Watchdog Again Pushes GSA to End Contracting Pilot Program

The Office of Inspector General for the General Services Administration and the agency’s Federal Acquisition Service generally disagree about the success of the Multiple Award Schedule to guarantee agencies are receiving competitive contract prices. 

In particular, the watchdog repeated its recommendation from last year that the agency cancel the Transaction Data Reporting pilot program, due to a lack of promised price guarantees.

 The OIG issued a report on Friday finding that GSA’s FAS price analyses “cannot give customer agencies assurance that GSA Multiple Award Schedule (MAS) contract pricing will result in the lowest overall cost alternative to meet the government’s needs.”

MAS, a key contracting program for GSA run by FAS, is designed to leverage the federal government’s buying power to provide agencies with competitive pricing. In 2016, GSA created the TDR rule and pilot program, requiring certain MAS contractors to report transactional data for products and services sold under their MAS contracts. As a result, contractors were not required to provide commercial pricing information or track other information for pricing, like they were previously required to do. According to OIG, under TDR, the “pricing objective has changed from obtaining the vendor’s most favored customer pricing to ensuring prices are ‘relatively competitive’ with other government contract prices.” OIG stated that GSA’s pricing on MAS contracts is important because, according to federal regulation, customer agencies “rely on GSA’s price reasonableness determination to ensure orders result in the lowest overall cost alternative.” 

For the report, OIG examined eight contracts with a total estimated value of $2.5 billion in the TDR pilot program and 12 contracts that required commercial pricing disclosures valued at approximately $1.8 billion. The inspector general found that FAS’s pricing methods for MAS contracts in the TDR program were insufficient. 

“I remain deeply concerned by GSA’s failure to remedy the grave problems plaguing the TDR pilot project and its pricing methodologies. GSA should address these problems before expanding the TDR pilot across the $39 billion MAS program, or cancel it,” GSA Inspector General Carol Ochoa said.

For example, OIG found that many FAS contracting personnel did not have access to TDR data to use for pricing decisions on TDR contracts or did not understand the data and how to use it; therefore, they primarily compared proposed pricing to other MAS and government contracts, in addition to using pricing tools. However, OIG noted that this does not guarantee that this is the offerors’ best price and that agencies are getting the lowest overall cost alternative. Additionally, seven out of 11 FAS contracting personnel interviewed for the report shared concerns about the value of TDR to MAS, adding that it should be canceled. A 2021 OIG report looking into TDR and plans to expand the rule to all MAS contracts by Nov. 1, 2022, also concluded that TDR data is “inaccurate and unreliable,” though FAS disagreed.

Furthermore, OIG discovered that all of the contracts that required commercial pricing disclosures had incorrect price information. Specifically, disclosures provided information that was “unsupported, outdated or that identified no comparable commercial sales.” As a result, this led to more pricing risk and missed price negotiation opportunities, creating the possibility that agencies are overpaying for products and services. OIG provided several examples of contracting officers awarding contracts higher than the average rate for other contracts. In particular, a “contracting officer awarded a proposed hourly rate of $108.32 despite a CALC tool report generated by the contracting officer that found this rate was $26.32, or 32 percent, greater than the average hourly rate based on price comparisons to 384 other MAS contracts.”

Specifically, OIG recommended that the FAS commissioner:

• Cancel the TDR pilot program, because after six years, the program “has not resulted in a viable pricing methodology that ensures compliance with [Competition in Contracting Act of 1984] requirements for orders to result in the lowest overall cost alternative to meet the government’s needs. OIG noted that it previously issued this recommendation in its 2021 report, which FAS rejected. 

• Tell customer agencies to perform separate, independent price determinations, because following MAS contract pricing and Federal Acquisition Regulation may not guarantee compliance with CICA requirements for contracts to be the lowest cost alternative. According to OIG, agencies should continue to do this until the requirements and control set forth in the third recommendation are set in place, to make sure there is CICA compliance.

• Create requirements and controls to make sure that FAS contracting personnel can properly analyze commercial sales practices in order to negotiate pricing consistent with requirements and to identify and support the determination of most favored customer pricing. 

• Seek new pricing methods that can make certain that FAS’s contracting personnel can take advantage of aggregate government buying power to negotiate and award MAS contracts that are the lowest cost alternative and meet government needs. 

GSA management disagreed with the first three recommendations and the overall conclusions of the report.

In response, FAS Commissioner Sonny Hashmi noted the perceived success of TDR; information about the procedures to ensure CICA compliance; pricing analyses that support MAS contracts meeting their goals, according to FAS; and its position that it does not need more information to analyze commercial sales practices disclosures. 

“FAS believes that the MAS Program follows competitive procedures necessary to establish fair and reasonable contract pricing, and orders placed against MAS contracts using the procedures at FAR 8.405 are best value and result in the lowest overall cost alternative to meet the Government’s needs,” Hashmi said.

However, after reviewing the FAS commissioner’s response, OIG noted that its conclusions are the same. Specifically, that FAS price analyses on MAS contracts under TDR and contracts requiring CSP disclosure are deficient. Therefore, these methods do not guarantee agencies will receive the lowest cost alternative contract. As a result, OIG encouraged FAS to reconsider its recommendations and to address the issues in its findings.