By now the entire government contracting community is well aware that one of the most significant changes in Federal Supply Schedule (FSS) contracting in years occurred last week, as the General Services Administration (GSA) issued its Final Rule on transactional data reporting. The Final Rule amends the GSA Federal Acquisition Regulation supplement (GSAR) to require FSS contractors and others with certain GSA Government-wide Acquisition Contracts (GWACs), and Government-wide Indefinite-Delivery, Indefinite-Quantity (IDIQ) contracts to report transactional data related to orders placed under those contracts.
As we indicated over a year ago in a prior client alert, both the contracting community and the GSA Office of Inspector General had concerns with the draft transactional data reporting rule. GSA has addressed some, but not all, of these concerns. Below we highlight some of the major considerations relating to these watershed changes:
- Contractors should start now to set up systems for capturing transactional data.
The transactional data required to be reported to GSA will
include such details as contract or blanket purchase
agreement number, delivery order or task order number, item
descriptions, manufacturer name, part numbers, Universal Product
Codes (if applicable), quantities purchased, and prices paid.
GSA will set up an electronic reporting system, into which
contractors will upload the requisite data. (Reporting
instructions will be available on the GSA Vendor Support Center
website, https://vsc.gsa.gov.) Data will need to
be reported monthly, and will be due
30 calendar days after the last day of the month. Contractors must maintain a consistent method of transactional data reporting, based on their established commercial accounting practices.
According to GSA, reporting this information instead of tracking commercial pricing will result in a substantial burden reduction for contractors. GSA also believes that the reported transactional data will be "instrumental for improving competition, lowering pricing, and increasing transparency." Many commentators and contractors are not so sure the new tracking requirements will be implemented as easily as GSA expects. Contractors should begin preparing now to set up systems and processes to accurately capture the requisite data in order to be ready once the new requirements apply to their contracts. In addition, errors or omissions in the transactional data could subject contractors to allegations of False Claims Act violations.
- Contractors cannot just stop monitoring commercial pricing and discounts.
The most significant part of the new rule is that those contractors that report transactional data will no longer be subject to the existing requirements for Commercial Sales Practices (CSP) disclosures, and the GSAR Price Reductions clause (PRC) will no longer apply to them. This means the end of the onerous requirement for contractors to monitor pricing and discounts to be certain that they are maintaining the relationship with their basis of award customer, so as not to trigger the PRC.
However, the new data reporting requirements will be implemented gradually, starting with new GSA government-wide vehicles and select FSS contracts and certain Special Item Numbers (SINs) under those contracts.1 Participation for many schedule holders initially will be voluntary. The new transactional data requirements will only become mandatory for new schedule holders as the applicable Schedule is added to the pilot. Existing Schedule holders will become subject to the new rule at the time to extend the terms of their contracts (although existing schedule holders are encouraged to enter into bilateral contract modifications to make the clauses applicable sooner). For other, non-FSS types of pre-existing GWACs, the new rule provides that contracting officers can issue bilateral modifications implementing the new rule, or they can rely on existing data reporting requirements.
The relevant GSAR clauses implementing the new rule for FSS contracts are GSAR 552.238-74, Industrial Funding Fee and Sales Reporting, Alternate I and GSAR 552.238-75, Price Reductions, Alternate II, which eliminates the basis of award tracking customer requirement. GSAR 552.216-75, Transactional Data Reporting, will be used for all new GWACs and Governmentwide IDIQs. Until such time as these new clauses are in effect for a company's contracts, however, the PRC clause still applies. It would be a mistake for contractors to prematurely stop monitoring sales to basis of award customers and/or updating CSP forms.
- Contractors should be wary of how their data will be protected and disclosed.
Some of the main concerns contractors had with GSA's draft rule concerning transactional data was how information provided to GSA might be shared with competitors, and whether their pricing information could become subject to dissemination under the Freedom of Information Act (FOIA). GSA has addressed these concerns by (1) hosting the data on a portal accessible only by authorized users, and (2) stating that it will create a public data extract for use by the general public, consisting only of information that would generally be considered releasable under FOIA. With respect to the secure portal, government data security is, of course, only as good as the IT security protections used by the agencies with access. Contractors may rightfully be concerned about that security, but ultimately will have no choice but to disclose the required data. Details about the planned public data extract have not yet been developed, but we will closely watch for GSA's proposed implementation of this requirement and whether it goes too far in making proprietary and confidential business information available to the public.
- It is not yet clear how the new rule will work for complex products and services.
Tracking and capturing transactional pricing for standard off-the-shelf products will be relatively straightforward. More difficult will be tracking and comparing pricing for more complicated products and service offerings, such as bundled services consisting of several different labor categories, combinations of products and services offered at a single fixed price, or customizable products such as laptops loaded with different types of software. It is unclear how GSA will capture line item data for complex product and service offerings or how that data will be used to meaningfully compare pricing from different vendors.
- It is not clear what the government will do with the data it collects.
In theory, transactional data captured through GSA's electronic system eventually will be made available to government purchasing officers across multiple agencies in order to inform their purchasing decisions, leverage government buying power, and drive competition. The idea is that the government will use transactional data, as well as other pricing information, to ensure that offered prices are competitive. To start, however, only GSA category managers will have access to the data. Access will then extend to all FSS contracting officers, followed by all agency ordering officers. It is unclear how long it will take to give all concerned parties access to the data, and even more unclear what those parties will do with the data once they have access.
Contracting officers retain the ability to ask for additional pricing information (other than certified cost or pricing data), so contractors could face the burden of compiling transactional data yet still be asked to supply some of the same (or different) pricing information to government agencies. This could include the same sort of historical commercial pricing information that is supplied today as part of CSPs or, for products and services without significant commercial sales, cost build up data could be requested. Finally, it remains to be seen whether contractors will hesitate to offer certain customers large discounts or one-time low prices, lest the transaction trigger the expectation that all future government customers will get that low price. As with all new government initiatives, the proof will be in the execution.
Our attorneys are carefully monitoring developments with implementation of the new transactional data requirements and stand ready to assist our clients in meeting the new reporting requirements.
1 The initial Schedules and Special Item Numbers (SINs) to be implemented in this phased rollout are:
- Schedule 58 I, Professional Audio/Video, Telemetry/Tracking, Recording/Reproducing, and Signal Data Solutions: All SINs
- Schedule 72, Furnishing and Floor Coverings: All SINs
- Schedule 03FAC, Facilities Maintenance and Management: All SINs
- Schedule 51 V, Hardware Superstore: All SINs
- Schedule 75, Office Products: All SINs
- Schedule 73, Food Service, Hospitality, Cleaning Equipment and Supplies, Chemicals, and Services: All SINs
- Schedule 00CORP, Professional Services Schedule: SINs 871-1, 2, 3 ,4, 5, 6, and 7 (Professional Engineering Services)
- Schedule 70, General Purpose Information Technology Equipment, Software, and Services: SINs 132-8 (Hardware), 132-32, 33, and 34 (Software), and 132-54 and 55 (COMSATCOM).
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
© Morrison & Foerster LLP. All rights reserved