By Steve Kelman

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Are agencies paying too much through the GSA schedule? Readers respond

I want to thank all the readers who made such interesting comments and reactions on my recent blog post about whether agencies were getting the best possible deals through the General Services Administration schedule contracts.

I am particularly grateful for the generous and thoughtful comments from Jeff Koses at the General Services Administration. It is a really nice sign for all of us in the contracting community that GSA welcomes a constructive dialogue on this issue.

By the way, my friends at Federal Computer Week tell me that they are planning to take a sample of widely used IT products and perform the Google test I suggested, to see how the GSA schedule list price compares with the lowest price available on commercial sites. Stay tuned for the results. I am myself curious to see what FCW will find. I sure hope I am wrong, but I fear that the best retail price will frequently be the same as or lower than the GSA schedule list price.

A few reactions to the reactions. First, I was definitely not trying to “beat up” on GSA. Actually, I think the GSA schedules have the potential to be a very important tool for good federal buying. They allow quick buying. They are pre-negotiated with terms and conditions. And above all, there is the potential to get discounts, either on a spot basis, using reverse auctioning (which allows contractors to lower initial bids in real time after seeing what others bid), e-Buy (GSA’s online tool for requesting quotes), or through blanket purchase agreements (in which agencies negotiate volume discounts).

My key message, I guess, is that the government is not doing a good enough job negotiating discounts, and that the “most-favored customer” language used by GSA (based on regulatory/statutory requirements) is lulling many contracting officials to believe, incorrectly, that the GSA list price is the “best price.”

I was interested to find that many buyers think that GSA list prices are far from the best, although commenters from GSA and a vendor suggested that at least some times GSA seeks to negotiate prices that are lower than best prices for a quantity of one. Several commenters suggested that the problems with GSA schedule list prices are even worse for services. One problem is that different GSA contracting officers appear to have different approaches to what “most-favored customer” pricing means (which incidentally has gotten GSA into political problems with members of Congress who interpret this as the best price available in the universe).

I suggested in my original post that GSA needs to do a much better job counteracting the misimpression that GSA list prices are the best prices. Perhaps every page on any schedule document or web page should state something like: “These prices may not be the lowest prices for quantity purchases. If you are planning a quantity purchase, you should seek a discount.” Information on various ways to attain discounts (reverse auctions, e-Buy, BPA) should be included prominently in all GSA training and printed materials.

Dave Drabkin, would you be willing to make my life a little easier by posting a comment noting the major recommendations of the Multiple Award Schedule Advisory Panel about how the government could do a better job gaining discounts off schedule list prices when buying in quantity? (Hey, I know you’re speaking personally and not for Northrop Grumman!)

Finally, my idea about the Google test was intended as a performance measure. Actually, on an ongoing basis, this would be more appropriately used as an agency-level performance measure. Agencies should take a random sample of actual commercial off-the-shelf prices (for IT and other products) through Google. As a performance target, GSA pricing should be better than the best available retail price in 95 percent of the cases. Deviations from this performance target could engender good organizational learning about what the agency might need to do to improve pricing. (Sometimes, especially for IT, the Buy America provision could be responsible for higher pricing, which would engender information about the price taxpayers are paying for these provisions.)

Posted on Aug 03, 2010 at 12:08 PM


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