This post was written by James P. Gallatin, Jr. and Lorraine M. Campos.
With more than 50 years of combined experience in Federal Supply Schedule (“FSS”) contracting, we have negotiated, administered, reviewed, investigated, litigated, and testified as experts about FSS contracts. Today’s FSS contracts can last up to 20 years. It’s difficult enough to look back over the prior 10 years of a contract life and try to determine what the parties meant and understood when it all began. But a 20-year lookback is a challenge of biblical proportions given the “virtually unintelligible” requirements of the Commercial Sales Practices (“CSP”) and Price Reductions Clause (“PRC”) provisions.
Having seen the same issues over and over, we realized that to practice in this area, one needs a set of moral imperatives, perhaps even a set of commandments, to guide them. And while we haven’t seen Moses, we have spent much more than 40 days and nights with GSA and VA Contracting Officers, Administrators, Auditors, and IGs. With that experience and a handy set of stone tools, we offer these commandments as a “moral foundation” for others venturing into the desert to contract by.
Thus, we present our Ten Commandments of FSS Contracting.
Disclose it all. Disclose it in narrative form. Disclose all of the company’s commercial pricing, including discounts, concessions and rebates. Disclose Black Friday, blue-light, end-of-year, buy-one-get-one, and just-because-it’s-Tuesday specials. We don’t care what the deal is called – just disclose it.
Explain how the company’s current commercial sales and pricing models work. This is especially true if the current models do not fit the solicitation requirements. Do not try to make the company’s pricing “fit” the CSP chart. Rather, draft your own CSP to paint an accurate portrayal of the company’s pricing practices. Remember, the CSP solicitation asks for a discount off of a price list. If your company’s pricing uses a gross margin build-up off of a factor of cost, then explain that and base your proposed pricing on that model.
Every exchange of data, in any form, including supporting data, should be contemporaneously and fully documented.
Keep copies of everything in Commandment III – Everything. Forever. Period.
An FSS contract requires contractors to negotiate a Customer of Comparability (“CoC”), also known as Tracking Customer or Basis of Award Customer. Generally speaking, “all commercial customers” is not a sound CoC. Keep in mind that while you are required to disclose all your commercial pricing, you are not required to provide the government with the best pricing you offer to any customer – just the best pricing offered to any comparable customer.
We have seen award letters that contain incomplete sentences, random extra punctuation, differences from page to page in the description, and contradictions in attached charts – in short, incomprehensible award letters. Read the award letter and all documents incorporated by reference out loud and ask someone unfamiliar with the negotiations to read the letter. If the letter doesn’t make sense to you, and especially to the other reader, clarify the ambiguities.
Things change – pricing, commercial sales practices, place of manufacturer, administrators, company headquarters can easily fluctuate. Nothing is worse than receiving a subpoena for not responding to three audit notices because they were sent to and sitting on the empty desk of the contract administrator who left the company seven years ago.
Assigning administration of the FSS contract to a salesperson as a penalty for not closing a deal (yes, we’ve seen that), to a finance person temporarily in between audits (been there), or to another distracted and temporary resource (uh huh), is certainly a tried-and-true formula for disaster.
The Trade Agreements Act (“TAA”) is applicable to all FSS contracts. In accordance with the TAA, only U.S.-made or designated country end-products shall be offered and sold under FSS contracts. Manufacturers change manufacturing locations regularly. So does the list of designated countries change, parts are added and removed from the FSS contract. For those reasons, someone in the company needs to understand not only these requirements, but also the sourcing of your company’s products under the FSS Contract to ensure TAA compliance.
There are special requirements for invoicing the government. Is there a negotiated discount if invoices are promptly paid by the government? Are open-market associated items offered as part of the FSS order? If so, you better notify the purchaser via your invoice.
And thus we impart our Ten Commandments of FSS contracting. Since we also want to impart our exhaustive knowledge of each of them, in the coming 10 weeks we will tackle each revelation in depth and provide guidance to live by (or at least to contract by). After all, at Reed Smith, we don’t just give you fish – we teach you how to fish.