March 1, 2013—Sequestration Day. This morning our 13 year-old son was reading the Wall Street Journal article on sequestration and asked me a question only a kid could ask: “So Dad, if I had a penny would I have more money than the government?” His question led to a long conversation about the budget, how debt works, and the mechanics of sequestration. It was one of those family conversations that you will always remember.
On my drive in to work this morning I kept thinking about our conversation and Thought No. 6 of the Thirteen Thoughts for 2013: Put “commercial” back in commercial item contracting.” Putting “commercial” back in commercial item contracting will foster savings, efficiency, competition and innovation for the customer agencies and the taxpayer. Over the last decade, the proverbial pendulum has swung regarding policy, procedures and requirements imposed on commercial item contracting. By way of example, in 1996 there were 17 provisions of law or executive order applicable or potentially applicable to commercial item contracts. By 2012, the number had grown to 51 provisions! In addition, the level of oversight and data reporting associated with commercial item contracting programs like GSA’s Multiple Award Schedule (MAS) program have increased significantly.
Identifying and eliminating policies, procedures and requirements that are inconsistent with commercial practice is consistent with President Obama’s Executive Order 13563—Improving Regulation and Regulatory Review and Executive Order 13610—Identifying and Reducing Regulatory Burdens. In sum, these executive orders provide direction to agencies to review and eliminate regulations where the costs outweigh the benefits. It is looking at Total Acquisition Cost versus just price. This approach is good for government, good for the taxpayer and ultimately good for the economy. As Executive Order 13610 states, “[d]uring challenging economic times, we should be especially careful not to impose unjustified regulatory requirements.”
In the spirit of the President’s executive order, the blog post highlights the Price Reduction Clause (PRC) as an unjustified regulatory requirement. The PRC is costly and irrelevant to the MAS program. The PRC is inconsistent with the current competitive ordering requirements of the MAS program. Statute and regulation require that for all orders exceeding $150,000 under the MAS program, customer agencies must give all MAS contractors capable of meeting the requirement notice and an opportunity to compete for the order. e-Buy, GSA’s electronic quote system for the MAS program, provides customer agencies with the ability to provide notice to all contractors. In FY12, over 80,000 Requests for Quotes were posted on e-Buy by customer agencies. As such, pricing is being driven by competition for agency requirements at the task order level. It is not being driven by the PRC. At the same time, the PRC increases costs to MAS contractors in contract administration and compliance—costs that especially hurt small business. Moreover, the PRC is an anti-competition, anti-growth provision. The PRC restricts competition in the private sector. It is the potential for MAS contract liability when a MAS contractor offers a price reduction to a commercial customer for a commercial requirement that restricts the ability to fully compete in the commercial marketplace. In turn, this restriction on competition in private, commercial transactions limits growth and job creation. It is time to reform the PRC.
Reducing the growing burden on commercial item contracting will streamline the acquisition process creating greater opportunity for entry into the federal marketplace by commercial firms. At the same time, the growing complexity of federal procurement has led to commercial firms managing risk by creating separate legal entities to deal with the federal government. This is inefficient and counter to the government’s efforts to reduce transactional costs across the procurement system. Putting “commercial” back in commercial item contracting will reduce risk and increase efficiency for all. The Coalition looks forward to continuing the dialogue with the entire procurement community regarding total acquisition cost and commercial practices.