It's All About the Rules
THE U.S. GOVERNMENT’S General Services Administration (GSA) oversees a program—the Multiple Award Schedule (MAS)—that allows companies to establish long-term contracts with the federal government for all types of goods and services. The MAS program has become popular over the past several years. Currently, more than 9,000 contractors hold more than 16,500 contracts, offering more than 9 million line items.
However, securing a MAS contract is more than just getting a number. It requires careful compliance with government rules and regulations. Unfortunately, many GSA schedule contractors fail to grasp this, and this failure leads many a contractor down a path that is too focused on sales and not focused enough on compliance. Before embarking on a MAS contract application, contractors should ask themselves whether they are willing and able to comply with the many, often counterintuitive and archaic, rules and regulations that govern the program.
The MAS program is sometimes referred to as the GSA schedule, the federal supply schedule, or simply “the schedule,” for the benefit of the federal government as a whole. In GSA’s words, the schedule represents the “largest, most diverse, and innovative federal marketplace in the world.” Contractors compete to get “on schedule,” and, once on, are afforded the ability to compete further for task and delivery orders from an extensive array of federal and quasi-federal purchasers.
The GSA schedule is not without its critics, but from the government’s point of view, it is critical. The program streamlines the procurement process for federal government officers; compared to previous methods of bidding each project individually, this approach offers significant savings in time and money. The GSA has reported that using the MAS program to procure goods or services reduces acquisition time from an average of 268 days to 15 days.
Because of the relative simplicity of the program, sales through the MAS program are growing at a phenomenal rate. In 1997, schedule vendors saw $5.6 billion in revenue come their way. By 2002, this number had jumped to $22 billion. In 2005, the most recent fiscal year, schedule revenue topped $33 billion. The figures for 2006 are expected to grow further still into the $40 billion range.
While much of this growth has been in the area of information technology products and services, the security industry has seen its share of success as well. Since 9-11, the sales growth for the GSA schedule that focuses on security products and services has been remarkable, rising from about $352 million in 2001 to $2.27 billion in 2005.
It is this sales growth that has spawned the current rush in getting on the GSA schedule. In the rush to get that beloved contract number, however, compliance has been given short shrift.
This lack of focus on compliance has not gone unnoticed by the government. In an effort to increase compliance by both government procurement personnel and by schedule contractors, GSA has instituted a new compliance initiative called “Get It Right.” According to GSA, the program calls on every person who is a part of the federal acquisition community to focus on the proper use of GSA schedules as a way of improving the overall performance of the federal acquisition process. In short, the plan is all about using GSA’s contracting vehicles in a manner that is consistent with all applicable statutes, federal acquisition regulations, and best practices.
Those involved in GSA policy are not the only people in the government who have noticed a lack of compliance among contractors and agencies. The GSA Office of Inspector General (OIG), for example, has made its voice clearly heard on this issue.
The OIG, which is charged with investigating allegations of noncompliance and combating fraud, waste, and abuse with the MAS program, has been busy for the past two years. According to GSA’s OIG Semiannual Report to Congress for 2005, the OIG opened 228 new investigations into contractor noncompliance, suspended more than 55 contractors (both companies and individuals) from conducting business with the federal government, and debarred more than 60 contractors. In 2006, 118 new investigations were opened, more than 20 contractors were suspended, and more than 17 contractors were debarred.
In addition to these punishments, the United States Department of Justice (DOJ) has assessed millions of dollars in fines and penalties against schedule contractors, some of which grew out of GSA OIG audits. Others grew out of whistleblower allegations or investigations under the False Claims Act.
The more notable 2005 DOJ settlements in the MAS contractor program included a $9.8 million settlement with OfficeMax; a $9 million settlement with Humanscale Corporation (formerly Softview Computer Products); a $4.75 million settlement with Office Depot; and a $7.4 million settlement with Staples. Even in a strong economy, most companies would rather not have to record a loss of this magnitude on their books.
The OfficeMax, Office Depot, and Staples settlements all resulted from the same offense: selling office supply products manufactured in countries not acceptable under the Trade Agreements Act (TAA). Each GSA schedule incorporates the TAA, which dictates that a GSA schedule contractor cannot sell a product unless the product is manufactured in a country that has a reciprocal trade agreement with the United States.
These three companies offered products from China and Taiwan, countries not designated in the TAA, through their respective GSA schedule contracts. Additionally, these settlements were the direct result of cases filed under the qui tam or whistleblower provisions of the False Claims Act by a competitor, Safina, and two of Safina’s executives. The executives and Safina will collectively receive over $3 million of the total recovery from these three settlements as the statutory reward for blowing the whistle on these companies.
The TAA requirements are clearly written into the GSA schedule contract and are hard to misinterpret or misunderstand. For companies the size of and with the resources of these office-product giants to sell noncompliant products is a message that even the big-name companies do not have a handle on how to establish and maintain a GSA schedule compliance program.
Humanscale’s fine resulted from two mistakes. First, during negotiations for the GSA schedule contract, Humanscale failed to disclose current, accurate, and complete discount and pricing information to its GSA contracting officer. Second, Humanscale violated the price reductions clause on three of its GSA schedule contracts. This settlement was also the direct result of a case filed under the qui tam or whistleblower provisions of the False Claims Act by a former employee. The former employee will receive $1.5 million of the total recovery as his statutory reward for blowing the whistle on his employer.
To ensure compliance, companies need to address the following issues, drawn from an administrative report card the GSA has produced on compliance: ordering issues, price lists, financial considerations, and administrative actions. Companies must also make sure that they have in place the proper personnel, record-keeping mechanisms, and compliance culture.
Ordering and Pricing
Ordering issues that the GSA deems critical include the on-time delivery average, which should be 95 percent or greater; the honoring of warranties on items in contracts; and the proper handling of warranty claims. Teaming arrangements with other companies should be clarified to ensure that customer service and warranty claims are handled effectively.
The section of the report card dealing with price lists is concerned primarily with keeping those lists up to date. For example, federal contractors maintain published price lists that reflect current, approved pricing through the most recent modification.
Financial and Administrative
To comply with financial requirements, the company should be free from bankruptcy proceedings and should accept government purchase cards issued by the GSA. If the company works with participating dealers, those dealer sales should be recorded by the company and included in reports to the GSA.
A company must notify the GSA of any corporate name changes, major contract changes, or contact information changes such as addresses, phone numbers, fax numbers, or e-mail addresses. It is also incumbent upon the company to keep its Central Contractor Registration and Online Representations and Certifications Application (ORCA) current.
An internal GSA schedule program should be administered by personnel who understand and, if possible, have worked with GSA schedules before. It is critical that security professionals remember that administering a GSA contract, or any government contract for that matter, is quite different from administering a commercial contract. A knowledgeable government contracts administrator will understand the federal procurement process and will be conversant in the unique language of government contracts. This person will understand how various government agencies interact and how to deal with bureaucratic tangles.
Without this level of expertise, either internal or external to the company, two things happen. One, the company is more likely to violate the rules of the schedule program; two, the company will have a harder time defending itself if it is alleged to have violated those rules. A qualified administrator will help mitigate both situations.
Annual GSA training for company personnel is a must. GSA schedule contractors are best served by using a dual training approach. Companies should send contract administration personnel to external GSA training sessions and have customized in-house training for contract administrators, sales staff, and financial personnel. Because each contractor will negotiate price reductions, it is best to have customized training on this issue. External training allows personnel to remain current on the trends and changes in the MAS program.
GSA schedule contractors have several options for obtaining external MAS program training. GSA’s annual GSA Expo offers a small business track that always includes a session on GSA schedule compliance. Professional associations also help. For example, the National Contract Management Association offers GSA training at its annual World Congress. Professional seminar companies like Federal Publication Seminars also offer comprehensive GSA training programs. Finally, consultants or government contracting attorneys can deliver custom GSA training.
A key element of any GSA schedule compliance program is record keeping. At a minimum, companies should maintain thorough libraries that house records on solicitation, post-award modifications, sales and payments, and training.
A solicitation library should include all documents submitted to GSA during the solicitation process, which would include the solicitation, any clarification correspondence, any negotiation correspondence, and the final proposal.
A library of post-award contract information would include all GSA-approved modifications, including the latest version of the GSA’s published price list.
The sales and payments library should include documentation on each GSA sale. Each time a GSA contract is awarded, the company should record the sale and keep documentation on the required quarterly payments made to the GSA.
In a training library, the company should keep the collection of documents that track in-house GSA training. The library should include information on what type of training was conducted along with a record of attendance. The library should also include information on what type of external seminars the company’s government contracts manager or other staff attended.
The Federal Organizational Sentencing Guidelines mandate that companies foster cultures that value compliance. The guidelines specifically state that an effective compliance and ethics program can mitigate the punishment given for criminal conduct. According to the guidelines, organizations must step up their responsibility for such programs by having oversight by a board of directors, screening and excluding unethical people, providing effective training, having a process for evaluating the effectiveness of the program, promoting and enforcing the program through incentives, responding appropriately to problems, and acting to prevent further similar behavior.
Contractors that focus on compliance issues, and not simply on getting a contract number, will be well rewarded in time. Company managers must keep in mind, however, that compliance is something that cannot be done once a year. Compliance takes discipline, commitment, and patience. The program, like the GSA contract itself, must be monitored on a daily basis. Processes and procedures should be reviewed continuously to ensure that they are up to date and functioning as intended.
Tomi W. Bryan, Ph.D., is president and general counsel of FedLinx, Inc., an organizational design and GSA consultancy in Greensboro, North Carolina. She is the author of GSA Schedule Contracts: A Guide to Program Compliance & Best Practices.
Jonathan Aronie, a partner in the Government Contracts Practice Group at Sheppard Mullin Richter & Hampton in Washington, D.C., contributed to this article.