1. Compliance and Growth in the MAS Marketplace
Overview of Compliance Risks and Responses
Roger Waldron
President
The Coalition for Government Procurement

2. INTRODUCTION FEDERAL SUPPLY SCHEDULE CONTRACTS
FSS contracts contain unique, non commercial items
Industrial Funding Fee
Price Reduction Clause
Trade Agreements Act
Audit Rights
Recovery Act Reporting
Mandatory Disclosure Rule
Compliance is critical: failure to comply can lead to termination, False Claims Act liability, suspension or debarment

3. COMPLIANCE AN ANALYTICAL FRAMEWORK
The keys to success
Know and understand the contractual and regulatory requirements
Know and understand thyself (e.g. business operations, market)
Apply “self-knowledge” to contract/regulatory requirements to determine compliance measures
Implement measures: “Create a Culture of Compliance”
Business ethics code
Training
Internal monitoring and controls

4. INDUSTRIAL FUNDING FEE (IFF)
GSA recoups its cost via a fee (.75%) tacked onto the FSS contract prices
Contractors must include the fee in their FSS prices
Contractors must report contract sales revenue to GSA on a quarterly basis
Contractors must remit the IFF (.75% of sales revenue) to GSA on a quarterly basis
Compliance measures: (1) ensure FSS orders/invoices reference your GSA schedule contract and (2) Ensure your ordering and billing system tracks all sales for reporting purposes

5. CONTRACT PRICING & THE PRICE REDUCTION CLAUSE
GSA negotiates prices based on each offeror’s commercial sales practice information
GSA negotiates discounts from an offeror’s commercial price list
Objective is to obtain equal to “Most Favored Customer” Pricing
GSA should consider/compare terms and conditions
See GSAR Clause
Offeror is essentially negotiating against itself
GSA and the offeror must also agree on a tracking (also referred to as the Basis of Award (BOA)) commercial customer for Price Reduction Clause purposes

6. GSA SCHEDULE CONTRACTS: PRICE NEGOTIATION
Most Favored Customer (MFC) Price = Government’s price negotiation objective
If the contractor’s offered price is “equal or better than the best price offered to any customer” for the same item(s) “regardless of quantity or terms and conditions,” the offeror completes a chart with information on most favored customers.

7. GSA SCHEDULE CONTRACTS: PRICE NEGOTIATION
If the contractor’s offered price is NOT equivalent to the most favored customer price, the offeror must complete a chart for all customers that get a price equal to or less than the price offered to the Government
required information included; name of each customer or category of customers; discount received, with terms and conditions; quantity or volume required to be eligible for discount; delivery terms and concessions

8. THE PRICE REDUCTION CLAUSE (PRC) MECHANICS
Three Prices are linked through the PRC
The tracking (BOA) price
The commercial price list
The FSS contract Price
Changes in the BOA price or the commercial price list will result in changes in the FSS contract price- the PRD requires that the price relationship be maintained
Revised commercial price list that reduces prices
Additional discounts to the BOA customer or customers
Additonal or new discounts to a wide-ranging set of customers
Discounts not disclosed during negotiations

9. THE PRICE REDUCTION CLAUSE COMLIANCE MEASURES
Interrelated contract framework
Disclose pricing practices
Detail differences in commercial sales practices versus the FSS market place and contract requirements
Negotiate a BOA tracking customer that works
Monitoring system
Written pricing policies and training
Approval process for deviations from the policies
Track discounts for BOA tracking customer
Contract Administrator

10. GSA CONTRACTS: TYPICAL INTERNAL STRUCTURE
Steps to reduce process risk
Inspect new proposal requirements for every solicitation rather than rely on prior proposals
Engage in specialized compliance training
Utilize centralized control or monitoring of discounting and other pricing practices
Conduct periodic, independent compliance reviews and sanction significant misconduct

11. GSA CONTRACTS: TYPICAL INTERNAL STRUCTURE
Risk mitigation: System Requirements
Searchable sales database to identify all current accurate low prices for use in negotiations, modifications, and audits
Designated personnel should be quick to notice and report breakdown
Overrides should documented and justified
Monitor government and tracking customer prices
Track sales by GSA contract number
Retain data in time periods consistent with contract retention and audit access requirements

12. GSA CONTRACT AUDITS Post-Award Audits
Covers over-billings, billing errors, compliance with Price Reduction and IFF clauses, proof of commerciality of items offered on GSA Schedule, contract administration, and small business subcontracting plan compliance
Generally does not cover pricing, but GSA may use to obtain pricing information
Contractor has a duty to maintain record for three years after last payment.
Contractor Assistance Visits: include review of:
Products to ensure they fall within scope
Pricing and IFF Buy American Act/ Trade Agreements Act Compliance

13. GSA CONTRACT AUDITS Steps to Controlling the Audit Process
Assign one person to interface with auditors
Respond reasonably to written data requests
Provide access to necessary documents in organized fashion
Document all meetings and telephone conversations
Maintain structured environment
Conduct Entrance/Exit conference
Request copy of draft audit report from auditors; chance to correct errors
Obtain copy of final audit report from CO
Prepare rebuttal, with factual documentation
Present defense to CO

14. Changes in Audit Process
IG now
Interview employees
Why?
Repercussions?
Cooperate with IG
Include Counsel
Employee discretion to participate

15. THE TRADE AGREEMENTS ACT (TAA) THE FRAMEWORK
FSS contracts: The TAA applies to all contract line items except those set aside for small business
FAR , Definitions- eligible end products
Japan, Canada, Germany, Korea, Taiwan (Good)
China, India, Malaysia, Thailand, Vietnam (Bad)
FAR 25.4 Trade Agreements
Far – Commercial item certificate
19 CFR 177 Subpart B- U.S. Customs country of origin

16. THE TAA SUBSTANTIAL TRANSFORMATION ACT
Subjective Test
Substantially transformed in an eligible country into a new and different article of commerce with a different name, character or use
Totality of the Circumstances- Case by case analysis
The determinative issue is the extent of operations performed and whether the parts lose their identity and become a integral part of a new article
Complex/meaningful assembly operations versus simple/minimal
US Customs Determinations of Country of Origin

17. THE TAA COMPLIANCE MEASURES
Address TAA during negotiations with contracting Officer
Make TAA part of Contract Compliance Program
Monitor Inventory
Track and archive COO information for inventory
Subcontracts
TAA Certification and/or a compliance with laws provision
Require notification of production point changes
Flow down the applicable FAR clauses
Training – know your contract and the applicable foreign acquisitions requirements

18. MANDATORY DISCLOSURE RULE THE REQUIREMENTS
FAR (b)- Applicability, Ethics and Disclosure
Applies to all contracts exceeding $5 million and 120 days, including commercial item contracts, contracts performed overseas and contracts with small business concerns
Requires a Written Code of Business Ethics and Conduct
Contractor must provide a copy to each employee engaged in performance of the contract
Must be in place within 30 days of contract award
Requires the contractor to exercise due diligence to prevent and detect criminal conduct; and
Otherwise promote an organizational culture that encourages ethical conduct and commitment to compliance with law
FAR (b) applies to FSS contracts

19. THE MANDATORY DISCLOSURE RULE
FAR (b) – Mandatory Disclosure
Requires the contract to timely disclose in writing to the inspector general and the contracting officer (in that order) whenever, in connection with the award or performance, or closeout of a contract, the contractor has credible evidence that a principal, employee, agent, or subcontractor has committed a violation of federal criminal law involving fraud, conflict of interest, bribery or gratuities found in Title 18 of the US code or a violation of the civil False Claims Act

20. THE MANDATORY DISCLOSURE RULE THE MECHANICS
FAR (b) – Mandatory Disclosure
For the Federal Supply Schedules, multiple award contracts and govermentwide acquisition contracts, disclosure must be made to both the IG of the ordering agency and the IG responsible for management of the contracts
Provides that the Government, to the extent permitted by law, will safeguard the information obtained via contractor disclosure as confidential where the information has been marked “confidential” or proprietary
Invokes FOIA and states that to the extent permitted by law and regulation the contractor will be given prior notification before public release of such information

21. THE MANDATORY DISCLOSURE RULE FOOD FOR THOUGHT
FAR (c) – Business Ethics Compliance Programs and internal control system
This section does not apply to small businesses and commercial item contracts including FSS contracts. However, this provision provides insight into the government’s views regarding “due diligence.”
Ongoing business ethics awareness and compliance program
Includes periodic communication and training on the business ethics awareness and compliance program and internal control system
Provided to principals, employees and as appropriate agents and subcontractors

22. THE MANDATORY DISCLOSURE RULE FOOD FOR THOUGHT
FAR (c)(2) –Internal control system
Minimum requirements continued . . .
Assignment of responsibility at a high level and adequate resources to ensure effectiveness of the ethics and compliance program
Reasonable efforts not to include and individual as a principal who has engaged in conduct that is in conflict with the code of business ethics (background checks)
Periodic compliance reviews of company business practices and procedures
Audits, periodic evaluations, assessment of the risk and remedial actions

23. THE MANDATORY DISCLOSURE RULE FOOD FOR THOUGHT
FAR (c)(2) –Internal control system (continued
Minimum requirements continued . . .
Internal reporting mechanism; such as hotline
Disciplinary action for improper conduct or for failing to take steps to prevent or detect such conduct
Timely disclose, in writing to the IG, with a copy to the contracting officer of any applicable violation of federal criminal law or the civil False Claims Act
Full cooperation with any Government audit, investigation or corrective action

24. THE MANDATORY DISCLOSURE RULE SUSPENSION AND DEBARMENT
FAR and
Applies to all current contracts and all contracts where final payment was received within the last three years
Applies to all contracts and contractors regardless of size or type (includes commercial item contracts, small businesses and contracts below $5 million or shorter than 120 days)

25. REMEMBER THE FUNDAMENTALS
Successful government contractors invest in contract compliance
Assign an executive responsible for compliance
Establish a code of conduct and training
Establish a hotline for your employees
Implement systems/policies/procedures addressing IFF, PRC and TAA requirements
Review, audit, and update your compliance program
Create a culture of compliance

26. Regulatory Update
Preventing Abuse of Interagency Contract Interim Rule – FAR 8.4 and 17.5
New FSS Ordering procedures- Interim Rule FAR 8.4
eBuy and BPAs
FAR Part 51 Deviation Ordering Guide
Public Access to Federal Awardee Performance and Integrity Information System- Interim Rule
FAR Circular 2005=50
Requirements for Acquisitions Pursuant to Multiple-Award Contracts (Section 863)
Sole-Source 8(a) Contracts
Use of Commercial Services Item Authority
Other?

27. Regulatory Update Continued
GSAR Rewrite – MAS Pricing Policies and Procedures
GSA Requesting Comments on Improving Regulation and Regulatory Review
Proposed rule addressing Organizational Conflicts of Interests – FAR 9.5 (Coming soon)
GSA Request issued on March 22, 2011 and comments are due by April 15, 2011.

28. GREENING THE GOVERNMENT
EO 13514: Federal Leadership in Environmental, Energy, and Economic Performance (Oct. 2009)
95% new contract actions for products/services must be green:
Section 13: GSA determining the feasibility of requiring vendors to report greenhouse gas (GHG) emissions
2 pilots:
GreenGov Supply Chain Partnership (Companies experienced in GHG voluntary reporting)
Federal Supplier GHG Emissions Inventory Pilot (Small businesses)
GSA Greening Schedules (Icons)

29. FEDERAL STRATEGIC SOURCING INITIATIVE
OMB Memorandums:
Implementing Strategic Sourcing (May 2005)
Improving Government Acquisition (July 2009)
MAS BPAs
Office supplies
Domestic delivery services
Telecommunications Expense Management Services
Managed Print Services

30. DEPARTMENT OF DEFENSE: BETTER BUYING POWER INITIATIVE
Increase competition
Cost or Pricing data requests
Subcontract management
Efficiency Initiative to Reduce Industry Overhead Costs (Feb. 2011)
Reduce Time and Materials Contracts
Shorten contract terms/modular bite-sized contracts
New Source Selection Procedures
Impact on MAS Program
Potential increase in market share

31. COALITION POLICY INITIATIVES (THE 5 Cs)
Contract Duplication/Consolidation
Consistency in Interpretation of Rules
Contract Structure (ODCs)
Contract compliance and competition
New ordering procedures
Maximum order threshold
Price Reduction Clause
Contract Greening

32. Growth Prospects

33. GSA Schedule Sales Data
FY 2010: $38.8 Billion
FY 1998: Just under $8 Billion
This chart shows the growth of the GSA schedules indicating sales by fiscal year

34. WHAT’S HAPPENING TO YOUR GOVERMENT CUSTOMER?
Oversight and Transparency
Limited Fiscal Resources
Current Uncertainty (Continuing Resolutions)
Push for Savings (Strategic Sourcing and Competition)
Future Cuts
Insourcing Slows
Acquisition Workforce Grows

35. CURRENT FEDERAL MARKET CLIMATE
Continued Audits and Increased Reporting
The American Recovery and Reinvestment Act (ARRA) Transparency
The President’s $40 Billion Goal in Reduced Contract Spending
Savings Initiatives
Strategic Sourcing
Competition
OMB & DoD Setting the Policy Framework

36. CURRENT FEDERAL BUYING INITIAIVES
Strategic Sourcing
Leverage Government’s Collective Buying Power
Reduced Costs, Better Logistics
OMB & GSA Setting Framework
Mandatory or Non-Mandatory?
Government-Wide or Agency Specific?
Competition
Acquisition Planning
Justifications
Electronic Systems
Conflicts with Strategic Sourcing?

37. BUSINESS EXPECTED, BUT AT A COST
Transparency & Oversight
IG Audits & Investigations
Ethics Compliance/ Mandatory Disclosure Rule
Pricing Reviews & Tools (GSA Taking the Lead)
Subcontracting Reporting
Federal Awardee Performance and Integrity Information System (FAPIIS)
ARRA – Model for the future?

38. IS THERE MONEY? Continuing Resolutions Budget Stagnation/ Reduction
How do you add value and save money?
ARRA Has Ebbed
Change in Congress: Greater pressure to reduce spending

39. WHAT DOES THAT MEAN FOR MY BUSINESS PROSPECTS?
How Easy Is It For Your Customer To Find You?
How Can You Save the Customer Money?
Why Are You The Low-Risk, Proven Solution?
Increased Competition May Mean More Opportunity

40. THE SELLING TRIANGLE End-User: The Most Obvious Person
Program Manager: Sometimes The End User’s Boss, Sometimes the Same Person
The Contracting Officer

41. MARKETING & FINDING LEADS
Business Intelligence
Target Specific Agencies
Call on CO’s, End-Users, and Project Managers
Examine FPDS for Past Buying Habits
Read Industry Publications
Attend the Right Conferences
Review E-Buy and Websites
The Pitch
What Makes You Special, Low-Risk and Cost Effective?
Socio-Economic Partnerships
Past Performance
Don’t Over Do It
Agency SES: GS-14s and 15s that control program funding and direction

42. The Coalition for Government Procurement
Roger Waldron
President
The Coalition for Government Procurement