Procurement

IT pricing policies are dinosaurs, say contractors

price illustration

A federal contractors' group looking to influence GSA's efforts to overhaul the pricing structure for goods and services under the agency's Multiple Award Schedule contracts says some pricing rules can be particularly damaging to IT services.

One of the biggest issues with the schedule contracts is that federal contractors have to disclose commercial pricing policies and practices, said Roger Waldron, president of the Coalition for Government Procurement. The price reduction clause in MAS contracts requires vendors that provide discounts to private-sector customers to give the same price break to government buyers.

Resource

Read the Coalition for Government Procurement's white paper.

Waldron said that dynamic was designed for a time before today's fast-moving, competitive IT market and impedes IT contractors and federal customers alike.

Waldron's group released a new white paper on GSA's schedule pricing policies on Sept. 16 in hopes of advancing efforts by the agency to rewrite its rules. GSA has been reworking the pricing rules for schedule contracts in the last two years or so, said Waldron, recognizing that markets -- especially IT services -- have changed dramatically since they were implemented in the early 1980s.

The paper lists several suggestions for changes, but Waldron said in an interview that the price reduction clause is one of the most problematic issues for IT vendors. Because the provision requires companies to disclose to federal buyers the discounts they give to private-sector customers, IT service and gear providers sometimes don't make their latest technology available through federal schedules. The cost to build the infrastructure to track pricing for services and IT gear sold via thousands of private contracts is too costly to justify, he said.

According to the white paper, professional services are now the largest part of the GSA's schedules program and have been disproportionately hurt by a "static MAS pricing policy."

About the Author

Mark Rockwell is a staff writer at FCW.

Before joining FCW, Rockwell was Washington correspondent for Government Security News, where he covered all aspects of homeland security from IT to detection dogs and border security. Over the last 25 years in Washington as a reporter, editor and correspondent, he has covered an increasingly wide array of high-tech issues for publications like Communications Week, Internet Week, Fiber Optics News, tele.com magazine and Wireless Week.

Rockwell received a Jesse H. Neal Award for his work covering telecommunications issues, and is a graduate of James Madison University.

Click here for previous articles by Rockwell. Contact him at mrockwell@fcw.com or follow him on Twitter at @MRockwell4.


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Reader comments

Thu, Sep 19, 2013 Richard P DC Metro

It in nonsense to require that antiquated concept - if a store in Iowa cannot sell certain items they discount them to clear their shelves - under the FAARs forever that same price should now be retroactively applied to that product. Likewise, in industry to make a sale to a customer you might sweeten the pot exactly the same way to clear out old inventory to a customer still using those devices and even use it as a loss leader as part of a much larger sale or even the salesman forgo their commission on that piece part - then the company could be subject to fines and penalties and possible criminal prosecution for not giving that same price to ALL government clients forever and retroactively. It is best price PERIOD with no consideration for conditions and no time factors.

Thu, Sep 19, 2013

For most companies the federal government is the single largest customer. As the largest customer, we should probably get the best price for any commodity item that you sell to us. This paper is a foolish and veiled attempt to drive profit at the taxpayers' expense. The companies that are members of this trade association would be better served by considering how this type of white paper will be received by your biggest customer. You can see a list of the members here: http://thecgp.org/member-companies.

Wed, Sep 18, 2013 BDD

"One of the biggest issues with the schedule contracts is that federal contractors have to disclose commercial pricing policies and practices" Really? Contract compnies would prefer not to verify that the citizens of the US getting the appropriate discounts? If the cost of doing business with the gov't is too high, then the companies will leave. It is a business decision. The policy, as it stands, insures that the tax payers are getting the proper costing.

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