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Using General Services
Administration Schedule Contracts to
Sell to the Federal Government
February 5, 2008
Association of Corporate Counsel
www.acc.com
3
Panel
John G. Horan (Moderator)
John A. Burkholder
Disclosure Requirements for your Proposal
Alison L. Doyle
The Workings of the Price ReductionClause and Industrial Funding Fee
Jason A. Carey
Audits and the Liability for Non-Compliance
4
Background on GSA Schedule Program
GSA Schedule Program Offers Tremendous
Opportunity
11 Million Commercial Products and Services
Available under the Program from
Approximately 19,000 GSA Schedule
Contractors.
The Government Spends over $30 billion
Annually Through the Program.
5
Background on GSA Schedule Program
GSA Schedule Program Offers Tremendous
Risk
Severe Sanctions -- Loss of Revenue, Civil
Suit, Criminal Investigations
Widespread Misunderstanding of GSA’s
Requirements -- GSA’s Office of Inspector
General Uncovered Defective Pricing on 84%
of Contractor Audits
6
DISCLOSURE OBLIGATIONS OF A GSASOLICITATION
Significant difference between GSA schedules and othergovernment or commercial contracts
Historical sales data, other information for “best” price
“Commercial Sales Practices Format” (“CSP-1”)
Establish “commerciality”: dollar value of sales of items togeneral public, “established catalog or market price,”previous 12 months
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DISCLOSURE OBLIGATIONS OF A GSA SOLICITATION
Next, state whether discounts and concessions offered are
“equal to or better than best price offered to any customer”
for same item(s) “regardless of quantity or terms and
conditions
“Most favored customer” price – Government’s price
negotiation objective
If “Yes,” in next section offeror completes chart with
information on MFC(s)
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DISCLOSURE OBLIGATIONS OF A GSA SOLICITATION
If “No,” in next section offeror completes chart for allcustomers that get a price equal to or lower than priceoffered to Government
Information: name of each customer or category ofcustomers; discount received, with terms and conditions;quantity or volume to be eligible for discount; FOBdelivery term; concessions
Must disclose deviations from written policies or standardcommercial sales practices, with explanation
9
DISCLOSURE OBLIGATIONS OF A GSA SOLICITATION
Typical deviations: one-time goodwill discounts (charity or
disgruntled customers); limited sales of obsolete or
damaged goods; sales of samples to new customers; sales
of prototypes for testing
If deviations “so significant and/or frequent” as to bring
into question fairness, reasonableness of offered prices,
contracting officer may require more clarifying
information
10
DISCLOSURE OBLIGATIONS OF A GSA SOLICITATION
Government uses disclosures of prices, discounts,concessions and deviations for advantage in pricenegotiations – one of two significant differentiators fromcommercial contracting (along with Price Reductionsclause)
No requirement to certify information disclosed on CSP-1,but GSA says up front it expects offeror to providerequired information that is “to the best of [offeror’s]knowledge and belief, current, accurate and complete as of14 calendar days prior to its submission.”
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DISCLOSURE OBLIGATIONS OF A GSA SOLICITATION
Offeror must also disclose any changes in price lists,
discounts or discounting policies that occur after
submission of offer, but before close of negotiations.
All information disclosures are “matters” within
jurisdiction of a branch of U.S. Government – subject to
False Statements Act, 18 USC 1001
Best practices: disclose current, accurate, complete
information, and when in doubt, disclose
12
DISCLOSURE OBLIGATIONS OF A GSA SOLICITATION
CSP-1 information subject to pre-award audit (discussion
below)
All GSA schedules incorporate by reference GSAR
552.215-72, “PRICE ADJUSTMENT-FAILURE TO
PROVIDE ACCURATE INFORMATION” (“defective
pricing clause”: prospective and retroactive; T/D)
Danger of False Claims Act prosecution (deliberate
ignorance; reckless disregard)
13
Ongoing Compliance Obligations Postaward:
The Price Reductions Clause
Mandatory for GSA schedule contracts
Implements the agreement between vendor and GSA on
an “identified customer (or category of customers),” also
referred to as a “most favored customer” or “basis of
award customer”
Maintains the relationship between GSA and MFC price
or discount over the life of the contract
14
Ongoing Compliance Obligations Postaward:
The Price Reductions Clause
Price reductions are any change to your
sales practices that disturbs the relationship
between the GSA and MFC pricing
Requires common agreement on ‘the
relationship’ and how it is to be maintained
Requires internal controls to ensure triggering
transactions are only made when approved
15
Ongoing Compliance Obligations Postaward:
The Price Reductions Clause
Triggers price reductions at the same timeand for the same period:
Price reduction/discount increase to MFC
Price reduction caused by revision of thecommercial pricelist you disclosed duringnegotiations
Price reduction caused by grant of morefavorable terms and conditions than thosedisclosed during negotiations
16
Ongoing Compliance Obligations Postaward:
The Price Reductions Clause
Does not trigger a price reduction:Price reductions to federal customers – encouragesfurther discounting on federal sales
Firm fixed price definite-quantity sales to the MFCover the Maximum Order Threshold
If state/local customers are the MFC, their purchases ofIT through GSA under special schedule authority willnot trigger a price reduction
Errors in quotation or billing if fully documented to thecontracting officer
Temporary price reductions (i.e. sales)
17
Ongoing Compliance Obligations Postaward:
The Price Reductions Clause
Contractors must report price reductions
within 15 days
Price reductions that are not reported (or not
timely reported) risk permanent application
18
Ongoing Compliance Obligations Postaward:
The Industrial Funding Fee
Contractor must collect .75% IFF on all schedule
sales – part of the original price negotiation
Contractor must submit quarterly reports and
remit IFF collected
Requires ability to capture schedule contract
orders separate from commercial sales and careful
review of all government orders for possible
inclusion
19
Ongoing Compliance Obligations Postaward:
Other Obligations
Ability to timely confirm orders are from authorized usersof schedules
Process to identify and address orders that include itemsnot available on schedule contracts
Adopt and adhere to a plan to seek small businesssubcontracting opportunities
Implement equal opportunity and affirmative action laws
Flow down at certain mandatory clauses to subcontractors
Maintain compliance of schedule products with TradeAgreements Act requirements
20
Ongoing Compliance Obligations Postaward:
Other Obligations
Issue approved price list which includes pricing
and mandatory terms and conditions
Post product and price information on
GSAAdvantage!, the GSA online resource
Add/delete product offerings to keep up with
marketplace
Record retention – three years from final payment
on each five year performance period
21
GSA AUDITS
Three Kinds of Audits:
Pre-Award Audits – FAR § 52.215-20 (Alt. IV)
Post-Award Audits – FAR § 552.215-71
“Contractor Assistance Visits” (CAVs)
22
Pre-Award Audits
GSA Has Increased the Number of Pre-Award Audits
GSA reviews materials related to commercial pricing and
discount practices
Ensure disclosures are accurate, complete, and current
GSA has no right to obtain cost or pricing data or
information used to set commercial pricing and discounts
Request a copy of the pre-award audit report, though GSA
is not required to provide it
23
Post-Award Audits
Covers over-billings, billing errors, and compliance withPrice Reduction and IFF clauses
Generally does not cover pricing, but GSA can usually getinformation relevant to pricing
Duty to maintain records; usually for three years after lastpayment
CAVs should be viewed as audits, and can include reviewof:
products to ensure they fall within scope
pricing and IFF
Trade Agreements Act compliance
24
The Importance of Audit Procedures
Identify and develop responses to any existing fraudconcerns
Prevent claims of fraud or obstruction based on the audit
Protect your rights
Bases of liability:
Criminal: False Claims Act; False Statements Act;Obstruction of a Federal Audit; Conspiracy
Civil: False Claims Act (treble damages)
Administrative: Disallowances & Penalties
25
Audit Procedures
Preparation for the Audit:
Obtain the audit request in writing
Conduct an internal pre-audit review
Establish a primary point of contact
Establish a workplace for the audit team
Make a copy of each document provided
26
Audit Procedures
The Entrance Conference:
Identify the point of contact
Discuss procedures for requests documents andinformation
Discuss procedures for copies
Request an Exit Conference and a copy of the draft AuditReport
27
Audit Procedures
The Audit:
Use the Point of Contact
Respond within a reasonable period
Ensure that requests are within the scope of the audit
Negotiate the request if outside the scope, burdensome, orunreasonable
Identify potential issues and begin preparation of aresponse
28
Audit Procedures
Exit Conference:
Auditors should summarize results and inform thecontractor of procedures for issuance of the final report
Contractor should express its position on issues
Contractor should request a copy of draft report
Contractor should request an opportunity to respond inwriting
29
Recognizing When an Audit
Has Become an Investigation
Shift in Focus of the Audit
Unusual Focus on a Particular Aspect of the Audit
Failure to Discuss an Aspect of the Audit
Failure to Provide an Exit Conference
Refusal to Discuss Findings on a Particular Issue
Failure to Include an Aspect of the Audit in an AuditReport
Failure to Issue an Audit Report
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