June 07, 2013

Using GSA Schedule rates for noncompetitive service subcontract price analyses.

Government audit agencies and contract evaluation boards have voiced concern over the use of GSA Schedule rates as a basis of comparison for a FAR Part 15-type price analysis. There are several factors influencing this concern, including but not limited to the use of untracked and unverified costs in the build-up of GSA rates (TINA and CAS are not applicable to commercial item procurements and GSA Schedules are issued under FAR Part 12); and the inclusion of costs that are not ordinarily a factor in FAR Part 15 rates (like IFF). In short, the outlook of agencies like DCAA and DCMA is that there is a high probability of contractors "cherry picking" already inflated GSA rates to perform price justifications rather than price analyses.  

And they aren't wrong. Try this experiment sometime - pull a range of noncompetitive price analyses for one-off service procurements then count how many of those price analyses result in negotiations. I'd be willing to bet the overwhelmingly popular answer will be "zero".  

But there's a problem with this audit agency distain. If the sub was selected on a noncompetitive basis to perform services and they do not have or will not provide invoices or other proof of payment for rates of a same or substantially similar nature by a third party, how can contractors use the next available price analysis technique - competitively published price lists - without GSA Schedules?  

My answer is to attempt to address and nullify the "cherry picking" concern via modified price analysis techniques for the use of GSA Schedule rates using Olympic Scoring and Comparative Range Rate Reduction

If I'm using GSA Schedule rates for a price analysis, I pull five or six different schedules from similarly situated contractors. Once I map the rates, I arrange the rates from lowest to highest then drop the lowest and highest out of consideration to create a Comparative Range that is much more reliable than pulling one or two rates, all of which happen to be higher than the proposed rate.  

Once the ceiling rate of the range has been established, I reduce that rate by 5% and use the 95% rate as the basis of price analysis comparison. The narrative states that this reduction is implemented to equalize out some of the costs associated by GSA schedule rates that are not included in subcontractor's rate such as IFF. 

Through the use of (a) multiple closely aligned schedules; (b) accurate LCAT mapping; (c) Olympic Scoring; and (d) Standardized Range Reductions, GSA Schedules can become reliable tools for execution of a successful noncompetitive price analysis - that may actually result in negotiations.