GSA TDR Pilot Program Considerations

Posted by Jeff Clayton Leo Alvarez on October 25, 2018

GSA TDR Pilot Program Considerations

By Jeff Clayton and Leo Alvarez, Baker Tilly, Deltek Partner

It has been two years since the General Services Administration (GSA) unveiled one of the most significant changes to the Federal Supply Schedule (FSS) program in more than two decades—the Transactional Data Reporting (TDR) pilot program. Vendors on Schedule contracts covered by the pilot program who were willing to report transactional prices paid data on a monthly basis would no longer be subject to the FSS program’s Price Reductions Clause (PRC) and its “tracking customer” requirement; neither would they be required to submit Commercial Sales Practice (CSP) disclosures, hallmarks of the GSA Schedule negotiation since the 1980s.

At the time, GSA hailed TDR as an essential tool in understanding government-wide purchasing behavior and allowing agencies to make smarter acquisition decisions while decreasing the overall burden to contractors. Since then, however, the future of the program has become unclear. To evaluate whether the TDR program is the best next step for interested government contractors, we begin at the beginning with a look back at this fundamental change, before exploring how the program has evolved and reviewing where it stands today. 


 

Lessons Learned from GSA Transactional Data Reporting


November 13, 2018 | 11 a.m. ET 

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A New Pricing Model

Before the TDR program, a vast majority of GSA Schedule contract pricing was predicated on a company’s commercial sales practices, with the GSA looking to achieve pricing that was favorable when compared to the prices that a company achieved in the commercial marketplace (a “vertical” pricing approach). For many in the contracting community, these pre-TDR disclosure rules, forms and instructions had plenty of drawbacks:

  • Companies may have had a difficult time understanding them and the data they were requesting
  • They imposed an administrative burden on contractors
  • Government procurement officials may have had trouble interpreting the CSP information or using it effectively.

Recognizing the federal government’s shift toward category management, GSA introduced the TDR pilot program as a way to alleviate some of industry’s concerns and to help the government achieve its goal of optimizing sourcing decisions by helping it to better understand its purchasing practices. 

The three-year pilot program was rolled out in August 2016 to eight select GSA Schedule contracts (accounting for nearly half of all Schedule sales). It required participating vendors to electronically report unit-level sales data for orders placed against those contracts on a monthly basis. Previously, GSA Schedule contractors were only required to report an aggregate total of sales on a quarterly basis. TDR requires 11 different data elements in sales reports containing item-level information, like price paid per unit, total price, quantity, and task order number.

Eight GSA Schedule Contracts Included in the Pilot

GSA Schedule

GSA Schedule Description

Special Item Numbers (SINs)

72

Furnishings & Floor Coverings

All

58 I

Professional Audio/Video

All

51V

Hardware Superstore

All

03FAC

Facilities Management and Maintenance

All

75

Office Products/Supplies

All

73

Food Service, Hospitality, Cleaning Equipment and Supplies, Chemicals and Services

All

70

IT Equipment, Software & Services

132-8, 132-32, 132-33, 132-34, 132-54, 132-55

00CORP

Professional Engineering Services

871-1, 871-2, 871-3, 871-4, 871-5, 871-6, 871-7

Under TDR, the GSA bases its pricing objectives on how the same, or similar, goods and services were purchased within the government marketplace (a “horizontal” pricing approach). Instead of monitoring pricing to comply with the PRC requirement and submitting CSP disclosures, contractors submitted transactional-prices-paid data on a monthly basis. This tradeoff meant that GSA Schedule pricing was no longer benchmarked against a company’s commercial sales practices, but rather on pricing offered within the government marketplace. Ultimately, how an organization discounts at the order level (or perhaps even how its competitors discount) in the government marketplace had the potential to impact pricing negotiations at the Schedule level or at the order level. While many contractors reacted positively to the removal of the CSP disclosure requirement and the significant level of effort and risk associated with it, this shift in the overall GSA pricing model caused many others to take a “wait and see” approach to the TDR concept. 

So, What has Happened Since TDR Inception?

In August 2017, the GSA decided to make the TDR program voluntary rather than requiring it for new offerors or those existing GSA contractors approaching option renewal. Initially, the pilot was made mandatory for new Schedule contracts and option renewals for existing contracts in order to help spur adoption of the TDR concept. For those vendors that were previously forced to accept TDR, they would now have the option to opt-out and revert back to the tracking customer requirements of the PRC. This created some confusion for contractors upon rollout, as opting out required vendors to re-submit CSP disclosures, establish a new Basis of Award (BOA) customer, and identify a price/discount relationship for the purposes of PRC monitoring. 

It has now been more than two years since the introduction of TDR. At its onset, the TDR model was viewed by the GSA as having great potential to fundamentally change not only how GSA negotiates its Schedule contracts, but also how ordering activities use those contracts to make purchases. Indeed, the macro use of transactional data by category managers for creating smarter buying strategies was one of the primary drivers for implementing the TDR concept; however, how, and even if, the GSA has used the data that is now available to them remains an open question.

Transactional Data Reporting (TDR) Today

On July 25, 2018, the GSA Office of Inspector General (GSA OIG) issued an audit report finding that the GSA’s evaluation plan for TDR was inadequate. At the start of the pilot program, the GSA maintained that the three-year pilot program would be evaluated based on various metrics related to pricing competitiveness, sales volume, FSS utilization, small business participation, and other measures valuable to category management. The report titled, “Audit of Transactional Data Reporting Pilot Evaluation Plan and Metrics,” stated that the GSA’s current evaluation criteria are vague and do not enable the GSA to objectively measure or evaluate whether the TDR pilot program is improving the value of the GSA Schedules Program. The GSA responded to these findings by elaborating on their quantitative metrics and reiterating their belief that these criteria will work and only need time to prove the TDR concept.

Also noted in the report is that roughly 500 million rows of TDR data amassed by the GSA has yet to be used to evaluate the TDR program. While it is available to an internal FAS analytics team and some category managers, these individuals do not bear the responsibility of measuring the program’s effectiveness. Due to the proprietary nature of the data, the GSA is still working on a solution to ensure its security before distributing to a broader audience. This broader distribution to contracting officers would seem necessary to achieve the desired effect of promoting category management, reducing prices and achieving a number of additional goals.

In response to OIG’s report, the GSA noted that they had planned for GSA FSS Contracting Officers to begin using transactional data to negotiate contract-level prices in late fiscal year 2017. Thus far, a limited number of contractors report experiencing this, and that widespread use of the transactional data to support contract-level price negotiations may not be happening with much frequency. At industry meetings where the TDR program was being proposed and ultimately rolled out, GSA officials stated on a number of occasions that the data would not be used to facilitate a race to the bottom on prices, and that it was uncertain when and how the data would ultimately be used by contracting officers at the GSA and ordering agencies. It will be interesting to see how and where transactional data is deployed and relied upon by the government to negotiate better contract-level prices, as well as whether the unique factors that can lead to lower prices on a specific order where volume and other requirements that can influence pricing, are understood and taken into account.

Key Takeaways

TDR was established under the premise that it had the potential to centralize pricing decisions, reduce contract duplication and lower acquisition costs. After two years, it appears that an evaluation of the pilot is still in its infancy, which could put pressure on the program to yield meaningful results quickly. While there are a number of open questions, FSS contractors should carefully consider the implications of the OIG’s findings.

  1. Given that GSA has yet to use the data, and that performance targets are still in question, it remains to be seen whether TDR will be expanded to other schedules, or whether the schedules currently included in the pilot will continue to include TDR as an option.
  2. While GSA has continued to stress that a reduction in prices is but one aspect of how TDR will be evaluated, there is some potential for TDR vendors to feel additional pricing pressure at both the contract and order levels if GSA pushes to achieve positive value metrics and expands access to the transactional data.
  3. GSA agrees that it should validate if the TDR data is “complete, accurate, and reliable” before using it to make decisions. Contractors should be careful to ensure that their TDR data is being reported accurately. Periodic reviews of pricing and other information included in the data, as well as the process and systems relied upon to produce the data, are key considerations.
  4. The current evaluation metrics do not provide guidance on how TDR should be assessed when accounting for items with limited sales, complex bundled solutions, fixed price orders, and differing terms of sale at the order level. Contractors who have accepted TDR, and sell products or services with these kinds of issues, should be aware that they may need to provide additional data to support pricing.

Need more information on the GSA’s TDR pilot program? Hear our complete overview of results so far during the webinar Lessons Learned from GSA Transactional Data Reporting, live session taking place Tuesday, November 13, at 11 a.m. ET.

 

About the Author

Jeff Clayton is a principal at Baker Tilly, with more than 19 years of industry consulting experience in government contracting and commercial environments, providing a broad range of pricing, government contract compliance, and dispute/litigation-related services to government contractors and their legal counsel. He frequently works with clients to support their preparation of GSA and VA Federal Supply Schedule proposals and option exercise packages.

 

About the Author

Leo Alvarez, CFCM, is a manager in Baker Tilly’s Government Contractor Advisory Services practice. He has more than 10 years of experience working with federal contractors to identify, quantify and manage government contract risk through regulatory and compliance consulting, with a specialized focus in all aspects of Federal Supply Schedule (FSS) contracting.