The Transactional Data Reporting rule (TDR or "the rule") being piloted on selected GSA contracts will require contractors to submit monthly reports, including detailed information for all sales made under a company’s GWACs, GSA Schedule contracts, and other Governmentwide IDIQs.
Notably absent from the reporting requirement is any reference to commercial or non-federal sales of any kind. Contractors who submit this information will no longer be required to disclose their commercial sales practices on the CSP-1 Format, nor will they be subject to certain requirements under the Price Reductions clause (PRC, 552.238-75). These changes are meant to offset the costs of capturing and reporting data on a monthly basis. The government spends quite a bit of time explaining how the overall burden to contractors will decrease, though we imagine that many contractors will question the burden reduction calculations.
The rule stipulates that contractors provide 11 data elements in their monthly reports, to include:
- Contract or blanket purchase agreement (BPA) number
- Delivery/task order number/procurement instrument identifier (PIID)
- Non-federal entity
- Description of deliverable
- Manufacturer name
- Manufacturer part number
- Unit measure (each, hour, case, lot)
- Quantity of item sold
- Universal product code
- Price paid per unit
- Total price
Additional data elements (“fill ins”) may be added to the data if approved by GSA’s senior procurement executive.
The following GSA Schedules and associated SINs are a part of the pilot program:
- Schedule 03FAC, Facilities Maintenance and Management: All SINs.
- Schedule 51 V, Hardware Superstore: All SINs.
- Schedule 58 I, Professional Audio/Video, Telemetry/Tracking, Recording/Reproducing and Signal Data Solutions: All SINs.
- Schedule 72, Furnishing and Floor Coverings: All SINs.
- Schedule 73, Food Service, Hospitality, Cleaning Equipment and Supplies, Chemicals and Services: All SINs.
- Schedule 75, Office Products: All SINs.
- Schedule 00CORP, The Professional Services Schedule (PSS): Professional Engineering Services (PES) SINs.
- Schedule 70, General Purpose Information Technology Equipment, Software, and Services: SINs 132 8 (Purchase of New Equipment); 132 32, 132 33, and 132 34 (Software); and 132 54 and 132 55 (Commercial Satellite Communications (COMSATCOM)).
Initially, the pilot will be mandatory for new Schedule contracts and option exercises for existing contracts. Existing contract holders will have the option of incorporating the TDR clause1 and adopting the pilot program through a bilateral contract modification. It’s important to note that contractors on either Schedule 00CORP or Schedule 70 that have contracts with the affected SINs will be required to report transactional sales for all SINs under those Schedules. It’s not abundantly clear whether those contractors would receive the potential benefits of not preparing a CSP and not being subjected to the tracking requirements of the PRC for other SINs under those contracts.
Below are a few additional details regarding the pilot rollout:
- Begins no less than 60 days from the rules’ publication date (June 23, 2016) and will be deployed on a rolling basis across the identified Schedules and SINs.
- Contractors will receive notice at least 30 days prior to the pilot being applied to a specific contract and SIN.
- Set to run for at least one year so that GSA can assess its effectiveness.
- A transactional data reporting clause2 is also available for immediate use in GWACs and government wide IDIQs, and is meant to drive some consistency between the various reporting requirements that contractors may be exposed to across their contract portfolios.
- Does not currently apply to contractors selling medical supplies or services through VA Federal Supply Schedules.
GSA hopes to use the additional data to make smarter buying decisions by understanding the prices paid by government buyers for similar products while taking advantage of competitive government market forces amongst (and within) contractors to achieve lower prices.
The rule explains that contracting officers (COs) will be trained and instructed to consider the terms, conditions, and special circumstances associated with the transactional data they use to make pricing/buying decisions. The data will ultimately be available to GSA COs and other COs across the government to make pricing decisions at both the Schedule and order level. Additionally, the government plans to make all “FOIA-able” data submitted under the TDR available to the public.
Despite some clear benefits, many questions remain
A brave new world for pricing under GSA Schedule contracts
This rule has the potential to fundamentally change the way GSA negotiates its Schedule contracts, and the way that ordering activities use those contracts to make purchases. Before TDR, the vast majority of GSA Schedule contract pricing was predicated on a company’s commercial sales practices, with GSA looking to achieve pricing that was favorable when compared to the prices that a company achieved in the commercial marketplace (a “vertical” pricing approach).
In many ways this makes sense, as one would assume that the free markets would efficiently assign value to a specific company’s goods and services, recognizing the subtle differences that might make one company’s offerings more valuable than the offerings of other companies. The pre-TDR disclosure rules, forms, and instructions had plenty of drawbacks, too—they may not have been clear, companies may have had a difficult time understanding them, and government procurement officials may have had trouble using the CSP information effectively—but one could understand the theory behind it.
Under TDR, GSA plans to base its pricing objectives on how the government buys the same or similar items in a portion of the government marketplace (a “horizontal” pricing approach). The shift in the overall contract model may not come as a surprise to many products or services contractors who have recently been subjected to horizontal pricing analyses, and those familiar with horizontal pricing may have some reservations about how the data will be used.
In our experience, GSA COs have frequently had difficulty accepting the notion that many important terms and conditions, specific to an individual sale, can cause a contractor to offer pricing that it would not extend to other customers, under different terms and conditions. While many contractors will cheer the removal of the CSP disclosure requirement and the significant level of effort and risk associated with it (for good reason), the effectiveness and reason with which transactional data will be employed during pricing negotiations, at both the Schedule and order level, remains a big question mark.
It is also unclear how contracts will be priced if no (or limited) transactional sales data for GSA Schedules, GWACs, or government IDIQs exists. This could be the case for new or innovative products or services, or simply for new entrants to the federal marketplace. It could also be the case for companies with significant sales that are faced with a CO or auditor who is having trouble interpreting the transactional data or accepting it as a basis for pricing.
The text of the TDR indicates that GSA or ordering activity COs should follow the instructions in FAR 15.404 under these circumstances. Contractors could then be required to provide uncertified pricing data similar to that which is currently required in a CSP, or even uncertified cost data. If there is uncertainty and inconsistency in how companies disclose their practices, and in how GSA negotiates pricing under the current regime, the increased potential for requests of other than certified cost or pricing data would only seem to increase the level of uncertainty for contractors and the inconsistency in how fair and reasonable determinations are being made. It will be interesting to see how frequently this occurs, and as a result, if contractors end up incurring a level of expense and risk under the TDR that is comparable to what they currently experience when preparing CSP disclosures (in addition to the expense incurred preparing monthly transactional data reports).
GSA OIG’s role
Eliminating the CSP and BOA monitoring requirements from GSA Schedule contracts may change the landscape for OIG’s involvement in negotiating and auditing contracts, but exactly how it will change is less than certain. The rule doesn’t mention any changes to the clauses in GSA Schedule contracts that provide the government with its audit rights.
Those audit rights currently stem from:
- FAR clause 52.215-20, which grants the government the right to examine “pertinent records to verify the pricing, sales, and other data to related to the supplies or services proposed in order to determine the reasonableness of price(s).”, and;
- GSAR clause 552.215-71, which allows GSA or any duly authorized representative the right to access all records related to the GSA Schedule contract during the period of performance and for three years after final payment.
It is possible that the OIG could still request commercial pricing data during their pre-award audits and assess the government’s offered pricing in comparison to the prices a contractor offers in the commercial market. If a contractor has not provided that type of information previously, they may escape risks associated with defective pricing and the Price Adjustment clause (GSAR 552.215-72). But, they could have trouble meeting their pricing objectives if they haven’t taken some care in managing their commercial sales practices and in considering how those practices relate to their government pricing practices. If they did provide this kind of information to support a CO’s FAR 15.4 style price analysis, and the information they provided is found to be inaccurate, they could still be exposed to some of these risks.
In addition to the pricing risks that may remain under an audit, or if a CO requests other than certified cost or pricing data during negotiations, it appears that the transactional data reported under the TDR is something that could be audited. In fact, during the public meeting to discuss the proposed rule, GSA OIG representatives indicated that they likely would review this data. Contractors will need to take care when preparing and reporting this data to ensure that it is current, accurate and complete, and prepared in a careful and thoughtful manner that supports their pricing objectives.
Public availability of transactional data
One additional aspect of the TDR that could significantly impact contractors is GSA’s intent to make the transactional data available to the public. During the public comment period for the proposed rule, multiple contractors raised concerns about how the transactional data would be shared with government users and with other vendors, particularly given the proprietary nature of some of the data. GSA indicates that the details of the public data extract are forthcoming, but what does seem apparent is that anyone, including other vendors, would have access to purchase price information for products sold under the FSS contracts.
Recommendations for contractors impacted by TDR
Better the devil you know or the one you don’t
Contractors will need to quickly determine if they hold one of the impacted contracts or SINs. If the answer is yes, they’ll need to decide whether or not to accept a bilateral modification to accept the TDR or stick with the current structure. There is likely no right answer, as the facts and circumstances influencing this decision could vary from company to company. New proposals and option exercises under these contracts and SINs will not have a choice as they will be subject to the TDR.
Contractors who accept the rule or engage in a contract action that will subject them to the rule need to prepare for it. In addition to preparing to report the required data, they should communicate with their CO to determine what information, if any, will be necessary to negotiate GSA prices in order to avoid any surprises. Will their CO ask for commercial pricing data? Will they ask for cost data? Would any additional fields in the transactional data be helpful to support negotiations?
Complying with the TDR
Contractors subject to the TDR should:
- Ensure that they have the systems and processes in place to timely and accurately create monthly reports that include the 11 required data fields.
- Think strategically about what this means, what contracts will require reporting, and whether their current GSA Schedule pricing structure and systems are set up in a manner that will facilitate reporting and best position them to achieve their pricing objectives.
- Identify the system (or systems) they will rely upon to capture the necessary data and establish policies and procedures to make the process as efficient as possible, while ensuring integrity in the reported data.
- This data could be scrutinized by both the CO and government auditors. Some portions of it will also be made available on a public website, so contractors need to take care to ensure it is accurate and complete.
- Continue to be mindful of pricing practices, both to government customers and commercial customers.
- Discounted government sales at low prices may cause GSA to push for lower baseline contract prices, either during contract performance or during negotiations at the next option period. The same discounted government sales could also lead to tough negotiations and lower prices at the order level.
- Consider putting policies in place to control government pricing in order to avoid unnecessary deterioration of profits.
- This does not necessarily release the shackles from commercial sales and discounting policies. As noted previously, the FAR Part 15 analysis that COs can still perform under the TDR, and the audit rights afforded to GSA through FAR 52.215-20, may result in GSA, GSA OIG, or ordering agency COs continuing to rely on commercial prices (or cost) as part of their negotiation calculus. To prepare for this, contractors may be wise to continue to monitor and control their commercial pricing practices.
It remains to be seen exactly how the transactional data that companies report under this rule will be used, and whether any other data will be relied upon to negotiate prices at the Schedule or order level. There are a number of additional questions about the TDR—if/how companies will be audited, what data will be made available publicly, whether the rule will achieve the desired results for the government, and a host of other things.
At this point in time, a lot of uncertainty exists and it would seem that the rule could lead to more inconsistency in the Schedules program for contractors and government buyers alike. Contractors would be wise to approach the new rule and its requirements with caution.
- Take the time to understand obligations under the rule
- Think carefully about how offerings are priced in both the government and commercial marketplace
- Be certain that all of the requirements (including TDR) under all contracts are understood
- Ensure that systems, policies, and procedures are in place to meet those requirements.
For more information on this topic, or to learn how Baker Tilly government contractor specialists can help, contact our team.
1GSAR Alternate I, 552.238-74 Industrial Funding Fee and Sales Reporting
2GSAR 552.216-75 Transactional Data Reporting