IT vendors seek relief from award audits

A group representing federal information technology contractors last week asked the Office of Federal Procurement Policy to eliminate General Services Administration policies that allow government buyers to conduct audits after a contract is awarded and to demand price adjustments.

The Government Electronics and Information Technology Association (GEIA), which represents more than 80 companies, filed its petition with Deidre Lee, administrator of OFPP, saying the post-award audits and price adjustments do not comply with the Federal Acquisition Regulation and the Federal Acquisition Streamlining Act, both of which require consistency with commercial business practices on commercial-item contracts.

The government has the right to conduct the audits and demand the price adjustments under clauses in GSA's multiple-award schedule program. The audit clause grants GSA the right to examine a contractor's documents for up to three years after a contract is awarded to check for overbilling and other billing errors. 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.

Such practices are "unheard of" in the commercial market, and the clauses impose enormous business risks and require vendors to bear the cost of maintaining huge amounts of information, said James Serafin, director of marketing and government relations for GEIA.

But GSA says the clauses protect the government and taxpayers from paying too much for products and services, and some procurement officials also are critical of the petition.

"We believe the policies we put out are in accordance with the law and regulations," said Ida Ustad, GSA's deputy associate administrator for acquisition policy. "If we didn't believe the clauses were a necessary part of the program, we wouldn't have put them in the rule."

The FAR says the government is supposed to employ commercial practices in its procurement policies "to the maximum extent practicable," Ustad said. That clause is significant, she said, because Congress realized that the post-award audit and price-adjustment clauses are useful tools that commercial buyers employ.

Carl Peckinpaugh, a lawyer in the government contracts section of the law firm Winston & Strawn, Washington, D.C., and an FCW columnist, said GEIA was "totally overreaching" with its petition. "To get OFPP to cancel these FAR clauses, they have to show this is inconsistent with the commercial world. If they can't show that, they lose automatically," he said.

GEIA is likely to lose its case because private industry does employ the business practices covered by the clauses, Peckinpaugh said. GEIA also lost credibility by delaying the petition for seven months, he said.

GEIA announced plans to file the petition last November but said it would put off formally submitting the petition until after the winter holidays.

GEIA waited until now because it wanted to allow time for meetings with Lee and other OMB officials, Serafin said.

Robert Sherry, a lawyer who helped GEIA write the petition, said representatives of the association met three times with Lee, but it was difficult to reach a compromise.

"Given her position...she has a lot of interest groups to satisfy," Sherry said.

Bert Concklin, president of the Professional Services Council, said his organization supports the petition and called the clauses "residual micromanagement artifacts" that came into being during the first half of the century.

"To retain vestiges of the old, overregulated, no-risk approach to federal procurement is out of sync with the degree of deregulation and risk-sharing that has characterized much of the rest of acquisition reform," Concklin said.

The Information Technology Association of America also has endorsed GEIA's effort to eliminate the clauses.Lee, who did not respond to a request seeking comment on the petition, has until July 30 to issue a ruling.

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