GEIA to petition three FAR clauses

Vendors unhappy with the General Services Administration's ability to conduct post-award audits and to seek price reductions and price adjustments are taking their complaints to a new forum under an obscure clause found in the Office of Federal Procurement Policy Act.

The Government Electronics and Information Technology Association (GEIA) plans to petition Deidre Lee, director of the Office of Management and Budget's OFPP, to rescind the price-adjustment, price-reduction and the post-award audit clauses under GSA's multiple-award schedules program.

The act allows anyone to petition the OFPP administrator to review any procurement regulation, and if the administrator determines that a procurement regulation is inconsistent with the Federal Acquisition Regulation, she must rescind it.

GEIA claims the three clauses clash with the FAR, which requires the adoption of commercial best practices. GEIA also claims the clauses cost companies millions of dollars in reimbursements and fines and intimidate companies from entering the market. A draft of GEIA's petition to Lee claims the clauses are "inconsistent with customary commercial practice" and impose an "onerous potential liability."

"We assert there's nothing like this in the commercial market— certainly not with the breadth and scope of these clauses," said Dan Heinemeier, GEIA president.

GSA, however, said the clauses protect the government and taxpayers from paying too much for products and services.

Ida Ustad, GSA's deputy associate administrator for acquisition policy, said GEIA's claims are all old arguments that were made at the time GSA issued its final rule on the Federal Acquisition Streamlining Act (FASA) last year.

"As far as we're concerned [the clauses] conform with the FAR," Ustad said.

The post-award audit clause grants GSA the right to examine a contractor's documents to check for overbillings, billing errors and compliance with the price-reduction clause. The price-reduction clause requires that when a contractor offers more favorable prices to commercial customers, the government must generally receive the same treatment.

The price-adjustment clause allows the government to reduce the contract price if the contractor failed to provide accurate information when the contract was being negotiated.

"Industry has complained that what [the clauses] do is cause a lot of people not to enter the market, so the government is deprived of a lot of goods and services that are otherwise available to the commercial market," said Robert J. Sherry, a lawyer who helped GEIA write the petition.

Sherry said FASA includes strict language about clauses, saying they must be either required by law or consistent with commercial best practices. The GEIA petition maintains that the clauses in question are neither.

Larry Allen, executive director of the Coalition for Government Procurement, said the coalition supports GEIA's efforts.

"We have addressed and sent our own letter to Dee Lee [that] re-emphasizes the fact that industry in general feels the clauses in question are completely inappropriate and may violate the intent of Congress," Allen said.

Carl Peckinpaugh, a lawyer in the government contracts section of the law firm Winston&Strawn, Washington, D.C., and an FCW columnist, said he disagreed with industry.

"The general proposition that industry uses best-pricing clauses and reserves the right to audit are fairly common," he said.

Heinemeier said GEIA may file the petition the first week of December, but might wait until after the holidays to allow Lee more time to consider it. She will have 60 days to rule on the petition.

Lee last week said she was aware of the issue, but she declined further comment.


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