Panel takes up price reduction clause

• By Michael Hardy
• May 06, 2008

One important step to improving the General Services Administration's multiple award schedule contracts would be to reconsider use of the price reduction clause, according to contracting experts who spoke before a newly convened advisory panel May 5.

The panel, holding its first meeting in Washington, includes 11 government officials and four industry representatives.

The price reduction clause is a mechanism that ensures the government is getting at least as good a deal as a contractor's private-sector clients. However, it is cumbersome, often hard to apply to procurements that are not simple commodity buys, and might in many cases be unnecessary, said Christopher Pockney, a principal at Ernst and Young.

Competition serves to keep government prices low, he said. After companies get on a GSA schedule, they still have to compete for business under it. "Where a task order is awarded with competition, why would the Price Reduction Clause even apply?" he asked.

However, panel member David Drabkin, acting chief acquisition officer at GSA, said in some cases agencies conduct a competition by soliciting bids from the contractor they want to use and two more they know won't respond, ensuring the deal goes to the preferred vendor. Pockney said that practice suggests some agency contracting officers need better training and oversight.

However, he added, it's difficult to gauge how often the scenario Drabkin described occurs. "We can throw anecdotes around all day," Pockney said. "I think there's a shortage of real data."

Christopher Yukins, associate professor of government contract law at George Washington University, said revising pricing policies should be only the first step to broader reforms of the schedules program.

"GSA's schedule contracts represent roughly 10 percent of federal procurement, and it is absolutely imperative that the schedule contracts reflect new best practices and not old compromises," he said.

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