Driving the federal government towards a Low Price Regardless (LPR) contracting model
By Roger Waldron for FederalTimes.com December 1, 2014
As part of the Federal Strategic Sourcing Initiative (FSSI), the Office of Management and Budget and the General Services Administration have created a Prices Paid Portal. The goal of the Prices Paid tool is to reduce total cost of ownership for goods and services by providing greater visibility on the prices agencies have paid for them.
The Prices Paid Portal is part of an ongoing effort to collect transactional data across the government. The challenge in managing pricing data is to ensure it is used to identify contracting strategies and/or terms (like volume commitments) that increase competition and deliver greater value to the American people. Unfortunately, current data management practices will likely reduce competition and value over the long term.
Sound management of pricing and procurement data requires discipline, sophistication, and, most significantly, an understanding of markets and how companies respond to competitive dynamics. Moreover, price alone is incomplete data. In order to effectively understand pricing, one must have access to and understand the underlying terms and conditions, contract commitments, market and economic forces that drive pricing. Price is only one data point in determining “total cost of ownership.” An accurate measure of “total cost of ownership” includes much more than just price. It also includes acquisition cost (i.e. how much did it cost to conduct the procurement), operational costs, maintenance costs, and disposal costs. The emphasis solely on prices paid data ignores these fundamental cost elements.
To date, the experiences with FSSI and GSA regarding the prices paid data is that of an agency seeking to drive down prices “at all costs.” It is the implementation of a new Low Price Regardless (LPR) model—(i.e. give us the lowest reported price regardless of the associated terms and conditions, volume commitments, market and economic conditions). For example, GSA is using historical, horizontal price comparisons to drive down pricing in the Multiple Award Schedules (MAS). Price comparisons that too often ignore differing terms and conditions, commitment and market conditions—even ignoring such basic price drivers as unit of issue!! It is LPR on steroids. .
For help with Government Contracting: contact your nearest Procurement Technical Assistance Center (PTAC). Funded through Cooperative Agreements between the U.S. Department of Defense and state and local governments/institutions, PTACs provide free and low-cost assistance in virtually all areas of government contracting.