Tuesday Insight – February 27th, 2024: What Would Best Value Mean for the Schedule?

Apr 2, 2024

As discussed two weeks ago in this FAR and Beyond blog, the General Services Administration (GSA) has proposed to amend the Competition in Contracting Act (CICA) of 1984 to adjust the statutory authority for the Federal Supply Schedule (Schedule) program by clarifying what constitutes “competitive procedures” under the law. Currently, the Schedule program is deemed a competitive procedure if participation is open to all responsible sources and orders and contracts under the program result in the lowest overall cost alternative to meet the government’s needs. Under GSA’s proposed legislation, the Schedule program authority would retain the requirement that it be open to all responsible sources, but would change the requirement that awards result in the “lowest cost alternative” to a requirement that awards result in “best value” for the Federal Government. Even though the phrase “lowest cost alternative” should include consideration of “total acquisition cost” based on factors, such as convenience, administrative cost savings, and other salient characteristics, it has not been interpreted or understood that way, at least by some.

First and foremost, if enacted, the legislative language will enable the Schedule program to continue to modernize beyond the price reduction clause, which clause represents the antithesis of best value. The price reduction clause is a burdensome and complicated process requiring commercial contractors to monitor their commercial pricing and sales processes and practices to ensure that they do not charge the Federal Government for a product or service higher than that offered to an identified most favored commercial customer. The practice exposes the contractor to potential penalties, such as treble damages under the False Claims Act or suspension and debarment, if a pricing mistake is made. These compliance costs eventually are passed on to the Government, making the perceived pricing or cost benefits of this outdated practice truly illusory. Moreover, they make the Government an inhospitable market for vendors, causing a reduction in competition and Government access to innovation.

Indeed, the Government recognizes that the number of small business participants in government contracting is on a downward trajectory even as spending with small business is increasing. The proposed legislation would be a step in the right direction to attract small businesses and new entrants that currently do not believe the benefits of the Federal market outweigh the costs and risks associated with Schedule contract negotiation and compliance.

Changing the requirement’s emphasis to providing the best value to the Federal Government enables contractors to restructure their Schedule contracts and propose unique, innovative, truly commercial offerings, instead of relying on the current practice where contractors often are forced to use templates where every contractor offers similar, homogenized products or services. Schedule offerings truly would reflect the commercial market, where innovation is not hindered by administrivia, like pricing clauses that fixate on costly and time-consuming processes with no concomitant yield in benefit. The change in statute would have the cascading effect of reducing barriers to entry for commercial firms, streamlining processes and reducing costs for all, and enhancing competition for customer agency requirements.

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