Supply chain challenges and inflation are having a negative impact on businesses across the economy. The federal procurement system, a subset of that economy, is not immune to these impacts. Indeed, the same cost increases affecting the performance of businesses, especially small businesses, in the private sector have materialized for businesses seeking to meet their contractual obligations under government contracts.

Fundamentally, successful contract performance is rooted in a strong, stable industrial base at the ready to meet the government customer’s performance requirements in an economically sound manner. Recognizing that the devaluation of purchasing power associated with inflation prompts cost increases for businesses, including those performing government contracts, it should be self-evident that the ability of government contractors to continue performance at a loss arising from those inflationary pressures ultimately will undermine the business viability of those contractors. These deleterious effects of inflation also impact government customers. In the short term, they can give rise to less than optimum performance in meeting contract requirements. In the long term, they threaten the health of the federal government’s industrial base and associated supply chain.

GSA’s Multiple Award Schedule (MAS) program, the government’s largest commercial item contracting program, also is vulnerable to the impact of inflation. MAS contractors are seeing inflationary cost and pricing pressures across the supply chain, from transportation, to materials, to wages, to energy, and all are prompting the need for price and rate increases. Yet, GSA’s current framework leaves contracting officers relying on a standard Economic Price Adjustment clause with little or no effective guidance supporting the streamlined administration of contractor requests for price increases. Time is money, especially for small business that see costs increasing while MAS prices remain stagnant. From our members’ perspective, there appears to be no sense of urgency in addressing the impact of inflation across the MAS program. Moreover, as noted in our recent blog, “The Tyranny of Low Price and Other Challenges,” GSA’s overall approach to commercial pricing under the MAS program institutionally ignores economic realities, creating distortions in the federal procurement market.

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