Surviving the GSA Schedule Contractor Assessment: What They'll Test and How to Comply

Jennifer Aubel & Vanessa Payne

http://blogs.aronsonllc.com/fedpoint/

Surviving the GSA Schedule Contractor Assessment: What They’ll Test and How to Comply

2© 2016 | www.aronsonllc.com | www.aronsonllc.com/blogs |

Agenda

• Basic Overview of Contractor Assessments• Evolution • Preparation• Other Unique GSA Compliance Areas• Documentation• Contractor Assessment Reports• GSA OIG Audits v. Contractor Assessments

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Basic Overview of Contractor Assessments







Primary Objective: Finding Lost Dollars

• Identify Underpayments– Does the contractor accurately identify GSA Schedule

sales and remit the proper amount of IFF• Identify Overcharges– Does the contractor offer the awarded GSA price or

lower with all negotiated discounts– Does the contractor monitor the Basis of Award and

comply with the Price Reductions Clause• Cancel Underperforming Contracts







Contractor Assessment Overview

• Evaluate contractor’s processes and procedures:– Maintains an acceptable and verifiable sales tracking, sales

reporting and Industrial Funding Fee (IFF) remittal process– Provides supplies and services within the scope of the

contract and available through the approved GSA pricelist– Enforces pricing controls for commercial and GSA

transactions– Modifies the contract as required







Overview (cont’d)

• Assesses the level of compliance with GSA Schedule terms and conditions, such as:‒ Maintaining the contract’s Basis of Award‒ Complying with approved GSA discounts, including any

negotiated prompt payment or quantity/volume discounts‒ Providing only Trade Agreements Act (TAA) compliant

products and services‒ Providing qualified personnel to perform services under the

contract







Evolution of the Contractor Assessment







So Long, Contractor Assistance Visits

• In the last year, GSA has introduced major changes to its periodic compliance review process

• The Contractor Assistance Visit (CAV), which focused on helping the contractor, was replaced by the Contractor Assessment, which is less educational and more about finding lost dollars

• There are significant differences in the frequency and focus of Contractor Assessments vs. the CAV







Assessment Frequency

• NEW! Contractors reporting GSA sales of $150K or more in the last four quarters may be subject to limited-scope Contractor Assessments as frequently as annually

• NEW! All contractors are subject to a comprehensive Contractor Assessment in the fourth year of each five-year contract period, prior to the option renewal







Assessment Focus

• Limited scope “Annual Assessments”– Contracts with higher utilization (over $150,000 in annual

sales) will receive more frequent attention– Contracts with lower sales may receive less attention

• All contractors will receive a full compliance review during the End-of-Term Assessment

• Contractors who fail to meet the minimum annual sales requirement of $25,000 will receive a different notification altogether – a cancellation letter







Other Changes

• NEW! Contractor must sign “Visit Consent Document”







Other Changes

NEW! Virtual Assessments:• Officially, Virtual Assessments are conducted annually for

contractors reporting less than $150,000 in contract sales over the last four reporting quarters

• Unofficially, many IOAs will try to conduct Virtual Assessments whenever possible

• Conducted via web conference, email and/or telephone• Contractors must submit extensive documentation to the IOA

electronically to review before Virtual Assessment







Preparing forContractor Assessments







Annual Assessments

What will be tested:1. Sales Reporting System2. Pricing on GSA Schedule Orders3. Prompt Payment Discounts







Sales Reporting System

Evaluates contractor’s ability to maintain acceptable and verifiable systems that:

1. Track sales against the GSA Schedule2. Identify when the sale is reportable to GSA3. Calculate the correct amount of Industrial Funding Fee (IFF) to be

remitted4. Ensure timely submission of quarterly 72A sales report and IFF

remittance







What is a GSA Sale?

• Your GSA Contract number is stated on the Purchase Order / Task Order

• Ordering information and terms same as GSA contract• Customer is authorized to use the Schedule– GSA Order ADM 4800.2H - Eligibility to use GSA Sources of

Supply and Service (www.gsa.gov/portal/content/104212)• The product or service is on your GSA Schedule• The pricing is at or below the Schedule price• FAR 51 Deviation



http://www.gsa.gov/portal/content/104212





When is a GSA Sale Reportable?

• Contractors may select one of four triggers for when a GSA sale is reportable:– Date of Order– Date of Shipment / Delivery– Date of Invoice– Date of Payment

• Once selected, the contractor must maintain that reporting trigger for the life of the contract







GSA 72A Sales Reporting

• Sales reporting is due by the 30th of the month after the end of the quarter, even when there have been no sales in the quarter

• Sales must be reported by SIN (don’t forget to segregate Disaster Recovery and Cooperative Purchasing sales)

• Do NOT include open market and other non-Schedule items, such as travel and living, in your sales totals







Sales Reporting Best Practices

• Document SINs, open market items, and ODCs from the proposal forward

• Flag GSA orders in your accounting system so you can easily run reports on sales

• Place reporting dates on your accounting calendar• Use electronic payment to avoid late penalties• File reconciliation and reporting confirmations• Don’t forget Participating Dealers and CTAs







Pricing on GSA Schedule Orders

• The IOA will review the pricing on selected invoices for GSA orders and compare it to the awarded prices for those items at the time of award

• Any overcharges will need to be repaid promptly• The IOA may ask you to file the corrected 72A sales report during

the assessment• Systemic pricing errors will be reported to the PCO and can cause a

directed OIG audit• Volume / Quantity Discounts must be specifically identified







GSA Pricing Best Practices

• Automate pricing functions, if possible• Ensure employees use current GSA catalog to price schedule

proposals rather than calculate the price from the commercial pricelist

• Most overcharges occur on multi-year orders with automatic escalation. Make sure the order escalation does not take the price over your current GSA rate.







Prompt Payment Discounts

• IOA will review GSA invoices to make sure all prompt payment discounts are indicated

• If the prompt payment discount does not appear on the invoice, GSA will assume that the government would have paid in time to receive the discount and that you owe the customer money back

BEST PRACTICE: Make sure to include prompt payment discounts in the invoicing instructions when you set up GSA Schedule orders in your accounting system







End-of-Term Assessments

What will be tested:1. All Annual Assessment Items2. Basis of Award / Price Reductions3. Labor Category Qualifications4. Trade Agreements Act (TAA)5. Scope6. Delivery7. E-Commerce







Basis of Award Compliance

• The IOA will review transactions with your Basis of Award (BOA) customer, or class of customer, to see if unreported price reductions occurred

• This is the single highest financial risk compliance area of the assessment

• If you don’t know what the BOA is on your contract, you should figure it out IMMEDIATELY







Most Favored CustomerThe customer or class of

customers that receives your best pricing, regardless of terms and

conditions.

Basis of Award CustomerThe customer or class of

customers upon which the Price Reductions Clause is predicated.

Most Favored Customer (MFC) vs. Basis of Award Customer (BOA)

These terms are frequently used interchangeably, but they are not always the same.







Basis of Award

• Establishes a relationship between the BOA customer’s discount and the GSA discount that must be maintained for the life of the contract

• When this discount relationship is disturbed, then a PRICE REDUCTION has been triggered

MSRP BOA Discount

BOA Price

GSA Discount

GSA Price(w/o IFF)

Discount Relationship

Basis of Award $500.00 10.0% $450.00 15.0% $425.00 5.0%







Price Reductions

GSAR 552.238-75 Price Reductions• Price Reductions are not really about price, rather they are about the

discount• What transactions are monitored for price reductions?

MSRP BOA Discount

BOA Price

GSA Discount GSA Price Discount

RelationshipBasis of Award $500.00 10.0% $450.00 15.0% $425.00 5.0%

Price Reduction $500.00 12.0% $440.00 15.0% $425.00 3.0%

New GSA Discount $500.00 12.0% $440.00 17.0% $415.00 5.0%







Monitoring the Basis of Award

• Contractors must implement and maintain a system that tracks commercial sales, especially sales to the BOA customer.

• Selling to BOA customers at a higher discount than negotiated may trigger the Price Reductions Clause

• Disclose any price reductions to GSA within 15 days







Exceptions to Price Reductions

• Sales to authorized users of the GSA Schedules• Sales in excess of the Maximum Order Threshold (MOT)• Price reductions caused by an error in bidding• Dissimilar terms and conditions– Pre-payment, trade-ins– Marketing considerations, exclusivity– Sales quotas, stocking requirements, customer support

• You must still disclose these transactions in your CSP







Price Reductions Monitoring Best Practices

• Educate ALL stakeholders in the process• Limit who can extend pricing to customers and automate pricing

controls when possible• Institute checks and balances between sales and contracts with

consequences for ‘rogue’ behavior• Consider whether a reduction can be classified as temporary before

giving GSA a permanent decrease• Schedule regular internal reviews







Labor Category Qualifications

• Labor Category Qualifications – GSA may review a sample of resumes to verify personnel meet the minimum education, experience, and functional requirements of the GSA labor category descriptions under which they were billed.

• Subcontracting – When subcontractors are mapped to the prime’s categories, the prime must document how the mapping was verified and be able to demonstrate that the sub met the minimum qualifications for the position

WARNING: GSA considers the use of unqualified labor an overcharge. You will have to repay the difference between the rate

charged and the rate for the category the employee actually qualifies for. This can get expensive.







Labor Category Best Practices

• Require all employees to update their resumes at least annually• Document any experience/education substitutions used when

mapping personnel to GSA labor categories• For each task order, document mapping of order labor categories to

GSA labor categories• Obtain current resumes for all subcontractor employees mapped to

GSA categories• Consider mapping all direct employees to a minimum GSA labor

category and updating annually







Trade Agreements Act (TAA)

• Schedule products cannot be manufactured or substantially transformed in countries that are not compliant with the TAA (i.e. China, India, etc.)

• The IOA may conduct a floor check to verify country of origin (COO) for contract items

• Services COO is the country where firm is established• TAA has recently gotten a lot of media attention, so expect GSA to

become more aggressive in enforcing compliance







TAA Best Practices

• Resellers and integrators should require manufacturers to recertify the COO of their products at least annually

• Spare parts and accessories often cause problems (ex. batteries and power supplies); do not sell separately if TAA conflicts exist

• Customs and Border Protection (CBP) is the ultimate arbiter of TAA compliance

• Consider talking to a government contracts attorney for complex topics like cloud software







Scope

Does the GSA Schedule order fall within the scope of the awarded Special Item Numbers (SINs) on the contract?

BEST PRACTICE: This issue mainly arises on services contracts. Just because an ordering agency issues a contract under a certain Schedule or SIN doesn’t mean that the IOA will accept their scope

determination. If you are concerned about whether an RFP is out of scope of your Schedule, talk to the ordering agency about it or

don’t bid.







Delivery and eCommerce

• Delivery – IOA will review contractor’s delivery practices, including selecting a sample of orders to determine if the stated delivery terms and conditions are in accordance to the contract.

• eCommerce – Historically refers to contractor’s acceptance of government pay cards and electronic payment of the quarterly IFF.







Administrative Compliance

Modifies the contract as required including:• Administrative updates • Mandatory / mass modifications• GSA Schedule pricelist updates







Other Important GSACompliance Areas







Compliance Concerns Specific to Products

• Environmental Attributes – if contractors have items on GSA Advantage with environmental indicators, the IOA will sample GSA Advantage items and ask for substantiation of environmental indicators.

• Participating Dealers – IOA will verify that the contractor has an effective system in place for capturing sales by participating dealers. Quarterly sales reports from participating dealers may be reviewed.







Compliance Concerns Specific to Products

• AbilityOne – Contractors are not allowed to offer products that are “essentially the same” to those manufactured by AbilityOne (formerly JWOD). These items must be deleted from the contract.







Compliance Concerns Specific to Services

• Labor Statutes – GSA Schedules include labor laws such as the Service Contract Labor Standards (SCLS), formerly SCA, and the Davis Bacon Act (DBA) which set statutory minimum wages and benefits for certain hourly employees on federal contracts. Contractors providing service employees or construction-type work under their contract should seek additional guidance on this complex issue.







Federal Compliance Reporting

Don’t forget that many general federal contracting requirements are also included on GSA Schedules:• Employment Eligibility Verification (e-Verify)• Equal Employment Opportunity / Affirmative Action• Veterans Hiring Reporting (VETS-4212)• Code of Ethics and Business Conduct• Service Contract Reporting (SCR)• Executive Compensation and First-Tier Subcontracts• Small Business Subcontract Reporting (eSRS)







Documentation for Contractor Assessment







Documentation Basics

• Although the IOA will typically start with a generic data request, be prepared to provide additional documentation upon request

• If the requested data set is exceptionally large, ask if sampling or reduced evaluation period is acceptable

• Virtual Assessments often ask for a large amount of materials up-front







Frequently Requested Documentation

• Sales reports in an Excel spreadsheet detailing all of contractor’s sales during the specified timeframe― Sales report should encompasses all transactions – including

GSA sales, federal non-GSA sales, and commercial customers• Copies of quotes, purchase orders, invoices from selected GSA,

federal non-GSA, and commercial orders during the specified timeframe

• 72A reporting records with substantiation







Frequently Requested Documentation

• Contract award documents, as well as modifications issued during the review period

• All commercial and GSA Pricelists effective in review period• GSA compliance policies and procedures, as available• Contractor Teaming Arrangements (if any)• Blanket Purchase Agreements (BPAs) placed under the MAS

contract (if any)• Participating Dealer Agreements (if any)• Resumes for task order personnel







Contract Documentation

Do you know where your GSA contract documents are?• Original Offer with all Clarifications • Contract Award (SF 1449) with continuation pages• Final Proposal Revision (FPR) Letter• Commercial Sales Practices (CSP-1)• Vendor and GSA-Initiated Modifications• GSA Pricelists• Reporting Documentation







Contractor Assessment Report







Contractor Assessment Report

• Graded report cards are no longer generated• Instead, the Assessment Report is designed to provide narrative

feedback on performance against contract terms and conditions.• Assessment Report is made available simultaneously to the

Contractor and the Contracting Officer• Assessment Report is an internal informational tool and is not

distributed externally







Annual Assessment Report







End-of-Term Assessment Report







GSA Inspector General (OIG) Audits v. Contractor Assessments







GSA OIG Audit v. Contractor Assessment

GSA OIG Audit Contractor AssessmentSubpoena power No subpoena power

Lengthy data collection and analysis

Short assessment and quick turnaround

Focus on specific issues (e.g. pricing)

Review of many compliance areas

Complete review of transactions Process review and spot checks

Pre-award or post award Annual, end-of-term, and special cases

Identify contractual issues Educate and review the mechanisms the contractor has in place to comply with selected terms and conditions of the contract







GSA OIG Audit Authority

GSA Audit Authority Clause:EXAMINATION OF RECORDS BY GSA (GSAR 552.215-71) – The Contractor agrees that the Administrator of General Services or any duly authorized representative shall have access to and the right to examine any books, documents, papers and records of the Contractor involving transactions related to this contract for over billings, billing errors, compliance with the Price Reduction clause and compliance with the Industrial Funding Fee and Sales Reporting clause of this contract. This authority shall expire 3 years after final payment. The basic contract and each option shall be treated as separate contracts for purposes of applying this clause







Types of GSA OIG Audit

• Pre-award Audit– Verifies contractor’s pricing disclosures are current, accurate and

complete and that controls are sufficient to ensure compliance

– May occur prior to initial contract award or at option extension• Post-award Audit– Verifies all pricing transactions, as well as terms and conditions,

to ensure contractor is in compliance.– Reviews for compliance in several key areas:• Price Reductions Clause (PRC) compliance• 72A Sales Reporting and Industrial Funding Fee (IFF)

remittance• Labor mapping compliance, contract scope, etc.







Major Recurring Findings in GSA OIG Audits

1. Commercial Sales Practices (CSP) were not current, accurate or complete – 77%

2. Customer agencies were overcharged for professional services – 50%

3. Systems used to accumulate and report Schedule sales were inadequate – 37%







Final Thoughts







Top 5 Ways Non-Compliance Can Cost You Money

1. Not understanding the Basis of Award2. Failing to reduce your prices when required3. Failing to increase your prices when allowed4. Failing to extend negotiated discounts (volume, quantity, prompt

payment)5. Violating the Trade Agreements Act (TAA) or Service Contract Act

(SCA)

Not educating the appropriate personnel on contract requirements







• Termination for Cause• Payment of restitutions to GSA

customers• Renegotiation of GSA

Discount / Basis of Award• Significant fines and penalties

• Suspension or Debarment• Civil Prosecution• Criminal Prosecution• Civil False Claims Act= $11K

per invoice plus treble damages

• Prison

Risks and Penalties for Non-Compliance

The regret of knowing it was preventable!







About Aronson LLC

• Thinking ahead for clients for more than 50 years• 225+ professionals located in Rockville, MD• 80+ professionals dedicated to supporting government contractors • Aronson helps clients rethink the way they approach their business through

innovative, industry-specific services and advice:– Audit, Assurance and Tax– Deltek Systems and Outsourcing– Financial and Contract Compliance– GSA Schedules

• www.aronsonllc.com/blogs/fedpoint/ – News and trends and insight for today’s savvy government contractor



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Awards / Accolades / Affiliations

The Gazette of Politics & Business Exceptional 53 Business Award In 2012, Aronson received the PB53 award for the third year in a row. The program acknowledges the top businesses and organizations in Maryland based on criteria that includes the company’s annual revenue, employee growth, noteworthy product or service innovations, community service efforts and more.

Accounting Today Top Firm In 2013, Aronson was once again named to Accounting Today’s list of the top 100 firms in the country. Accounting Today is a leading provider of online business news for the tax and accounting community.

Washington Business Journal Top 25 Aronson is ranked #12 on the Washington Business Journal’s Top 25 Accounting Firms in the DC Metropolitan area.

INSIDE Public Accounting Top 100 Once again, Aronson has earned a spot in the top 100 of this prestigious list, released by INSIDE Public Accounting. This is the longest running, most comprehensive and accurate independent analysis focusing on management and operations of America’s large local, regional and national firms.

Washington Business Journal Best Places to Work Aronson has been recognized five times as one of the Metro area’s “Best Places to Work.” The award recognizes a company’s achievements in creating a positive work environment that attracts and retains employees through a combination of employee satisfaction, working conditions and company culture.

Montgomery County Chamber Corporate Social Responsibility AwardIn 2010, Aronson was honored to receive the MCCC’s Corporate Social Responsibility Award based on the depth and breadth of the company’s energetic commitment to support young people, in the areas of education, housing and health.







Vanessa Payne is a managing consultant in Aronson LLC's Government Contract Solutions Group. With more than 15 years of full life-cycle government contracts and consulting experience, her expertise includes GSA contract management, subcontract administration, contractor task order proposals, and "Big Four" management consulting in the areas of process improvement, business process reengineering, cost accounting, survey development and analysis, workflow mapping, and facilitation services. She currently specializes in GSA Schedule contract preparation, renewals, and providing ongoing contract management, administration, and compliance support with a special interest in organizational procedure and policy review, improvement, and standardization.Vanessa has been a guest speaker on GSA Schedule and social media topics for Aronson and other industry organizations, and she is a co-founder and frequent contributor to Aronson's Fed Point blog. She received her master's degree in organizational development and strategic human resources as well as a graduate certificate in skilled facilitation from Johns Hopkins University, and she completed her bachelor's degree in communications at the University of Pennsylvania.

Managing Consultant, Government Contract Services Group

240.364.2663

[email protected]

Vanessa E. Payne



http://blogs.aronsonllc.com/fedpoint/





Jennifer Aubel is a principal consultant in Aronson LLC’s Government Contract Services Group. She is responsible for leading clients successfully through the GSA lifecycle -- from obtaining a new GSA Schedule contract through administering ongoing contracts. She works closely with clients to custom-tailor GSA Schedule solutions that meet current and future organizational needs by developing scope and pricing strategies, maintaining contract compliance, providing audit support, and improving the profitability and versatility of the GSA Schedule contract. Additionally, Jennifer frequently speaks on GSA Schedule topics at both Aronson and industry-sponsored events and is an active member of the National Contract Management Association.Jennifer has over 15 years’ experience in the federal contracting market, working for both contractors and as a consultant to GSA Schedule contract holders. Prior to working with Aronson, she managed a multi-million dollar GSA program comprised of six GSA Schedule contracts with more than 10,000 contract line items. She also managed a team that developed and delivered specialized training on the GSA Schedules program to small businesses across the country. Jennifer graduated summa cum laude from the University of Maryland University College with a bachelor’s degree in Legal Studies.

Principal Consultant, Government Contract Services Group

301.231.6253

[email protected]

Jennifer Aubel







240.364.2663

Contact Vanessa Payne / Aronson LLC

[email protected]

https://www.linkedin.com/in/vanessaepayne








301.231.6253

Contact Jennifer Aubel / Aronson LLC

[email protected]

https://www.linkedin.com/in/jnaubel







Surviving the GSA Schedule Contractor Assessment: What They'll Test and How to Comply

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Transcript of Surviving the GSA Schedule Contractor Assessment: What They'll Test and How to Comply