likes to encourage that understanding of the phrase.

That’s not to say that a contracting officer won’t leap on that language to argue that your lowest price ever should become your schedule price—again, that’s what contracting officers do. To head that off, you’ll have to cross-reference your matrix disclosures in the CSP-1. GSA also permits you to indicate whether rates are based on dollar volume and to indicate the dollar volume and the rates the volumes are based upon on a separate sheet.

If your business has only consisted of government engagements, it’s going to be a lot tougher, maybe impossible, to argue that your absolute lowest price should not be your GSA schedule price. GSA allows, as we’ve discussed, of-a-type services onto the schedule, but it’s not blind to the fact that a company whose only customers are government agencies isn’t, strictly speaking, a participant in the commercial private-sector marketplace. GSA has you over a barrel if you’re from the government-only category of businesses.

Subcontractors to federal primes are in an even worse position, because GSA is mostly deaf to the argument that labor rates charged by primes should be higher than those charged by a subcontractor. If being a prime is more work than being a subcontractor, goes the typical GSA argument, then charge additional hours for it, at your old rate. If you could survive as a company charging your subcontractor’s rate, then you will survive with that same rate listed on your schedule, the argument heartlessly concludes.

Taming the Price Reduction Clause

The class of customers or group of individual customers that you have claimed, through your commercial sales practice disclosure, most resembles government market conditions becomes your basis of award. After award, any time you grant a BOA customer an additional discount, you’ll have to correspondingly reduce your schedule price.

Which companies are your BOA, and the relationship their discounts have to your schedule price, are matters up for negotiation. The contracting officer ultimately picks the BOA. If during negotiations you say something such as “We’re excluding this class of companies from the BOA,” you risk provoking the contracting officer into insisting that it be included.

Once the contracting officer determines the basis of award, and it is codified in the final proposal revision, it makes sense to also include a list of those customer classes that are excluded from the BOA in the FPR. Not all contracting officers will agree to this, but it’s worth the attempt to ensure clarity.

Something that can be directly negotiated is the ratio between BOA discounts and schedule discounts. Some contracting officers will press for a better-than relationship, which is pushing it a bit far, since they’ve already gotten a most favored customer price. Also, a company needs the cooperation of its commercial division, so the relationship between commercial and government pricing needs to be easy to remember and enforce. For both reasons, we recommend asking for an equal-to relationship. In recent years, GSA has shown a much greater willingness to accept equal-to.

There exist legitimate and not-so-legitimate ways to minimize the effects of the price reduction clause on your commercial business, although that hasn’t stopped some companies from attempting the latter.

Legitimate ways to minimize the price reduction clause include making a special price given to a BOA commercial customer temporarily valid for schedules, too. The mechanism for doing so is filing a temporary price reduction (TPR), preferably in advance of granting the special price to a private-sector customer. The benefit of doing so—even if government customers don’t deserve the special price the way a particular BOA customer does—is ensuring that the special price doesn’t become your permanent schedule price. GSA doesn’t have a problem with accepting TPRs, unless a company falls into the sloppy habit of filing them more than occasionally. Under that circumstance, GSA will argue that frequent TPRs indicate that market prices are trending lower and so push for a permanent price reduction on your schedule catalog price.

If you fail to issue a TPR proactively—that is, before the commercial sales force gives a BOA customer a special price (a sign that your company needs better internal controls)—then rush to do so immediately. If no government orders have come in between the time the sale occurred and you’ve filed the TPR, you’re probably okay so long as you give the government an equal amount of time to respond to the special price.

If government orders have come in, you’ll have to refund those agencies the difference between the schedule and the special price. Do not just write a check for the refund. Proceed step by step: notify the agency, notify GSA, and come to a mutual, documented agreement on the overpayment and the refund amount. You will not necessarily make friends by doing so. An agency might be forced to send the refund to the Treasury Department, which will apply it to paying off the national debt. In which case, you’ll have an upset customer in need of further placation.

How understanding GSA will be about a late TPR depends on the repercussions of the lapse. A onetime breakdown of the reporting chain probably won’t raise any hackles; a pattern of breakdowns worth serious money will, making them harder to pass off as a temporary reductions.

Less legitimate ways to minimize the price reduction clause—which we don’t endorse—include no longer offering the products or services you listed on the schedule to your BOA customers. Then there would be no price reduction clause to trigger. Besides being a feat of enormous bad faith, doing so would probably provoke more questions from auditors and the Justice Department than would be worthwhile. Further, although doing this might be legal—no one is sure, since no company has wanted to test it in court—it also might not be legal, because if you stop offering a schedule-listed item to the private sector, your CSP-1 would no longer be valid. Whenever you file a contract modification, you confirm that the CSP-1 on file is current or has been updated. Even if you were to refrain from filing a modification in order to propagate the situation, Justice still might have a prosecutable case. In any case, it’s one thing to use the schedule application process to make a case for fair schedule pricing, which is what we propose. It’s quite another to approach it as a grifter would a long con.

Another practice likely to land you in trouble is selling to private-sector customers a high-end product for a low-end price on the condition that much of the high-end functionality will be disabled and not actually limiting the customer’s use of the high-end functions. So would artificially inserting a reseller to act as a supposedly normal discount buyer outside disclosed channel practices when in fact the product is being sold to a BOA customer at a discount that would trigger the price reduction clause. Both of these were tactics alleged in a 2011 settlement between Oracle and the Department of Justice for $199.5 million plus interest.

Price Adjustment

The rules surrounding price change through contract modification are straightforward, at least in one regard: a company can permanently adjust its price downward at any time, for any reason.¹³ Upward price adjustments are more constrained. On schedule 70, companies can’t file for a price increase within the first 12 months of receiving a schedule or an option renewal period.¹⁴ GSA also negotiates an annual rate increase cap, which for the IT schedule defaults to 10 percent.¹⁵ It’ll only accept three price increase modifications per 12-month period, too.¹⁶

Each time you submit a contract modification, you must affirm that your CSP-1 is up to date, so make sure that it reflects any and all changes to your commercial practices, even those that are not the cause of your modification request. It bears emphasizing that not disclosing all sales information in your CSP-1 gives GSA the opportunity to claim that you’ve been overcharging government customers, even if the prices you’re not disclosing are higher than those in your schedule.

Commercial products and services companies fundamentally differ in their approach to price adjustments in that product prices generally decline, while service prices go up. Let’s consider price adjustment mechanisms and strategy for each category in turn.

Commercial products

The basic mechanism for a schedule catalog price adjustment is a schedule contract modification based on changes in commercial sales practices, either because the commercial list price was reduced or because discounts granted to basis of award customers have increased. Sales force–dominated companies often resist lowering commercial list prices and instead tend to increase discounts as needed to stay competitive. When it comes to keeping in sync with the schedule, they’d mostly rather file a series of TPRs reflecting temporarily increased discounts before they agree to a permanent price reduction, since in lowering the schedule catalog price permanently, they are also agreeing that the commercial list price has decreased or that discounting for BOA customers has permanently increased.

The problem with relying on TPRs and not reducing commercial list as a product nears end of life is that you’re setting your next model to be introduced on the schedule at your previous model’s last discount-off-list level. GSA could argue that by not having lowered your list price, you de facto changed the BOA relationship, and on that basis, it could refuse to add the new item unless the discount remains the same as for the old model. From a schedule maintenance perspective, it is better to lower commercial list over the life of a product than to tinker with the discount relationship, except when a price reduction for that product will truly be temporary.

If you are the rare products company that does not possess a commercial price list, then your price adjustment mechanism will be the same as those of most services companies.

Services

If your schedule services prices are based on a commercial price list, then your process for modification will be the same as those for products. If you’re like many services companies, however, you take a more opportunistic, engagement-by-engagement approach to pricing. If that’s the case, then GSA allows for the possibility of not-seasonally adjusted, index-linked rate adjustment and for escalation of rates based on a predetermined factor.¹⁷

Escalation these days is harder to get than it once was, but you might want to insist on it during negotiations. The big advantage to escalation is that you can project out your rates to government customers over the period of a five-year option. You will know in the first year what you’ll be able to charge in the fifth year, and government customers setting up a long-term engagement like that kind of certainty. Unfortunately, escalation doesn’t allow you to make a rolling five-year projection, since there’s a chance you might not get escalation again at the same rate after option renewal.

Ideally, you’ll get automatic escalation, meaning that during the five-year option period, the rate increase kicks in without human intervention, or with a minimum amount of it. Some contracting officers might allow escalation but demand that you file a contract modification to activate it.

An escalation rate of 3.5 is pretty standard, although the more documentation you have about salary rate increases for your sector and geographic area, the better.

Unfortunately, GSA of late has preferred to get companies to agree to index-based pricing, which eliminates rate certainty over a five-year period since index performance is uncertain. A typical index is the Bureau of Labor Statistics’ employment cost index of professional compensation, which has the additional disadvantage of not reflecting compensation changes specific to the federal market, which in recent years has stayed closer to full employment than the private sector. Index-based pricing also requires a contract modification to activate. If you are forced into index-based price adjustments, you can at least take comfort in the fact that should the index turn negative, you won’t be forced to accordingly lower your prices.¹⁸

Services companies are less rigorous about price adjustments than products companies, but it’s possible to get too lax. A lot of services companies aren’t careful enough in this regard, to their eventual mortification. Upward services price adjustments have a cap, which for IT services is a firm 10 percent per year.¹⁹ Companies that skip a year, or two or three years, between price increases find that they’ve allowed a wide disparity to grow between government and private sector rates.

Contract Flow-Down to Indirect Schedule Holders

Manufacturers that decide not to hold a schedule with GSA and instead sell indirectly to the government through partners lighten the burden of government requirements, but they don’t evade them entirely.

When it comes to disclosing commercial sales practices, manufacturers that sell through channels have it easier, since they’re already prevented by the

Robinson-Patman Act from engaging in price discrimination among similarly situated intermediaries. Since discounts must be standardized (or the company faces prosecution under antitrust law), filling out the CSP-1 is fairly straightforward.

Things might get a little more complicated if the manufacturer also does direct sales in addition to channel sales commercially, or has never had a channel partner up until this point, especially if it gave discounts that in retrospect it can’t justify.

Manufacturers allowing their products to be represented on a reseller’s schedule are still subject to possible GSA inspector general preaward audits. But they aren’t subject to postaward audits because they aren’t a contractor, although they can still become involved in a reseller’s postaward audit if there are concerns about potential misrepresentation or failure to disclose. They also won’t face financial capability scrutiny from the GSA Kansas City finance center.

The Trade Agreements Act does apply. A host of clauses about equal opportunity employment, affirmative action for people with disabilities, a business code of ethics, and more listed in FAR 52.212-5(e) also may apply. So does a clause encouraging companies to prohibit personnel from texting while driving when performing any work for or on behalf of the government.²⁰ Clauses of varying gravity found in agency-specific supplements to the FAR might also apply to particular transactions.

Indirect schedule sellers must provide resellers with a letter of supply, guaranteeing the reseller sufficient quantities to meet government needs for the duration of the schedule option period. However, this is not a five-year insoluble business arrangement between supplier and reseller. Rather, that language is meant to protect the government should a disruption between the two companies occur while a government order is outstanding. That order must be satisfied, no matter how much the relationship has deteriorated.

Schedule Administration

During the course of a schedule’s five-year period, you will most likely receive two or more visits from a GSA official known as an industrial operations analyst, who’s there to carry out what GSA calls a contractor assistance visit. While many companies would be glad to do without the assistance the analyst will provide, the visit shouldn’t be a huge bother for those who have the systems and controls in place to successfully manage a schedule contract. Indeed, that’s the point of the visit—to check that those systems and controls are in place. The first visit is likely to occur after you’ve been on schedule a year or two.

The analyst is there to see that you’re collecting the industrial funding fee and are otherwise in compliance with your contract. The analyst will give your company a rating ranging from “exceptional” to “serious concerns exist”; the ratings are a factor in schedule renewal at the five-year option.

Final Note

Getting a schedule contract, we hope we’ve made clear, is not for the fainthearted. It’ll require price rationalization, ongoing monitoring of commercial sales, and a dedicated team to keep GSA satisfied that you’re disclosing your sales practices as they change to keep your contract in compliance. Government contracting, and GSA schedules contracts in particular, requires a dedication to internal controls not paralleled in the private sector. Schedules aren’t for the sloppy, as one well-respected government contracts attorney told us.

That said, schedules have proven to be profitable vehicles for companies committed enough to playing by GSA’s rules and nimble enough to make sure they’re not crushed by them. After having successfully achieved a schedule, a not-uncalled-for reaction among most companies is jubilation—we’ve done it! Unfortunately, companies newly in possession of a schedule actually haven’t done anything yet. They must still find government customers and weather the competition that occurs at the ordering stage. Possession of a schedule is no guarantee of actual orders.

ENDNOTES

1. GSAM 538.7000—538.7004.

2. FAR 8.406-1.

3. FAR 8.002(a); 51.101(a); 8.002(a).

4. GSAM 552-238-78(g).

5. FOB destination means the seller bears the costs for and risk of delivery of the goods until they arrive at the buyer’s specified address. FOB origin requires the seller only to deliver the goods to a common carrier.

6. GSAM 552.238-75(a).

7. GSAM 552.238-75(d)(1).

8. GSAM 552.238-75(d)(2) and (3).

9. GSAM 552.238-75(d)(4).

10. GSAM 515.408(a)(4).

11. CI-FSS-152(c).

12. SCP-FSS-003(f).

13. GSAM 552.216-70(a).

14. GSAM 552.216-70 Alternate I (b).

15. GSAM 552.216-70 Alternate I (c).

16. GSAM 552.216-70 Alternate I (b).

17. I-FSS 969(b).

18. I-FSS-969(e)(1).

19. I-FSS-996(d)(4).

20. FAR 52.223-18.