Should Manufacturers Get A GSA MAS Contract?

As the most widely used government contract vehicle, the GSA Multiple Award Schedule (MAS) is a valuable tool for manufacturers and their channel partners (i.e., distributors, value added resellers/dealers). By streamlining the buying/selling process, a GSA MAS Contract offers a pathway for these industry partners to deliver their innovative products and support services quickly to the government.   

Option 1:  Manufacturer and Channel Partners Hold a GSA MAS Contract

As the GSA MAS program has grown over the past few decades, GSA was eager to bring in as many industry vendors as possible.  This resulted in situations we see today where the manufacturer, distributor and VAR/dealers are simultaneously holding GSA MAS contracts for the exact same product line, more specifically the same part number. 

The price disparity created due to the varying margins results in significant differences in the final GSA Price to government customers for the same part number.  Most of the time, it’s the VAR/dealer who gets the short end of the stick as they are unable to compete with the lower pricing offered by the distributor or worse the manufacturer.

Historically, there was a clear line of outreach to the direct end user honored by manufacturers, distributors, and their VARs/dealers.  With the blurring of that line due to economics and the desire to control pricing and margins, manufacturers still seek to qualify for a GSA MAS contract without fully understanding all the ramifications. 

Here are some of the problems with this option in which the manufacturer and channel partners hold a GSA MAS Contract:

• A Letter of Supply (LOS) must be issued by the manufacturer to their channel partners for selling the manufacturer’s products on the channel partner’s GSA MAS Contract.  For years, lack of oversight or permission for the issuance of an LOS resulted in vendors selling a product line unbeknown to the manufacturer. 

• Manufacturers found themselves sending ‘cease and desist’ letters to these vendors to remove their products from their MAS GSA contracts.  These unauthorized vendors selling at rock bottom prices further exasperated the pricing issues. 

• Manufacturers who compete directly with their channel partners show little trust in their relationships with these partners.  They are happy to compete and let the cards fall where they may in a cut-throat approach to business.

• The business model for a manufacturer is not set up for compliance requirements with a GSA MAS contract.  The contract administrative and maintenance tasks are foreign to manufacturers including proper quoting, invoicing, tracking of sales, reporting of sales, subcontract goals and reporting, understanding mass modifications, etc.

• The quoting and invoicing systems for accountability to track government sales differ from the internal systems used for channel partners.  These issues surface the first time a manufacturer must participate in a Contractor Assessment with a GSA Industrial Operational Analyst (IOA).

• The mindset of selling direct from the manufacturer doesn’t provide a government customer with the technical support, integration services, or value-added experience which comes from an authorized VAR/dealer. 

• Manufacturers must update their own MAS GSA contracts with contractual modifications through GSA.  Price increases, new products, discontinued items all must be continually updated requiring the manufacturer to understand this process or hire a consultant.  And they must rely on their channel partners to update the manufacturers prices and product offerings on their respective GSA MAS contracts.

Option 2: Only the Manufacturer Holds a GSA MAS Contract

Let’s look at a situation where a large manufacturer works with hundreds of VARs/dealers throughout the country.  Under this option, the manufacturer could benefit from authorizing VARs/dealers to use their GSA MAS Contract.  No letter of supply from the manufacturer is required.

Effectively, the manufacturer grants permission to a VAR/dealer through a modification to the manufacturer’s GSA MAS Contract.  That VAR/dealer can then ‘reference’ the manufacturer’s contract number for all sales to a government customer.  The VAR/dealer may have their own GSA MAS contract respectively, but they will not be authorized to resell this manufacturer’s items on their contract.

Things to consider with this option of only the manufacturer holding a GSA MAS Contract:

• The manufacturer maintains control of the contract, pricing and the sale of their products through the MAS GSA contract.

• This option requires an organized and well managed approach to ensure that both parties (manufacturer and VAR/dealer) understand how to quote, invoice, track and report sales as well as pay the Industrial Funding Fee (IFF). 

• All VARs/dealers should sign an agreement with the manufacturer which outlines the terms and conditions of using the manufacturer’s GSA MAS contract.  Having a turn-key approach to making this option work is important so nothing falls through the cracks from a compliance standpoint. 

• Manufacturer must have a dedicated contract administration individual(s) to ensure all administrative, maintenance and compliance contract items are satisfied for the contract.

• As mentioned in Option 1, the manufacturer will still need to set up quoting and invoicing systems for accountability to track government sales through their GSA contract separate from all other sales.

• The manufacturer will still have to update their own MAS GSA contract with contractual modifications through GSA.  Price increases, new products, discontinued items must be continually updated requiring the manufacturer to understand this process or hire a consultant.

Option 3:  Manufacturer Encourages a Select Group of Channel Partners to Get a GSA Contract

The final option consists of a more forward-thinking approach to leveraging the GSA MAS Contract with the least number of changes required to the business model of a manufacturer. 

Manufacturers should consider encouraging a select group of authorized resellers in their government market base to pursue qualifying for a MAS GSA Contract.  Select these candidates based on their performance, geographic coverage, or commitment to the manufacturer’s product and the value delivered to the end customer. 

The manufacturer may even elect to share in the cost of the authorized reseller obtaining a GSA MAS Contract with an experienced consulting firm.  The benefits from this option far outweigh those delivered under Options 1 and 2 for the manufacturer, including:

• Manufacturer selects group of authorized VARs/Resellers and provides a LOS only to these partners for obtaining a MAS GSA contract.

• Manufacturer is not required to quote, invoice, track or report sales or pay an IFF.

• All contract administration, maintenance and compliance are the responsibility of the authorized reseller holding the MAS GSA contract.

• Manufacturer provides updates to products and pricing directly to their authorized VARs/Resellers.   The channel partners take care of all contractual modifications to bring their MAS GSA contract up to date.

If you have any questions or would like to further discuss this topic, please reach out to us at info@clearcoastusa.com.  The content provided herein comes from over three decades of experience of working with manufacturers and their channel partners relative to the GSA MAS contract program.