PRC to trash bin, contractor enthusiasm to infinity!

Stop me if you’ve heard this one before: the Price Reduction Clause, the “anachronistic” (Professional Services Council language) GSA Schedule regulation that trips up vendors large and small, is on its way out. It’s even hit the Federal Register as a proposed rule.

The PRC, as a refresher, is a clause in GSA Schedule contracts that requires vendors to negotiate a “basis of award” customer or category of customers (e.g., as broad as “all commercial customers”) at contract award. GSA aims to name the most-favored customer (or category; that is, those receiving the best terms and pricing); offerors typically try to narrow their exposure. That’s because any discount to the BOA automatically has to be passed along to the GSA Schedule buyers, and careful monitoring of all sales to the BOA can be a compliance nightmare.

The point of the PRC is to leverage competition in the commercial market to set pricing in the federal. Except the federal government is a huge buyer of products and services, and there’s often significant competition for its dollars, particularly with commercial offerings, all that’s sold on GSA Schedules.

What’s coming is a prices-paid system, whereby sellers will have to load prices for each labor category or product sold on a Schedule order. In fact, the proposed rule would force vendor entry for GSA-run non-Schedule contracts (GWACs and the like) immediately. It would be phased in to the Schedules.

Offerors will still have to disclose sales practices (aka discounting practices) for negotiation at award and option renewal, and GSA could request updated sales-practice information at any time. GSA sees this as maintaining “vertical” visibility into sellers’ pricing strategies. The prices-paid database, along with unnamed “industry benchmarks,” allow for “horizontal” price analysis across competitors.

The PRC and its best friend the False Claims Act have resulted in significant recoveries of federal overpayments to vendors large and small for not making full, accurate disclosures at Schedule award or violating those disclosed sales practices and not passing along proportionate discounts to the government. Industry associations are cheering for now, but my guess is the rule change results in slimmer margins for the vast majority of Schedule holders.


Originally published at www.scifibridges.com on March 8, 2015.