GSA Schedules Risk and Rewards

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2 About Aronson LLC Founded in Professionals located in Rockville, MD One of the largest CPA firms in the DC Metro Area 60 multi-disciplined Professionals dedicated to supporting Government Contractors Audit, Assurance & Tax Deltek Systems and Outsourcing Financial and Contract Compliance GSA Schedules News and Trends for Today s Savvy Government Contractor 1

3 Hope Lane Partner Hope A. Lane, CPA leads Aronson LLC s Government Contract Services Group with over 20 years of broad-based experience in the government contracting arena. She earned her Bachelor of Science Degree in Accounting from the University of North Carolina at Charlotte in 1987 and is responsible for assisting clients in all areas of government contracting-related financial compliance and contract administration. With an exclusive focus on government contracting, Ms. Lane possesses in-depth understanding and intensive hands-on experience. She has served in financial management positions with several regional federal contractors and has extensive experience in the management of all accounting and finance functions. Hope is actively involved in the National Contract Management Association, and the Professional Services Council. Ms. Lane is a guest speaker and lecturer for associations and industry trade groups and a featured speaker on GSA Schedules at Aronson LLC s Executive Briefings. Additionally, her industry expertise is frequently sought out by GSA. 2

4 Jennifer Aubel Managing Consultant Jennifer Aubel is a Managing Consultant in Aronson LLC s Government Contract Solutions Group. She is responsible for leading clients successfully through the GSA lifecycle, from obtaining a new GSA Schedule contract through administering ongoing contracts. She works closely with clients to custom-tailor GSA Schedule solutions that meet current and future organizational needs by developing scope and pricing strategies, maintaining contract compliance, providing audit support, and improving the profitability and versatility of the GSA Schedule contract. Ms. Aubel has over fifteen years experience in the Federal Contracting market, working for both contractors and as a consultant to GSA Schedule contract holders and is a member of the National Contract Management Association (NCMA). Prior to working with Aronson, she managed a multi-million dollar GSA program with six GSA Schedule contracts with more than 10,000 contract line items. She also managed a team that developed and delivered specialized training on the GSA Schedules Program to small businesses across the country 3

5 Workshop Objectives Provide an introductory look at the GSA Schedules Program and explain why they are a preferred contracting method Understand why GSA is receiving historically high numbers of new offers and why you may be interested in them Make potentially overwhelming GSA Schedules Program requirements understandable Discuss the benefits of holding and using GSA Schedules and what contractors can and cannot do with them Identify high-risk compliance issues and discuss how to best mitigate them Provide tips, resources, and guidance 4

6 Introduction to the GSA Schedules Program 5

7 GSA Schedule Contracts The Multiple Award Schedules (MAS) Long-term, government-wide contracts to provide commercial products and services at pre-negotiated prices Indefinite Delivery, Indefinite Quantity Contract (IDIQ) Continuous open season Evergreen 5-year Base Period with up to three additional 5-year Option Periods (potential contract life of 20 years) Hunting license; not a guarantee of business 6

8 Why GSA Schedules are an Important Tool 7

9 Why GSA? Federal Contractors Need Contract Vehicles GSA Schedules are one of the largest procurement programs and are the preferred method of buying for many federal agencies Obtaining a GSA Schedule contract allows companies to sell products and services throughout the federal government with ease GSA Schedules are often the easiest entry point for companies new to Federal market, especially commercial companies GSA Schedules benefit both contractors and Agencies 8

10 Advantages of GSA Schedules for the customer ( Buying or Ordering Agency ) Save time Streamlined ordering process for federal and state clients Contracting vehicles allow contracting officers to buy goods and services quickly without going through the traditional solicitation process Contracting / Procurement officials can buy from a company without going to open solicitation Lower administrative costs and shorter lead times Easier access to millions of commercial products and services Flexibility, ease of use, and choice Easy-to-use Online Proposal and Procurement Tools Cost savings 9

11 Advantages of GSA Schedules for the Schedule Contractor Pre-negotiated rates with guaranteed margins Government-wide access; sell to government agencies through one source, instead of having separate contracts with each agency Competitive advantage over non-schedule holders Flexibility and ease of use Allows teaming with other Schedule holders rather than a prime-sub relationship Easy-to-use online marketing tools 10

12 Why GSA Schedules are Important a.k.a. Show me the Money! 11

13 Billions GSA Schedule Annual Sales FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 12

14 Billions GSA Sales The Big 5 FY06 to FY11 by Schedule $15 $10 $5 $- Information Technology (IT) 13

15 Billions GSA Sales The Big 5 FY06 to FY11 by Schedule $4 $3 $2 $1 $- Management Consulting (MOBIS) Engineering (PES) 14

16 Billions GSA Sales The Big 5 FY06 to FY11 by Schedule $3 $2 $1 $- Total Solutions for Law Enforcement Financial (FABS) 15

17 More Than Just the Federal Government GSA Directive ADM F Eligibility to use GSA Executive and other Federal agencies Mixed-Ownership Government Corporations (FDIC, World Bank, IMF, American Red Cross, NATO, WTO) The District of Columbia Other government contractors on behalf of the government with specific rules (FAR Part 51) State and Local Governments Cooperative Purchasing (Schedules 70 and 84 only) Disaster Recovery (all Schedules) 16

18 State and Local Governments A Growing Market Overall IT Sales 6.1% increase Cooperative Purchasing 26.3% increase Disaster Recovery Program 546.5% increase 17

19 Obtaining a GSA Schedule 18

20 Eligibility and Evaluation Criteria Corporate Several years of commercial experience providing the proposed services or products Demonstrable Financial Capability and Stability Positive net income, Retained Earnings (not Accumulated Deficit) Line of Credit with available credit Positive Debt to Equity Ratio Technical Project experience and sales to demonstrate technical capability and support proposed GSA prices Customers willing to vouch for the services or products Pricing Demonstrable commercial sales and pricing history Align GSA against most favored customer/class 19

21 Required Disclosures Complete commercial sales history for the past 12 months: Pricing history by class of customer All standard and nonstandard discounting Standard terms and conditions along with any concessions Exceptions and deviations to standard practices Copies of invoices to support proposed prices Contract Statements of Work (SOW) to support technical proposal for services Country of Origin data for products Two years of audited financial statements 20

22 The Pricing Proposal What is the Most Favored Customer (MFC)? What are similar terms and conditions? What is the Basis of Award (BOA)? MSRP MFC Discount MFC Price GSA Discount GSA Price Discount Relationship Basis of Award $ % $ % $ % Remember, it s about the discount, not necessarily the price 21

23 The Industrial Funding Fee (IFF) Fee of 0.75% that is included in GSA s final negotiated prices Paid by the customer, but remitted by the contractor quarterly Why GSA cares so much about the IFF MSRP GSA Discount GSA Rate w/out IFF IFF Final GSA Rate $1, % $ $6.00 $

24 GSA Negotiation Hot Spots Remember, GSA seeks Most Favored Status Not necessarily lowest price; fair and reasonable rates Most Favored Customer (MFC) Commercial Sales Practices (CSP-1) Deviations from and exceptions to sales practices Escalation, discounts, and markups Financial capability (GS527) 23

25 Top 6 Ways to Lose Money Before the Contract is Even Awarded 1. Thinking that you have to offer GSA your lowest price, no matter what 2. Proposing products and services without an established cost/price structure 3. Not understanding how and when your prices can be escalated 4. Agreeing to every type of discount requested 5. Failing to consider the Service Contract Act (SCA) when pricing labor, if applicable 6. Not accounting for GSA s freight terms 24

26 Top 5 Ways to Lose Money After the Contract is Awarded 1. Not understanding the Basis of Award 2. Failing to reduce your prices when required 3. Failing to increase your prices when allowed 4. Failing to extend negotiated discounts (volume, quantity, prompt payment) 5. Violating the Trade Agreements Act (TAA) or Service Contract Act (SCA) Not educating the appropriate personnel on the contract requirements 25

27 Contract Compliance Obey or Pay 26

28 Types of GSA Audits Contractor Assistance Visit (CAV) No subpoena power Short visit and quick turnaround Review of many compliance areas Process review and data sampling Pre-expiration and mid-term reviews Helping contractor succeed Office of Inspector General (OIG) Audit Subpoena power Lengthy data collection and analysis Focus on pricing issues Extensive testing of transactions Pre-award or post-contract Looking for mistakes 27

29 Significant GSA OIG Settlements 10/6/11 Oracle, $199.5M+interest (inaccurate and incomplete CSP) 9/12/11 Accenture, $63.7M (kickbacks, bid rigging) 4/5/11 Verizon, $93.5M (overcharging) 1/31/11 Oracle/Sun, $46M (defective CSP disclosures) 8/31/10 HP, $55M (incomplete CSP disclosures) 10/10/06 Oracle, $98.5M (defective pricing) 12/2/05 Science Engineering Associates, $9.5M (using unqualified employees) 5/5/05 Office Max, $9.8M (TAA) 7/24/04 Snap-on Tools, $10M (price reductions) 28

30 Price Reductions GSAR Price Reductions (May 2004) (Alternate I-May 2003) Clause Requirements What transactions are monitored for price reductions? MSRP MFC Discount MFC Price GSA Discount GSA Price Discount Relationship Basis of Award $ % $ % $ % Price Reduction $ % $ % $ % New GSA Discount $ % $ % $ % 29

31 Exceptions to Price Reductions Sales to authorized users of the GSA Schedules Sales in excess of the Maximum Order Threshold (MOT) Price reductions caused by an error in bidding Dissimilar terms and conditions Pre-payment Marketing considerations 30

32 Trade Agreements Act FAR Trade Agreements (Aug 2009) Clause Requirements WTO GPA Countries Free Trade Agreement Countries Caribbean Basin Countries Least Developed Countries Compliance Risks Monitoring County of Origin 31

33 Non-TAA Compliant Countries China India Vietnam Thailand Malaysia NOTE: Hong Kong and Taiwan are compliant 32

34 Appendix Resources and References 33

35 Resources for Market Research Find out who has money and what, when, and why they are spending it FedBizOpps - Procurement information All types of federal sales opportunities, not just GSA List of Agencies and organizations eligible to use GSA US Government web portal with agency links Agency procurement forecasts Federal Procurement Data Systems (FPDS-NG) FPDS online record of federal contract awards Federal Acquisition Jump Site NAICS - North American Industry Classification System ADM4800_2F.pdf recasts/index.html prod.nais.nasa.gov/pub/fedproc/home.html 34

36 More Online Resources Aronson s Fed Point blog: Current news, trends and insights government contractors About GSA Schedules GSA Schedules elibrary: Search and view GSA /VA Schedules and participating vendors by keyword, alphabetical listings or number GSA Advantage! Market research, and online customer ordering GSA ebuy: Interactive RFQ tool GSA Vendor Support Center GSA State and Local Programs GSA Schedules and the Recovery Act GSA Office of Small Business Utilization (OSBU) Small Business Administration (SBA) vsc.gsa.gov

37 Contact Information Hope Lane Partner Aronson LLC 805 King Farm Boulevard, Suite 300 Rockville, MD (301) Jennifer Aubel Managing Consultant Aronson LLC 805 King Farm Boulevard, Suite 300 Rockville, MD (301)

38 Q & A 37