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GSA and DoD Help Customers With Increased Costs

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This content is a continuation of the blog:  Help My Costs Have Increased! Published on March 30, 2022.

With nationwide inflation at 10%, federal contractors are finally getting some additional relief from the General Services Administration (GSA) and the Department of Defense (DoD). 

ClearCoast applaudes the initiatives of the recently released guidance by these agencies to help companies, particularly small businesses, who have been particularly impacted by the inflationary costs and global supply chain delays.  Contracting agencies will benefit from these initiatives providing continued access to the commercial market through existing contracts including the MAS GSA Schedules program.

GSA updates its guidance for how quickly contracting officers can raise prices on the schedule

Jeff Koses, GSA’s senior procurement executive, and Mark Lee, the assistant commissioner in the Office of Policy and Compliance in GSA’s Federal Acquisition Service, told contracting officers on September 12 that they do not need additional approvals to invoke the economic price adjustment (EPA) clause in GSA contracts.  The updated GSA guidance memorandum, MV-22-02, Supplement 1, is available at https://www.gsa.gov/policy-regulations/policy/acquisition-policy/acquisition-policy-library-resources

“For EPA increases exceeding the ceiling percentage established in the solicitation, Acquisition Letter MV-22-02 initially lowered the approval level from the contracting director to one level above the contracting officer. This supplement, in recognition of ongoing price volatility and impacts to the global economy, removes the requirement to obtain additional approvals,” the memo stated. “This means that all requests for EPA increases can be approved by the contracting officer, whether above or below the ceiling percentage established in the solicitation. Contracting officers should review all EPA requests consistently and in line with the terms of the underlying contract.”

Koses and Lee’s updated guidance makes it clear that speed without reducing rigor is important.

“This temporary moratorium does not diminish a contracting officer’s responsibility for reviewing EPA requests and asking for additional information, if applicable, within the confines of what is normally necessary for processing EPA requests. Specifically, EPA requests must be evaluated to ensure the request is justified,” the memo stated.

This updated guidance is effective immediately and will remain in effect until March 31, 2023, unless otherwise extended.

DoD releases second memo to deliver relief to Contractors due to inflation

On September 12, the DoD also updated guidance for Contracting Officers regarding approaches for addressing inflation under existing firm-fixed-price contracts.

The updated guidance is based on feedback from the Department’s acquisition executives about how inflation is presently affecting the defense industrial base and contractors’ ability to perform under existing firm-fixed-price contracts. The memorandum advises Contracting Officers about the range of approaches available to them to make potential accommodations including schedule relief and amending contractual requirements, and in extraordinary circumstances, the use of Extraordinary Contractual Relief.

As conditions warrant, DoD will continue to adapt its approach to meeting mission requirements through the current economic environment.  

The updated DoD guidance memorandum is available at https://www.acq.osd.mil/dpap/policy/policyvault/USA001773-22-DPC.pdf

WE’RE HERE TO HELP.

For questions about EPA requests to your GSA MAS contract reach out to ClearCoast today.  Hire a GSA Consultant who serves as your best partner.

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About ClearCoast

ClearCoast USA, LLC brings over 30+ years experience in the business-to-government (B2G) industry.  Since 2000, ClearCoast has helped 200+ clients qualify for a GSA MAS Contract.

Should Manufacturers Get A GSA MAS Contract?

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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.

Help! My Costs Have Increased

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Are you feeling the pain of increased costs to your business? If you are like most of our government customers, your business is feeling the brunt of the rising costs of goods and services, and so too are agencies and their ability to meet their missions.

GSA Tackling Challenge to Reduce Heavy Burden on Contractors

Not since the mid-1970s have we experienced such an inflationary crunch placing a heavy burden on contractors and their supply chains, especially small business contractors.

The good news is that GSA has recognized the inflation challenge and is trying to do something about it to keep contractors from leaving the government market altogether, in part, because they are losing money.

GSA released Memorandum Acquisition Letter MV-22-02 on 3/17/2022 to provide a temporary moratorium on the enforcement of several limitations contained in certain GSA Economic Price Adjustment (EPA) clauses.

Effectively, the Acquisition Letter from Jeff Koses, Senior Procurement Executive:

1. Lowers the approval for price increases above the EPA clause ceiling in 552.216-70, from the contracting director to one level above the contracting officer.

2. Relaxes time limitations on EPA increases.

3. Relaxes limitations on the number of EPA increases a contractor may request.

4. Clarifies that if a contractor has removed an item from their Schedule contract, GSA will not enforce the limitation on adding the same item back at a higher price.

What does this mean for you as a GSA Contract holder? If your costs have increased as a channel partner in which the manufacturer has increased your pricing or you are a business reliant on maintaining a highly qualified labor market and your costs have skyrocketed, you can seek to increase your pricing. Typically, EPA requests could not exceed the allowable ceiling limits of 10% for products and 5% for services per GSA clauses GSAR 552.216-70 – Economic Price Adjustment and I-FSS-969, Economic Price Adjustment.

Come Prepared to Justify Price Increases

At ClearCoast, we have prepared dozens of EPA requests over the last 3 months for customers.  From manufacturers and their channel partners to businesses offering professional services, software, or other tools, we have guided customers in providing the proper documentation for consideration of an EPA by their contract officer.

For example, documentation from manufacturers could include the freight and fuel charges of raw materials and how it effects your supply chain. National industry resources publish statistics or cost indexes of what is happening based on the economy. GSA contractors should gather that data and any other supporting information to justify what is happening and tell the whole story.

Many companies have experience increased costs to their labor categories as employees return to work. These costs funnel down to a business’ bottom line, so it is important that you show the contract officer the data to enable evaluation of an EPA.

GSA is Stepping Up to Help Contractors

Acquisition Letter MV-22-02 outlines the actions as deemed necessary for GSA Contracting Officers to take in support of EPA requests from contractors including:

  1. Conducting a thorough evaluation, according to applicable policies and procedures.
  2. Approving EPA requests for increases that exceed the ceiling established in the solicitation with approval one level above the Contracting Officer.
  3. Taking into consideration all supporting data provided to show the impact to a GSA contractor’s bottom line.

This Letter and the actions outlined are in effect until September 30, 2022, unless otherwise extended.

ClearCoast recommends that GSA Contractors consider acting now to address the inflationary costs that have impacted their GSA Contract pricing. Don’t wait until it’s too late.  

If you have any questions or would like to discuss how we can help you increase your GSA prices during these challenging economic times, please contact us at info@clearcoastusa.com