By Ronald Marta, University of Houston PTAC
General Services Administration (GSA) Schedule Contracts are the most widely used government contract vehicles.
Currently, there are some 18,000 GSA Schedule contracts. Over 11 million commercial products and services are available through GSA Schedules. In fiscal year 2009, federal, state, and local governments spent over $37.4 billion through GSA Schedule Contracts. Little wonder that GSA Schedule Contracts are so sought after by businesses large and small.
In this article, we shall consider the pricing component for GSA Schedule contracts.
The first step in pricing for GSA Schedule proposals should be for the potential Schedule holder to define the cost structure of her/his business. In the government sector there are two broad categories of costs – direct and indirect. Direct costs can be determined by looking at the books and records of a company for costs incurred for labor, materials, and other direct costs. Indirect costs can be determined by establishing cost pools and bases and by calculating indirect rates. By determining the direct and indirect costs and by adding a profit factor, prices can be established for products and services for a GSA Schedule.
Let us now recall the basic idea of the GSA Schedule contract. Pricing for the contract is to be based on the offeror’s commercial sales. Therefore, we start with the offeror’s current, dated Commercial Price List (CPL) or commercial market pricing. The offeror then identifies its Most Favored Customers (MFCs) and the discount offered to the MFCs. Then, the offeror determines the discount to be offered to GSA. The price to be offered to GSA involves two calculations: the first excludes the Industrial Funding Fee (IFF); the second includes the IFF.
What is the Industrial Funding Fee? It is the charge that GSA applies for the administration of GSA Schedule contracts. Currently, the IFF is 0.75 percent. The GSA Schedule holder is supposed to report her/his GSA sales within 30 days after the close of each quarter via the 72A Reporting System. The GSA Schedule holder is also supposed to calculate and pay the IFF at the same time.
There are two documents that are critical for the pricing for the GSA Schedule contract. The first is the Commercial Sales Practices (CSP) format. Typically, this is Document 9 in the solicitation package. The CSP has one form for services and another for products. Both forms must show the total projected annual sales to the Government for each Special Item Number (SIN) offered. The SINs are the numbers under each GSA Schedule that indicate the category of product or service to be offered. If the potential Schedule holder is a dealer/reseller of a product, a Letter of Commitment/Supply from the manufacturer will be necessary.
The Pricing Proposal is the second document. Typically, this is Document 8 in the solicitation package. The template usually contains three formats: the first for services, the second for training, and the third for products. The services format has columns for Service Proposed (e.g. Labor Category or Job Title/Task), Minimum Education/Certification Level, and Minimum Years of Experience. The training format has columns for Course Title, Course Length, Minimum Participants, and Maximum Participants. The products format has columns for Support Product (ODCs), Brand Name, and Time Delivery. Otherwise, the columns to be completed are similar for the three formats: SIN(s) Proposed, Commercial Price List (CPL), Unit of Issue, Most Favored Commercial Customer (MFC), Discount Offered to Commercial MFC, Commercial MFC Price, Discount Offered to GSA (off CPL or Market Prices, Price Offered to GSA (excluding IFF), and Price Offered to GSA (including IFF).
The CSP document and the Pricing Proposal template represent the basic pricing documents for a GSA Schedule proposal. Both must be completed and included in the potential Schedule holder’s proposal package to GSA. There is now a requirement that GSA Schedule proposals be submitted electronically via the e-Offer tool.
Additional Considerations for GSA Schedule proposals.
- While a company’s commercial sales are the usual basis for GSA pricing, other pricing methodologies can be accepted by GSA. For example, “cost build-up,” which is based on historical costs with adjustments for future events. It is best to contact the contracting officer and discuss alternative pricing methodologies.
- Information about the pricing of products and services by companies that already have GSA contracts is available online at GSA Advantage. This can be a valuable source of information for the potential GSA Schedule holder about competitors’ prices and prices in the marketplace. However, it is not advisable to look at the pricing of other companies until one has ascertained the pricing for one’s own company. Cost structures vary from company to company. It is better to look first and foremost at the cost structure of one’s own business.
- GSA 552.238-75 Price Reductions is one of the most significant elements of the GSA Schedule contract. This clause says that, if the GSA Schedule holder sells its products or services at a price lower than the GSA Schedule price, then the GSA Schedule price must be reduced to the lower price.
- The GSA Schedule contract is a long-term arrangement. The pricing of GSA products and services can be adjusted during the period of the contract. Pricing adjustments must be coordinated with the Schedule holder’s GSA Contracting Officer.
Pricing Matters is a regular feature by Ronald Marta. Watch for future posts on a wide range of pricing issues.
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Ronald S. Marta has been a Senior Procurement Counselor with the University of Houston PTAC since 2008. Prior to that, he served as an auditor for 15 years with the Defense Contract Audit Agency (DCAA) and 7 years with the NASA Office of Inspector General at Johnson Space Center. His special areas of interest include accounting systems, proposal preparation, cost analysis, and audit preparation. Ron is a Certified Public Accountant and holds Master’s degrees in Business Administration and in Professional Accounting.
The UH PTAC is a specialty center of the University of Houston Small Business Development Center Network. UH PTAC provides government procurement consulting and training to 43 counties in Southeast Texas.
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