An inspector general's report has found that some IT products offered by the General Services Administration are not meeting the goals of providing agencies the lowest cost or the best possible price.
The report said that identical IT products on GSA's schedule contracts were available at multiple and varying prices, often higher than the commercial costs of the same product.
Related: Read the report.
The inspector general studied more than 118,000 IT sales that happened between 2014 and 2015 through GSA Advantage! — the agency's online system for schedule purchases — finding that some items sold for as much 88 percent more than the lowest GSA price for the same product.
GSA Advantage! Officials said that prices for the identical products can vary, depending on the features offered, but the OIG said that the sample studied did not show any such features.
The report also found that commercial prices for the 56 of the top 75 IT products sold by GSA were lower than the agency price. On average, GSA prices were 13 percent higher than the commercial options, with one product costing three times more on GSA Advantage!
GSA is charged with finding the most fair and reasonable prices for products on its scheduled contracts, but investigators found that the bulk of the agency's IT schedule contracts were from resellers, which offered varying price points.
"The cornerstone of the Schedules Program is competitive, market-based pricing. A contractor's commercial sales provide contracting officers with a basis to evaluate offered pricing," the report said.
"However, GSA's ability to obtain competitive, market-based pricing may be impaired when an IT schedule reseller has minimal commercial sales. Based on our review of 24 GSA OIG preaward audit reports on IT schedule resellers issued from 2009 to 2015, we found that many of these resellers did not sell in significant quantities in the commercial marketplace."
So when a reseller doesn't have extensive commercial sales information, they are supposed to provide GSA with "information on manufacturer sales practices," but often don't.
The report said GSA policy doesn't provide contracting staff with any alternative methodologies for negotiating price, only the commercial sales data provided by manufacturers or the contract bidders.
IT contracts are also supposed to automatically adjust GSA prices when the product's commercial price drops through Price Reduction clauses, but investigators found that contracts sampled had modified clauses that limited those price reductions for things like rebates and sales promotions.
The report also noted that the administrative costs of maintaining contracts for low-selling IT products is often outpacing the cost of the contracts.
The OIG that from fiscal 2011 to 2014, 400 IT contracts sold less than $2,500 in products, but because the contracts have a minimum sales guarantee clause, the government is on the hook for the contract amount plus the sales, which investigators estimated was up to $1 million.
The OIG reported that since 2007, the Federal Acquisition Service had paid $25 million administering IT reseller contracts with low or no sales.
The report offered six recommendations, including:
- Establish procedures to ensure that price variances for identical items are supported by analyses documenting additional concessions or services on the higher priced items.
- Develop new FAS procedures to reinforce the objective to get the resellers’ best customer price in contract negotiations.
- Establish controls that both ensure that contracting officers obtain accurate, current and complete manufacturer sales practices; and controls that ensure Price Reduction clause deviations don’t hurt price protections.
- Cancel IT schedule contracts that don’t meet $25,000 in minimum sales.
- Increase the $25,000 minimum sales requirement for contracts to a level that offsets administration costs.
- Find alternatives to the minimum $2,500 payment clause to resellers in IT contracts.
GSA officials concurred with all recommendations and outlined changes it was making in relation to them.
