mas contract systems review june 18 2009

8/14/2019 MAS Contract Systems Review June 18 2009

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SURVIVIVING A GSA SCHEDULESURVIVIVING A GSA SCHEDULECONTRACT SYSTEMS REVIEW:CONTRACT SYSTEMS REVIEW:A CHECKLIST FOR COMPLIANCEA CHECKLIST FOR COMPLIANCE

G. Matthew Koehl, Esq.June 18, 2009


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2Shook Doran Koehl

Presentation OutlinePresentation OutlinePresentation OutlinePresentation OutlinePresentation OutlinePresentation Outline Overview of the General Services

Administration (GSA) Multiple AwardSchedule (MAS) Program

Contract systems review process and scope

Contractor Report Card

Critical MAS contract issues, rules andcommon contractor problems

MAS Contract compliance systems


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3Shook Doran Koehl

MAS Program OverviewMAS Program OverviewMAS Program OverviewMAS Program OverviewMAS Program OverviewMAS Program Overview MAS Contract Program has grown substantially

since mid-1990s

$36 billion in Government FY 08 sales >17,000 MAS contracts

Premier contract to sell commercial itemproducts and services to the federal government


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4Shook Doran Koehl

MAS Program OverviewMAS Program OverviewMAS Program OverviewMAS Program OverviewMAS Program OverviewMAS Program Overview GSA is the lead procurement agency

GSA establishes long-term schedule contracts withpre-negotiated prices and terms and conditions

Contracts open to all Federal agencies and manyquasi-Government agencies and internationalorganizations


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Contract Systems ReviewContract Systems ReviewProcessProcess



GSA conducts routine reviews of MAScontractors contract management systems

Regular event for large + problem

contractors

Performed by Federal Acquisition Service(FAS) and not the Office of Inspector General(OIG)

Potential for referral to OIG and Departmentof Justice (DOJ) if serious problems discovered


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6Shook Doran Koehl

Evolving Scope of MASEvolving Scope of MASContract S stem ReviewContract S stem ReviewEvolving Scope of MASEvolving Scope of MAS

Contract S stem ReviewContract S stem ReviewEvolving Scope of MASEvolving Scope of MAS

Contract S stem ReviewContract S stem Review Late 1990s - superficial analysis of

written procedures for tracking MAScontract sales and paying Industrial

Funding Fee (IFF) IFF is a contract usage fee, MAS

contractors collect from ordering

agencies and remit quarterly to GSA(.075%)

Substantial incentive to audit IFF


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7Shook Doran Koehl

Evolving Scope of MASEvolving Scope of MASContract S stem ReviewContract S stem ReviewEvolving Scope of MASEvolving Scope of MAS

Contract S stem ReviewContract S stem ReviewEvolving Scope of MASEvolving Scope of MAS

Contract S stem ReviewContract S stem Review Scope expands over time

Is the contractor overcharging agencies?

Is the contractor is selling unapproved items?

Detailed analysis of 6-12 months of sales data Alternatively, FPDS sample orders

Report Card with 27 contract requirements Exhibit A

Some of 27 requirements N/A to individual MAS contractors

Some reviewed closely (e.g., IFF), others receive onlysuperficial review (e.g., Trade Agreements Act)


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Contractor Report CardContractor Report CardContractor Report CardContractor Report CardContractor Report CardContractor Report Card Category One - 10 critical Report Card items

Failure to meet any critical item = SeriousConcerns Exist Rating

1. Contract scope2. Trade Agreements Act3. Current MAS Pricelist4. IFF payments5. Minimum contract sales6. Basis of award customer tracking7. Overcharges vs. MAS pricelist8. Economic Price Adjustment clause9. Small Business Subcontracting Plan10. Identifying products with environmental attributes


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Contractor Report CardContractor Report CardContractor Report CardContractor Report CardContractor Report CardContractor Report Card

Category Two - 11 mandatory butnon-critical items 1 failure = Very Good

2-3 failures = Satisfactory 4 or more failures = Marginal

Category Three 6 additional items

Exceptional rating available if Very Good inCategory Two and 1 or fewer failures inCategory Three


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Contract Systems Review vs.Contract Systems Review vs.OIG AuditOIG Audit



Important to distinguish the contractsystems review from GSA OIG audits Pre-award OIG pricing review

Post-award OIG contract compliance audit

Exhibit B. Contract Systems Review

Exhibit C. OIG Audits


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IFF Payments The RulesIFF Payments The RulesIFF Payments The RulesIFF Payments The RulesIFF Payments The RulesIFF Payments The Rules Contract usage fee, MAS contractors collect from

ordering agencies and remit quarterly to GSA(.075%)

GSA : federal agency orders for MAS items are

subject to IFF unless the contractor establishesthe agency did not intend to use the MAS program

Arguably unreasonable contract interpretation

But, generally less expensive and better businessfor the MAS contractor to close out the review by


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Common IFF PaymentCommon IFF PaymentProblemsProblems



Commercial order entry systems used to identifyMAS orders are not designed for simple and easyIFF payment compliance

Systems tend not to be fully automated anddepend upon accurate data entry by contractorsales staff

Contractors most frequently to miss certain types

or categories of orders

High risk order categories in Attachment B toCourse Materials


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MAS Order Pricing - The RulesMAS Order Pricing - The RulesMAS Order Pricing - The RulesMAS Order Pricing - The RulesMAS Order Pricing - The RulesMAS Order Pricing - The Rules

MAS contracts contain a discounted ceilingprice which GSA has determined fair andreasonable Cannot charge in excess of ceiling

Also, approved price is usually benchmarkedagainst other indices: discount from a commercial list price commercial customer sales price

acquisition cost (resellers)

Price reductions based upon benchmark changes mustbe granted automatically on the same date and for thesame duration as the change to the pricing benchmark


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Common MAS Pricing ProblemsCommon MAS Pricing ProblemsCommon MAS Pricing ProblemsCommon MAS Pricing ProblemsCommon MAS Pricing ProblemsCommon MAS Pricing Problems

Sales staff unaware of the price ceilingand issue MAS quotes based on highercommercial pricing and practices

Order processing staff unaware of theprice ceiling and accept orders in excessof the approved ceiling price

Benchmark triggering price reductiondoes not get reflected in MAS contractpricelist

Benchmark triggering event category of price


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Unapproved Item SalesUnapproved Item Sales The RulesThe Rules



Federal agencies are authorized to purchaseapproved products and services through MAScontracts using streamlined ordering procedures

MAS orders may not include unapproved (i.e.,open market) products or services in excess of$3,000, even where related to the MAS productsor services

To meet its competition obligations, the federalagency must receive accurate information fromthe contractor about whether items are approvedfor sale under the MAS program


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Unapproved Item SalesUnapproved Item Sales Common ProblemsCommon Problems



Sales staff are unaware of which products andservices are currently MAS-approved

GSAs often slow contract modification approvalprocess creates differences between commercialand GSA-approved offerings

Intentional misrepresentation as MAS approved

Express misrepresentation

Quote referencing MAS contract with some MAS itemsbut not separately identifying other items as openmarket or not approved


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Trade Agreements Act Trade Agreements Act The RulesThe Rules



TAA implements trade treaties granting equal treatment in governmentprocurement to member companies China, India, Thailand, Vietnam not approved

Designated Countries FAR 52.225-5

Taiwan becomes designated country in July (est.)

Not a pricing preference absolute prohibition on non-designedcountry products (absent waiver)

The TAA applies to all MAS contracts

Except set aside Special Item Numbers (SINs) Order size not relevant


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TAA product country of origin is established by the substantialtransformation test

Products are TAA-eligible if last substantially transformed in a membercountry into a new and different article of commerce

Substantial transformation test is not satisfied by simple manufacturingefforts that dont affect the products essential use

End products that are last substantially transformed in non-designatedcountries are prohibited

TAA applies to services, but no enforcement to date. Country of origin is country where firm providing the services is established FAR25.402(a)(2).


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Trade Agreements ActTrade Agreements Act Common ProblemsCommon Problems



Contract systems review now includes TAA Only superficial analysis by GSA IOAs Heavily audited by GSA OIG

MAS reseller buys from distribution withoutobtaining manufacturer TAA certification

MAS reseller lacks good process for obtainingupdated manufacturer product country of origindata

Manufacturer product development functionchanges point of production without notice toMAS Contract administrator


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Trade Agreements ActTrade Agreements Act

Common ProblemsCommon Problems Inventory control and SKU management

issues

Failure to archive country of origin

information Hardware and software production migrates to China,

India and other non-designated countries

Industries struggle with TAA compliance Hardware items Medical products IT hardware Software


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Small Business SubcontractingSmall Business SubcontractingPlan The RulesPlan The Rules



Requirement for all large MAS contractors

Good faith effort to award percentages ofsubcontract dollars to various small

business categories Liquidated damages for failure to make a good faitheffort. FAR 52.219-16.

Annual or semi-annual report of plan goal

achievement Subcontracting Plan goal achievement now

part of contract systems review process


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Small Business SubcontractingSmall Business SubcontractingPlan Common ProblemsPlan Common Problems



Commercial Subcontracting Plan is notupdated on an annual basis

Companys purchasing function is not

properly trained and lacks procedures tomeet good faith effort steps specified inPlan

Failure to file annual SF 295 Report showing

progress on plan goals Failure to obtain regular business size status

representations from subcontractors


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Preparing For A GSAPreparing For A GSA

1. Scope. Written procedure to specifically identify any non-MASitems in MAS contract proposals and quotes

1. Scope. Written procedure for providing most updated MASpricelist to federal sales staff

2. Trade Agreements Act. Written TAA compliance procedure (ifapplicable) Resellers examples of manufacturer Letter of Supply certification to TAA

3. Current MAS Pricelist. Contract modifications with approved

MAS pricelists for the entire period of review


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Preparing For A MAS ContractPreparing For A MAS ContractS stems ReviewS stems Review



4. Industrial Funding Fee. Written procedure for trackingMAS orders and calculating IFF payments Be prepared to show how MAS order flows through entire order

processing system and is identified for IFF payment

Address MAS dealers, Contractor Teaming Arrangements, Blanket

Purchase Agreements and leasing payments

4. Industrial Funding Fee. Back-up documents for thequarterly IFF payment calculations for the entire period ofreview

4. Industrial Funding Fee. Copies of 72A reports and receiptsshowing timely payment of IFF for the past 36 months


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5. Minimum Contract Sales. Copies of 72A reports for period ofreview

6. Basis of Award Tracking. Written procedure identifying triggeringevents for tracking customer or other BOA Include discount to pricelist, if applicable Copies of commercial pricelist, if applicable

7. Overcharges vs. MAS Pricelist. Contract modifications withapproved MAS pricelists for the entire period of review

7. Overcharges vs. MAS Pricelist. Written procedure to verify MAS

order pricing at time of MAS contract quoting and order acceptance


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8. Economic Price Adjustment clause. Contractmodifications with approved MAS pricelists for the entire period ofreview

9. Identifying Environmental Attributes. Contractmodifications with approved MAS pricelists for the entire period ofreview

10. Small Business Subcontracting Plan. Copy of current approvedplan document

10. Small Business Subcontracting Plan. Copy of most recentlysubmitted SF 295 report


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Preparing For A GSA ContractPreparing For A GSA ContractS stems ReviewS stems Review



Miscellaneous. Qualified professional servicesemployees (not on Report Card) Written procedure and employee resume files

Miscellaneous. Binder showing compliance with the 17non-critical Report Card requirements

Define compliance (y/n) on your terms (e.g., timely delivery) Fix items that can be fixed quickly (e.g., contractor records

location) Systematic approach to long-term compliance


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Sales Transactions. If possible, review allidentified sales transactions before on-site contractsystems review. If a MAS contract or authorizeduser order

Items approved on then-effective MAS pricelist? Items priced below ceiling in then-effective MAS pricelist? IFF paid on order?

If not MAS, how to establish? If errors made on order, why?


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Compliance SystemsCompliance SystemsCompliance SystemsCompliance SystemsCompliance SystemsCompliance Systems

Regular internal audits

MAS pricing

MAS-approved items

Price reductions based on discounts and concessions tobenchmark customers

Price reductions based on reductions to commercial listprice

Trade Agreements Act


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ConclusionConclusionConclusionConclusionConclusionConclusion All MAS contractors with material sales volumes should

experience one or more contract systems audits during each5-year contract period

MAS contractors often encounter the same compliance

problems

Problems are not obscure but require advance attention toensure proper compliance

Contract systems review implicates some key requirements

that are reviewed only superficially but can presentsubstantial risk in a post-award OIG audit, take theopportunity to address correctly

Trade A reements Act

mas contract systems review june 18 2009

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