UNITED STATES OF AMERICA

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GENERAL SERVICES ADMINISTRATION

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MULTIPLE AWARDS SCHEDULE ADVISORY PANEL

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MONDAY,

JUNE 16, 2008

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The Advisory Panel met on the second floor of the American Institute of
Architects, 1735 New York Avenue, N.W., Washington, D.C., at 9:00 a.m.,
Elliott Branch, Chair, presiding.

[PANEL MEMBERS PRESENT]{.underline}:

ELLIOTT BRANCH, Chair

LARRY ALLEN

ALAN CHVOTKIN

DAVID DRABKIN

DON ERICKSON

THOMAS ESSIG

JAN FRYE

JACQUELINE JONES

JUDITH NELSON

GLENN PERRY

LESA SCOTT

THOMAS A. SHARPE, JR.

DEBRA SONDERMAN

APRIL STEPHENSON

THEDLUS THOMPSON

[ALSO PRESENT]{.underline}:

PAT BROOKS, Designated Federal Official

[PRESENTERS]{.underline}:

STEVEN KEMPF BRIAN PALLASCH

BARBARA KINOSKY

BILL GORMLEY

BRUCE LEINSTER

JAMES PHILLIPS

ELDRED JACKSON

T A B L E O F C O N T E N T S

[PAGE]{.underline}

Welcome and

Administrative Announcements

Pat Brooks, DFO\...\...\...\...\.... 4

[PRESENTATIONS]{.underline}

Steve Kempf, Acting Assistant

Commissioner for Acquisition

Management,

Federal Acquisition Service\...\...\... 7

Brian Pallasch,

Council on Federal Procurement

for Architectural and

Engineering Services (COFPAES)\...\... 60

Barbara Kinosky, President and CEO

Centre Consulting\...\...\...\...\...\.... 77

Bill Gormley, President

Washington Management Group\...\...\... 90

Bruce Leinster

Information Technology Association

of America\...\...\...\...\...\...\...\..... 151

James Phillips,

Executive Vice President

Centre Consulting\...\...\...\...\...\..... 183

Eldred Jackson

Department of Justice\...\...\...\...\.... 200

Panel Deliberations\...\...\...\...\...\... 247

Wrap up and Adjourn\...\...\...\...\...\... 312

P-R-O-C-E-E-D-I-N-G-S

(9:04 a.m.)

MS. BROOKS: I am Pat Brooks. I am the Designated Federal Official for
the Multiple Award Schedule Advisory Panel. I would like to welcome
everyone again to I think this is our third meeting. I remind you that
there is a meeting tomorrow. The meeting tomorrow will be at the Jurys
Hotel. Unfortunately, this facility was already booked.

After tomorrow\'s meeting, the July meeting is the 21st of July, which
is back here in this building. And the August meeting is the 18th of
August, which is also back here.

Just a couple of administrative things and then I am going to turn it
over to Elliott, our chairman. Make cell phones and pagers are turned
off.

When you are speaking today and most of the panel members will be doing
the speaking, I am not certain yet that we will have an open mic session
similar to what we had at the first meeting. I will leave that up to
Elliott to decide. But again, when you are speaking up, please use the
mic. We do have a transcriber and so it is easier for her, she can pick
up on the entire conversation.

The bathrooms are out the door to the right. Most of you have taken
advantage of the snacks. So, that will be there all day. When we break
for lunch around 12:00, 12:15, I think most of you are familiar with the
area for the eating places of 18th Street and along Pennsylvania Avenue.

I will remind you that during the meeting session, it will be just the
panel speaking or whoever is doing the presentation. If you have
questions regarding our proceedings or have questions for the panel, you
need to direct them to me. See me. I will be sitting here on the end or
see me during the break.

Any questions?

(No response.)

MS. BROOKS: Okay. Then, I am going to turn the meeting over to Elliott.

CHAIR BRANCH: Thank you, Pat. Good morning. We had a very productive
meeting at our last meeting. We had presentations from several GSA
contracting officers with respect to the pricing clause in the schedule
and other issues with respect to pricing the schedule, as well as
presentations from a number of folks in industry. And I think in our
deliberations we came up with a model. The panel kind of has a model for
how we want to look at this.

And the model really goes to three things. The first is stakeholder
expectations with respect to the schedules. The second is roles and
responsibilities with respect to government contracting officers in the
schedule. What is the role of the GSA contracting officer? What is the
role of contracting officers at the ordering agencies with respect to
ensuring a fair and reasonable price.

And the third is we want to look at how then that evolves into fair and
reasonable price determinations.

So, the main work of the panel today will be to address stakeholder
expectations from the multiple award schedules. And we will hear from a
number of folks primarily from the private sector.

But we are going to lead off our meeting today with a presentation by a
Mr. Steve Kempf who is the Assistant Commissioner for Acquisition
Management of GSA. So, Steve, welcome.

MR. KEMPF: Thank you. I wanted to start off this morning as a
representative of the Federal Acquisition Service to thank the panel
first. FAS certainly appreciates your time and efforts and we are very
much looking forward to the panel\'s recommendations.

FAS also appreciates the time today to provide some information on the
program. I will be going over some background, some internal efforts we
have underway at the moment to improve and manage our program more
effectively.

As you may know, FAS has undergone a reorganization over the last two
years. We are emerging from that reorganization with a strong management
team in tact and continue to focus on improving our programs, working
hard for our customers, our industry partners, and to ensure to the
stakeholders that the schedules program and all of our programs
represent best value to the taxpayer.

I first would like to start out with some background where we are today
with the schedules program. Today we have over \$17,000 long-term
government-wide contracts with commercial firms providing over 11
million products under the schedules. They cover almost every single
product you can think of. Everything from high end services relating to
management services to fire trucks, office supplies, and computer
equipment. This is really the one program that I think can effectively
leverage the government\'s purchasing power across the entire federal
government. It supports interoperability. It supports emergency
contracting and, in the end, delivers best value to the American
taxpayer.

Within the FAS organization, we provide program implementation across
three business portfolios. The schedules are essentially housed within
three of our business lines. The information technology services, the
general supplies and services and TMVCS, Travel Management and Card
Services.

We have nine MAS acquisition centers that manage the contracts. And they
are contained within FAS Central Office and also in our regional
programs. We have approximately 300 1102s awarding and administering the
MAS master contracts. Currently, we have 39 schedules and 1181 special
items numbers underneath those schedules.

The volume of the program is impressive. Last year we had over 36
billion dollars in sales. This year our sales are up about five percent
through April. I think the figure was about 29 billion. And we expect to
have another record year this year. In particular, the GSS program
covering the lion\'s share of our schedules is up significantly from
last year. Particularly, programs like MOBIS.

The IT schedules are flat but slightly up from last year and still
roughly comprise about one-half of the scheduled sales.

Over the last several years, the program has become more
service-oriented in that most of its sales are now predominantly in the
service arena. At the moment, about 65 percent of our sales are in
services.

One other change that has happened over the last several years is we
have opened up many of the schedules to state and local purchasing.
Several years ago, all of the Schedule 70 was opened up to state and
local purchasing. We also have several other programs, including the
Disaster Recovery Program, which allows state and local purchasers to
use the schedules to support any of the disaster recovery efforts. Also,
we can support certain products to drug interdiction programs.

And lastly, just last week the Senate passed and the House has already
passed authority for Schedule 84, the Law Enforcement Schedule to be
open to state and local. That schedule is about two billion dollars a
year with very diverse products. We expect the President to sign that
shortly. The next topic I wanted to talk a little bit about is the fast
efforts and the schedule efforts with respect to small business, to give
you some background and awareness of how schedules and small business
interact.

Currently of those 17,000 plus contractors, 81 percent of them are small
businesses. Over 13 billion dollars of the 36 billion dollars in sales
went to small businesses, well above the government expectation or goal
of 23 percent for small business participation in our purchasing.

17 of our schedules have special item numbers that are set aside for
small business. We also have several programs that, while generally
available to the contractors, really focus on assisting small businesses
to be successful in the multiple award schedule program. The first one
is the Pathways to Success program.

In about 2004 we saw that we were having a lot of difficulty with a lot
of people getting on to schedules and not being successful. So, they
were getting onto schedules and over a course of several years weren\'t
finding any sales under the schedule and we were sending them off of the
schedules due to lower no sales. We also found that they were having
some difficulty in preparing their bids and was causing the contracting
officers a lot of extra work.

So, one of the things we did was the Pathways to Success program. I
think this has been very successful for us. It has allowed us to \-- it
is a web cast that is available 24/7 to anybody through our website. It
tells people, it goes through a whole process about what kinds of things
you need to look for in order to make a determination when it is an
appropriate time to come into the schedules program. How to successfully
prepare an offer for the contracting officer to review. And lastly, how
to develop a winning business plan. I think all of these things were
important in order to create and manage expectations among the vendor
community about when it is the right time to come in and propose to be
on the schedules and what would happen during that process.

To date, we have had about 8,000 people take the course. Just this year
through April we have had 800 taken and pass the course. So again, I
think this is a very strong effort to assist a business and, in
particular, small businesses with how to interact with the schedules
program and what the expectations are.

After you do get a contract, there is an opportunity to take the new
contractor orientation, also very important here. It details and again,
this is an online presentation that is available, and it details what to
expect once you receive your schedules contract. What are your
responsibilities? It identifies key compliance issues. Things like the
Trade Agreement Act, Price Reduction Clause, reports that you will need
to be filing with GSA.

So, I think it really sets out what the terms of the relationship will
be, what kinds of things to expect. It also talks to the vendors about
how to approach their business development. We know that working with
the government is very rule-based and it is not intuitive for those who
haven\'t worked with the government before. And it does give the
industry partners a lot of information on how to sell to the government,
in order to help them be successful.

In FY07, 2300 industry partners took the course and we have had a very
strong overall customer satisfaction with the course at 87 percent.

One of the other things that we do, and it is particularly useful, I
think, to the small business community, is our customer assistance
visits. Sometime during the first five years of your contract, and
usually within the first two or three years, the supplier management
group, which resides within the office of acquisition management, sends
out what we call an industrial operations analyst to the contractor
site. And they do a lot of things when they are there. The inspect the
premises, to see what is going on within the organization. Then they sit
down with the contractor and go through the obligations and the terms
and conditions of the contract. They review the basis of award. They
also check the environmental programs that they have, review things like
the trade agreement act. How to report the industrial funding fee, and a
whole host of things that they check. So, I think this is one of our key
compliance and contract administration efforts on the contract.

When that visit is finished, and it normally takes between four and six
hours for a contractor assistance visit, a report is sent to an ACO who
then issues a report card on the vendor. Any performance issues that
came up during the visit are forwarded to the PCO for resolution. And as
I said before, it is a goal for us to make one of those visits within
the first two to three years of the contract. Again, we think this is
very important to assure compliance, to make sure that everybody
understand the terms and conditions and what they signed up in receiving
the scheduled contract.

And the last thing I would like to say is that I do believe this firmly,
that for many small businesses, the schedules program has been a real
opportunity for them to grow as a government contractor. For many
contractors, it is the first real prime contract that they receive. And
we feel with the numbers that we are seeing that many small business
have been very successful in the program. And it is very important to
the success of small business and important to customers as an access
point to get to small businesses in meeting their own socioeconomic
goals.

One of the other important programs that GSA does is our e-Tools
programs. We feel that this is very important. And there are some really
key points that I think are important to understanding how business is
operating and how business is actually changing under the schedules.

We have a lot of ways that we do work getting out the message about what
our e-Tools are. I think one of the most effective ways is every year at
our GSA expo we offer an enormous array of classes. This year there were
over 270 courses offered to the community, all at no charge. We had over
9,400 attendees at the expo this year in Anaheim, California. And it is
really an opportunity for people to understand GSA schedules and all of
our other programs. And we offer training throughout the day and offer a
lot of opportunities for interaction with our COs, with our management,
with the industry and with the customers.

Another way that we do offer training is we do have about 80 customer
service directors located throughout the country that go out and visit
customers and do hands-on training with them, particularly on the
e-Tools. And we felt that this has been a very effective way of
increasing the usage of our e-Tools for our customers. And we have seen
over the last couple of years a spike in the usage of our e-Tools. And
one of the reasons for this has been the customer service directors who
have been going out there and doing hands-on training with our customers
onsite and doing courses onsite that help them understand how to use the
e-Tools.

Now, to talk a little bit about the e-Tools themselves. GSA Advantage is
probably the most well know of our tools. It has been out there for
quite some time. Very important. It is, essentially, an online catalogue
of everything that is in the schedules and more. We do have other
programs in there like the GWAC programs SATCOM II. Some of the stock
program items are in GSA Advantage.

There is over 15,285 vendors, most of them schedule holders, that are on
GSA Advantage. There is over 15 million products and services on there.
We have almost 600,000 registered users in Advantage. Access and
ordering has increased 30 percent in the last 12 months on this program.
So, as you could see, people are using it more.

And one of the things I would like to highlight is that with the numbers
of people looking in and using the system, we know that one of the uses
of it is the industry partners are using it to do market research about
what pricing is out in the marketplace, as well as the government
customers using it to do their market research in terms of what pricing
is out there. So, I think Advantage has become an enormously successful
tool for market research within the government community.

Just to give you a little bit of background in terms of how much is on
there and the change that takes place in the program, on an average
date, we do about 100,000 changes to Advantage. And that could be
anything from a price change to say somebody had changed their entire
name and novated their contract and they are changing their logo on all
of their sites or whatever.

So, very diverse but important that these changes go on. At the end of
the year we see a high of about 2.5 million changes in a day at the end
of the year. Probably a lot more price and new products entered at the
end of the year in order to work through the government buying season.

With respect to how much sales are doing under Advantage mostly through
credit cards, we had gone from 26 million in fiscal year \'01 to 284
million in \'07. And over 75 percent of the Advantage orders are
actually going to small business.

The last e-Tool I want to talk about is we do have eOffer and eMod,
which are our tools for electronic submission of both the proposal and
modifications. We are currently working to upgrade those systems to make
them more user-friendly. They are not as well used right now as they
should be and we are working on some changes that we hope will impact
that and make them more useful, both to the vendors and GSA.

I skipped over e-Buy there. And this is also a very important tool that
we have. It is actually a procurement tool where you can do
solicitations online, a request for quotes or request for proposals. We
see that there has been a lot of strong competition when people use
e-Buy. The numbers are going up significantly, to. This year we expect
2.2 billion dollars to be awarded through the e-Buy system for schedules
alone.

Last year we had 53,000 RFQs, 4500 RFIs. And a significant note is that
the average number of quotes received per closed RQ is six, which I
think is very strong, in terms of the competition that we are seeing
when people are using our e-Tools.

One of the other advantages of e-Tools is that \-- the e-Buy system is
that you can send it out to all of the vendors that are under a specific
bin or you can mark it to send to certain small businesses, certain
types of small businesses, like service disabled vets or women owned
businesses. And this helps, in some ways to increase the visibility of
the RFQ and also try to get more bids in, particularly if you are
looking to meet certain socioeconomic goals that you might have as an
agency.

Next I wanted to talk about some of the key improvements that GSA is
working internally to improve the Multiple Awards Schedules Program.

This one I think you have seen, the first one I think you have seen
somewhat in the press and talked about over the last couple of weeks,
which is establishing a Multiple Awards Schedule Program Office within
the Office of Acquisition Management. And this office will have
responsibility for, we are still working on the details of what this is
and what that is going to be. But the office has been part of the
Acquisition Management Organization since our reorganization but we
haven\'t formally stood up the office within the structure of
Acquisition Management. And we are working right now with the three
business lines and with the Commissioner\'s office to develop a charter
for this organization and what it will do.

Initially we are looking at three areas where we are going to be
working. One is working on the policy and procedure consistency across
the programs to assure that each of the programs has a similar
application of the policies and the procedures where it makes sense.
Secondly, we will work as the lead for systems. For instance, the e-Buy
system and the Advantage system, we will serve as the integrator for
those offices to make sure that their voice in terms of what the system
needs are communicated to the CIO in order to enhance the systems and
make them work better.

And lastly, we will be the focal point for communication with key
stakeholders such as meetings like this or the Acquisition, the IG
workforce, the IG working group that we chair, so that we have one face
to the IG with respect to schedule issues so that we don\'t have
multiple communications sending different messages to key stakeholders.

I think this is going to be an important, as GSI and FAS split up, the
schedules program put that into three portfolios. I think there is a
need for continuing to have consistency across the programs and this
office will work to assist in making sure that that happens. And I think
that is a very needed thing within the FAS organization and we are going
to be setting that up shortly and formalizing that within the FAS
organization.

Another initiative that we are working on and, at this point, has just
about finished, was the MAS modification program. I think many of you
heard about the MAS Express Program which was focusing on getting people
on schedule within 30 days. This one was internal and has been just
about completed, in terms of its recommendations.

And basically what we are doing in this program is that we have applied
a Lean Six Sigma Methodology to look at the modification process. We
process tens of thousands of mods each year and it is important for us
to make that process work best. They did look at some of the competitors
out there to see what processes they were using to get their process
working better. They broke apart the entire process and looked at how we
can change it to make it work better for us. And basically, they have
made their recommendations and we are moving forward with them. They
will be implemented shortly after the new fiscal year starts and they
focus around two particular issues.

The first one relates to the control and distribution of the mods within
our centers to assure that they are more consistent by setting up an
intake desk in each of the centers where the mods come in. And this will
create a couple of things for us. First, we will be able to correctly
and consistently measure how long it takes for us to do modifications.
It will basically formalize that process. And secondly, it will give us
a bit more visibility into what kinds of mods are coming in, how long
they are taking, if they are being rejected, why. So, we are going to be
getting more information about how we are doing mods and what is
happening with those modifications.

So, I think that is a really important thing that we are doing. It will
help us get more management control over what is happening in the
modification process within the schedules program.

Secondly, we are looking at implementing what we are calling the rapid
edition modification process. And this will focus in on what I would
characterize as addition of products to the schedule where there has
been no change on the basis of award and you are, basically, extending
the same discount that you had. So for instance, if you are adding a new
product to your price list, you are continuing to give us a 20 percent
discount or whatever had been negotiated and there has been no change in
the basis of award, we want to make that a very quick process because we
feel that most of that negotiation has already been done and we will be
able to pull that modification through with some controls in there. And
we are actually building an online system for those to be sent into GSA
and processed.

And again, we are waiting to do it until after the buying season of this
year. We don\'t want to start that at the end of the year. And there
were some system development efforts that were necessary in order to
make that happen. And again, we looked across the government at some of
the other programs to see what they were doing, broke apart our process,
we have briefed this to our management, the IG, and I think industry
partners, so that they understand what we are going to be doing here.
There will be some significant training as this process comes out and
becomes part of our organization.

We are also looking at what we call rationalization within FAS. And this
effort points to what I would characterize as the overlap in the gaps
within the schedules and, more broadly, across FAS. We have a strategic
process from our office of strategic planning that has led this effort
looking at how do we look at the overlap between the schedules. What is
an appropriate overlap between the schedules? What is efficient? What is
inefficient? And then developing a process for dealing with that
overlap.

The first area we have looked at in terms of a model was the security
convergence area where we are seeing within Schedule 70 some of the
HSPD-12 products and services which are on 70. And then some of the
security products and services that are on Schedule 84 and the need to
have them, perhaps, in one schedule or eliminate some of that overlap.
So, we are using that as a test case for this effort. That is coming to
a close and we hope to have a process for dealing with gaps and overlap
on the schedules so that we can rationalize our offerings and be a much
more efficient organization and clear up confusion to the customers
under which schedule they ought to be using or should be using.

We have also recently allowed state and local governments to use GSA
Advantage. That happened in June. It was in our June release of the
Advantage program. And we are seeing that they have already started
using it to place orders. The first couple of days there were an order
here and there but we have seen the uptake and we hope that that will
increase our sales there as well.

And lastly, over the last couple of years we have increased the number
of virtual stores that we have under the Advantage program. And these, I
think, are really important. Probably the first one we had was with Air
Force Advantage, www.airforceadvantage.gov. We started that in fiscal
year \'01 and it was rolled out to all Air Force bases in \'06.

It is very important for them because it is a portal that actually
collects all of the information on the sales that are done through
Advantage and e-Buy. It also allows them to post information on there
about BPAs that are there for Air Force usage. Very important for
creating visibility into existing BPAs that the Air Force is encouraging
them to use. Very important, too, when you consider that some of these
BPAs have tiered pricing, so that as the volume goes up, the discount
they receive is greater. So, if all of the buying offices know they are
there, reminded of them, very important to them in terms of creating and
getting bigger discounts from their BPA holders.

Another thing that this does is it creates an opportunity for creating
inner-operability or use of specific products, that certain products are
identified and information goes out to the buying community within Air
Force about what they ought to use and then collects the information in
terms of what is being bought for their organization and brought back to
them.

We have done some more of these. We have one now at Labor, USDA, VA, and
we are working with some other DoD components to put them up. I think a
very powerful tool that, in time, will be much used at GSA.

I also wanted to talk a little bit about the innovative use of the MAS
program and how it demonstrates value. I think the program is very
powerful in order to derive greater value at the ordering level. And
there are some very specific tools within the program that afford the
users the opportunity to do this. First, is a BPA, which is, of course,
established by an ordering activity to fulfill repetitive needs for
supplies or services. BPAs leverage customer buying power by taking
advantage of additional discounting, increasing flexibility and speed
and efficiencies in the ordering process.

Another tool that is added to this is something called a contractor
teaming arrangement which is an agreement between two or more MAS
contractors to join forces to provide a total solution. These can
provide for a complex solution across several of the 39 different
schedules and can also allow for a small business to take the lead on
such large effort and gain experience as a lead on complex projects.

I think a few examples of this would be helpful for you. One of the
efforts underway has been the Federal Strategic Sourcing Initiatives,
which GSA has undertook with the Treasury Department in coordination
with OFPP and the CAO Council. To date, they have issued several BPAs.
One of them recently awarded was the Office Supply BPA off of Schedule
75. I think one of the important parts of this one is that despite it
being a Strategic Sourcing Initiative, it actually 85 percent of the
vendors under it were small businesses, 8A women owned or service
disabled veterans.

Forty-eight agencies are participating in this effort and we will be
seeing the results of this shortly but we expect to see greater pricing
discounts and savings across the government.

One of the other efforts which has been a little bit more mature has
been the express and ground domestic delivery services, where we have
seen significant discounts in savings across the government from using
these leverage BPAs across the entire government. We do have some
numbers in. We saw in \'07 16 million dollars in savings on 50 million
dollars in spend in \'07. And we expect a significant increase this
year, expecting 30 million dollars in savings on 90 million dollars in
spending this year, with 53 participating agencies.

I believe in this example, there are tiered pricing and, as the
government buys more, the discounts become greater. Discounts for
express services are currently at 31.8 percent and 16.9 percent for
standard ground delivery. Again, a very important tool that the
government can leverage its purchasing across the entire federal
government and work together to achieve greater savings using the
schedules.

And other example of this is SmartBUY/DoD Enterprise-wide Software
Initiative. Again here, with respect to software purchasing, both DoD
and GSA have combined in their efforts to leverage the purchase of
software products and then force the sales through them to leverage the
buys and increase the savings to the government.

I think one of the important efforts in this particular example is that
they have not only focused on price, but they have also focused on some
of the terms and conditions to achieve greater opportunities for
standardization, approved configuration management, and more robust IT
security. And I think there is no greater example than the data at rest
SmartBUY ESI initiative that was signed last year which I think greatly
improved the security of that offering across for all of the government
users.

Lastly, I want to talk a little bit about \-- we have talked a little
bit about how the program can be used to leverage buys across the entire
government. I wanted to give you a couple of examples of how individual
customers have used BPAs or CTAs to improve their service to their own
internal customers.

One I want to speak to is the Marine Corps Systems Command. They awarded
multiple award BPA CTA in four specialty domains. Engineering and
scientific; acquisition, logistics, and administration; business and
analytical; and specialty engineerings. They identified 30 teams on 30
multiple award BPAs representing over 150 schedule holders.

They awarded over 220 task orders for 304 million dollars in
professional services, achieving 26 million dollars in aggregate cost
reduction. Overall their task order turn around cycle was only 21 days
to award a task underneath their BPAs. Impressive by any standard. I
think one of the more important things was they were seeing right about
90 percent bid by all of the people who had held a BPA under the
multiple BPA paradigm that they set up to manage this.

So again, they achieved cost savings through increased competition and
decreased the turn around time that it took to get a task order awarded.
Very impressive by any standard.

Another example was with the Army with the Army and Aviation Missile
Command. They also developed their own BPAs and CTAs to support advisory
and assistance services for AMCOM Lifecycle Management Command. They had
over 200 task orders awarded in the first year. Their average discount
was ten percent. In addition, small business received 64 percent of the
task orders and 48 percent of the total task order dollar value.

Again, agencies themselves can set up these BPAs for specific purposes
and achieve better pricing, more competition, and faster turn around
time. An important tool.

Next I wanted to talk a little bit about some issues that I see that are
affecting the MAS program. Every year the GSA does some customer surveys
and compliance survey. We would go out to the customer base and ask them
questions about topics that we think we need to know more about in terms
of how we are doing. And one of the things that we saw in this year\'s
survey was some of the customers were a little bit unsure about how to
and when to ask for price reductions under the schedules. We especially
saw it at the low dollar volume. There was confusion about when it is
appropriate to ask for a price reduction. So, we think that one of the
things that we need to do a better job at in our training is to be more
clear to them about when it is required and when they should be asking
for price discounts in using the schedules.

Another area that we are currently looking at is that the order or the
data relating to ordering information is currently fairly limited, in
terms of our data within GSA. I think we talked a little bit about the
virtual stores. I think for the customers, it creates an opportunity for
them to gain a little bit greater information in terms of ordering what
prices and what kinds of activities are going on at the ordering level.
But again, that is basically for them.

We also can rely somewhat on FPDSNG to give us information on what is
happening at the order level but we still don\'t get a lot of price
information there with respect to what is happening.

This year, in concert with an MOA that we signed with DoD, our largest
customer, we also have undertaken a pricing study which will be looking
at the prices that we are receiving on individual schedules. We are
starting with IT-70 this year to look at that. But one of the focuses of
that study will be to focus most on what is the value of the schedules
and how to drive the best pricing in the schedules. What techniques are
most useful to customers in terms of getting the best price. And they
are going to be studying that across IT-70 this year and we are going to
be looking at some of the other schedules in the future. And that is one
of our efforts to get at better pricing and understand the pricing at
the ordering level.

The next issue that continues to be a concern for us within FAS is the
proliferation of contracts across the government. OFPP has undertaken a
study recently into proliferation of GWACs, MACs, Enterprise Contracts
and the like across federal government. We share their concern with the
number of those contracts.

And while GSA welcomes healthy competition, the proliferation of
contracts at these levels serves to drive down the ability of the
government to obtain leverage in any one or all of them as the number of
contracts increases significantly. Acquisition resources are focused too
much on awarding vehicles and less on task orders where their efforts
could lead to better pricing and enhanced contract administration.

And finally, I think the proliferation of contracts drives up the cost
of doing business for a contractor base, which eventually finds its way
into the cost of our contracts at some level.

So, I think this is an important area, I know OPP and to some extent
Congress has been looking at. And we hope that we see some change there
to allow us, as you know, probably the largest contractor to again take
back the ability to leverage the pricing on the schedules.

About a year ago, in the area of contract workload management, our IG at
GSA looked at the workload management within some of our centers and
made some recommendations for improving our overall workload management
within the scheduled centers. Again, they focused on some of our
systems, improving the modification process, which I said we already are
doing, and to take a little bit more of a strategic approach to managing
the program, which I said we, of course, were doing by setting up the
Program Office, both of which we discussed earlier today.

Further, we continued to develop programs to recruit, retain, and train
our workforce to ensure a strong program. I think GSA, among all of the
agencies, continues to have difficulty in terms of keeping contracting
resources as people are leaving the government or changing jobs between
agencies. It has been more and more difficult to keep contracting
officers within our centers.

I earlier spoke today about rationalization and the efforts we are doing
to make sure that we have rationalization, both within the schedules
program and across the FAS organization. That continues to be a program
issue that we are looking at.

And lastly, the consistency. Again, we are appropriate in our
solicitations and the interpretation of the contract clauses. And I
think that will be a very strong function in the program office that we
are setting up within the acquisition management group.

Lastly, I would like to leave the panel with just a few thoughts. First,
in the schedules program, there are multiple layers of competition. And
that, in the end, I believe results in the best value to the government.
At the master contract level, the PCO works hard to establish the most
effective customer pricing.

Another layer of competition exists at the task order level, where the
ordering activity exacts a price through leveraging volume or creates
additional benefits through competition to gain even further discounts.

Finally, across the entire government, the agencies are using BPAs and
Strategic Sourcing to leverage even further discounts and efficiencies
in the ordering processes that can be passed on to the taxpayer.

Secondly, in your consideration of the Price Reduction Clause, we hope
that you focus on the differences between products and services. As I
stated earlier, when the Price Reduction Clause was first put into the
contracts, we were, primarily, a product schedules program. As that has
grown over the years and we are now predominantly a services program, we
are looking at, we hope you will investigate and relate back to us,
should this clause be handled differently for products and services. We
think that there may be answer in there. We are really looking for your
efforts there.

And then secondly and lastly, we note that you are going to find some
things as you review the schedules program. And while you have a limited
scope of looking primarily at the Price Reduction Clause, we look
forward to any recommendations you may find to improve the service,
innovation, and value to our customers. We take every effort to be easy
to do business with and, finally, we want to provide value to our
ultimate customer, the American taxpayer.

Again, I thank you for your time and your service in support of our
programs and I look forward to your recommendations. I would be happy to
answer any questions you might have for me today.

CHAIR BRANCH: Thank you, Steve. Does the panel have any questions for
this presenter?

MS. STEPHENSON: I have a question.

CHAIR BRANCH: Yes. April and then Tom.

MS. STEPHENSON: We appreciate your time today and appreciate the
explanation of how the schedules work, some of the expectations for us,
etcetera.

Given that today\'s focus is on expectations for the stakeholders, one
of the first things that you had talked about was that the schedules
provide best value. What is your definition of best value and do you
view it differently for products than for services?

MR. KEMPF: I think I would go to the FAR definition, which I don\'t have
with me. But I think primarily when we are looking at best value we are
looking at the overall price structure and overall cost to the user. So
I think, you know, particularly with services, it is a much more complex
thing because you are looking at the risk involved in completing a
project and the value of the services.

So for instance, if you gave a contractor \$100,000 to perform a
service, my guess is that if you had five different contractors you gave
\$100,000 to, you are going to see that each of them would approach the
project differently and the result would be different.

So, in terms of best value, you are looking at the risk. You are looking
at what the overall result is going to be, the technical skill involved
in it, and their approach. And you are weighing the cost with the
benefits that they are providing.

I think with respect to products, it is a little bit less complex
because there, more often than not, lowest cost technically acceptable
might be a little bit better there, depending upon the fungibility of
the products and how interchangeable they are.

Does that answer your question?

CHAIR BRANCH: Tom?

MR. ESSIG: Two things. You talked about several layers of competition
and the benefits of BPAs to secure maximum or improve savings. And I
would like to compare that against your concern about the use of
agency-wide or enterprise-wide contracts.

One of the things that I have been looking at for several years now,
both at Homeland Security and formally with the Department of Defense
was we are aware when you use a BPA, there is a three quarters of a
percent charge that gets passed back to the ordering activity.

What I have been unable to identify is what benefit is provided to the
Agency that makes that three-quarters of percent advantageous. And there
is a three-quarters of a percent charge that is not incurred by the
Department when it issues its own Enterprise-wide Contract.

Do you have any data which provides that type of information?

MR. KEMPF: No. No, I don\'t. Are you talking about \-- let me ask you a
little bit more about what you are asking about.

Are you comparing the IFF fee to whatever fee somebody charges when they
do an Enterprise Contract?

MR. ESSIG: No. They get the maximum savings using BPAs or the best
benefit for an agency requires a lot of effort on the part of the
agency.

MR. KEMPF: Yes.

MR. ESSIG: And the appearance to me is that it requires about as much
effort as putting out own Enterprise-wide vehicles in place. But when I
do the latter, I don\'t have to pay GSA three-quarters of a percent fee.

Now, I don\'t mind paying the fee if I get value that is worth at least
three-quarters of a percent. I just don\'t have the data and nobody has
been able to show me the data that tells me that that is worth a
three-quarter percent fee.

MR. KEMPF: Well the one thing that I will say is that under the
schedules program, even when you are using the BPA, you still get the
value add of the supplier management, the folks working in the field,
the management that we provide, the terms and conditions that are
already negotiated, at which point you start your negotiation and the
terms and conditions are already in place.

So, in essence, although you are doing a secondary competition, there is
already part of the work that has already been done by the GSA
contracting officers, which you are building upon in order to get a
better price or discount. You already have a firm set of terms and
conditions that are already there. And then you already have our
contract administration that is provided as part of the contract, even
when you do a BPA.

MR. ESSIG: Yes and I understand that and don\'t disagree with that. I
have just never seen anybody who has been able to quantify the value of
that. I think it would be beneficial to have some data on that.

CHAIR BRANCH: Alan?

MR. CHVOTKIN: Thank you, Mr. Chairman. Steve, the proper focus to
differentiate between products and services in the last slide. Are you
suggesting that we use an alternative application of the Price Reduction
Clause when it comes to services or are you suggesting that there be a
completely alternative approach when dealing with services on the
schedule versus products?

MR. KEMPF: I guess I am looking for the panel to come up with whatever
you feel would be most appropriate. I think certainly the question is
out there and we heard the Chairman this morning talk about that.

Certainly, when we initially started the program, we were predominantly
products. You know, we can see that over time, often times products come
down in price for a myriad of reasons but we don\'t see that with
services. And secondarily, I think when you look at how services are bid
on a particular task order, there is always the mix of services and then
prices of those services, too, that is taken into consideration when
awarding the contract, which is much different than you see on the
products. You don\'t see that fungibility between products that you see
and skill levels. And so it is a much more complex arrangement.

So maybe, you know, I don\'t want to influence you one way or the other.
I want you to do your deliberations and come up and it could be either
one of those what you would find and we are anxious to hear what you
would suggest to us.

MR. CHVOTKIN: Well, I guess given the challenges that you have
identified in the presentation about the operation and implementation of
the current Price Reduction Clause, I am not sure it is any more
difficult for the panel to consider a completely alternative approach in
terms of GSA implementation that it might be an alternative approach of
the same Price Reduction Clause. Would you see much difference between
those two?

MR. KEMPF: Not really.

CHAIR BRANCH: Okay. April and then Tom.

MS. STEPHENSON: Back on the subject of the several layers of competition
and again, focusing on today\'s meeting of expectations of the
stakeholders, of the users of the schedule. Would it make more sense if
GSA negotiated various tiers of quantities of a particular product or
service so that a user can just take that item off of the schedule, as
opposed to having to then go through another layer of negotiations, get
other discounts, etcetera?

And if that is not possible, it is going to be a better fit for some
products and services than others, and it would seem that if a product
or service did not fit that kind of multiple tier and negotiation once
through GSA, then maybe that product or service is not a good fit for a
schedule to begin with. Any thoughts on this?

MR. KEMPF: With respect to your first question, I think we are already
seeing a lot of that activity both at the agency level and across the
government through the FSSI Initiative and other initiatives to sort of
do some of those tiered pricing for specialized products.

I think one of the difficulties we have with the schedules program is it
is put out there for anybody to use but we don\'t offer really any
quantities or any promise of any quantities in order to get those rates
to where we know they could be if, for instance, we had a requirements
contract or we knew we would be buying a million of a unit or a hundred
thousand of a unit where we could negotiate a better price.

If you find that that would be a recommendation that you would like us
to look into but again, I think right now we are really doing that on an
ad hoc basis through some of these initiatives, either like SmartBUY or
FSSI. And we do have the maximum order limitation quantities in the
contract where it is identified that if you are ordering above that, you
really ought to be going out, you are actually required to go out and
ask for a price discount because we feel ordering at that quantity, you
should be getting a greater discount.

I think one of the difficulties we have with taking care of that at the
schedule level currently is that we don\'t know who is buying what when.
You know, again, it is that visibility into what is being ordered by the
individual agencies. And having said that, if you were the first agency
to order the discount was ten percent and then after a hundred thousand
it goes to 12 percent, do we give money back to you?

So, how would we, I think one of the difficulties would be how would we
get to that price? When we got those pricing structure, then do people
wait until the middle of the year to get the price differential? I mean,
there are some issues there that I think would be difficult for us but I
think we could find a way to get past them.

MS. STEPHENSON: Yes, I think that would be the same as what agencies are
doing right now. Some may take the price off the schedule and not
realize the contractor is willing to give a better discount.

MR. KEMPF: Right.

MS. STEPHENSON: And someone else down the street may have pulled it off
and tough negotiator and got a good discount. And so you may have prices
all over the place for the same product or service that a contractor is
providing. And the question is how can we, as a collective group,
ensure, back to the definition of best value, ensure that price that is
coming off the schedule is indeed a best value?

MR. KEMPF: Well again, I think it is paying attention. You know, if the
ordering activity, paying attention to the rules and the direction that
we give them in our training. You know, identifying where that maximum
order limitation is, where we know if you ask above that, you ought to
be getting discounts. And then again, in our pricing study that we are
doing, identifying those factors that derive better pricing. I mean, we
know what most of them are. It is volume. It is the time of month or the
time of year that you are buying that can affect a certain sell or
trying to meet sales quotas and so forth that really drive down some of
the prices.

So, I think you know, getting that information out to the ordering
activities in order that their better user of the schedule will, I
think, improve the overall pricing that we do have.

Did you have another question, too? I can\'t remember. Was there another
one?

MS. STEPHENSON: I will defer to Tom. I do have another question but I
don\'t want to dominate.

CHAIR BRANCH: Yes. In the interest in keeping us on schedule today, I
really hate to kind of shut down this dialogue but we have a number of
people to hear from.

Can I ask you just one question, Steve? Would you be willing to respond
to written inquiries by the panel? Could we save those questions and get
a written response?

MR. KEMPF: Certainly.

CHAIR BRANCH: Okay. Thank you.

MR. KEMPF: Thank you.

CHAIR BRANCH: Thank you for your presentation today. It was most
informative. And I am sure the panel has some questions we would like to
follow up with you on. Thank you very much.

Our next presentation is from Brian Pallasch, Council on Federal
Procurement for Architect and Engineering Services. Brian, good morning.

MR. PALLASCH: Good morning. Good morning everyone and happy Monday
morning. This is exactly where we all wanted to be, I am sure. A bright
and happy Monday morning. Happy Father\'s Day.

I wanted to start and just give you a little tour of what is COFPAES.
COFPAES is the Council on Federal Procurement for Architectural and
Engineering Services. We have a number of organizational members. The
American Congress on Surveying and Mapping, the American Institute of
Architects where we are today here, The American Society of Civil
Engineers. I am a staff person there. I am the Managing Director of
Government Relations. The Management Association of Private and
Photogrammetric Surveyors and the National Society of Professional
Engineers.

We as COFPAES are five of the leading U.S. Professional Societies which
represent both the public service and the public sector of A and E
practitioners. We are governed by a Board of Delegates. Much like many
other organizations, if we take a policy on something, we do it by
unanimous rule. So, usually those policy decisions are hard fought and
hard won.

COFPAES was established a number of years ago, all the way back in 1966.
Our focus since 1966 has been on the procurement of A and E services. We
worked with Representative Jack Brooks to enact in fact what is now
known as the Brooks Act and have supported it since then and clarified
it and worked with some of you to make sure that clarification all made
sense. COFPAES is one of the leaders and one of the van guards, if you
will, of defending the definition of the Brooks Act that is found in 40
U.S.C. And you are getting a handout that is being passed around that
has all of this information. It is part of FAR Part 36, as you know, and
it is actually long endorsed in the American Bar Association\'s Model
Procurement Code.

I am not going to go through the entire QBS Process. I am happy to take
questions on that.

My main purpose for being here today is we have great concerns about the
Federal Supply Schedule and the fact that Brooks Act activities are
being allowed to take place under the supply schedule. Effectively,
price competition for architecture and engineering services is going on
on the schedule and we have been working with the GSA since before 9/11
and I can only remember that because I remember some meetings that
happened before 9/11, so almost eight years now to try and rectify that
situation.

You all created the Federal Supply Schedule and the Multiple Award
Schedules. And the current schedule with its pricing component, we feel
very strongly is a violation of the Brooks Act. The whole tenant of the
Brooks Act and the purpose of it and what Jack Brooks did and what
others who have gone on after him have said that architectural and
engineering services are public safety issues and they should be based
on the qualifications of the engineer and their technical capabilities
or the architect. And that is not a price competition. You go through a
long process to pick the right engineer. You don\'t want to pick a
bridge engineer to build a skyscraper. You don\'t want to pick an
environmental engineer to build a highway. And you go through that
process to find the right engineer and then, at that point, you go ahead
you and select, and then you discuss the price component of that.

We have had a number of discussions with the GSA and to this point, the
GSA, although there is now clarifying language up on the Federal Supply
website, those services are still being offered, architect and
engineering services, are being offered on the supply schedule. And
again, as we all know, the supply schedule is a price-based discussion
as we have heard previous to that.

We have gotten legislation enacted as part of SARA, which was in the
108th Congress, which says that you are not allowed to offer Brooks Act
services on the supply schedule. Yet, that remains. And at the bottom
line, I guess my point if you take something home today is, there are
still A and E Service on the Federal Supply Schedule. And in fact, what
that does for some of my members, and there are a number of engineering
firms who are on the supply schedule and architecture firms because they
feel they are forced into doing that, because many of these services are
being offered, the only way to get a contract is to be on the supply
schedule.

So they are, in fact, in this very odd conundrum of knowing that they
are sort of breaking the law, if you will, because they are competing on
price. But if they don\'t compete on price, their competitors who are
already on the schedule are going to get the work. So, they are rather
conflicted.

Our main purpose to discuss today is really just to get the Brooks Act
services off the Federal Supply Schedule.

I can go through the long current law but the current law does define
what a Brooks Act service or an A and E service is. It is a service of
an architectural or an engineering nature as defined by state law, if
applicable, which are required to be performed or approved by a person
that is licensed, or registered, or certified to provide such services.
Most of our members are licensed professional engineers. To be an
architect, you need to be licensed in a state.

In addition, there are those that deal with \-- most of this obviously
deals with real property. There are architect and engineering services
that are performed that are associated with research, planning,
development, design, construction, alteration, or repair of real
property.

In addition to that, it also includes surveying and mapping, and other
related services that is a new addition \-- well not new. It is not that
new any more but it was an addition to the Brooks Act after 1972.

In the SARA law, in Section 1427(b) was language that actually says
architectural and engineering services, as defined in section 1102 of
title 40, shall not be offered under multiple-award schedule contracts
entered into by the Administrator of General Services Administration or
under the Government-wide Task and Delivery Order Contracts entered into
under the appropriate sections.

In addition to that, I would just note that as we look towards the
states, more than 40 states have mini-Brooks Acts. So this law does flow
down to the state level. All 50 states have licensing laws for both
architects and engineers and a variety of requirements therein.

A couple of GAO rulings that should be discussed. It has been ruled that
the Brooks Act is not limited to just construction related projects or
services but also to A and E services generally. The GAO has also ruled
that the Brooks Act is not limited to A and E firms but also includes
surveying and mapping firms.

In summary, and then I will take some questions. The law and the FAR
clearly prohibit the current Multiple Award Schedule for A and E
services. We believe the GSA is permitting firms to violate not only
federal law but some state law by offering professional engineering
services on a schedule. And the FAR states that surveying is an A and E
service yet the Awards Schedule does offer surveying services.

There are no, that we can find, and having worked for the Civil
Engineers now for nine years, I can\'t think of a civil engineering
service that wouldn\'t be subjected to the Brooks Act. All my guys do is
deal with real property.

The other schedules offer rates for architects, engineers, surveyors,
and mappers, and GIS. And we feel also that that is clearly in violation
of the current law.

There are a number of disclaimers on the website. And we appreciate the
lengths that the GSA has gone to actually add those disclaimers but I
think our point simply is, you can\'t offer a Brooks Act service on the
schedule.

So, if we could figure out what would be an A and E service that is an
appropriate service to offer, that would be fine. We would be willing to
work on that but we have not yet found that.

And the other issue that we have is there really is no way for us to
police or enforce violations. We would love to find someone to come bid
protest that but it is sort of, we have had difficulty figuring that
process out, especially on a multiple award schedule.

And in conclusion, I just want to thank you all very much for your time
and I would be happy to answer any question that you may have to try to
get you back on track.

CHAIR BRANCH: Does anyone have \-- yes, Jacqueline and then Larry.

MS. JONES: Are you referring to Schedule 871 for professional
engineering services?

MR. PALLASCH: Yes.

MS. JONES: Okay. That solicitation says specifically that Brooks
Acts-type activities are not allowed under this schedule. And if the
agencies are ordering A and E services off that schedule, it is out of
scope and the contractors shouldn\'t be performing out of scope.

MR. PALLASCH: And we have gone back and I can bring you a volume of
correspondence and the number of meetings that we have had with the GSA
to discuss this. There is no such thing as a professional engineering
service that you can offer that doesn\'t deal with real property. When
you talk about architecture, civil engineering, environmental
engineering, those are all real property items.

We actually have issues with the terms used as professional engineering.
Fifty states govern the use of the term professional engineer.
Understanding that the federal government can do, sometimes, as it sees
fit but the term professional engineer is a well-defined, well-litigated
term. If you are not a licensed professional engineer in a state, you
cannot call yourself a professional engineer. And there are people that
have issues with that all of the time.

So, we take issue with the fact that there is even a professional
engineering area on the schedule. And we have for eight plus years now.

MS. JONES: So you are saying basically that because the term
professional engineering is used, that that automatically includes A and
E services.

MR. PALLASCH: From the awards that we have seen, there are A and E
services being awarded through the schedule right now.

MS. JONES: And again, that is the customer who is placing orders for A
and E services.

MR. PALLASCH: But the GSA is the cop of the Federal Supply Schedule, are
they not?

MS. JONES: No, we are not.

MR. PALLASCH: Aren\'t you in charge?

MS. JONES: No. We don\'t \--

MR. PALLASCH: So you set up \-- then how do we police the rules then?

MS. JONES: Well, the agencies should know what is in scope and what is
out of scope and so should the contractors. They shouldn\'t be
performing A and E if the schedule specifically says that it is not
allowed.

MR. PALLASCH: And if an agency comes to a professional engineer or an
architect and says we can do all this under the schedule, see, it says
professional engineer \--

MS. JONES: They shouldn\'t do it. The contractor shouldn\'t do it.

MR. PALLASCH: Well, I am here to tell you that they are doing it. And I
think that the GSA should better police that and figure out a way in
which to do that so that they are no violating other parts of federal
law.

CHAIR BRANCH: I am going to suspend my own kind of protocol here and
just make an observation. Not every professional engineer is engaged in
architect and engineering services. In the shipbuilding sector, if you
look at our pricers and you look at the people who analyze our claims,
many of them are PEs. Because many of them are civil engineering, the
analogy to the shipbuilding industry and construction is very, very
strong. So they are either CEs or IEs. And we have, I know, used those
folks for claim analysis on shipbuilding contracts in the past.

So, I think we need to be really careful to categorically state that
civil engineers only do A and E work. And with that, I will turn over
the mic to Mr. Allen. Larry, do you have a question?

MR. ALLEN: Thank you, Mr. Chairman. I had a question for Brian.

You all, implicit in your presentation is that the members that you have
in your various groups would like to see, essentially have the PES
schedule shut down. Is that right?

MR. PALLASCH: I mean, there are two options. We could make it somehow
Brooks compliant and we have had those discussions with GSA. It seems
rather difficult and I believe the last I recall, the ball was in GSA\'s
court to come back to us. But there have been some changes and so we
have awaited a response.

Short of that, then yes.

MR. ALLEN: How can you, then as a membership organization, rationalize
that against the fact that there are several member companies in the
associations that you all represent that are in the top 50 of PES
schedule and a conservative estimate would be that those companies do
over 50 million dollars a year through PES?

MR. PALLASCH: It demonstrates that there is actually violations of the
Brooks Act going on in the PES schedule.

MR. ALLEN: I don\'t know if that \-- my interpretation, I think that is
a subjective interpretation from my part. My interpretation seems to
indicate that there are companies that are happy doing business that
way. And if you are going to take away a 50 million dollar business
avenue forum, you had better have something else to back that up.

I know in my association, my member companies would like to know how
they could go about replacing 50 million dollars worth of lost business.

MR. PALLASCH: I\'m not sure that they need to replace the business. The
business would still be there. It just would be done under the Brooks
Act and not under the PES schedule.

CHAIR BRANCH: Does anyone else on the panel have any questions for this
presenter?

(No response.)

Okay, Brian, thank you very much \--

MR. PALLASCH: Thank you.

CHAIR BRANCH: \-- for your time. We appreciate it.

Okay, we are scheduled to hear now from Barbara Kinosky, President and
CEO of Centre Consulting. And then after this presentation, the panel
will take about a 15 minute break.

Does everyone on the panel have a copy of Ms. Kinosky\'s presentation?

MS. KINOSKY: Anybody else want a copy for their friends, relatives, lake
house, outhouse?

CHAIR BRANCH: We will pass them down the row and we will see how many
you get back.

MS. KINOSKY: Okay, I will definitely get you back on schedule. Because
what I have got to say is real short, to the point, and hopefully you
can then break.

Good morning. My name, as you know, is Barbara Kinosky. Thank you for
allowing me to speak about two issues that I believe directly impact
both contractors and government buyers.

My company, Centre Consulting, Inc., is both a GSA schedule holder and a
training company. Our wholly-owned Federal Contracting Institute trains
both government and industry personnel on a wide range of schedule
topics, federal procurement topics, including a specialized Centre
National Contract Management Association GSA Certificate studies
program. So as you can see, we are very active in the GSA training
arena.

The two important issue that I would like to address today are
time-and-materials, T and M contracting and performance-based
contracting. GSA schedules assist the government in its stated goal of
buying more goods and services in a commercial manner, consistent with
FAR Part 12. As we all know, contractor services on GSA schedules are
negotiated at hourly rates consistent with commercial practices.

While I am mindful of past abuses in the area of T and M contracting, it
is now my opinion that we have now over-legislated and over-regulated
the government\'s ability to use T and M contracts. We are now at the
point where DoD cannot buy commercial services unless they meet the
following very narrow exceptions. Services procured in support of a
commercial items; emergency repair services; or service acquisitions
where an agency head approves the contracting officer\'s determination
that the services are commonly offered and sold competitively in
substantial quantities in the commercial marketplace through the use of
T and M or labor-hour contracts. These limitations may negatively impact
some of the most innocuous purchases, for example, staff augmentation.

It is no secret that many agencies are relying on contractor staff to
supplement and even support key positions. The person sitting at the
reception desk answering the phones in a Pentagon office is probably a
contractor employee. Should DoD procurement professionals have such
stringent limitations placed on their ability to purchase this type of
support on a time-and-material basis? And where is the contractor going
to sell the receptionist with the security clearances in the commercial
marketplace? And the same could be true for rocket launchers. You know,
you are just not going to buy them at the Home Depot as a commercial
item.

This segues to my next point on performance-based contracting. As I said
in my testimony before the Section 14232 Panel, not all acquisitions are
appropriate for performance-based contracts. Do we really want to
monitor how fast that receptionist answers the phone? I say let\'s step
back and look at the types of goods and services we are procuring and
decide what restrictions are appropriate for those specific items. The
government needs to be able to buy some services quickly and easily on a
labor-hour basis and the contractor needs to be able to provide them
without excessive amounts of file documentation requirements on both
sides.

Questions?

CHAIR BRANCH: Does anyone on the panel have questions for this
presenter? Debra.

MS. SONDERMAN: Thank you very much for your comments. I think \-- well,
I will just speak for myself.

I wish I could waive a magic wand and have the Congress change some of
the rules that have been imposed on us but I can\'t. And since I live in
the District of Columbia, I am fighting for the basic right of
representation.

(Laughter.)

MS. SONDERMAN: But my question is, do you think \-- we have had
discussions not necessarily in this panel but in other forums about this
whole notion of what is called personal services contracting but is
really the situation you described. We contract for a receptionist who
we then have to set up a rather elaborate structure because we are not
allowed to have personal services contracting.

What recommendations do you make to us to take up and what nexus is
there with the price reductions clause, which is our specific charter?

MS. KINOSKY: Exactly. And actually, I would like to think about that
very carefully and, if I could, provide you with some suggestions.
Because we need to look very carefully at what it is we are buying, what
we are buying a lot of.

It is very interesting, a couple of years ago, well I don\'t know how
many years ago, when Dee Lee was over at the Pentagon, I was waiting for
a meeting with her. And somehow it turned out that everybody in that
office supporting her was a contractor. So, I was just curious. So I
walked out and I said, excuse me, are you a contractor, are you a
contractor, are you a contractor. And it was just kind of amusing to me
to find out that the only people, it seemed like, in that immediate
office that actually worked for the government were Ms. Lee and a couple
of other colonels that were in that office.

But we really need to have some kind of a clean line where you can
procure these services fast, easy, without all the file documentation.
Maybe we need to make some type of rule. And I know Congress exactly is
very much in the act and even more so coming up with more legislation on
the definitions of commercial items and commercial services.

But I think we need to define those services that we need on a recurring
basis that are very essential for running particular offices and be able
to procure them, quickly, fastly, with minimum file documentation.

CHAIR BRANCH: Judith.

MS. NELSON: Good morning. Thank you very much.

I think I actually would take exception to your definition of what DoD
can procure by T and M. I don\'t think Section 803 is quite that narrow
and actually would make that point. And it is not within, I mean I wish
it was in the scope of this panel to define what is inherently
governmental but it is not.

But you make the statement that contractor services on GSA schedules are
negotiated at hourly rates consistent with commercial practices. Do you
have any recommendations for the panel? Because one of the things that
we are looking at is the disclosures that should be made particularly by
service contractors and the current disclosure requirements. Do you have
any recommendations toward that end?

MS. KINOSKY: Are you talking about on the initial CSP filing \--

MS. NELSON: Correct.

MS. KINOSKY: \-- when the contractors get their \-- Are you talking
about how you should categorize the services?

MS. NELSON: No.

MS. KINOSKY: I\'m not sure I follow your question.

MS. NELSON: Regarding their commercial model and how that is translated
to the government.

MS. KINOSKY: Oh, okay. Are you talking about contractors that actually
are not selling commercially but are \--

MS. NELSON: Contractors who are selling commercially and contractors who
are not selling commercially. On either side.

MS. KINOSKY: What disclosures they should make?

MS. NELSON: And how those disclosures should be made.

MS. KINOSKY: Well, I think we do a pretty good job on the initial
schedule filings in being able to categorize your types of customers and
the discounting practices that you give them.

Are you talking about taking that a step farther and defining what types
of sales you are having? The types of \--

MS. NELSON: There is a great deal of discussion that the current
commercial sales practices model is \--

MS. KINOSKY: Yes, correct.

MS. NELSON: \-- is modeled around the products model, \--

MS. KINOSKY: Oh, okay.

MS. NELSON: \-- given that it was written during a time that the
schedules program was products-based. And now we know that it is largely
around 65 percent services oriented. And that model based on discussion
by contracting officers and the industry partners says that it doesn\'t
really suit disclosures by service-based contractors.

So, do you have any recommendations on how to amend the disclosures part
of the solicitation?

MS. KINOSKY: Yes, I do, actually, because there is a division of a
company where we do a lot of GSA schedules and it is very confusing to a
lot of contractors who have never done business with the government and
even those that are doing business with the government on what types of
disclosures they have to make, whether they have to make the labor build
up.

And I can tell you it is not uniform within GSA either, understanding
what it is the contractor has to submit. So that is really a very good
question because we find contracting officers in GSA asking for an
entire cost buildup model, when a contractor has done nothing but sell
commercially. And then we find commercial contractors who are wondering
whether or not they have to disclose everything right down to their
profit and their costs and right down to the items.

I think yes, that while I think the disclosure form is pretty good, I
think we need further instructions on what to do uniformly. And in MOBIS
is a good example. There is some clearer guidance there in MOBIS of what
to do but not all the schedules are like that. And I find there is a lot
of inconsistency among the different schedules of what it is that you
should provide in addition to the CSP.

CHAIR BRANCH: I guess I have a question. Coming from a DoD activity, we
do not buy the types of services that you sell on a time and material
basis. We generally buy them on a cost reimbursement basis. Should there
be added flexibility under the schedules programs to sell to the
government on a cost reimbursement basis, in your view?

MS. KINOSKY: Well, it is interesting. We just had a discussion with FAA
and they have been dinged by Congress lately for their lack of
performance-based contracts. And they were a little troubled about
having to go into more cost reimbursement because their feeling was that
they can\'t budget appropriately on cost reimbursement contracts because
they never know what the final audit is going to disclose for the
contractors. So, they felt like on a time and material basis, they knew
exactly how many hours they were allocating what that dollar amount was,
whereas, on a cost reimbursement basis, they were waiting for contract
closeout.

CHAIR BRANCH: Are there any other questions for this presenter?

(No response.)

CHAIR BRANCH: Okay. Thank you very much. I appreciate your presentation
this morning.

MS. KINOSKY: Thank you very much.

CHAIR BRANCH: It is exactly 10:30. As Ms. Kinosky promised us, she got
us back perfectly on schedule. So, why don\'t we take a 15 minute break
and then we will hear from Bill Gormley at 10:45.

(Whereupon, the meeting went off the record at 10:29 a.m. and went back
on the record at 10:45 a.m.)

CHAIR BRANCH: We have a presentation from Bill Gormley.

MR. GORMLEY: Good morning. I would like to thank the panel for the
invitation to speak here today. It is almost back to the future for me,
personally.

But in regards to your topic of stakeholder expectations, it really goes
to the basic foundation of the program objective of the Multiple Award
Schedules. This really goes to two areas I will talk about. The
government contracting side, I have heard a couple of questions. I hope
I get those asked today from earlier presenters. Industry, government
working with industry as well as the government customers and how they
interface with the schedule program.

Not that I am a history buff, but sometimes I think it is good to look
and see what has happened. No one really knows who designed the program.
Whoever it was should have gotten a big honor because it was done at the
Department of Treasury and it was conveyed over to GSA in 1949. That is
as far as I could go back and then pick it up.

But you can see the different kind of highlight moments along the way.
There was actually a policy written in 1982 for pricing. Obviously, it
was more products at the time. There was a lot of discussion from the
mid \'80s to the early \'90s on pricing again. And that had to do with
the discount schedule marking data sheets for those of us who have some
gray hair here. For those that don\'t, you didn\'t really miss anything.

In 1996, there was a new policy. The Administrator of GSA at that time
selected an individual to become the MASR for a few years, or excuse me,
earlier than that. But as a result of that, created a new pricing
policy. And that is when services and the services were added,
basically, from customers wanting the ability to buy the services with
product.

Following that, there was leap into what was known as solutions which
people use very loosely today. But that is the combination, obviously,
of the products and the services side. And here we are today with the
MAS Advisory Panel, which the timing could not be better for this body
to be put together.

I think we use a lot of terms and sometimes they can be loose. But I
think when you get to pricing, and you get to business, and government
spend, and taxpayers contributions to the government budget, I think a
lot of attention needs to be paid to it.

So, I kind of laid out here the ability to get to the lowest overall
price. That really exceeds even FAS\' objective in lowest overall cost
versus price. And I thought, I was trying to do kind of an outline of
some events from 49 in \'92 were predominantly paper orders, and you
look at the Price Reduction Clause which this body has asked you to look
at and come up with recommendations on. During those times, the Price
Reduction Clause that the government was going to offer or receive or
industry was going to offer a lower price at any time on any sized
order, they had to extend that price throughout government for a period
of time. Normally, for a minimum of 30 days and in some cases for the
length of the contract. As a result, there were not many price
reductions. There were price reductions but they were very, very
strategic and the government lost out on a lot of opportunity.

In 1994, GSA changed the Price Reduction Clause, basically to align
itself with commercial practice. I will get to that in more specifics
later on in the slide. That basically allowed spot pricing.

In 1995, GSA \-- someone was talking about Industrial Funding Fee. Part
of the contribution of the Industrial Funding Fee is the cost of GSA
Advantage. There is a cost of establishing that program and running it
and having it really relate to the customers. Someone talked about, I
think the U.S. Air Force as a My Air Force. I think the VA actually has
something set up directly in their website as well and others.

There is a cost up to three-quarters of one percent which came up
earlier. I doubt anyone will define a report so definitive as to what
does my three-quarters of a percent pay for or what do I get from it.
But I take the position that for a fact, there is no company that can
run on three-quarters of one percent, number one. So, that may bother
people as far as having to pay additional money and I will talk about
price reductions and how you get your three-quarter percent back during
your ordering process.

But anyway, GSA Advantage in 1995. And then 2000, e-Buy, which really
detained the electronic RFQ process, which has addressed a lot of
concerns in Congress and possibly others in this room about how do I
know I am getting the good deal. How do I know it is competitive? You
know with all of the buying folks that around the country, how do we
have some continuity of how do they go to market and how does GSA
respond to that? How do e-Buys, GSA is to be commended on that, on the
improvements they have made over just the past few years.

Basically, a little more history here, but was products that we were
industrial based as a country, the major change was adding services. And
that was a huge change. It took a couple of years just to get the policy
written to allow services back in the schedules or allow services to
enter into the schedules program. And it was followed by solution and
new ordering procedures. And people talked about BPAs and teamings and
that is when that was really able to embrace some commercial practices.

So, it was really the convergence of services and products is probably
what has brought us here today.

I was trying to find a simple way of talking about industry pricing
because pricing is kind of key factor here. It gets a lot of interest
from a lot of folks.

And there is three \-- should I talk down now? Just kidding. Do you want
me to start over?

There are, on the commercial pricing model, I was trying to find some
way to convey I think a very important point here for this body, and I
am sure everyone recognizes it but I think it is always good to refresh
ourself. Three key business elements of getting a sell price, you know,
a very good sell price is really, from an industry standpoint, is
inventory level. And inventory level is not just product. It is
resource. It is people. So, I mean, inventory is not, don\'t take the
straight perch on that. It is both. Market penetrations, that a company
has to consider itself from a market penetration. How bad do I want to
stay in the market for this particular order or activity or government
entity or how bad do I want to get into it? And then also the companies
that are run for a profit. They have sales goals which contribute
towards that. We are not talking margins here. I am just trying to give
you the three key elements. All three are very fluid. All three are
known at the time of the buy.

I think the sale price. When you look at it whether it is a purchase
order or a task order, and it really offsets, you know, it will always
be more competitive than the contract price. And what I mean by that is
a contract price really has built-in higher cost assumptions on any
contract.

Important change, though is, with a move to services and solutions back
in \'96, the present speed of business changed dramatically. Especially
the need to respond electronically, which GSA and many other parts of
the government are currently doing.

So, the pricing for services and solutions, including products, became
more fluid. And therefore, there was a need to change the Price
Reduction Clause.

I was looking at some of the objectives that this panel has and I looked
at some of the key MAS objectives as a program. Ensure financial
integrity, you know, really of the whole acquisition, the federal
acquisition part of the schedules program. And that goes from ordering
contracts to issuing orders and task orders and the ability for
customers to buy commercial items. And that was the whole monitor of the
schedules program was to give the federal government the opportunity to
acquire commercial products.

I am not going to dwell a lot on my past here but I know it was
difficult to move from specifications on what you and I would consider
very common commercial items to going to the schedules program within
government. So, to make any change of a regulation is not any small
undertaking. And I have a lot of respect for this body here today, as
they make their recommendations.

I hear a lot of folks say well, the schedule is too easy to use or
something is wrong with it. It is too fast. There has to be a lot of
time given to considerations for pricing and ordering. I would disagree
with that, in that the fact that something is fast and easy does not
make it wrong. And if you look at NASCAR, there are some of the keenest
machines out there that perform very well to fast speed.

Lowest overall price. I think part of that, is I think the panel is
really being asked to exceed what I consider to be the FAS objective of
lowest overall cost.

Obviously, the low administrative cost on behalf of the government and
the ordering activities. I used to look at this, that the schedules
program in managing the schedules program, I would view GSA as handling
about 80 percent of the acquisition process and that the ordering
activity of the buying activity handling the 20 percent. Which actually,
GSA established the contracts, does the pre-negotiations, and then the
ordering activity at the time or the requirements formulated or if the
requirement is known, is the greatest opportunity to get the best deal
for the government.

And for those of you who remember Eleanor Spector, her and I had a very,
very lengthy conversation on this back in the day. She actually called
me out of the blue three or four weeks ago. We had a great catch up
conversation. But I will never forget when she put me in front of all of
her, I don\'t whether you would call them commanders, or I would say
heads. And it was a very telling point back then where people, we all
have this DNA element that we can get the best deal. And each of those
individuals in that room felt that way as well. And we had some very
open conversations. But at the end of the day or at the end of the
meeting, I give Eleanor a lot of credit. You know, she stood up and said
you know, this program can be added to our toolbox and I am going to
sign a letter that she signed that really changed the whole schedules
program.

She asked me about that a couple of weeks ago and I actually told her
that I was going to be here. And so she was, she may even sneak up and
come in here so that we could have some fun. But she, the position in
that meeting has stuck with me for a number of years in that the
argument for getting those folks together and she wanted to let her
people have their say, is that they could buy cheaper than what is on
the Multiple Award Schedule program. And I am going to talk about this
more later but now may be a more appropriate time.

She said Bill, how can you guarantee the lowest overall price within the
schedules program? And I will tell this body the same thing that I told
Congress and staffers on the Hill over the years. There is no guarantee.
And I said no one has the opportunity to guarantee the lowest price in
any program. Period.

And I will give you a good example. I think we are pretty well familiar
with the number one retailer in this country, Wal-Mart. I had the
opportunity to work with them for awhile and they used to market
themselves. And here was a well-known company, 100 percent in control of
the products and services that they provide, have a number one rated
logistics systems, and within that, they consider acquisition to be part
of the logistics. Even with 100 percent of the control that they have
and the margins that they are under to meet as a company, they used to
advertise, if you remember, Wal-Mart used to guarantee lowest price.
Lowest. Guaranteed lowest prices. Today, they guarantee low prices.
There is no guarantee on how do we get the lowest. It is a myth. It is
an objective we always want to have. But to actually say we have reached
that is going to take more than a lifetime.

So, within the schedules program when people say hey, I can actually
acquire this cheaper than what is on schedule, many times I would ask
the customer \-- first of all, I would congratulate them. If you feel
you got a great deal, fine. But did you look at the schedule price? Yes,
I did and that is why I got a cheaper price. Did you call the contractor
up or call some contractors up and ask for a better deal? No but I got a
better deal.

So that is part of a myth I think this panel should take as part of
their consideration. And I was very pleased I came early and was able to
hear Steve talk about some of the outreach programs GSA is going to be
undertaking. So I think they are very desperate in the customers \-- GSA
owes it to its customers to train them on what the opportunities are
within that acquisition toolbox. They are getting spot pricing at any
time. Again, I will talk a little bit more about that later.

And overall promote the effective efficient and fair award in
administration. I think customer choice is what the schedules is about.
And it doesn\'t mean that the customer is going to get more than they
deserve or you know, will be some elaborate spending model for
government. It is an opportunity that for those who actually have
programs to run, the programs, when you reach that point in time, when
you need something quickly and there is an opportunity to serve your
internal customer, I tell you right now, the majority of people in
government will look, at some point, to the schedules program because it
is an established, well-known program to provide the services and
products.

I showed this to someone yesterday. Oh my God, Gormley, are you going to
show them that? I\'m like, yes. It is not like it is not working, hoping
I got everybody\'s attention, but a lot of the program is working. I
mean, the percentage is probably over 90 percent of the program is
working fine. But key elements here, and I will go over each one of
these, I think should be addressed.

The EPA, I am going to price adjustment \-- well, first the pricing for
services, I think is really one of the key elements or reasons why we
are sitting in this room today. Then on the contract administration
phase, A through G and I will touch on each one of those now.

Pricing for services. I will admit it took us two years to come up with
a pricing policy for services. And someone has already commented,
Gormley, some of us think we are here today because of you. Well, I can
apologize but it is nice to meet you again anyway.

I think the product side, yes, it can use some refinement, but on the
services side, and idea to consider for the panel, hopefully that is why
we are all here today, to give you some insight, was really to go with a
two-step contracting concept process within the schedules program. You
know, consider the past performance. Consider financial. Obviously, you
already have the standard terms and conditions available. I mean, that
is a qualifier. You know, someone wants to get into the mechanics of
this, I will be glad to do this later. It is not going to be within my
time but I would be glad to come back and discuss any of this with the
panel.

Step II of the two step is price competition at the task order level.
And by doing that, it kind of does go back to spot pricing in a way. But
it really, I think what we are trying to do is get the fair and
reasonable, it is the pricing and how is that demonstrated in the
schedules program for services. I think the two-step would be something
I feel would be a good recommendation for the panel to consider.

I think the overall impact from that with services, the two-step for
services is increase competition. It would really incentivize the
customer to go compete. I think that is the real important part here.
That is, opportunity to get the lowest overall cost on each task order.

And it would entice new commercial services companies to the program.
And this also includes many small business who, based on my interaction
throughout industry, a lot of folks are not coming through the program.
GSA may say, hey we have enough in there. I always think there is a
cycle. People come in and people leave. And I think it is a good
opportunity for small businesses and it is a great model GSA has here.
So, I think you would enable a lot of folks to come back.

Okay, I want to go to A through G here. So, hopefully you will bear with
me and we will get through this.

EPA, the Economic Price Adjustment clause. You know, the contractor or
GSA has in their contract provision that those addressed changes in the
economy during the course of a contract period, which is the EPA clause.
Many of them are 10 percent or they are tied to a price index or
indexes. What is being seen now by industry is where there have been, as
we all have been affected here, and if you haven\'t been affected by
gasoline, I need to know where you live, the EPA is becoming more of a
valid clause that needs to be paid attention by government and the
contractors. But I think we would like to see EPAs become a priority
now. They are an agreed upon contract provision.

Late EPAs create financial harm to the contractor because of government
delays in executing the modifications. You know, we have instances and
basically you can think of this, someone has an EPA increase just of ten
percent, the government has already pre-negotiated their discount within
this contract and by delaying the EPA provision, which is happening
quite a bit, it could be workload, it could be for a lot of reasons, it
is basically making the government a more most favored customer or
putting him in that position. So the government is becoming more, price
is becoming more favorable to the government without negotiation but by
delay of the EPA. And it is something I think that is real important and
a lot of contractors are looking at this provision more closely now than
they ever have in the many years that I have been associated with it.

B, adding items under awarded since. The intent of the program was to
offer the latest product on the technology side. It could be, it is not
only the IT schedule, office supplies, or anything, when every product
runs its course of life. So when the product, the government\'s intent
here is not to require industry to continue to make a or provide an
outdated item. And in industry, when they are trying to add items within
a special item that you have already been awarded to replace deleted
items, to me that should be automatic. I think industry feels very
strong on that.

So, remove any barriers to adding items to the contract. And
particularly during the renewal process. There is many folks in industry
that the renewal process has taken, and Steve admitted to this earlier,
alluded to it, a long time. Longer than it should. But something
short-term or immediate that GSA could take action is allow automatic
uploads on items that are within a SIN and have already pre-negotiated
conditions.

C, the price reduction compliance. I think part of the confusion here
really comes around, and this is a big one for a lot of folks to have to
address or swallow. I think the ability to manage this program has
effectively, from all three legs of the stool here, that impact, you
know, obviously the GSA industry and the customer, is really focused on
a narrow basis of award. What this does, by having some folks will try
and negotiate all end users. And that is a guaranteed failed audit. And
that would be like the IRS doing 100 percent review of everybody in this
room. We wouldn\'t want to admit it but we would all fail it. Maybe we
wouldn\'t think we would but, in the views of the IRS, we would. So that
you get into this gray area.

And I think by having a narrow basis of award, really then, you are
really negotiating in more solid ground on the part of the government
and with the industry, it allows them to set up a compliance system that
really allows it to tailor itself to what it has agreed upon. This is
one of the key elements right here that is creating a lot of confusion.

And audits are necessary. I will talk about that, but this is prime
target right here. So, it is really being unfair by all parties. And
what I mean by even the customer side, you know, how can that be unfair
to the customer. We do have contract renewal delays and so forth which
cause a delay in continuity of customer support.

So getting into the contract renewals, stick to the contract agreement.
You know, don\'t treat a renewal like a new offer. You know, your open
ratings and financials. GSA already knows the company. They have already
done financials initially. If they are doing business on there, unless
there are specific complaints, which there is a mechanism for customers
to get feedback, the GSA and the contracting officers, and they have IOA
visits and so on and so on, it is treated like a renewal, not a new
offer. And this is really becoming a stumbling block within GSA and it
creates a major disruption to continuity of the customer services
indicated.

Audits. I am surprised there wasn\'t somebody on the panel from audits
or maybe there is. So, I apologize if I am not aware that there is.
That\'s good. Very good.

I think from all sides, complete on time, the hardest thing is when
audits are not completed on time. And there will be a number of reasons
why an audit cannot be completed on time. But I like to turn that around
and say there are probably a number of audits that could be completed on
time. And that creates, you know, companies take their resources to pay
attention to the auditors, which they should provide the information.
And unfortunately, there are many, there are too many instances, and
hopefully the IG feels this way, too, there are too many instances in
which audits have to get rescheduled. And when they go ask for the data
run, contractors provide the data run, the audit is delayed. The
auditors come back and say run another data run. That is very difficult
for companies to do and to justify internally.

So, I think that is a consideration. I\'m not sure how this panel
addresses it, but I think you would have somewhat of a broad area of
other ways to improve the program, possibly.

And what we have had is contracting officers turning some negotiations
over to auditors. And I know the IG Office has commented on that but
there are clear instances where the contracting officers, for whatever
reason, are putting auditors on the phone to negotiate. And from an
authority level standpoint, I have a problem with that. But anyway that
is something for this panel to consider.

I think if we could get to, when there is an audit, and they are
necessary and there should be audits, that there should be a business
discussion. There should be some common objectives. And GSA is starting
to use the audit process. It almost feels like a delayed fear factor,
when we have our audit done internally, you know, with one of the key
auditing firms, I am not going to \-- you know, the idea would be they
have the same type of relationship, recognizing that that can\'t happen.
But there still can be a transmission of findings. There are certain
findings that can be transferred to the offeror for discussion. It is
hard to say, change my offer. And you will say, how do I change my
offer. Well, based on the audit, I want you to change my offer. These
are literally discussions like I am just sharing with you.

And the contractor will say, how do I change my offer? You need to
change your offer. And they will say, well, we found some things. What
did you find? Well, I can\'t tell you. Those things are not conducive to
a good relationship. That is something, I think, that this body, if they
can address, would be very effective.

Inconsistent understanding of policy. I was very pleased to see Steve
got up there, and I guess, he checked that off himself, and established
the MAS program. That is desperately needed. When you look at program
that is over 30 billion dollars, several thousand contractors and over a
million items and services that need to, it warrants such a program
office.

And the data requests that go beyond the MAS policy requirements.
Probably the best way for me to probably to address that here for this
panel would be, I think, under the pricing policy, I think the panel
should consider inserting fair and reasonable and deleting all
references to most favored customer. This term is being used way out
what its intent was more and more so now. And I wish I could, I can\'t,
but I could give you

numerous examples of where the GSA contracting officers are asking now
for better than most favored customer. And when we say what do you mean
by that, they will say better than most favored customer. It is very
tough to have those conversations.

And I think the government, through all the acquisition programs in
government, things do boil down to fair and reasonable. It is the price.

Thank you for your time and I look forward to entertaining any
questions.

CHAIR BRANCH: Bill, thank you for your presentation this morning.

MR. GORMLEY: Sure.

CHAIR BRANCH: Does anyone on the panel have questions for this
presenter? Lesa.

MS. SCOTT: On slide 10 \-- let me find my notes. Your slide 10, you were
talking about the changing \-- hold on a minute. Let me find my note.
There it is.

MR. GORMLEY: That\'s all right.

MS. SCOTT: When you add items, at what point would you say or what point
or what percentage of change in the items or in the services would you
say it becomes tantamount to a new offer? Would you have a
recommendation?

MR. GORMLEY: I don\'t think there is because you are negotiating under a
SIN, which gives a broad definition of what is covered by the Special
Item Number.

I will give you an example that will tell you that. I mean, if a company
changes it product line and if they have paper under there, okay? From a
products standpoint, and they actually go to selling products, that
would not fit. So, they could not add or copy it to the paper SIN. But I
mean, if it is within the categories that are awarded, you can pick, you
talk about any special item number here, they are broad but they are
clear enough to find that if you are, particularly when you are deleting
the item because of life cycle and you are adding the next version of
that item, that clearly is a straight add. I mean, if you are going to,
I don\'t know, Elliott\'s engineering group, I head that earlier, but if
you go to I don\'t know what size millimeter of a thickness of lead you
use for mechanical pens and I change the lead size and the pencil size,
that is an add and delete. Or if you go from GSA is pushing greening.
Right? So, if someone has virgin copier paper on there, they going to
offer recycled, they should be able to add it. As long as it fits within
the pricing conditions that were negotiated and agreed upon in the
initial award of the SIN.

CHAIR BRANCH: I think Judith. Let\'s just come around the horn here. We
will start with Judith, and then Don, and then David, and then Jan.

MS. NELSON: I\'ve got two questions but I will just do one because there
is a lot of people asking questions.

So, since you were there at the initial iteration and here you are back
again, here is your opportunity. Bill, what would you recommend for
changes for the CSPs for service oriented?

MR. GORMLEY: I mean, I can lay those out to you here, it would take me
\-- I don\'t think it is that far off, to be honest with you. I think
the key here, overall, the intent \-- yes. We can change the name of the
document but I mean that is not going to do it.

So, the key here is what is the best way to capture significant enough
of information for the government to determine it gets a fair and
reasonable price? That is the deal. And we are negotiating discounts, by
the way, not, as we know, not pricing. And that is the other important
part here.

I think the panel here should be looking at it from the standpoint of
services. I think there is an opportunity here, as I indicated in my
presentation, to go to a two step. When you get the GWACs and others,
there is no, they focus more on technical and not price because the
pricing incurs at the point of a task order. And I think the schedules
could model some variation of that. And I would be glad to talk more
about it to this body.

As far as the product side, you know, we could, there is three or four
ways that we could go on that. And I would just, because it is going to
get pretty \-- it is going to get to the DNA of this whole thing because
there is a lot that goes into this. Because what you have to look at is
it has many tentacles. And whether there are, you know, we are talking
about resellers, we are talking to OEMs, the distributors and so forth.
And there is a lot of types of businesses that have that one policy to
interact with.

So what we don\'t want to do is, I think, is throw the baby out with the
bath water. I think that the CSP, in its intent does serve a very valid
purpose. Can it change? That is why you are here. Yes. Part of the
change I have given you. I think you need to pull services out and go to
two-step. And I think that is pretty straightforward. And that hopefully
will not be too difficult to do. I know there is a lot that goes on
after these recommendations. But I think that is a great opportunity and
can address some of the other labor questions that were asked earlier as
well.

But on the products side, I can give you three or four. I will be glad
to submit to the panel three or four variations of ideas.

CHAIR BRANCH: Don.

MR. ERICKSON: Thank you very much for the presentation.

I just, Bill, would like you to elaborate on the last point you made.
Again with Point G. And more specifically, if you can just talk about
what you believe the original intent was of the most favored customer
clause. And then just talk more specifically about your recommendation
for deleting that.

MR. GORMLEY: Sure. Part of the \-- well, I\'m not going to go beyond 49.
That is when I was born. So, beyond that.

The intent of the price of the MAS policy was really modeled after Most
Favored Nations Policy. And it does go back to that. And for someone to
be able, in the government, if you put yourself in the government\'s
mode of trying to get access to commercial items, in many different
industries, we are talking about a wide array of items here, services
and products today, is that there is no way that a negotiation could
occur within a contract that would guarantee the lowest price. It just,
it won\'t work. We can have this \-- we could debate this if this panel
wants to but it is not going to happen. Because fair and reasonable, I
think, is the determination that the government has a responsibility for
to the taxpayer that whatever we acquire should be a fair and reasonable
price, as a minimum.

The contract, to me, should be converted from most favored customer to
fair and reasonable. A lot of things go into consideration for fair and
reasonable. Transportation, installation, other services associated with
what is mainly being bought here. All of that comes into fair and
reasonable as the price.

Most favored customer kind of back in the day was a recognized way of
saying hey the government has a responsibility to get a good deal for
the taxpayer. Most favorite customer, when you speak that, automatically
gives you the feeling, hey, we got a good deal. Really, the intent of
the program is equal to most favored customer and where the government
can demonstrate it deserves more, the government should be the most
favored customer.

The government by not having the program office, the government has
gotten away from equal to that entity\'s most favored customer and that
the government always is looking for most favored customers. And some of
the examples I gave you earlier with the audit, you know, from MSC, some
people are asking for better than most favored customer. I mean, I would
like to ask anybody here if they could explain it.

So, we have moved away from what I consider the Most Favored Nations
initial objective here to put it in a government sense most favored
customer, or equal to most favored customer. Fair and reasonable, I
think, addresses that in many ways.

CHAIR BRANCH: David.

MR. DRABKIN: Bill, you said that one of the other points you made
earlier was that when it comes time for option exercise, we ought not to
go back and re-look at everything. We have a 20 year contract. And for
most of the markets in which these contracts are awarded, things change
dramatically in the space of 18 months, not to mention the five years,
the basic period, and each other. How can we not go back at option
exercise and do some sort of complete review to make sure that we have a
valid \-- valid is the wrong word, but we have a relevant contract for
the next five years?

MR. GORMLEY: Well, without sounding flip here, the renewals look
forward. Right? Sometimes we need to look back. So, if the demonstrated
sales is one key area within the program, if sales have continued to
grow, there is clearly a demand within government for whatever is being
sold. I think that ties in and GSA has IOA visits. You do those once a
year or every two years now, I think you all just changed it recently.
So the government is actually in the contractor\'s facility probably two
or three times during the course of five years. And I think Jeff and his
folks have put in some kind of report card system or your office put in
a report card system as well. So, I think there are systems there to
address past performance. As far as the financial side, without giving
names of companies here, I mean, there ere like ICON companies that GSA
is doing. I mean, Fortune 500, they are doing financials on for a
contract that has no guarantee in business. For a contract that allows
either party to cancel within 30 days without giving any explanation.

So, the risk part of the government here, and I don\'t want to overstate
this and make it over simple, but I think the risk here is not as great
as some people think it is. And therefore, it is a five year with three
five year options. And I think when you take those elements and review
them and you can renegotiate the pricing side, Dave, I would say if
someone\'s sales have gone up significantly, the government says there
is a great need for this, then I think that was supposed to be part of
the renewal process was really looking at the discount or the pricing
side.

MR. DRABKIN: I hear what you are saying but you know the Fortune 500
companies that are on our schedules, they are making money, even though
there is no guarantee of sales. And while everybody will talk about it
and we have to address it somehow, I mean, we don\'t guarantee a certain
level but we all know year in and year out, it has been fairly
consistent with at least the Fortune 100 and probably the Fortune 500,
the amount of business they do with us, give or take ten percent.

I am not exactly sure that you can say that no guarantee of business is
really no guarantee of business when you are a schedule contractor. I
think for small business, that is very true. I don\'t think it is true
for the large ones.

MR. GORMLEY: You know, you can use history in negotiation for pricing.
So that is what I have indicated on that. I think the important part
here is from the standpoint of a company having to make its decision
internally. They have to address a board and say what dollars are we
going to continue to put in this program. You know, what are we getting
out of it? Now, while their sales may be increased, it doesn\'t mean
their margins are increasing either. I mean, you want companies to make
money. They are not going to be here. It is what is considered a
reasonable profit. We all understand that. But on the other hand, I
think it is important that you have to have some, you have got to have
\-- if GSA is expecting to get the best deal on every award on every
product, nobody gets that. And I don\'t care what kind of procurement.

And this is Eleanor Spector meeting all over again because she walked
around the room there, and I will just share it with you, if we have a
minute, Elliott, just to give it effect. So, she had every branch of
service there. I was there and her. And she was like okay, I forget, one
of them was running the desktop contract. I don\'t know. It was back in
the day. Memories, right?

So, they are like, I forget the gentleman\'s name. He was getting all
exercise there and that was good. And she says do you feel your contract
price for that desktop is lower than the GSA schedule price? And the guy
said of course, yes. I said okay. She said, Bill what do you think about
that? I said, I am going to take the other side because we have got
price reduction, because you haven\'t called GSA\'s schedule contractor
up yet. So we went through all that.

And I said, I tell you want, my holiday is coming up here in a couple of
weeks. It is going to be Memorial Day. I have got a son going into
college. I bet you I can go buy that computer you have under contract
cheaper on your market than you bought for all DoD. And that set Fourth
of July fireworks off in that room.

Market pricing. So, to the gentleman\'s question of fair and reasonable
earlier, to get to a fair and reasonable basis, let the sell price occur
at the transaction level. And that is the guarantee that the governments
don\'t get the lowest price at that time.

So when we go to renewal process, here is some of what GSA has done. GSA
will go for a BPA, for some product on your schedule. GSA has already
negotiated the schedule. They are trying to negotiate products for their
supply system. Their markup in the supply system is going to be double
digit markup. So they are looking for that company to give that more
than double digit discount already in there.

So, GSA has recognized that it is getting a good deal sometimes up front
but don\'t expect the schedules to really offset some other challenges
internally. There is only so much price room there. And if you get the
best deal up front, you are not going to get a very big discount later
on.

CHAIR BRANCH: Bill, I have a question. You know, as I listen to this, I
guess what I am starting to form in my own mind is that there is a
tradeoff. And I think most of our agency users would probably say that
the chief advantage that I get out of GSA schedule is speed with some
confidence that the pricing is reasonable.

I think those of us who are in probably the MAC business, and in the
interest of full disclosure, I am one of those guys, would say if I am
willing to spend the time and the effort, I can probably do better for
my segment of the market than I can on GSA schedule.

So given that one of the chief advantages to GSA\'s schedule is speed,
given that the market is dynamic, how do we ensure that agencies who
have decided that speed is more important than price but are looking for
a fair and reasonable price, how do we build a structure in to the
multiple award schedules that will give them a high degree of confidence
that that tradeoff is worth it?

MR. GORMLEY: I would say that the components of addressing your
government need or that scenario is already in the program. And what I
mean by that is if one of the folks here was to put out emergency
procurement and needs something, you know, the Katrina horror stories
and people need it right away, there is a feeling that some industries
will take advantage of that and not give a good deal. Okay? I think it
is wrong but that is for the sake of discussion here.

The schedules program is merely going to be a ceiling of a fair and
reasonable. And when you put that requirement out to those companies,
the only way that price can go is down. There is a guaranteed
non-opportunist transaction there. In addition, to when GSA does award a
contract for the rest of government, all of the other socioeconomic
needs are taken care of, subcontracting, all of the compliance things
are done. So for all the other requirements to establish a contract,
those certs and reps have been met.

So now you are into a buying mode and not in a contracting mode or an
acquiring mode. And so there is a lot of work. And that is the speed
side, as I indicated earlier. I would say 80 percent of the acquisition
process is done and you have got 15,000 vehicles out there ready to go
out and serve the government contract vehicles. And that is when the
buying occurs. That is when you get the best part.

MR. FRYE: Bill, you \--

CHAIR BRANCH: Go ahead.

MR. FRYE: We skipped over me. I\'ve got a real short question. Yes or no
would be just fine on this one, Bill.

You came on very strongly in support of the EPA clause to protect the
contractors. Do you support just as strongly the clause that protects
the government, Price Reduction Clause, in terms of buying stuff or
products?

MR. GORMLEY: Sure. I mean, there is no question. I haven\'t indicated
otherwise here.

Now, the EPA is just a current environment right now that is pretty hot
with the material, gas and so forth and transportation which is a lot of
these contractors right now.

MR. FRYE: That\'s it.

CHAIR BRANCH: My apologies, Jan. Let\'s go to Judith.

MS. NELSON: Elliott asked this question over a previous presenter.
Schedules are currently exclusively Part 8 but Part 12 as well. Do you
think it would be advantageous to the customers if there were a way in
which industry partners had the ability, if they chose to, offer cost
reimbursable services by some means under the schedule?

MR. GORMLEY: Yes, I think the whole services offering needs to be
addressed and allowed within the schedules program, the various ways of
providing, the commercial ways of providing services or the
government\'s needs in providing different types, services in different
modes. You know, as fixed price or to your point, cost plus or things
like that. I think the schedules should be able to host that.

Yes. Because in that case, what that does, this is really good, that
takes a lot of confusion out. It puts continuity in. And I think the
question here that the panel hopefully has already given some thought to
is your ability to move services from within the schedules, across
schedules.

And this is a big discussion within GSA over the years. You know, and
there are some folks that have successfully managed having a continuity
of services like a project leader level one. And they could be in seven
schedules because it is a project leader level one. And I think that is,
some people get, well, you can\'t have that under my schedule because
you have got it under this schedule. The blending or the need from a
customer standpoint, I was just trying to look at it from a customer\'s
perspective.

GSA should not have to educate the customer on which schedule to use
because the schedules are identified to really promote the industry
silos, if we want to call it that, or approaches of industry. And I
think that has created probably some confusion internally on how to
manage multiple schedules with the same labor category. I think that
should be part of it as well.

CHAIR BRANCH: Alan.

MR. CHVOTKIN: Thank you. Mr. Gormley, I want to probe a little bit on
the recommendation of the pricing, your earlier two-step offer of how we
sum up. It seems to me, you are suggesting we minimize the effort of the
contract formation and drive at least the pricing activity down to the
order level. That has been a recommendation of the 1423 panel in some
ways, as well as some others.

How would that \-- so what kind of pricing discussion would you have at
contract formation? Would it still be a ceiling price? Would it be a no
price and then drive all of the pricing at the order level? How would
that work in your view?

MR. GORMLEY: Yes, I think the ideal would be no price. I don\'t think
the government could handle that. And I can understand why. I don\'t
mean to be slight here.

I think there is going to have to be some means of pricing has to be
there. Now, to your point of a ceiling price, it could be the price
offered by the contractor. And then they would have to demonstrate
something to say how does this price reflect their commercial business
or other government contracts. There has to be some determination of
fair and reasonable.

You know, Elliott\'s point where he has MACs. If some of his contractors
are on your schedule and they convey that MAC price over, then he has
already determined it fair and reasonable. Something along those lines.

CHAIR BRANCH: Yes, Tom.

MR. ESSIG: One question. You made a comment that one of other MAS
objectives was customer choice. I wonder if you would agree with a
statement that that flexibility that that choice gives you comes with a
cost, both for the supplier and the customer. And that if an individual
department or agency was willing to limit that flexibility, they could
achieve some savings.

MR. GORMLEY: Well, the beauty about the program, the program is out
there for folks, to use your example, for people in the agency to
actually restrict it, do a BPA. So you have that tool right there, to
your point. And you know, there is always going to be leakage. And so
where does the leakage go? Do they walk outside and go on the open
market or are they going to go to GSA Advantage on the product side or
the services side on e-Buy? But it does give you that opportunity to do
exactly what you are talking about.

MR. ESSIG: Thanks.

CHAIR BRANCH: Jackie?

MS. JONES: What is your recommendation for GSA leveraging its buying
power at the contract formation?

MR. GORMLEY: Other than?

MS. JONES: Well, other than driving the price down for competition at
the task order level or just being able to establish fair and reasonable
at the schedule level. Usually when the solicitations are led, they have
estimates in terms of what historically agencies have ordered against
the schedules and what those sales have been.

So, how do you suppose we leverage our buying power at the schedule
level, if we are only looking for fair and reasonable price?

MR. GORMLEY: Yes. Well, I think fair and reasonable price, as I
indicated earlier, is really going to be, you know, the onus is going to
be on the offer or to submit documentation to you to demonstrate how
the, we are talking about services now, how they came up with their
service offering and their pricing.

I mean, that would be, to the scenario I just used with Elliott, he has
already determined MACs to be fair and reasonable or any of the other
GWACs or you can go to those offices. If a company has a contract and
they have been termed fair and reasonable, I am not saying that is the
way to do it, but that is a way of doing it, or to consider.

The onus would be on industry. I mean, basically, that is the
fundamental responsibility of a contracting officer. I mean, it is not
going to be, when you start getting things too much in a template, and I
always view the negotiation is that. We are not dealing in sealed bids
and like that. I mean, this is the opportunity for industry and the
negotiators sit down and have an understanding and have a negotiation
and there is going to be a lot of things the government can ask but also
industry has to be able to come up to the table and say hey, this is how
we have demonstrated our pricing to you.

Have a negotiation. It could FOB terms. It could be on the furniture
side. It could be, you know, inside deliveries, which commercially they
would charge for me. They don\'t charge the government. It is all of
this. All of this stuff here becomes part of the negotiation. And that
is, to me, that was the fun part about it at the time.

It has gotten so mechanical now, it is like, give me more than most
favored customer, or give me most favored customer and that is it. That
is not a negotiation. And that is part of what has gotten this body here
today because the people just want to go straight to the price or the
discount and not consider what else is being offered to the government.
There is a lot that industry has offered to the government outside of
pricing.

CHAIR BRANCH: Yes, Glenn.

MR. PERRY: When you went through you \-- I have a multiple part thing
here.

MR. GORMLEY: Sure.

MR. PERRY: You went through the history. And I am looking at the
timelines. And you have to admit in the last ten years we have seen an
incredible change in the marketplace as far as what GSA might have
signed up for at the time that you created some of the changes in the
use of the schedules to what it is today. And then I think about the
GWACs and the other things the GSA is putting on the table to use. And
then we have also heard in some previous remarks from members of GSA\'s
team about what they are not able to do or cannot do and some of the
expectations that even you put in that you said that you were assuming
they were doing certain things X number of times during the contract
life.

And if we were, as we were kind of focused on the schedules, the
multiple award schedules, part of GSA\'s business, but on the other
hand, I look at it from the client agency, you know, I am not sure any
particular day I view one or the other as really different.

So, based on that in today\'s world, what is your feeling about what you
think GSA is capable of and where should we focus our attention on the
use of the schedules going forward within the multiple award schedules,
taking into consideration the workforce, the other things that GSA is
doing and those sorts of things to best serve the Agency, the client?

MR. GORMLEY: How long do I have to respond to that? Anyway \--

MR. PERRY: About 30 seconds or so.

MR. GORMLEY: First off, it is a great question because basically the
schedules were built to allow the customer to handle a certain part of
this acquisition. Okay? And I think GSA, when you look at the timeline,
GSA started to recognize that in the early \'90s and put together
really, I think it was the first, and I think probably still the largest
electronic means of ordering. So, from a customer standpoint, you can
push a button and click and go into GSA Advantage.

What I will say is that I think and I think they were looking at that,
and Dave or somebody can correct me if I am wrong here on this, GSA is
supposed to put information in there that can tell you, the customer,
that you have an opportunity here based on the size of your order to get
a lower price. And you can actually do that online. I mean, that is a
heck of a system to offer throughout all of government.

So, that is available now for thousands of items. That is the ease of
it. As the customer, you should not have to know about anything that is
going on in this room right here, per se. It really is the interface of
the schedules to your agency or department. And so Advantage is your
interface. e-Buy is your interface. e-Library is an educational tool
that shows you the sources go to under 8.4. Those are all electronic
means that the three-quarters of one percent supports and runs. That is
at all your buyer\'s fingertips. And everybody is strained for 1102s
here, I am sure.

So, I think from an electronic standpoint, this is stood up and
available for you. Now, let\'s go the back room which is always ugly.
Right? Even in industry. The back room, the back end side is GSA has one
heck of a void of 1102s. They have got over 60 vacancies alone in the IT
center. I was telling my son the other day, I wish the government
personnel office could be as efficient in recruiting people as the Air
Force was in recruiting my son. That didn\'t take long. Right?

So, I think, not that this panel is here for personnel matters, but the
hiring side is cutting across everybody in this room. So GSA has got to
figure out how to get people in there. And I know they have started to
Lean Six Sigma and so forth but it gets down to the point where the
system, by not having a program office for quite some time now, has
gotten this thing so out of balance that hopefully this panel is going
to be part, its recommendations is putting back some simplicity.

This is not that difficult, folks. Negotiations can be difficult. But
the program is fundamentally very simple and very straightforward. So,
when you talk about all the times \-- I mean, if you think about it,
this program has stood up over all the changes of industrial to services
economy. It is still there. And so you all have the opportunity to
rebuild this thing or to make some changes to it. But at the end of the
day, it is a very fluid system allowing items and services and items to
be available.

So, GSA just needs, to me, to hire the resources to support it. That is
what it \-- and plus your pricing recommendations all come out of here.
I think the infrastructure is there.

CHAIR BRANCH: I think we have time for one more question from this
presenter. Thedlus?

MS. THOMPSON: Bill, I have a question about price reduction compliance.
You had indicated that you recommend that we delete references to most
favorite customer. But you are still in favor of a Price Reduction
Clause within or some type of price reduction mechanism within the MAS
contracts. How would that work without the most favorite customer? What
do you envision?

MR. GORMLEY: Well, you have fair and reasonable pricing. So, your
contract is awarded. So your most favorite customer policy, or the
implementation of the most favorite customer really works through point
of time of award. Now, following the award, you have agreed to a basis
of award. And that becomes your benchmark, so to speak of what your
pricing moving forward is supposed to be again.

So, the contractor monitors their base of award against the discount for
the length of the contract period. Fair and reasonable price, you are
going to have established either \-- you can establish fair and
reasonable price and equate that to a discount, and I mentioned, have a
narrow basis of award, and maintain that relationship.

Your Price Reduction Clause, as you know, triggers at the time of
ordering. So that is for the sales side.

CHAIR BRANCH: Bill, thank you for \--

MR. GORMLEY: I appreciate it.

CHAIR BRANCH: \-- a good presentation this morning. I appreciate it.

MR. GORMLEY: Thank you for your time.

(Applause.)

CHAIR BRANCH: Okay. We have Bruce Leinster from the Information
Technology Association of America, who is going to give us a few brief
remarks this morning.

MR. LEINSTER: You are leading the witness.

CHAIR BRANCH: You are the only thing that stands between this group and
lunch. So, be aware.

MR. LEINSTER: Or Tiger\'s tee time.

I will expand a little bit on some of the comments Bill made,
particularly with recommendation regarding pricing.

Good morning. My name is Bruce Leinster and I am speaking today on
behalf of the member companies of the Information Technology Association
of America. ITA is the premiere IT and electronics industry association
working to maintain America\'s role as the world\'s innovation
headquarters.

Following its April 2008 merger with the Government Electronics and
Information Technology Association, ITA is the largest industry
association representing technology companies supporting the federal
government. The association provides leadership and public policy
advocacy, market research, standards development, and business
development to some 350 corporate members offering internet software
services and hardware solutions to the public and commercial sector
markets.

My comments today are intended to describe industry\'s expectations for
the General Services Administration IT Schedule 70 program. Because the
products and services that we offer to government agencies on our
respective schedules are in fact commercial products and services, our
hope and expectation is that our products would be sold through the
schedule in as close to a commercial manner as possible. We believe that
the IT schedule is conducive, perhaps more so than any other federal
contract to creating that commercial environment.

Today, I will offer a few ideas which we believe will move us even
closer to that ideal. To be sure, we know that the federal acquisition
process will never replicate the commercial marketplace. However, our
expectation for the GSA schedule program is that it should provide an
unencumbered process for procuring commercial products in a competitive
setting and in a timely manner. Creating this environment would require
use to the fullest extent practical of commercial terms and conditions.

Some characteristics of such a process are as follows. First, fast and
easy to use, offering streamlined processes with an emphasis on
simplicity. Ordering guidelines for customers that are easy to
understand and follow. Terms and conditions for contractors that are
easy to understand and follow. An automated system managed by GSA to
support task award and administration.

Secondly, low administrative costs for government and contractors.

Third, open solicitation with competition at the task order level
administered by the procuring agency.

Fourth, wide acceptance by government agencies and contracting officer.

Fifth, consistent interpretation of terms, conditions, and guidelines by
GSA across all regions.

Sixth, specific requirements detailed at the task order level.

Seventh, task order requirements and sufficient specificity to determine
contract type at the task order level.

Eighth, timely processing of modifications to keep the contract current
and competitive.

Nine, use of blanket purchase agreements.

And ten, the ability to provide integrative solutions through the use of
contractor teaming arrangements.

Now, a lot of this is already being done, as we know. And we think there
is room for improvement.

In the commercial marketplace, terms vary by vendor. Prices are set by
volume, competition, and negotiation and are typically not subject to
re-determination or adjustment. Business and pricing practices are not
required to be disclosed or certified except when necessary to address a
particular issue of customer satisfaction. Tracking and reporting of
sales activities are not required and there is no limitation or
restriction on the place of manufacture or the source of materials.

While there may be exceptions in particular customer negotiated
settlements, any such pricing, tracking, or sales reporting
requirements, are not subject to the type of penalties associated with
federal acquisitions. In the federal acquisition environment, the risk
of failing to comply with the myriad of government unique requirements
in terms and conditions, even when using the GSA IT schedules, poses a
far more menacing prospect to commercial contractors than we face in the
commercial marketplace.

The False Claims Act, big protests, the Buy American Trade Agreement
Acts, the Truth-In-Negotiation Act, pre and post-award audits and
suspension and/or debarment of examples of government unique
requirements that drive up the costs for contractors and which we don\'t
see in the commercial marketplace. We don\'t face these requirements
when selling in the commercial marketplace.

So, when suggestions are made that commercial customers impose similar
data submission requirements on their suppliers as does the government,
it must be understood that the risks associated with any such
requirements are far greater in the federal environment.

Indeed, the cost of compliance to commercial companies in federal
acquisitions include one, process tools and resources to track
disclosures, to maintain the ongoing accuracy and updates of those
disclosures. Two, process tools and resources to track the source of
materials, products, and place of manufacture, i.e., Trade Agreements
Act. Three, audit staff to support pre and post-award audits. And four,
the maintenance of separate cost accounting structures.

Further complicating the process with regard to GSA schedule
transactions, is the fact that there is no central government buyer that
can aggregate sales, conduct negotiations and provide a single location
for delivery and invoice processing, an arrangement typically
encountered in the commercial marketplace.

Of course, industry has chosen to participate in federal acquisitions.
And we understand the barriers we face in so doing. However, the
Congress has recognized its dependency on commercial products and
services. And, in an attempt to encourage

nontraditional government contractors to offer their products and
services to the government, it has alleviated many such barriers through
legislative initiatives, such as the Federal Acquisition Streamlining
Act, the Clinger-Cohen Act, and the Services Acquisition Reform Act.

Unfortunately, even as we speak, we face new chilling obstacles in the
form of proposed or contemplated initiatives, presenting issues such as
changes to the definition of a commercial item, bid protests on multiple
award, indefinite delivery, indefinite quantity contract task orders,
contractor disclosure requirements, increased authority and autonomy of
agency inspector generals, as well as tampering with the manner in which
time and material contract rates are established. Something emphatically
different than what we faced when establishing such rates in the
commercial marketplace.

Now, I would like to draw the panel\'s attention to the issue or
pricing, specifically with respect to provisions in the Clinger-Cohen
Act and the Services Acquisition Reform Act.

In the commercial market, prices are generally established between
buyers and sellers based on such factors as committed volumes,
competition, relationships, strategic sourcing, and the business
environment at the time of price establishment. Of course, buyers and
sellers do negotiate and prices are established for individual
transactions, based on the factors mentioned above.

However, and this is important, sellers are free to set the initial list
price at whatever level best serves the seller\'s business objective.
There is no central facilitator setting seller\'s list or catalogue
prices. In fact, sellers often don\'t even publish a list or catalogue
price.

This reality leads us to our recommendation to further enhance the
utilization of the GSA IT schedule and to remove one of the most onerous
encumbrances facing any schedule contractor. That is, the manner in
which prices are set and published in our GSA schedules.

And here I will differ somewhat with the answer that Bill gave when the
question was asked about do we need a government price. During the first
two sessions of the panel, there was prolonged discussion of the manner
in which prices are set. We heard about the so-called most favored
customer concept, as well as the manner in which prices are subsequently
adjusted, i.e., the price adjustment clause. One consistent theme in
those deliberations was the incredible complexity associated with that
process; data disclosure, pre and post-award audits; certifications;
etcetera. Lend to those complexities and create a minefield of problems
for participating contractors.

Prior to Clinger-Cohen, the negotiated price had a great deal more
significance than it does today. It was the price which governed every
schedule order. Because offering any agency a better price, triggered a
price reduction action of that scheduled price. It was, in fact, the
major reason that the schedule was infrequently used, as agency
contracting officers were criticized for buying at the government\'s
list price. Instead, requirements were acquired using nonschedule open
market solicitation processes, that were far more costly to both the
agency and contractors.

And I will speak to Bill\'s point. I, too, had a discussion with Eleanor
Spector. It happened to be at one of our quarterly DPAP meetings that we
had then and we have now with Sheay Ashad. And we were raising the issue
of schedules. And this was before the introduction of spot prices. And
she said Bruce, I will never allow my contracting officers to pay what
is, in effect, the government\'s list price. Well, as we know, all that
changed.

With the advent of Clinger-Cohen, the ordering rules pertaining to the
GSA IT schedule were revised. These new rules became responsible for the
explosion in the use by agencies of the GSA IT schedule, as well as the
result in order of magnitude increase in revenue derived from schedule
transactions.

More significantly, these changes have made the published GSA schedule
price all but irrelevant. This is because real prices are established
not at the award phase of the contract, as Bill and others have cited,
but rather at the task order level, where individual agency requirements
are defined and fierce competition drives the actual task order prices.
Before Clinger-Cohen, this phenomena simply did not exist.

This begs the question why must we suffer through the negotiation/price
reduction process when such prices in fact govern very little of the
revenue attributed to schedule transactions. The revenue. I am not
talking necessarily the number of transactions but on a total revenue
basis. The vast majority of revenue is not at the GSA schedule price. It
is at less than that schedule price, due to competition at the task
order level.

The GSA IT schedule program is the most commercial acquisition tool
available to agencies and participating contractors. This is especially
true since the advent of the Clinger-Cohen Act and it is appropriate
because the products and services we are offering are the same as those
we sell to our commercial customers. However, this tool can be
significantly improved and made more commercial by addressing the issue
of pricing. Consequently, ITAA would like to recommend that the panel
seriously consider adapting two provisions. One is contained in the
Clinger-Cohen Act and originally offered as a pilot program. And the
other recommended by the acquisition advisory panel created by section
1423 of the Services Acquisition Reform Act and Alan Chvotkin, you
referred to that earlier.

The first provision dealt with the IT schedule establishment of product
prices, as it is set forth in Title 54 of the Clinger-Cohen Act. I say a
copy is attached but unfortunately, I don\'t think we did bring copies.
But we will provide them, if you need them.

The second provision addresses the pricing of hourly rates and is listed
as recommendation number four in the Acquisition Advisory Panel\'s
Report to the Congress. It, too, can be submitted but Glenn, I think you
asked earlier for a copy of the SARA panel report. So, I am guessing you
have that. But if you need it, please call Olga or Trey Hodgkins and we
will make it available.

What is important here is that both models are based on the reality that
real prices are established through competition at the task order level.
And both models propose the elimination of any negotiated published
schedule price, rather these prices would be set by individual vendors
and published on GSA Advantage, the electronic online tool to which both
agencies and contractors have access.

If we genuinely believe that competition is the most effective price
driver and the SARA Panel certainly reiterated that belief and found
that competition was the preferred driver in the commercial market, then
we strongly believe that this is an idea whose time has come for
implementation and we urge your consideration.

We recognize that this is well beyond what might have been contemplated
by panel members at the outset of deliberations but what better
opportunity to act on a concept that would indeed be a tremendously
refreshing step in the direction of creating a more unencumbered,
commercial-like environment, than the opportunity created by the
establishment of this panel.

Of course, not all transactions are achieved through competition.
However, with the availability of prices from every vendor on GSA
Advantage together with what should be some awareness among agencies of
what they and others have previously paid for the same items, agency
contracting officers should be very informed negotiators when they are
in the unlikely situation of bargaining absent the presence of
competition.

Members of the Panel, ITA would enthusiastically make its members
available to assist you in any further deliberations of this proposal.
This concludes my remarks and I, together with my colleagues here
present, if that is possible, would be happy to answer any questions.

Thank you for this opportunity.

CHAIR BRANCH: Thank you, Bruce. Alan.

MR. CHVOTKIN: Thank you, Mr. Chairman. One quick question and then a
second one.

Bruce, could you please prove that ITA is the premier association?

(Laughter.)

MR. LEINSTER: My company belongs to both \-- two of the three other
associations represented. Olga made me say that, Alan. I told you that
before I started.

MR. CHVOTKIN: Most of the recommendations here address Schedule 70.

MR. LEINSTER: Yes.

MR. CHVOTKIN: To what extent are they applicable across all of the
schedules or could they be? And could you elaborate a little bit on any
unique differentiation between products and services, even on Schedule
70 in terms of the recommendations?

MR. LEINSTER: Yes, I don\'t see \-- you are correct. Our comments are
focused principally on the IT schedule, where most of our business is
driven. And because of the vast amount of products and services that we
sell, this whole process we go through is much more impactful than on
other schedules. But I don\'t know why it couldn\'t be applicable,
perhaps someone can help me here but I don\'t know why it wouldn\'t be
applicable to other contracts, such as MOBIS and PES, and so forth.

The differentiator between products and services, in this context, Alan,
I don\'t see one. The commercial marketplace deals with both products
and services in the manner I described and it is driven through
competition, not through some artificial negotiation where we set some
artificial published price. It is not the price that is used to settle
business. I think Bill reiterated that as well.

CHAIR BRANCH: April and then Larry.

MS. STEPHENSON: Bruce, you raised a number of issues here. And in the
interest of time, there may be additional questions that we submit in
writing. Hopefully that would be all right.

MR. LEINSTER: Please.

MS. STEPHENSON: But there is one comment you made towards the end if you
could clarify here and it is at the last sentence of your second to the
last paragraph, where you state that together with what should be some
awareness among the agencies of what they and others have previously
paid for the same items, contracting officers should be very well
informed negotiators.

Absent getting that information from the contractor, how would you
envision that agencies would know what other agencies have paid for the
service?

MR. LEINSTER: I don\'t think that burden should be on the contractor I
think that burden should be on intelligent buyers. And I don\'t see any
reason why people within NAVSEA don\'t know what NAVSEA has paid for
these products and services previously. Make me defend my prices.

MS. STEPHENSON: Well, the question isn\'t what NAVSEA is, it is when
NAVSEA goes to purchase it, how do they know what you have offered to
Treasury, to Education, to Homeland Security, to a number of other
customers? You would have that best source of that information. I would
assume that companies, contractors would keep track of some sort of
information in knowing how their sales are going, what price points to
use, advertising, etcetera, etcetera.

So, I guess I just don\'t understand why it is difficult for a
contractor to provide that type of data to a customer, rather expect
that that customer would know what all the other customers across the
federal government were buying it for.

MR. LEINSTER: Well, first of all, when you talk about price points and
advertising and marketing, there I think we are dealing with, once
again, what I would call our published prices.

With regard to individual transactions where prices actually are really
set, my reluctance to provide anything to anybody would be, once again,
the whole issue of false claims and certifications and so forth and so
on. You didn\'t tell me about the deal in Omaha. Well, I didn\'t know
about the deal in Omaha when I was talking to you. It was there. It gets
back to the Truth-In-Negotiation Act, I suppose. You know, lack of
knowledge doesn\'t excuse you.

So, I don\'t think that burden should be on the private sector. I think
it should be on the government. The government should create, David and
I have had this discussion, the government should create or try to
create databases as to what they are paying for services.

We have always said an intelligent buyer is the best kind of buyer to
deal with. Make me explain why I have given other people better prices
under different situations. And remember also, April, I think this is
very important. This only should be a consideration when we are in a
sole source mode. And sole source should be very limited. With the
products and services that we sell, why are you ever in a sole source
mode? Now my sales people will kill me but why?

CHAIR BRANCH: Larry and then Judith.

MR. ALLEN: Bruce, a couple of times you referred to commercial terms and
conditions and then you gave us some specifics of government terms and
conditions. Could you maybe offer a couple of specifics of what a
commercial term and condition would be that drives commercial contracts?

MR. LEINSTER: Yes, when I talk about using commercial terms and
conditions, I am not only talking about relying on our terms and
conditions but I am also looking for the elimination or the absence of
government-unique terms and conditions to the fullest extent
practicable.

But Larry, I am talking about things like warranty provisions, software
license provisions, provisions dealing with limitation of liability,
which is a prevalent commercial practice. You look at any commercial
contract on the back of the product you buy and it will talk about
limitation of liability. That is not a government practice. We want a
marketplace that relies on our terms and conditions, as opposed to
government unique terms and conditions when we are selling and
delivering commercial products and services.

CHAIR BRANCH: Judith.

MS. NELSON: All right. My question goes to \--

MR. LEINSTER: I don\'t know about CSPs.

MS. NELSON: I\'m not going to ask about CPSs, Bruce, I promise. My
question actually goes back to what April asked. And I am wondering if
even the government can be an educated buyer if what you are offering is
an integrated solution. Because what we are talking about here is a fair
and reasonable pricing. So, \--

MR. LEINSTER: April, what is the best, what is the ultimate best
determination of fair and reasonable? Adequate competition. And
competition \-- solutions, buying solutions sole source really ought to
be unforgivable. So you have every GWAC is going to be ultimately based
on competition at the task order level.

That is the only answer I can give in terms of \-- I don\'t know how you
would \-- we wouldn\'t have a published price for a solution because we
don\'t know what the solution is until the agency comes out with a
requirement.

CHAIR BRANCH: Bruce, I have a question. You know, you are the latest in
a long line of presenters to this panel who go back to the premise that
the market should set the prices through competition. I guess I would
like to hear your thoughts on whether the committee might recommend to
GSA that schedule contracts be solely be limited in their use to their
situations in which we have competition.

MR. LEINSTER: I would be cautionary because, as you know, Elliott, there
are times when sole source is appropriate. And the appropriate J and A
has to be generated to justify the use of sole source. So why take away
the schedule as a tool to use, when in fact it has been determined. In
fact, when FAR Part 12 came out and it said T and M contracts are okay
so long as they are awarded competitively.

You know my question was if it has been determined that sole source is
the appropriate vehicle for whatever reasons and it is properly
justified through the J and A process, why take away the T and M
contract as a potential tool? I guess that would be my response as it
relates to the schedule? Why take the schedule away once you have
determined \-- unless you are saying you can\'t \-- then the government
is at a disadvantage because it can\'t negotiate a good price absent
competition. Well, you are in that situation when you are not using the
schedule, if it is sole source.

CHAIR BRANCH: Let me just ask a follow-on to that. I mean, it would be
my observation that under Part 8 that we don\'t generally generate
Justifications and Approvals for other than full and open competition,
although we do document the file to why we are going to a source.

So, would an alternative be to tighten up the process by which we
justify a sole source use to the schedule? Because I will tell you a J
and A gets a whole lot of scrutiny than a justification to use the
schedule on an other than full and open competitive basis gets, at least
in my agency.

MR. LEINSTER: I did not know that, Elliott. And my colleagues might
shoot me on this but I wouldn\'t have a problem, of course, I am
retired, I wouldn\'t have a problem \--

(Laughter.)

MR. LEINSTER: I would not have a problem with strengthening those
provisions.

CHAIR BRANCH: Okay. David.

MR. DRABKIN: Since you brought it up, I thought it was probably a good
place for us to fill in some blanks. In fact, it was not permitted to do
sole source procurements under the schedule until we amended the rules
back in 2004, I think it was, where we did in fact add the authority to
make sole source awards, principally because many of our customers were
doing it anyway and they weren\'t following any rules just doing sole
source.

Secondly, the word multiple award schedules has been at least the policy
perspective that you have got at least three vendors who can perform on
that schedule the same functions. If you don\'t, you are not supposed to
have a schedule. And we know that there were some schedules which had
only one or two vendors on them, offering a particular type of service
\--

MR. LEINSTER: Schedules or task orders?

MR. DRABKIN: Schedules.

MR. LEINSTER: Schedules?

MR. DRABKIN: Schedules. And we know that FSS, the former FSS was
supposed to be looking at it. So, if there is a multiple award schedule
that doesn\'t have at least three vendors on it, that is a violation of
our own internal policy.

And it is true that, looking at the language in 8.4 it could be
tightened up to make it clearer when you are using sole source that you
are following FAR Part 6 and not some abbreviated portion of FAR Part 6.
Just, since you brought it up.

CHAIR BRANCH: Judith.

MS. NELSON: If you are recommending \-- there has been a recommendation
by several previous panel members \-- not panel members but, well, panel
members and presenters that the commercial vendors set standard
professional labor categories to be used on schedule.

So, if ITA is proposing that there be un-priced labor categories, along
with that, would you propose that there be a standard set of
professional labor categories \--

MR. LEINSTER: If that were practical.

MS. NELSON: \-- with standard descriptions?

MR. LEINSTER: Again, Judith, if that were practical. My reluctance is we
are commercial companies and these are the categories that we provide in
the commercial marketplace. So, to make me fit into one size fits all
would be a distortion of my go-to-market strategy, my go-to-market
practice. We have had this discussion with David before as well about
why can\'t we standardize these categories because I guess it is
confusing as a buyer to say one company\'s program managers are
different than another company\'s program managers.

So, it is a fair question and I am just reluctant to do anything that
would pigeonhole us and make us depart in anyway from our commercial
practices.

And getting back to your CSP question, if we set our own prices, we
wouldn\'t have CPSs, I don\'t think.

CHAIR BRANCH: Bruce, thank you for a very thought-provoking presentation
this morning.

MR. LEINSTER: Thanks, Elliott.

CHAIR BRANCH: And I think we will reserve the right to get some
questions, follow-up questions to you in writing. We would appreciate
that.

MR. LEINSTER: Thank you.

CHAIR BRANCH: Thank you.

(Applause.)

CHAIR BRANCH: Okay. It is about 12 after 12:00 and I know we were
scheduled to stop at 12:00 and break for lunch until 1:15. Let me
suggest that we reconvene at 1:30 to give everyone time to kind of wind
their way through the rush hour traffic in the Central Business
District. So we will start again at 1:30.

(Whereupon, at 12:12 p.m., a lunch recess was taken.)

A-F-T-E-R-N-O-O-N S-E-S-S-I-O-N

(1:29 p.m.)

CHAIR BRANCH: All right. It is 1:30 and we will continue with our
presentations this afternoon. So, next on our list is James Phillips,
who is Vice President, Executive Vice President for Centre Consulting.

Mr. Phillips?

MR. PHILLIPS: Thank you for having me here. My firm is Clinger-Cohen. My
firm is a schedule holder. We hold a MOBIS schedule, where we provide
acquisition support and training and we are also a Schedule 69 training
schedule holder, where we provide training services to federal agencies.

We also operate and maintain a contracting center called the federal
contracting institute where we provide public seminars, two acquisition
professionals, both commercial and government. And I want to stress that
that training puts me into contact on a daily basis with the acquisition
people working in the trenches. And my comments today are going to
reflect a lot of the concerns I hear from them.

Finally, I do advise people who are trying to comply with the unique
issues on schedules. So, I have a very good understanding of some of
their frustrations.

In terms of focusing my remarks, I wanted to kind of grab hold of a
central theme that I think really makes the schedule programs essential
and important, so that we can reinforce that as we look at these
difficult pricing questions that have come to the floor. And that theme
I would stress or suggest is flexibility. The schedules really are a
highly flexible procurement tool. Why do I say that?

Well, first offerors make an offer that mirrors their unique offerings
or unique capabilities. They are not responding to government
specifications. They are telling the government, here is what we offer.
Here is what may be of interest to you. Likewise, from the buyer\'s
perspective, it is also highly flexible. They can go out and do market
research using tools like GSA advantage and e-Buy, assess what it is
they want to buy and then they can do streamline procurements with
considerably less effort than if they had to resort to FAR Part 15
procurements.

So, the schedules truly are a flexible tool and I would hope that we
would strive to maintain that flexibility going forward.

Where then do I see trouble on the pricing side where the flexibility is
being jeopardized? Well, I have identified three areas that I would
bring to your attention. The first one is this notion that we have today
that mass prices have to be the lowest price an offeror has extended to
any class of customer. That has never been correct. As a legal matter,
that has never been the requirement. That notion is confusing and it is
polarizing in the acquisition community and I submit it is bad policy.

The schedules are a starting point for entry into the federal market. It
is the starting point for most large commercial companies that are
focused on federal sales but don\'t have a strong government sales
experience. These companies focus on pricing relative to volume
considerations. You want a better price, you need to buy more. So,
coming in the door that you have to give the lowest price simply does
not work.

It also detracts from the fact that we really want to get to best value
buying. When you look at the ordering procedures, agencies aren\'t told
to buy based on low price. They are told to do a streamline best value
source selection and select based on what is the best value offer. So,
if you tell offerors coming in the door, you can\'t come in unless you
give us your lowest price, you are going to turn a lot away and you have
just confused the rest that have entered. So, I would submit that we
need to be clear up front and get away from inaccurately communicating
to people that lowest price is the mandate for getting on schedules.

The second issue that I see as being very problematic to flexibility is
the mods process. When I say mods I mean modifications. A great
attribute of the schedules program is that they can be updated as
companies have new offerings through a modification. The problem we have
today is it takes a long time to do mods. That is frustrating to sellers
because they can\'t make their new offerings quickly.

It is also frustrating to buyers. They are being called upon today to
hold up their procurements while mods are being processed on the
schedules. So both sides are frustrated with that feature. So we need to
look at efforts to streamline the mods process.

My view from looking outside the process is that a big impediment is the
fact that we now have three baskets that contracting officials have to
deal with at GSA; new offers, modifications, and renewals. And renewals
have increased tremendously in the last five to ten years because the
schedules program has grown. They are often extremely complex and time
consuming. I would recommend that GSA look at putting renewals in a
separate basket and assigning those to specialists and letting the
majority of the workforce focus on the bread and butter transactions,
new offers and mods.

The final area where I see trouble is this whole notion of are the
schedules really friendly to commercial companies? Specifically large
commercial companies. It is not mystery why the schedule program grew
from 5.6 billion in 1997 to nearly 40 billion today. Congress enacted
the Clinger-Cohen Act and the Federal Acquisition Streamlining Act which
basically said, we are going to have a preference for commercial items
and the government is going to buy more like buyers buy in the
commercial space.

And I would submit that a promise was made to commercial companies that
we are going to, to the maximum extent possible, reflect commercial
realities when we do procurements. Well, we are now ten years later and
we are seeing that there are serious road bumps. One major road bump in
the price reductions clause. If you are a large commercial company and
you have a lot of salesmen selling to a large number of customers, it is
extraordinarily burdensome to comply with that clause. And that is a
real deterrent to commercial companies entering this market. And a lot
of them in my opinion, are evaluating leaving the market.

That is bad for the government. If you have these large commercial
companies leave the market directly, you are not going to have the
newest technology available to government buyers and the market will
then have to be serviced by resellers, which means the government will
get charged markups by middlemen and resellers. We are much better
served if we can find a way to make the schedules friendly to these
large commercial companies. And I will focus specifically on the price
reductions clause.

I would also focus on this whole notion of anti-kickback act, which we
have seen lately, which basically tells companies that if you have a
rebate program or a partnering program, you are committing fraud. If
those kind of programs are accepted in the commercial market, do we
really want to be telling these companies they are violating the law and
be subject to criminal sanctions if they do the same thing in their
vendor relationships in the government market? I would strongly urge
that we revisit that issue as well.

CHAIR BRANCH: Thank you, Mr. Phillips. Does anyone have questions for
this presenter? Debra and then Jan.

MS. SONDERMAN: Do you differentiate in your recommendations between
services and products?

MR. PHILLIPS: You know, services are different because we use statement
of works for them. So we always have to have that differentiation in
there. I think a lot of the low price problems that I highlighted, and
frankly the Price Reduction Clause problems I highlighted are more
pertinent in the case of products. Services, the issues don\'t go away
but they are less pronounced, in my opinion.

MS. SONDERMAN: Thank you.

MR. FRYE: Could you expand a little bit more on your assertion that the
government is going to be charged more by resellers because business are
opting out of the schedules?

MR. PHILLIPS: Well, look, somebody has to get paid in this transaction.
And if the government can do a good job negotiating with that vendor and
that vendor now no longer is available and they have to go through a
middle man, there is a markup borne by the middlemen. I have done a
study of whether the government gets higher or lower prices. But just
that reality that there is a markup that the resaler has to make
suggests that that may not be a good deal for the government.

MR. FRYE: Do you know of instances where a small business, for instance,
has been set up as a front because a large business has not wanted the
government to see their pricing structure?

MR. PHILLIPS: I am not aware of instance, nor if I was aware would I
disclose them here.

(Laughter.)

MR. PHILLIPS: I will tell you I actively counsel large companies to
consider using resellers, if they do not have the wherewithal to grab
hold of these compliance challenges. And I tell companies very clearly,
if you want to enter this market, you had better be able to invest in
compliance. And so I am not telling them to go through a reseller as a
front, but I am telling them you need to know what the risk and going
through a reseller may be a better model for you.

CHAIR BRANCH: Debra.

MS. SONDERMAN: You recommended that the renewals portion of, or that
basket of the three baskets you described be separated. This brought to
mind some things I was thinking about listening to folks this morning.
Is the size of GSA\'s workforce working on the schedules program, I
think 300 was what we were told for their 17,000 contracts, is that
adequate to handle the workload, in your opinion?

MR. PHILLIPS: It obviously is not and GSA will tell you it is not. I
don\'t think there is any dispute about that. And so the size is not
adequate and the number of transactions and their complexity have been
increasing. So, it is not a good situation.

CHAIR BRANCH: Larry.

MR. ALLEN: Thanks. You had talked about companies using resellers. It is
a fact though that in certain areas of commercial commerce, you buy from
resellers as a matter of course. You don\'t go through manufacturers all
of the time.

For example, if you want to buy Microsoft products, you don\'t go to the
Microsoft store. Right?

MR. PHILLIPS: Correct. And that really reflects the vendors\'
orientation on how they want to approach markets.

Going through resellers is a perfectly valid market. Why would you do
that? Well, you want to get more feed on the street, if nothing else.
But many companies don\'t have that orientation. They want to sell
direct. But then they find they are frustrated in attempting to do that
because they just aren\'t well positioned to deal with these compliance
challenges.

CHAIR BRANCH: Jim, I guess the question that I have is if you take, you
know, these are public funds. And I understand that certainly no one who
does business with the government gets up in the morning and says I
think I will cheat one of my biggest customers today. But they are
public funds and we have, I think, some obligation to the taxpayer with
respect to transparency, not only of the procurement process, but also
expenditure of these funds. So, if we were to do away with these
compliance issues, what might we substitute for compliance to guarantee
that transparency both in the process of spending government funds, as
well as the transparency of our fiduciary responsibility?

MR. PHILLIPS: Well, if we look at the price reductions clause, that is
premised on the fact that we need to have near instantaneous alignment
between a contractor\'s GSA pricing and their commercial pricing. The
standard under the clause is 15 days after a transaction. That triggers
an obligation to make a disclosure.

So what I would question is, yes, we need transparency but are the
burdens associated with that clause worth those consequences and can we
get most of what we need by other means. For example, instead of saying
we have instantaneously get alignment, maybe you decide periodically
every two years contractors have to update their CSP. Now you would get
the same information. You would find out where their GSA price aligns
with their commercial sales practices but it would not be as burdensome
to the company.

I would also say, part of the problem with a price reductions clause is
it is viewed as being a huge penalty or a \"gotcha\" to contractors. And
when they made mistakes, then it is a question of have you committed
fraud and how much are you going to pay back to the government? We ought
to be empowering these companies to make correct disclosures at periodic
time frames without this polarizing \"gotcha\" syndrome.

CHAIR BRANCH: Other questions for this presenter?

(No response.)

CHAIR BRANCH: Okay. Thank you \--

MR. PHILLIPS: Thank you.

CHAIR BRANCH: \-- very much for your remarks this afternoon.

Oh, sorry. One more here. Judith.

MS. NELSON: I don\'t know that it is so much a question but perhaps just
to clarify for the panel because it strikes me. And if you could turn of
your mic because I think we are conflicting with each other.

Mr. Phillips, as you make the remark that we ought to be making the
opportunity for industry partners, contractors to update their
commercial sales practices, I am not sure that the panel members are
aware of all of the contractor clauses in the GSA schedule contract.
There actually is a provision that requires contractors to update their
commercial sales practices at any point at which a schedule contractor
adds any product or service to their contract or requests a price
increase. So, that actually exists within the contract.

In addition to which, a contractor is encouraged to and free to at any
point in which they do change their commercial sales practices based on
the Commercial Sales Practices clause, update their commercial sales
practices to keep them current, accurate and complete.

And so I am not sure that \-- just for point of clarification.

MR. PHILLIPS: And what you said, I agree with. Those provisions do
exist. But if they don\'t process any mods, then they would not have an
opportunity or a basis for updating their CSP. And I would view this
more as let\'s use the CSP to do price checks. Because the goal is to
make sure the prices are reasonable and allow us to then possibly
mitigate the adverse elements of the price reductions clause.

CHAIR BRANCH: Yes, Jackie.

MS. JONES: There are opportunities to update when there are changes. So
anytime there are changes, the contractors are required to update their
CSP information.

MR. PHILLIPS: That is correct.

MS. JONES: Yes.

MR. PHILLIPS: I don\'t think most of them understand that, however. And
in fact, I think most contractors check the box that says that their
CSPs remain unchanged. Not that that is correct in doing that but just
anecdotally in my review of the market, I think that happens probably in
80 percent of the mods you see.

CHAIR BRANCH: Other questions or comments for this presenter?

(No response.)

CHAIR BRANCH: Mr. Phillips, thank you very much \--

MR. PHILLIPS: Thank you.

CHAIR BRANCH: \-- for your remarks this afternoon. Our next presentation
will be from Mr. Eldred Jackson from the Department of Justice. Mr.
Jackson?

MR. JACKSON: Good afternoon. I want to give you all a stakeholder\'s \--
this is a stakeholder presentation in reference to my view as the
Director of Procurement at the Agency and what we see as what is going
on with the GSA schedules in the MAS program.

My goal is to share with you a CO\'s perspective. Increased
communication, shared common mistakes made by offerors, and improved
relationships between the government and the contracting communities.

The Acquisition Management Division at the Office of Justice Program
supports all phases of the acquisition process from acquisition planning
to post-award, for various goods and services for the Office of Justice
Programs. We utilize the multiple award schedules program to acquire
various goods and services, including IT equipment and services,
conference support, video film production, temporary administrative
support, accounting support, training and technical assistance, audit
support, language services, various requirements for MOBIS, office
supplies, environmental services, and the HR schedule.

Our expectations of vendors are the following. Rule number one, a good
team. For respondents to a government proposal, a good team goes a long
way. Unfortunately, all the time we do not see this.

Rule number two, key personnel. If the RFQ state key personnel must be
present, they should be there. This has also been an obstacle with
various vendors.

Rule number three, management approach. Vendors should know what team
members shall be executing tasks as outlined in the RFQ.

Rule number four, and a very important rule, quality control. Vendors
should always have a quality control plan that reflects their commitment
to the project.

Rule number five. The government expects and respects creativity. The
vendor\'s response should not be generic or elaborate, it should remain
constant to the RFQ and sometimes that doesn\'t happen.

Rule number six, never assume anything. Please ask all questions during
the RFQ question and answer period.

Rule number seven, oral presentations. Statements made during the oral
presentation should reflect the technical proposal.

Rule number eight, past performance. Incumbent vendors should not rely
on their past performance when responding to RFQs. We see this on a
daily basis.

Rule number nine, when agencies issue an industry date on a major RFQ on
e-Buy, they are seeking competition. We are truly seeking competition
when we go out on the e-Buy.

Rule number ten, teaming arrangements are encouraged, if a vendor feels
that is the best approach when responding to an RFQ. We understand some
major procurements you may need to consult with another vendor. We
encourage that.

This is our wish list for GSA. MAS wish number one. Better direction is
needed when tasks may relate to various schedules. Scenario. I have
heard vendors or various people from GSA say in reference to a
requirement for an IT conference, some people will tell you use MOBIS.
Some people would tell you use the conference schedule. Some people
would tell you use the IT schedule. It depends on who you speak to
within the organization or within the vendor community.

MAS wish number two. GSA contracting officers should visit customer
agencies and participate in the oral presentations when invited. I think
if they would come to some of the agencies and actually see what we
experience in oral presentation time period, it would be eye-opening.
The most embarrassing situation is when you have oral presentations and
you have seven or eight vendors do oral presentations as part of their
technical proposal. And the panel, after the person leaves out of the
room, the technical evaluation panel says, I will say the famous words
of Jerry Springer, \"Where did you get these people from?\" It is not a
good thing.

(Laughter.)

MR. JACKSON: MAS wish number three. Interested government councils are a
great communication tool but I wish more emphasis was on a government CO
relations. The Service Industry Government Council is a great thing but
I wish somewhere within GSA they would have more communication between
GSA COs and the agency COs with reference to councils of that type of
nature.

MAS wish number four. More training is needed for vendors on how to
effectively market their schedules and to agencies on how to effectively
buy services on their schedules.

Wish number five. Vendors need to know that big brother is watching.
Agencies should not feel that after a task order is awarded, they are on
their own. And sometimes we feel we are on our own. We do have some
people that we can go to within GSA but, as a whole, sometimes people
feel like, once this is awarded, you are on your own.

Insight number one. GSA has failed the vendor and the government
contracting community, if a contract is not renewed because of lack of
sales or revenue by a vendor. Example, we all know that if a contract is
not awarded, is not renewed it is because GSA has felt that they just
have the overhead of having this contract on the books but it hasn\'t
gotten any revenue. What has GSA done to help this market vendor market
its sales by having seminars? As I stated earlier, those are the type of
vendors who are coming to our oral presentations doing horrible jobs.
Well, I think if GSA would come to some of these vendor oral
presentations, they would see why some of these vendors are failing.

Insight number two. Unfortunately, some COs believe that GSA is only
interested in revenue in lieu of customer service. That is why a lot of
COs do their own commercial item contracting or utilize other agency
IDIQ contracts.

Insight number three. From a director\'s standpoint, when hiring 1102
personnel, there is a plus when an applicant has experienced utilizing
the various MAS programs offered by GSA.

Insight number four. The dictionary is the only place where success
comes before work. In the MAS program, success comes after you have been
award task delivery orders from submitting best budget proposals to a
customer agency. The work is updated in the MAS schedule contract. A lot
of vendors really and truly feel, after they have gotten multiple award
schedule, you know, they have made it. The work has only just started to
begin.

Insight number five, win-win. When utilized correctly by the government
and vendor communities, GSA schedules are a win-win solution.

And the final insight, the MAS program is effective because it all
starts within the GSA, the vendor community and customer agencies.

And I do support the program. If you have any questions, please feel
free to contact me.

CHAIR BRANCH: Mr. Jackson, I think the questions will start right now.
Don, and then Judith, and then April.

MR. ERICKSON: Thanks very much for your presentation. I have a few
questions. I will ask one now and then defer to my colleagues and
hopefully come back.

My question goes to MAS wish number four in terms of training. I am
obviously concluding that you believe training is not sufficient. I
guess I more specifically am interested in knowing where you feel the
gaps are in training offered by GSA for both the workforce and for the
vendor community.

MR. JACKSON: Okay. I try to go to the various conferences every year,
like the one in the Anaheim, California that GSA just had, but to take
the whole workforce out there is pretty hard. I worked with Mary Parks\'
group out in Kansas City and I also worked with her to collaborate with,
I guess, the GWACs within the San Diego area, where we basically had all
of those GWACs come to my office and train especially some Alliance,
Millennia, as well as the 8(a) Stars program.

So that was something that we set up and I would gladly set something up
like that where we can have someone do the same thing with schedule
staff. We do use Acquisition Solutions and they have the nice little
flow chart to help people with the program and we also try to use that
as a training vehicle.

As a whole, back to the 1102 within GSA, I am not saying there is a
problem with them in their training because you all are working with
them on different levels. But I think there is not a total commitment
from understanding what a CO as the task order level is doing, as a
whole.

They are awarding the overall commercial contracts. But at the task
order level, every CO that they speak to is not basically concerned
about the issues and concerns, maybe because of the workload and being
overwhelmed. The vendors, when they see that they can have their own BPA
or you can award a contract to them sole source, that is how they may
feel, based on what they see and just general brochures they have seen
out there in the vendor community. And I think more training needs to be
done to work with them in reference to understanding using the
schedules, especially on the services side correctly.

And I guess the biggest thing that I ran into within the last 45 days on
two occasions, once you have received an order from an agency, you
can\'t reject the order, three or four weeks down the line, after you
have started doing the services. You need to let the agency know right
away, I have an issue.

CHAIR BRANCH: Judith, and then April, and then Jackie.

MS. NELSON: Thank you very much, Mr. Jackson.

First of all, if we are definitely looking for 1102s with experience who
bought services. So, if you are volunteering any, we would love to have
them. I can tell you that.

UNIDENTIFIED SPEAKER: So would Glenn and so would Jan.

MS. NELSON: No but he is suggesting that we get them. So, I am going for
them, if he has got any over from DOJ, I will take them.

(Whereupon, comments were made without the use of a microphone.)

MS. NELSON: No, I am just saying. But coming from DOJ, you say your
insight number five, which is a win-win situation. When utilized
correctly by the government and vendor communities, GSA schedules are a
win-win solution. And maybe you are not able to provide this off the
cuff and perhaps you could provide it in a follow-up in writing but
since you are coming from DOJ as a customer of the schedules, do you
have any specific examples that you could provide the panel, where you
felt that, or you found that the schedules are able at a task order or
BPA level able to provide you not just in a timely manner, but at price
level, a good buy?

MR. JACKSON: Yes. We did the strategic soliciting for training and
technical assistance with the office of juvenile justice and delinquency
prevention and the office for victims of crime, a 60 million dollar BPA.
And it has been very successful. We saved a lot of money in reference to
that and it has been, we went out to the vendor community who basically,
the vendors who actually do a lot of training and technical assistance
with grantees. We consolidated like five contracts and it has been a
win-win.

The program offices are happy. The overall COTRs are doing a good job.
The vendor understands what their responsibilities are. And to me that
is when it becomes a win-win.

We also just did something recently in reference to conference support,
where we did a consolidated conference support requirement for 36
million dollars. We had an industry day. We had like 20, 25 vendors
showed up and we actually awarded to one vendor. And we were trying to
make sure they understand the new rules and regulations in reference to
that we all are going to now with conferencing and the guidelines in
reference to per diem and expenditures and those type of things. So, it
has been a win-win.

CHAIR BRANCH: April.

MS. STEPHENSON: Since today\'s meeting is focusing on expectations of
the stakeholder and you are certainly a stakeholder, what is your view
of the purpose of the GSA\'s schedule? We have heard a number of
different things over our first couple of meetings. It could be a
starting price. It could be the universe of contractors, a lot of
different things.

So, I had two parts to the question. One, what is your expectation for
the purpose of the GSA schedule and if you could change it in some way
that it would work better for you, how would you suggest changing it?

MR. JACKSON: I\'ll talk about the change clause first. The vendors,
vendor outreach, them understanding what makes successful proposals with
the agency. As a whole, I don\'t think enough of them know that. I know
that DoD goes through this extra scrutiny now about how you have to have
at least three vendors who have to make successful. I don\'t think
enough vendors actually have the toolbox, the toolkit to actually have
successful proposals. And that is what we see over and over again.

The pricing part, you know, we can work with that. For the most part, I
believe what has been awarded initially on a GSA schedule, and then as a
task order level, they could come up with their additional discounts in
pricing. And that has been successful. But it getting, like we said
earlier, best value. Getting their proposals, that is the main thing.

CHAIR BRANCH: All right, Jackie and then Glenn.

MS. JONES: Hi, Eldred.

MR. JACKSON: Hi.

MS. JONES: First, I would like to say thank you for coming.

I have a question. What do you expect from the schedules relative to
pricing?

MR. JACKSON: As I said earlier in reference, I guess, to commercial
pricing are better, in reference to what you all \-- I guess from my
understanding, a GSA contracting officer looks, when they are looking at
it before they award a contract to a vendor, an offer, they look at what
the price in there has established in the marketplace, in reference to
commercial pricing.

They accept that pricing or the best available pricing within that
nature where they actually can show inputs or something that effect.
That is the starting point for pricing and labor, from what I
understand. Anything that you want to negotiate with them, as far as I
am concerned is a better deal for the government.

For example, if a labor rate is \$45 an hour for someone, let\'s say a
conference planner. At the end of the day, when he comes in with our
proposal for a task order, if it said \$42.50 or \$40 an hour, I think
that is showing that the government has done even a better job at the
task order level to get better pricing and the best value.

MS. JONES: So do you use the schedule pricing as a benchmark in terms of
evaluating an offeror\'s response to an RFQ? Do you even look at it?

MR. JACKSON: Yes.

MS. JONES: Okay.

MR. JACKSON: We look at it. We basically ask vendors to show us their
overall, come in with your GSA pricing and show us what you have given
us at the task order level.

So for example, the vendor, for a conference management may give us all
of their labor rates for the conference management GSA schedule and then
it is attached with a level or the BP level give us what they are
offering the agency.

MS. JONES: Do you often find that there is a big variance in that?

MR. JACKSON: It depends on the requirement. As the gentleman said
earlier, if it is a large requirement, like I trade in that TA for 60
million dollars, you may get 30, 40 percent off of a price, or 15 or 20
percent. It depends on what the actual requirement is.

MS. JONES: Absolutely. I am just saying for small or just maybe an
average size requirement, do you see a big variance from the schedule
rates?

MR. JACKSON: I don\'t think no more than five or seven percent.

MS. JONES: Okay. Thank you.

CHAIR BRANCH: Glenn?

MR. PERRY: Thank you. Thank you, Mr. Jackson. Thank you for being the
first agency contracting officer to come before us and be willing to
tell us about how it is affecting at the agency.

And on that, you did \-- I don\'t want to belabor this. You used the
term win-win. Who are the wins for when you said that?

MR. JACKSON: Okay. Multiple things that I had mentioned earlier we buy
are commercial in nature. So if I have to go out and do a total FAR Part
15 requirement and I am going to get the same vendors, then it is
basically not saving me administrative lead time. So, it is a win-win
when we can actually use GSA schedules and we know that their pricing
has already been negotiated and you will have done some type of
responsiveness and something with different vendors at the beginning.
Then we go out to the vendor community and we go ahead and go out with
our actual task orders. And we get feedback from them and we know
exactly where we are going, as far as pricing, to the proposals are
concerned.

And at the end of the day, when I have a program manager who said this
was a good, the statement of work works, the evaluation process works,
using FAR Part 8 worked, and they actually say \-- it is win-win when
you go on a requirement when there is ten, regardless, whatever 15
people or however many when we do an e-Buy and at the end of the day,
eight people came in and did oral presentations. And when the program
officer says all eight can do this work, that is a good win-win. When
they tell you only three can do this work or where did you get these
people from, then you know, maybe I should do something else.

CHAIR BRANCH: Let\'s see, April and then Judith.

MS. STEPHENSON: On slide 21, you mentioned that agencies should not feel
that they are on their own after the task order is awarded. Could you
elaborate on a couple of items that you would be looking for after the
task award is made, what you meant by this statement?

MR. JACKSON: Well, after you award the task order, the vendor does not
realize what is in their terms and conditions. You had a post-award with
them and they still have some issues of concerns and they are like, you
know, we can\'t perform, we are having some issues or concerns. And you
tell them that they need to perform and why they have to perform, and
what is in the contract, and what is in their GSA contract. And they are
saying, well, we still have some issues. I say pick up the phone and
call the GAS CO and say we have some issues here.

And within the last 45 days, I have done it on two or three occasions
and this worked. And I would rather it work than me saying that someone
is basically saying, you know, I\'m sorry, I am overwhelmed or I can\'t
get back with you. Recently, within the last 45 days, I have done it on
two occasions and it has been successful. But in the past, I can\'t say
it has always been someone will listen on the other end.

MS. STEPHENSON: Just to clarify. So there are instances, or when you do
the task order, not all of the terms and conditions of the GSA contract
may be incorporated. You are referencing the GSA contract and depend on
GSA to continue to support certain aspects of the terms and conditions
of that contract.

MR. JACKSON: It may be the GSA terms and conditions or it may be at the
task order level, the agency terms and conditions.

But when there is time to accept or reject an order, the vendor may come
back and say, well after they have already accepted the services, they
are saying, I am going to reject the order now because we are holding
them accountable for their people showing up or clearance requirements
or key personnel requirements and things of this nature. And they are
like, uh-oh, nobody never did this to me before. Well, wake up. We are
doing it here.

And then they are saying I want to walk away from this now. Because at
my agency, we have something called multi-technical, financial, and
technical reports. And we basically hold vendors accountable for
submitting those things in a timely manner. So, some vendors are like,
well, we didn\'t do this in the past. Well, you are going to do it here
now. We won\'t be able to tell someone after nine months where the
agency or taxpayer\'s money has been spent in reference to this effort.
And your monthly reports will be the first place we can start to say how
your money has been spent.

CHAIR BRANCH: Okay. Judith and then Don.

MS. NELSON: I know that today\'s session is around stakeholder
expectations but I am going to ask a question around roles and
responsibilities. Since we have an agency stakeholder here. And there
has been brought up a concern regarding the use of schedules when a COTR
or contracting officer goes out and competes or looks at, because there
is a requirement to just look at three schedule holders. And I was
wondering, since you do seem to use schedules quite a lot successfully,
are you able to educate within your office and program office to move
away from, or not have a culture of looking at say one schedule
contractor that the COTR or the contracting officer wants to use and
two, that they have no interest of using? Because that has been a
concern that some of the panel members have brought up. And how do you
foster a culture that doesn\'t allow for that?

MR. JACKSON: Okay, this is what you do. On the supply side, I tell the
COs to go into schedule e-Library, to e-Buy. Put in your part numbers,
see what comes up, regardless of what market research you have gotten
from the COTR. Because that way another day if an auditor or someone
else comes back and says how did you choose these two or three vendors
versus whoever, you can say, I went with what was in schedule and e-Buy
and I went to the three lowest vendors who had their pricing in e-Buy to
start as my rule to go out and to get three quotes.

If the COTR has gotten someone outside of that and their market research
shows \-- example. If the COTR has got someone with that same part
number but when I go into e-Buy and they are not listed on e-Buy, too
bad. Because for the FAR, you go by what e-Buy says in reference to the
vendor community. So we are going by what the FAR states there. And it
goes away from people saying you have certain vendors that you are
looking at all the time.

So, if auditing or somebody else comes and says how did you go out and
select vendors? I went by Schedule E. I went to GSA vendors and got my
vendors and the three lowest vendors on Schedule E on Advantage and that
is who we went to.

On the service side, we have industry days. So that way it goes out the
window. You go out there on e-Buy and say we are going to have an
industry day. And we had a big SETA requirement. I think we had like 40
people who came to the SETA requirement. On the conference requirement
you had like 35. And you just, on an office storage, when we had like
maybe ten. It just depends. But that way, it takes away from this
attitude, as I stated earlier, about like people feeling like we are
restricting competition. And for audit purposes, you can say, we went
out with this in e-Buy.

CHAIR BRANCH: Don?

MR. ERICKSON: Eldred, thanks very much for the attention you gave in
your presentation to addressing some of the needs of the vendor
community or what your expectations of the vendor community are.

I guess my question is, tying a little bit into your industry days that
you have held, where are you finding, in your opinion, most of the
confusion from the vendor community about the use of the schedules
and/or pricing policies? What are some trends from the vendor community
you are seeing in areas where they may be confused?

MR. JACKSON: On the pricing side, the only time we hear something on the
pricing side is when we may ask them for to show us a detail of their
price and we ask them show us your GSA pricing versus what you are
providing us here. So that way we can go back in and do a comparison.
And sometimes they feel like, you know, we haven\'t done this in the
past. So, show us where your pricing is coming from.

As far as the overall industry days or whatever, I think people
sometimes don\'t feel their agencies are really, may have someone in
mind or feel like they, they have someone in their mind why are you
going through this process versus \-- why are you going through this
process? You have an incumbent who have been here for five or six years.
Because we want to increase competition at our agency, truly.

So, I think some will feel like why are you going through this process
versus just awarding something. So we basically try to have the industry
days so we could actually try to increase competition.

MR. ERICKSON: How often do you have your industry days?

MR. JACKSON: For major procurements, I want to say we have had them at
least within one quarter, we had four. So any major procurement, it
could be \-- if it is over \$100,000 we may have an industry day for it.

For example, for the office storage requirement, we wanted to go to a
fixed price. After hear the vendor community say various reasons why it
was not a good idea, we changed our statement of work. So it has been
advantageous to us, too, on the pricing side for office storage
requirement in reference to our response time and what we may need.

So that was one the way we had that. But on our other ones, it just
varies. They have been coming but there hasn\'t been any pricing issues.

CHAIR BRANCH: Okay, Jackie.

MS. NELSON: Can I just clarify? Did you say that anything over the
simplified acquisition threshold you hold an industry day?

MR. JACKSON: For the most part. It just varies. We do use NASA SEWP for
IT. We also use NIH in the past. We haven\'t used it recently, but we
used other MAS or GWACs that are out there. We also used Encore DISA
before. But for the most part, we use GSA schedules.

CHAIR BRANCH: Jackie?

MS. JONES: Eldred, in our contracts we have a clause for a standard for
contract sales and it is called contract sales criteria. And the
expected sales amount is \$25,000 per year for contract sales. And at
the option period, when a contractor has no sales, those contracts are
usually allowed to expire in some circumstances. There could be
exceptions.

When they have low sales, our center specifically will ask the
contractor do they have any pending task orders out there that they just
haven\'t reported on yet.

So, can you explain what you mean by insight number one that we failed
the community?

Okay. As I stated at one of the other slides in reference to the oral
presentations, if you ever came to OJP to hear some of the oral
presentations, then it would tell the story. And you would see why some
of these vendors are not winning contracts or their technical proposals,
how they are not doing a good job in what they basically provide us.

And sometimes, most times we won\'t award an initial offer. So we don\'t
even get into discussions. So, some of the vendors just do a horrible
job in their submissions. And you know, I shouldn\'t have to say GSA \--
I am going to mail this to GSA to say what a horrible job that you all
did. That is why I was saying a reference to big brother watching. I
wish sometimes these people would just come to the Agency, sit down, and
see what we are experiencing. So, at the end of the day when I tell a
customer that has agreed to have competition, they said, Eldred I want
to have competition but at the end of the day there was only three
really good vendors, the other five were horrible.

But in some cases there may be where there are eight who really can do
the job on the oral and technical side.

MS. JONES: So do you find that those that are horrible are occasionally
or maybe usually out of the scope of their schedule contract or their
proposal in scope is just a terrible proposal?

MR. JACKSON: The quality control, the things I mentioned in the first
part. Aspirations for a vendor, expectations of a vendor. Those are the
areas where they are doing a horrible job. Quality control. Management
approach, key personnel.

If someone has planned a vacation in the Bahamas, we don\'t expect them
to be at the oral presentation but you could have a speaker phone and
have them chime in from wherever they are. I mean, there are certain
things that you as a vendor that you can do.

You know, as part of the Industry Government Council, I wanted to hear
some of the things that the vendors are saying from their standpoint.
But it could be a large vendor or a small vendor. Across the board, I
have seen things like there was a commitment. It\'s subtle things like
that that you are saying, where is the level of commitment at for your
key personnel? Oh, we didn\'t do it. So how can I hold you accountable
if you don\'t even have a level of commitment from your sub or the
person you are teaming with?

And from another requirement, we had a vendor as I told you about, who
is on each task. We had a vendor who had had a contract for 15 years. We
said, could you please clarify who is doing the task? I felt like I was
out on the playground at a pickup football game again. They looked
around the room, and said you are going to do this, you are going to do
this, you are going to do that.

When you have a contract for 15 years, you should know what task you are
going to do. I see so many vendors who feel like I was Miss Freshman, I
was Miss Sophomore, I was Miss Junior, I am going to be Miss DOJ.

Every time, you need to be able to come with a fresh approach realizing
that the technical evaluation panel may have changed from the last time
you did this requirement. And the COTR may have changed or the statement
of work may have even changed.

So you can\'t just take your name off April 15, 2004 and then put April
15, 2008 and submit the same thing again. You have to look at the RFQ
and say, let me see what is going on with this agency and try to do an
approach that is going to be a win-win. Or an agency will say that is
like using another GWAC or Multiple Award Schedule, some other kind of a
vehicle that is out there with another agency or piggybacking other
things within their own agency.

You know, agency-wide vehicles versus they may have done FAR Part 15
versus using the MAS program.

CHAIR BRANCH: Other questions? I guess I have a few questions for you,
Mr. Jackson. But before I go into that, I do want to thank you for
giving us your perspective here. I think it is going to be extremely
useful to the work of this panel as we try to make some recommendations
to GSA with respect to the structure or the multiple award schedule
program, especially as it relates to pricing.

You gave us a great structure to consider these issues. So, I am going
to refer back to the structure you gave us in my questions. And my first
is, as I look at your rules one through five for the vendor community
and they seem to be centered around or focused on the idea that this is
how vendors can discriminate or distinguish themselves from their fellow
competitors. The winners generally pick themselves. We don\'t really
pick the winners. The winners just articulate the reasons they
distinguish themselves.

So, is it your sense that the way the GSA pricing model works affects
the way vendors do these things, put together the right team, give you
good key personnel, understand the statement of work, and so forth?

MR. JACKSON: Well, I think the pricing, it may have an affect for a
particular requirement based on exactly what the agency is looking for.
I have seen it before where people may say well, this team is working
on, as I used to tell my customers, when they used to work at State
Department before I came to the Justice would say, I am at the State
Department, we are the premier agency, so you have to basically give us
whatever we want. So when I came to Justice, I say it is just us,
J-U-S-T-U-S, just us.

So, basically, you have to let the vendors know that you have
requirements and expectations of them. And when you go out with an RFQ
and with an industry day \-- and actually, when you have an industry day
and you actually have a panel of four or five program people sitting
across the room like you all are today at this front table and going
through a presentation with 30 or 40 slides, that means the agency has
put forth their best face in reference to trying to do this the right
way.

For example, we have something called National Crime Victims Rights
Week. And all we had was one person. We had like 30 vendors who came for
a conference and only one person bid on it. That was the incumbent one.
But the point is it was a major conference requirement that anyone could
have done who do award ceremonies all the time.

So, the program office, you did your job. CO you did your job. Vendors,
what is the problem? And no one gave us any feedback saying what the
issues were.

CHAIR BRANCH: All right. Thank you. I just want to refer to your rule
number nine. When agencies issue an industry day on a major RFQ on
e-Buy, they are seeking competition. Can you share with us some of the
difficulty you have had in getting competition? I know you shared the
example of your major conference here. Are there others that you can
recall to mind where you may have gotten some feedback from industry on
why you didn\'t get the kind of competition you were looking for?

MR. JACKSON: Well major SETA requirement, we got feedback from industry
that they felt that it may have been too restricted. So we went back to
the statement of work and put some things in there. We got back with our
general counsel office and the CO to look at some things and to make
sure that it was not to that point.

We went back out on the procurement again because we didn\'t get
adequate \-- the first time we went out, we were not happy with the
proposals. And we were going to have go out and go do discussions. And
so we basically canceled them and went out again and we basically got
more feedback from vendors. And they saw that there was truly open but
it was still, I don\'t think we only had three vendors who submitted
proposals. And that is on science, engineering, and technical
assistance. A lot of people can\'t do that type of work. I think it was
actually on the PES schedule.

CHAIR BRANCH: All right. I just have one other question for you. Your
MAS wish list number two. You say a GSA contracting officers should
visit customer agencies and participate in oral presentations when
invited. And you have elaborated on that a bit and I certainly
appreciate your insight there. But it kind of begs the question with
respect to your going on assumption. So, let me kind of probe that with
you a bit.

So, what is your expectation of a GSA contracting officer with respect
to the due diligence in contract formation so you, as an agency user can
have a high degree of confidence that you have quality vendors who
understand terms and conditions and so forth?

What do you really expect the GSA contracting officer to do?

MR. JACKSON: If I have an industry day, if I do all this due diligence
and I have an industry day, if I have five or six vendors come in and do
an oral presentation over two or three days, if time permits, it would
be nice for you to come in and sit in my shoes for one day and actually
see these oral presentations so you can see exactly the type of
proposals that we are getting.

I think, for the most part, unless there is something that truly is an
issue with everybody\'s proposal, you should be able to award on initial
proposals all the time on services on GSA schedule. You should not have
to actually go into discussions. But sometimes you do.

But sometimes at the oral presentation, you can see exactly how prepared
or not prepared a particular vendor may be in reference to the overall
requirements or exactly \-- like Jackie was saying earlier. Sometimes I
don\'t think vendors understand their own GSA schedules.

Like I said before, success comes before work. They know they have
gotten a GSA schedule. And when they see you, they are talking about
they have a GSA schedule. But they have to realize that the work
doesn\'t, it doesn\'t stop there. You have to actually go in with good
proposals or you won\'t get the \$25,000 over two or three years because
you are not getting good proposals to us.

CHAIR BRANCH: Let me ask the question a slightly different way.

MR. JACKSON: Okay. I\'m sorry.

CHAIR BRANCH: That\'s all right. If I were a GSA contracting officer and
I were to come and sit in your oral presentation and let\'s say that you
had ten of them. And at the end of the day only two of them looked like
they were highly probably candidates for award, what would you expect
me, as a GSA contracting officer to go back home and do about the other
eight, if you will?

MR. JACKSON: Well, probably go back and look at their revenue. Probably
it would say why they are not getting some of the contracts that they
may have a chance of winning in the future.

Number two, you can say that maybe we have said that this overall is a
responsible offer but if we are going to have trouble with these offers
down the line that they win task flows because the agency is going to
have to end up doing some kind of termination because the vendor is not
really that good, then I need to basically let headquarters know. Let
them know that big brother does care versus what can I do to help you
after the fact.

I think a lot can be done ahead \-- like I said. The worst thing is
having a program office tell you, where did you get these people from.
And that happens sometimes because there may only be three or four out
of the ten who came in with a good proposal.

So, they are saying \-- it reminds when I was in DoD, when you actually
had the procurement and you had approved sources. You know. Blank,
blank, blank and blank are approved sources for these actual spare
parts. That is what ends up happening on the commercial MAS schedules
sometimes. You know, if you want to look at it from a DoD standpoint.

CHAIR BRANCH: All right, thank you. Judith, you have a question?

MS. NELSON: One other quick question. Can I just ask, when you are going
out for services, particularly a complex buy, when it is just not like
training or something like that, when you put it out on e-Buy, do you
designate what schedule you want it to come back in, or do you leave it
open for the vendor to choose?

MR. JACKSON: No. We basically say it is the schedule, the PES schedule.
We will say it is the MOBIS schedule. We will say whatever. Unless we
hear from someone that there is some type of conflict. And that hasn\'t
happened but one time in the last five years. We put out with one
particular schedule in mind.

And what I wanted to say too, what the gentleman was asking me earlier,
one time when I was trying to explain the GSA schedules to a new
employee, I said, you went to UVA. I say, did you go to a sorority rush?
When you go to sorority rush, there may be, you know, you go to all
these houses. It could be Kappa Delta, Kappa Kappa Gamma, on and on and
on. You go to each house and you introduce yourself and you let them
know what type of person you are. They look at your GPA. They look at
your resume. They look at your references and they decide. That\'s how
it is with agencies trying to select a vendor.

Unfortunately, everybody who is coming from my standpoint, everybody who
has been accepted to UVA is invited to rush. It is up to us to find out
who the vendors, at the end of the day, who is actually going to be in
the sorority or fraternity.

And unfortunately, some of the people who get through first day or
second day shouldn\'t be there. Because someone at UVA should have said,
you know, what, you didn\'t meet the basic requirements to be even
admitted to this university.

And that is how I see the schedules program.

CHAIR BRANCH: Okay. Mr. Jackson, we really appreciate the time you spent
with us this afternoon. And thank you for your presentation.

MR. JACKSON: Okay. Thanks for having me.

CHAIR BRANCH: It is a little after 2:30. So, we have some time this
afternoon for deliberations. And this is what I would like to do.

First of all, I would like anybody who have heard the presentations and
our questions this morning and early afternoon who would like to add any
additional comment to see Pat. And we will accommodate you this
afternoon, give you five minutes or so to add anything that you wish to
have on the record.

But before we do that, I would like to just adjourn us for a short
break. So let\'s say we come back at 10 of 3:00 and see if there is
anyone else who would like to add their views at open mic. And if not,
we will start our panel discussions.

(Whereupon, the meeting went off the record at 2:33 p.m. and went back
on the record at 2:52 p.m.)

CHAIR BRANCH: Okay. It\'s a little after 10 of 3:00. So, if we could
begin again.

I understand that we have no additional speakers this afternoon. So, at
this point, I think it probably behooves us to begin to talk about our
reactions to some of the things we have heard. And I will start off and
I will alternate between meeting at which end of the room I start at and
kind of give my thoughts and then we will just go down the row.

I have heard several things here today and have been making a list of
them. And let me talk to what I think the most important issue is.

It is clear from the variety of speakers and their viewpoints that the
schedules, issues associated with the schedules are probably larger than
the charter of this advisory panel. So what I would like to suggest we
do because I think that while pricing is critical, pricing is part of an
architectural structure of these schedules. And the other pieces of that
architecture clearly have to be considered.

So, as we deliberate, I would like to break, to the extent that we can,
our considerations into two pieces. One, given the structure that we
have today and our ability to impact it through regulation, what are
some of the near-term actions we could recommend to the Administrator of
GSA with respect to improving the effectiveness of the schedules within
the scope of our charter?

The second is, given that this really is a business model and it is
difficult to look at the business model one piece at a time, what are
other things we would like to recommend beyond the scope of this panel,
that the administrator may consider either through the convening of
another panel, through industry fora or through his internal policy
apparatus?

So, I just kind of put that out there for the panel to kind of react to.
It is certainly not a way that I am going to attempt to dictate we
proceed but I think it might be a useful model for us to follow just to
stay on task.

As I have listened to the speakers today, as well as in our previous
meetings, I guess this comes down to kind of a list of themes for me.
So, let me talk about what those themes are.

One is contract type. You know, are the schedules as they are currently
constituted flexible enough to employ the right contract type to serve
the interest of the vendor community, while assuring that the
government\'s interests are protected? And this is, for me at least,
something that I see, especially as we talk about how we acquire certain
types of service, using time and material contracts. I know there is
quite a bit of energy in the community around that. We use T and M for
those sorts of services because that happens to be the vehicle of choice
today. I guess the question is, should it be?

I am more convinced that we have to take a different approach with
respect to the acquisition of product versus the acquisition of
services, after hearing speakers. What those approaches are, I think the
panel needs to give due consideration to but it is clear to me that with
respect to protecting the government\'s interest while providing a fair
opportunity to our industry partners to compete and make a reasonable
return on their investment, services and goods pose two different
problems.

The third thing I think we really need to kid of \-- or I am hearing is
this idea of what the schedule advantage is. And I think Mr. Phillips
probably articulated that very well. At least one of the advantages, and
that is flexibility, both for the vendor community as well as the buying
community. But I think it raises a more fundamental question as to what
we believe the overwhelming advantage to using the multiple award
schedule model as GSA has created it. What is that advantage to both
industry and the buyers?

And then finally, you know, I am hearing a lot of energy around what I
call structure versus execution. I think this was resonant in the A and
E presentation this morning and I think it was also a highlight of Mr.
Jackson\'s presentation. And I think we need to ask ourselves a
question. Is it the structure of the multiple award schedule and pricing
model that is an opportunity for improvement or is it the execution at
the task order level, where we really ought to be focusing with respect
to improvements?

So, those are my thoughts, as I have listened to the presentations we
have heard since the fifth of May, as well as the ones we have heard
today. And with that, I will ask Debra to share her thoughts with us.

MS. SONDERMAN: Thank you, Elliott.

A few things came through to me or have come through pretty clearly. One
is that there seems to be a mismatch of expectations. I have heard
various people from GSA express what their intention, or what they
believe their intention is, in setting up and awarding contracts. But as
Mr. Jackson eluded to, I have certainly had the experience of vendors
showing up saying, I have my schedule, where is my order, which tells me
that they don\'t have a realistic understanding of what it means to be a
schedule contractor.

And it reminds me very much of the days in the previous millennium where
we used to get the Standard Form 129s. And vendors would mail them out
to everybody, oh, here is my bidder\'s mailing list. Will you put me on
your bidder\'s mailing list? And think that that was magically going to
result in sales and work opportunities for their companies.

And in some respects, it seems like a schedule contract has taken the
place. Thank goodness we have CCR so we have gotten rid of the 129 but
we have put something else, it seems, as a proxy in its place. And
perhaps one of the reasons for that is that back in the day, that was
the Program Office\'s way of saying I don\'t want to talk to you right
now. You know, are you on the bidder\'s mailing list? Oh, you\'re not?
Well, you need to go talk to whoever and send in your 129 and then I
will talk to you later. So somehow or other, we need to wrestle with
this intellectual honesty in how we deal in the marketplace.

Another theme that comes through to me is this issue about competition.
And I am not sure whether that is an effectiveness issue or whether it
is a structural issue or an implementation, an execution issue. But you
know, there is, at least in some communities, a perception that there is
competition at the initiation of the schedule contract, even though
there really isn\'t. It is more like a qualification. But that seems to
be a really critical thing, at least that I have heard from industry,
that if we had better competition, we wouldn\'t need the Price Reduction
Clause because competition would take care of getting us the best price
for our specific deal at that time.

And GSA needs more people for the schedules program, clearly. That seems
to be \-- I know from my own experience, when you use a schedule
contract and things go well, it is great. But the first time you run
into a problem trying to actually get a hold of the contracting officer
to discuss that and get help with resolution, it is a very frustrating
process.

MS. THOMPSON: I think for me, in terms of expectations of stakeholders,
and I am sort of piggybacking on what has already been said, I see still
the need for a two-step process in terms of pricing at the MAS level, as
well as the ordering level. Not only because I believe our statute
provides for that or implies that that would be the case but I also see
it as very definite and distinct duties.

And now I am sort of overlapping with our next category which is going
to be duties and responsibilities of the stakeholders. But I see MAS
contracts as really providing a very needed scope, in terms of applying
a lot of the socioeconomic and other mandates that we have under
procurements, such as the Trade Agreements Act, small business,
subcontracting plans. This is, I think, one of the presenters actually
discussed one of the, or maybe it was Elliott that talked about speed of
being one of the important aspects of using the MAS contracts. And I
think that at the contract level, that is one of our strengths and that
we do provide for a lot of those mandates to be complied with before the
order is actually placed.

I view the MAS contracts, basically, as being sort of like building
blocks. We actually, you know, negotiating prices and sort of building
blocks which can be used at the ordering level to sort of build the
solutions if you will.

Moving on to the next point I thought was very important is, of course,
the workforce has already been stated. I think it is pretty clear that
we need to provide a little bit more outreach to vendors as well as to
ordering agencies and I think that is key to meet expectations of both.

MR. FRYE: Okay. Well, I have also picked up on a couple of themes. One
of the things that I am most interested in is the arguments I hear about
safeguarding the taxpayer interest. And of course, industry seems to
have one side, the associations seem to have one side. And I look, at
least right now, I am looking at their line with a jaundiced eye. And by
the way, until this weekend, I didn\'t realize that these arguments had
been ongoing since the mid-90s. I have got a copy, for instance, of an
IG report co-produced by the Office of Inspector General with the
General Services Administration and the Office of the Inspector General
with the Veterans Affairs. And it is very interesting to read this
document, although it goes back to 1995 because the themes are exactly
the same.

In addition, I have got some letters that were sent by various industry
associations from the early 2000s. The same arguments were proposed
then. One of the overriding arguments, this idea that the vendors much
provide data and information is just overwhelming. They are unable to do
that. I find that very, very difficult to believe.

In this whole process, we are not asking for cost information. We are
asking simply up front for information about vendors and prices that
they provide to their most favored customers. They seem to have this
theme that it is a very, very onerous thing and yet I don\'t see it as
onerous.

I went back. It was interesting. I looked at a document, if I could turn
to it here, something that Dee Lee said in [The]{.underline} [Federal
Times]{.underline} August 2nd of 1999. \"What I am trying to do is
understand what these rules make you do that you would otherwise not
have to do.\" And this is in relation to this information that is
requested under the Price Reduction Clause.

She goes on to say industry has alleged that it is very difficult for
them to know precisely \-- well, I won\'t paraphrase that. But suffice
it to say she was a bit undetermined as to why this was such a hard
thing for industry to do as well.

I see a theme, as Elliott said, acquisition of products by services. I
think there is clearly a difference. And I guess that is about it.

The question I am leaving with today is, I have got to go back and do
some more research. Do large corporate purchasers use the same
methodology that we are using? Industry says no but they always
represent themselves in other forums as sellers versus buyers. They also
buy stuff. I wonder how they buy. And they don\'t present that side of
the argument.

So, with that \--

CHAIR BRANCH: Glenn.

MR. PERRY: Well as we go down the table we are going to start
duplicating thoughts, potentially, here.

Elliott, as far as your scope issue, I am struggling a little bit with
where to draw the line. I think \-- there is a lot of people in what we
have heard so far, and unfortunately, we have only heard the first
ordering agency perspective. Not a pretty good perspective probably but
that is the only one we have heard so far.

Everyone else has referred to the so-called \-- there seems to be an
assumption that whatever the business model is for the schedules,
somehow we are automatically leaping to there should be no questioning
that this is good for everybody. And so we are not really getting down
into \-- and that is the part where I am struggling, Elliott, about
going beyond the scope.

The reasons, what happened in 1994 through \'96, \'97 with the changes
in the rules were done because of whatever the circumstances were at
that point in time. And we changed the rules because you had Brooks Act
issues, you had how long it was taking to do acquisitions on a one by
one, by one under CICA\'s full and open competitions versus little
things that were going on with the schedules, at those dollar thresholds
where you didn\'t have to get in. So we did things then because of
whatever the circumstances are.

Because of those changes, it changed the marketplace as far as what is
going on today, as far as where the contracting work is, or what we
perceive that to be. And clearly, I think you can year the big
differences in the dollars and the transactions that are now going
through something that ten years ago or 12 years we were doing this, now
you have shifted all of this over here. I don\'t know how we can just
accept whatever that business model was that we started then should be
the same today.

And then you lump in also the technology that is available to us today
and the amount of information that we have capability of having our
access to today between us, all starts to go into this issue. And then
what expectations on today\'s conditions, what should the Multiple Award
Schedule be for the Agency? What should it mean to them? Or how do they
best use it?

Everybody I am hearing is having a little bit of difficulty, to me, in
describing what they think the benefit of GSA\'s role is in the award
schedules to me. I am still not hearing a really clear understanding of
what that is. I hear people duplicating what I think, in many cases,
what they think it is. And that doesn\'t sound like a good thing to me
or at least not a good use of resources, especially when we have such a
big issue as workforce issues.

I hear, no offense to my colleagues at GSA, I hear the reference I\'m
sorry to taking care of the compliance issues on small businesses and
things like that. Well, we still have to worry about them. The schedule
doesn\'t really help a lot. It tells us who in those categories are
small, large or whatever. But when it comes down to the actual dollars,
if we are spending a large amount of dollars on schedules, we still have
to do things to make sure that the distribution of those dollars,
because we have no idea what is going on in the rest of government, and
we don\'t know. You can\'t tell me that the business for that particular
vendor or that particular sector government-wide, because it has been
explained by several of the speakers so far that GSA has no business
data that they can provide us as to what is going on, then I don\'t feel
comfortable that you are taking care of the compliance issues just by a
fact that somebody is on a schedule.

So we are still having to worry about it and still having to make sure
that the mix of the business that we have, doing in our agency with that
particular, with that group of vendors still gives us a picture that we
are meeting our requirements for those.

So, and I am going way beyond my time here that I think you reasonably
would expect. We are still having to do the competition piece. So when I
add \--

And there were a couple of things that were said about, for example, Mr.
Gormley said that we should change the \-- and I think we definitely
agree on the pricing thing. I think as soon as possible, you need to
separate the goods, the product from the service stuff or we are never
going to get through this and start to treat them, and come up with a
recommendation and start coming up with them separately.

He said something about, well, he gave some data on the growth of the
services sides of schedules which have grown to some huge percentage
against the whole schedules. But then on the next line said well, it is
not a problem. These problems are not a big problem. Well, they have got
to be a big problem if we have got 65 to 70 percent of the dollars
running through the schedules and the service pricing isn\'t working.
That is a big problem. And so that is, we have got to get that focused
on.

I think on the products side, it is a whole different story. I agree
with you, Mr. Chairman, that the price list, I think that works really
well for things. And I think we could do some things with that and
improve that. And then really focus and tackle on the servicing part.
Because that is the part that looks to me like you might even have to
just blow up the whole business model and do something different in the
way that GSA handles it.

CHAIR BRANCH: Thank you. Lesa?

MS. SCOTT: I think I would start first by talking a little bit from a
contracting officer\'s perspective, living in the schedules program. The
contracting officers of the schedule program know how to award
schedules. They know how to determine a most favored customer report.
They understand how to do a price fair and reasonableness determination.

Many of them do not know how to place an order against a schedule. And
they never have actually placed an order against a schedule. And this
presents an interesting conundrum when they get a phone call from a
client agency saying well I am running into this problem. And they end
up running up to some of us that have and going, uh-oh, I can\'t help
them.

So, sometimes they don\'t answer the mail and some of it is because they
can\'t.

Then there is another conflict that they are dealing with, particularly
in the services arena. The contracting officers in general are very,
very motivated to try to get a really good price. In many cases, that is
interpreted as a very low price. They are incentivized to try to get
that price down. I encourage them to work on thinking in terms of zero
dollars to the max order limitation because those prices established
there are for those \$250 small agencies with less than 3,000 employees,
where we can\'t get any leverage as a small agency. And having worked in
that arena, I have talked about that next.

So one of the issues is they try really hard to get a really good, read
that low, price, particularly under the max order. They are also very,
very pushed. The auditor community that we deal with, in particular
Schedule 70, are very, very interested in doing cost buildup and it is
an on-going discussion that we have. A very active discussion that we
have, particularly for services. They have got a lot of motivation on
their end.

One of the issues that we have as a continuing discussion point is they
come in saying we are one government. That is true from their
perspective. But I also know from industry perspective, we are not. If I
have got 250 small agencies coming in with individual orders, that is
individual instant requirements, many different parameters, all
different. That is a very very different cost proposition for industry
than it is for us as one government.

So, if I, as a contracting officer am told by an auditor, well X company
has done millions of dollars with the government and then their discount
should be 75 percent because they treat it as one government, it is not
one government from the vendor\'s perspective. And the poor contracting
officers really get hit hard with having to try to figure out what is a
reasonable mid-point position that they can defend in determining the
price fair and reasonable.

Having actually worked in one of these small agencies that the 3,000
plus or less, fewer employees, I actually used GSA schedules
tremendously. It was the best, and fastest, easiest way for us to get to
goods and services. And as a consequence, I have got a lot of comments
to bring forth from that perspective.

It saved us a lot of time. It saved us a lot of money. I didn\'t have to
spend a lot of time. I didn\'t have to have my contracting officer spend
a tremendous amount of time. We could go to GSA Advantage to do our
market research. We could use GSA Advantage to get prices and we could
do that to help us to define the labor categories and the labor
categories that we thought we needed to put our requirements together.
We then also would use that to come up with the price ranges that we
then would use to make our IGCEs.

And it just went much faster because I found that I had come from in
fact Department of Justice prior to that time. And when I went to the
small agency, the contracting staff that were supporting me were not
nearly as sophisticated. They knew how to do orders against GSA schedule
but if you came at them with something outside of that box, it became a
real challenge for them. So the idea of competing GSA schedules was
quite eye opening to them. I don\'t want to know what they were doing
before I got there but I, as a customer, to them was demanding
competition on my orders. And it was enlightening to me to realize that
some of the very smaller agencies, or at least that one in particular,
they were kind of just saying, oops, okay, great price, I am done.

Then, in particular, coming back to the strategies that we have heard
today, I have got some concerns about where should the price be
determined. What is the best place to determine price?

If we do it at the schedule level, at the contract level, that is going
to help those small agencies that I just talked about because they will
be able to trust that we have done something to give them a price that
is fair and reasonable if it is going to help them minimize the amount
of work they have got to do to duplicate us. And it should allow them to
see that we have tried to leverage the buying power of the government in
total to get them something that they can do without a lot of extra
steps and then support that time savings that I mentioned earlier.

But on the other hand, but then also that is where the idea of GSA
Advantage and

e-Buy are loaded with prices. They will be loaded with labor categories
and it will allow you to use that all to help you develop your
requirements and develop your government cost estimates. But what is
disadvantaged about doing the pricing at the contract level is that it
gets us further away from standard commercial practices because we are
trying to set up something that will last for five years and can be
renewed on a renewable basis with an option exercise.

To clarify something, the options that we do in Schedule 70 are
un-priced. So, we do have to go into quite a bit of detail. It is a
very, very lengthy process to exercise an option on Schedule 70, for
that reason. There is past history that has to be reviewed. The basis of
award has to be reviewed each time and you have to carry that history
forward. So, at that level, it means we are distancing ourselves from
the standard commercial practices upon which we are supposed to be
basing the schedules.

If we do the price at the task order level. And let\'s say we took the
pricing out of the contract level, then what happens is that the instant
action would be determining the price. And in many ways, this should
give us much better prices. The disadvantages, particularly for those
small agencies, you are not going to have pricing on GSA schedules. So
you are not going to see it in GSA Advantage. You could easily find
yourself having nothing to use for a basis for your government cost
estimate. So some of the savings the agencies would see would be gone
because they wouldn\'t have that as a market research tool.

But on the other hand, it would be closer to standard commercial
practices. It could reduce some of the unique pricing concerns such as
the idea earlier I mentioned, kickback rebate. At some of my industry
sources, what I understand is their sales forces are absolutely
empowered to make the final decision in some of the offers that they
respond to. And they literally can work the deal any way they need to,
if they really want to bring it in. And that goes back into the whole
issue of effective pricing because they offer unique things that they
might not have.

And they are empowered up, in some cases, to certain dollar level. They
are empowered in terms of quantities or they are empowered up to the end
of the quarter. Whatever the method is that that company uses. But that
means that the company doesn\'t necessarily have the data that we need
for the auditors to look at. That person says well this is what I gave
them. And well, what was your thinking? That is not there. That is not
documented necessarily in the corporate records, which is what drives
the auditors crazy.

And finally, if we did do the task order level pricing, the head-on
competition would be great and that would do good things for pricing. It
could leave us with some gaping holes in terms of the data that GSA
would have available to give to the client agencies. And so it could
leave us with some real problems for those folks that do have a sole
source situation where they are trying to use us as a resource to help
them either deal with their sole source or support the data in their J
and A\'s for their sole source actions.

And I conclude my comments.

MR. CHVOTKIN: First of all, I think the scope of our charter to both
Elliott\'s point and Glenn\'s point is actually quite broad. And I hope
we at least revisit that. There is two key sentences in the scope of
activities, one that challenges us to review the MAS policy statement in
implementing regulations, solicitations and contract provisions, and
internal processes regarding the structure use and pricing of the
program and the second that asked us specifically to look at the most
favored customer provisions and Price Reduction Clauses. So I think
there is adequate scope here and I hope we take advantage of that scope
for at least the following two reasons.

I think we heard a lot of common complaints from all of the
presentations and the work, our own discussions over the last couple of
meetings, a lot of inconsistencies in the policies, inconsistencies,
uncertainty about the application of existing rules and ambiguity in the
application. And I think that should be troubling to all of us because
regardless of what the schedules are, there ought to be that common
understanding let alone where we might find advantages for making
changes.

Secondly, I am not surprised that the schedules actually are perceived
to be different things to different people. Users will find a different
need than the GSA contracting folks. And the oversight community might
find a different need than some of the industry members. It is important
that we understand those perspectives, as we are trying to develop our
solutions. But I don\'t think we should be surprised that different
organizations and different stakeholders are coming at it from different
perspectives.

So, the three areas that I think require some of our attention, the
first we might have a unanimous view already, the difference between
services and products. And I think that is pretty well clear that we
need to address it.

Secondly, how do we maximize participation in the schedules program and
the competition for those so that we really do make the schedules
program a tool that can be advantageous to the agencies and address some
of the, taking the cost issues and the advantages of GSA schedules
versus independent contract activities into account? And Mr. Essig and I
had a brief discussion as he raised his questions this morning. I think
it really looks to the, you have to look at this holistically. you have
to look at both the cost and revenue side of this to make sure that we
are capturing all of the issues.

And the third is to the pricing to ask the question of what is the right
pricing standard that we should be using, most favored customer versus
reasonable price. And then at what level at the contract formation
versus the ordering?

And then there is a lot of reasons, advantages and disadvantages, and
Lesa had a good explanation of it. We ought not to conclude that one is
better than other on the current view, without also asking the question
of what is the ability to capture the data. Because I think there may be
alternative. And we know of alternative systems that exist that capture
a lot of data about transaction activity in individual agencies and
there may be models that we could use to fill that data gap if we chose
to recommend one area over the other.

So, while we look at the absence of data today and should be troubled by
it, that may, in and of itself, should not be a reason not to pursue a
particular solution.

MR. ERICKSON: I will be extremely brief. I share many of the comments.
But what I wanted to do was start off by making a comment that I have
shared privately. I thought our last presenter, before I get into more
specific comments, Mr. Jackson is probably, in my opinion, the best
presenter of the day, in terms of actual value, in terms of what I would
gain from his presentation. And perhaps at some appropriate time, we can
have a conversation with how we could encourage other project managers
or people in similar procurement areas within various agencies, how do
we recruit them to actually participate in these proceedings as well.

But one of the things that I wanted to focus on in particular that was
touched on I think in most of the presentations and starting with the
first day, was the issue of \-- well, let me preface it by going back to
Elliott and what you said, in terms of what recommendations do we give
the Administrator in the short-term that may transcend both objectives.
And what I would say is the issue of education and training.

I think what we have learned from all of these presentations, whether it
be implied or stated specifically, is that there is a lot of confusion
about fundamentally the value of the schedules program, what its purpose
should be, what its rate of return should be, how you use it to make
acquisitions, what the various clauses are.

So, I think there is a real need, once there is some clarity to some of
the rules and procedures that Alan touched upon and others have, that
perhaps one recommendation we make to the administrator is, A,
evaluating some of the existing training that is going on right now and
FAS talked about that a little bit this morning. And B, after that is
accomplished, talk about how to augment that training both for the
vendor community and for the contracting community and the acquisition
professional community.

Lastly, the one comment that I wanted to make that I found intriguing in
the first presentation was, and I don\'t know a lot about it but it is
apparently the pricing study that is going on in regard to Schedule 70.
I don\'t know how that impacts our work to the extent that we need to be
briefed on that but perhaps one recommendation would be to, after we
learn more about it, would be to expedite the extension of that study to
other schedules and the prioritization of those schedules in terms of
recommendation to the Administrator.

MS. STEPHENSON: I ditto a lot of the comments that have been said.
Especially, Elliott, you started out with saying we have had a lot of
issues come to us that probably are beyond our charter and I tend to
agree. I recognize, Alan, that our charter is quite large as far a the
wording but I think to get something useful within the period of time we
have, we do need to focus on the areas in which we want to address, as
opposed to those in which we want to offer as recommendations for maybe
another panel or another group to review.

I especially liked, I ditto your comment about Mr. Jackson. I really
appreciate that we had a contracting ordering agency coming in here. I
would also like to ditto the comment that the more that we can get in
here, the more that we will learn what the ordering agencies are faced
with, what the issues are, and maybe will help us in refining the areas
and recommendations that we may have.

The different approach for products and services, that seems to be a
given with all of the things that we have heard. However, what I am
struggling with is what is the solution. And I don\'t know that this
panel has the time or is equipped to come up with the solution,
especially for services. Perhaps that would be a recommendation to the
Administrator to establish another group to focus solely on services.

If we do intend to tackle a recommendation for how services could be
better procured, one of the areas that comes to my mind is a more
standardized definition of the various positions and services that is
provided. I am not sure that that is the way to go but that is what
comes to mind.

There was definitely, based on the presentations today, a gap on the
expectations of the schedules. The contract level versus the task order
level and perhaps more will come out with our next meeting, where we
look at the rules and responsibilities. But it does appears as though
there may be some duplication in the discussions and negotiations with
the contractors at the contract versus the task order level.

At a minimum, it appears as though GSA needs to explain to the ordering
organizations the value of the services that are being provided and how
the ordering agencies could perhaps capitalize upon the work that GSA
has already done versus what appears, and again this is just what I hear
from the speakers, it appears as though it perhaps is a starting point
and then agencies negotiate based on the task order.

I haven\'t seen that there has been a lot of benefit for the contract
versus the task order but that could be because a number of the
presentations have been from the industry side, as opposed to the
ordering side so that is why I would like to hear more from the ordering
side on what benefits they see and how they, I think we could streamline
this process.

The last is having to do with some of the comments that have been made.
And it has been in nearly every meeting that we have had from industry
and from the consultants that they don\'t know what they have sold, at
what price, to who and at what quantities. In some of those comments
when they say that, I have to say that the first thing that comes to my
mind that must not be a very well run company. Because if I was running
a company, I would want to know what I am selling, at what price and to
who and keep track of that.

I think that that would be valuable information for the negotiator. Not
so much the cost buildup of it. That is not what I am talking about. I
am talking the mere, here is the price, the quantity, and the customer
and this is what they got. That would be valuable, I think from a
negotiation perspective.

So, I think in whatever we come up with as recommendations, I certainly
support getting more information on the price and the sales data from
contractors.

And aside from supporting all of the comments my colleagues have made,
that is the rest of my comments, Elliott.

CHAIR BRANCH: Judith.

MS. NELSON: Okay, a couple of things come to mind. I guess somewhat a
few of them reiterate and a couple of things in response to some of the
things that panel members have said.

The first is, I do agree that, and I have said it before, that the Price
Reduction Clause should be looked at or at least evaluated in terms of
products and services and I have felt that for a long time. However,
since a great deal of the work that is done through schedules is done on
an integrated solution basis, I think that a we do that, we need to be
wary, since it is, a Price Reduction Clause is something that needs to
be monitored. It is not just a freestanding clause. AT the end of the
day, both the contractor and the PCO, administratively, need to be able
to monitor this on a contract basis to ensure that they are in
compliance and that, ultimately, they stay in compliance.

If we have one clause for products and one clause for services, we need
to be able to make sure that in an integrated solution basis, this is
something that would work. So it is not as easy, I think, as saying
well, we will just divide them in two. Because many of our contractors,
and then on teaming and BPA situations will be providing both and in an
integrated fashion. You know, to say that we will be giving you
software, and hardware, and blah, and blah, and blah, and for that, we
will be providing services and it could well be that we will give you a
discount on these services or we will give away these services, or we
will give away this product so that you may buy the following. And then
how do you monitor the Price Reduction Clause in that type of situation?

So, it is not a simple, I mean, there are some real complex issues to be
looked at when you divide the Price Reduction Clause in that manner. So
that is one thing I would like to take into consideration.

I am a very strong advocate of removing the phrase most favored
customer. I think that there is currently language in the regulations
that deals with the exceptions or the how to look at most favored
customer and talks about terms and conditions and what is a most favored
customer under similar terms and conditions. But there is great
confusion as to what that means. And so be eliminating the phrase most
favored customer and going to fair and reasonable and basis of award, I
think a lot of that confusion could be dealt with.

I wonder whether or not putting wording into the regulations and the
instructions, and I don\'t suggest necessarily this wording but
something akin to that the negotiated contract is the ceiling price and
putting that directly into the regulations would help eliminate flat-out
some of the confusion. Rather than saying seek additional discounts at
X, Y, Z level, or may seek, or should seek, or shall seek, or whatever,
but simply flat-out putting it in there that says this is the ceiling
price, may help eliminate some of the confusion.

So, that is one of the places that I am thinking based on some of the
things that I have heard today to eliminate some of the mixed
expectations.

Another thing that strikes me is while the schedules program has a very
large, large business representation, I know that 81 percent of our
contracts are held by small businesses and 37 percent of the sales.
Well, that is not an inconsequential amount on a 36 billion dollar
program last year and we are increasing this year. And you know, another
10 billion is coming through VA. And I am not sure on the figures, Jan
maybe knows, what those are for small business there. I mean, I know it
is not the pharmaceutical companies.

MR. FRYE: It is over 60 percent.

MS. NELSON: Over 60 percent, okay. So, I would recommend to the panel
that as we look at the policies and regulations that we recommend that
they not totally be skewed to the what is it that a large business
solely can do for the government but also what is it that a small
business can do for the government and how they operate.

And going to the next point is, when we talk about what is the value of
the schedules program, there is another stakeholder that we have not
heard from and perhaps we need to bring in someone from one of the
congressional offices because we have not heard from them.

There is, unquestionably by statute, and from the congressional offices,
and I can tell you from sitting in the policy office over at MAS, we
spend a great deal of our time dealing with congressional mandates.
While we are no longer a mandatory source for the government, we are
expected to implement regularly a great deal of congressional mandates
on behalf of our sister agencies, whether or not that be Disaster
Recovery, whether or not that be your ability to buy environmentally
compliant products. And so that is a whole other stakeholder that have
not yet taken into consideration. And that is a value that GSA schedules
program brings to the customer agencies by a whole other stakeholder.
So, I think we need to look at that.

And I did, actually, I don\'t know who brought it up, maybe it was Don
and he stepped away, the issue of under our DoD MOU, we are performing a
study on pricing. Steve talked about it this morning and it is pricing
at the task order level. In other words, what are the agencies paying
for products and services? And at this point DoD and GSA made the
decision to focus on the IT schedule. And then they will move forward on
other schedules versus not what is being negotiated at the schedule but
what are contracting officers negotiating at the task order. What are
they able to negotiate at the task order?

And that study is part of one of the outcomes of the DoD MOU with GSA.
And it is in its infancy, the movement towards that part. But is
required that we do that as part of our agreement with them.

But short of the production, moving forward with that, in response to
one of the comments that Glenn made, the Administrator asked us to
convene this. But there actually is, to my knowledge, no evidence to
this time that the service pricing model is not working. There is no GSA
OIG report saying that it is not working. There is no DoD OIG report
saying that it is not working. Actually, to the contrary. GSA not long
ago, within the last two years provided to DPAP a very extensive model
of how we negotiate our pricing at a contract level and it was widely
and well held. And Sheay Ashad has largely and in writing supported.

So, I would not agree with the statement that the pricing model in
negotiations is not working, just to represent the facts model just for
the record there.

So, I guess that those are my statements. I would really like to see
someone from Congress come in or at least representing that. I still
would like to see perhaps, and I know you are representing DoD, I would
kind of like to see someone from DPAP and their perspective come in. And
I still would like to see someone from the IG, GSA\'s IG Office come in,
as well as some other customer agencies.

MR. SHARPE: I don\'t think I have the depth of maybe some others on the
GSA schedules but the impressions I have formed after several days, and
I do bring a vantage point of some of the benefits of strategic
sourcing, is certainly we have to address products and services
separately. And in my mind, I have got different comments on both.

But in terms of the products, what I have heard is really a mixed view
of the value. So, where I kind of approach this panel trying to improve
the pricing, I am kind of stepping back. I am not convinced of the value
overall. And I think I have heard mixed views. And I based that on, I
just don\'t have the confidence, given what I perceive is a level of
complexity, some confusion around roles and responsibilities and what I
perceive, personally, as an over-reliance on the vendors to help with
pricing. I have heard a lot of comments, why don\'t the vendors know the
prices? It might be asked the other way, why don\'t we know the prices
we pay, quite frankly?

And then in terms of services, I heard what Judith just said, and I
probably have a fair level of ignorance. But I am not convinced we have
a services strategy and that might be my own ignorance.

But all that said, from what I understand on the schedules, I think
there is a pretty profound structural conflict of interest. I listen to
the comments around strategic sourcing from GSA earlier and the
experiences around the Federal Strategic Sourcing Initiative where GSA
gets better prices, it is less fee. I think that is a profound problem.
Nothing against the individuals involved but it certainly does not
incentivize the behavior we like to see.

And I wonder if maybe there is a larger question here to be asked in
terms of the value and the pricing. I don\'t recall exactly how many
billions of dollars are going through the schedule, but I would think
that we would want to see that managed strategically. And it may hold
some of the answers to some of the workforce difficulties between
sourcing this strategically and eliminating some of the transactional
work possibly.

Jan you asked the question, you know, how do some of the big vendors buy
some of these things. Bruce and I worked together at IBM years ago. I
used to buy IBM\'s services. So this comment might be dated but they
have standard skill descriptions and they buy it off of a rate card with
geographic prices. And that is how they do it. And they put billions of
dollars through it. So, I think if we talk about services, I would agree
with April that certainly that thought comes to mind.

The other big opportunity is around data. I think we want to know what
we are paying for things. And to know what we are paying, it is not just
going to be an IT answer so we have that business data warehouse. You
have to call things the same way. Otherwise, even if you get into the
business data warehouse, you are going to see apples and oranges for
different prices and I\'m not sure that is going to help you.

So I think it gets back to the idea if all this spending is around
services, some kind of standard way we call that out and then start
collecting the pricing.

Those are some of my comments and thoughts from what I have seen so far.

CHAIR BRANCH: Thank you. Jackie.

MS. JONES: Well, I actually have a lot of thoughts swirling in my head.
Some I will probably duplicate, such as Lesa\'s comments concerning the
acquisition of requirements or fulfilling the government\'s requirements
based on a small requirement versus a very large multi-million dollar
requirement. And I agree with her that that is one of the advantages
that the schedules afford to our customer agencies.

You know, I have to say that I am little bit disappointed that we
haven\'t had more customer agencies in there to talk to us. Because
there seems to be a division to me, a great division, where I have heard
over the last several meetings industry wanting the competition to be at
the task order level and just basically wanting us to do away with the
Price Reductions Clause and just leave it as a free and open competitive
process, regardless of them being consolidated under a single
solicitation.

I would like to mention that we have been talking about price a lot. We
have been talking about the Price Reductions Clause and most favored
customer issue. And I didn\'t hear Eldred mention that as an issue. Not
once in his whole discussion with us from a customer agency\'s
perspective.

In our schedules contracts, we have what is called the maximum order
where agencies are encouraged to seek further competitions over a
certain dollar threshold. And in most of our schedules, that threshold
is on an average about a million dollars. So, when an agency has an
order over a million dollars, I mean, certainly, they should get a
better price. But what about, again, reiterating what Lesa mentioned,
what about the small agency who has recurrent repetitive requirements
that let\'s say doesn\'t even exceed \$500,000 in a whole year?

There are other benefits to providing the services or the products on
schedule in terms of consolidating and taking advantage of the
government\'s buying power. There are FOB charges that agencies would
otherwise incur, being a small agency, let\'s say a four service agency
out in the middle of Washington State National Forest, if you will. They
may not get that. They may not get things delivered to them FOB
destination as it is under the schedules contract where that is the
case. They may not get the warranties or the benefits of having warranty
coverage. They may not get the benefit of having some of the clause
coverage that we do in the schedule solicitations.

So, there is more to look at than just price when it comes to talking
about some of the benefits of the schedules programs to our customer
agencies. Because that is who is important first and foremost. Because
without them, GSA wouldn\'t have a schedules program and without the
customer agencies, the vendor community wouldn\'t have the sales that
they do and they wouldn\'t have the ability to fulfill recurring
requirements or very large requirements the way that they do in a
streamlined approach.

So, with that said, something I wanted to add in addition to that is
that we talk about this issue most favored customer and whether or not
that is relevant. And you know, I have heard it said today that most
favorite customer should go away. But when I take a step back and think
about commercial practices as it is today, and I think of myself as a
consumer of commercial services and products, a lot of providers, if you
will, have gone to this terminology preferred customer. And it is
expected when you bring your business to a provider on a repetitive
basis that you get something back from that.

You know, we have the grocery store chains who have this terminology
preferred customer, where you know, I can go in an swipe my preferred
customer card and I get better prices than somebody who isn\'t. There is
the mileage plus plans that the airlines offer. I certain airline over
and over again and bring them my business, they give me points and I get
something back from that service industry. There is the hotel chains
that where if I frequent them over and over, I get something back from
bringing them my repetitive business.

So, I don\'t see where the government should be any different than that.
I mean, this is a commercial practice, if you will. How we apply that
within government under the same concept and the same principal is a
matter of how we maybe develop that strategy, if you will. But in terms
of making a comparison of apples to apples or what is going on in the
commercial world, if you will. I just don\'t see that the government is
any different when acquiring Part 12 type products and services.

CHAIR BRANCH: Larry.

MR. ALLEN: Close to the end. Close. I have somewhat of a different
viewpoint from some of the things that were said here.

First of all, I do believe that the schedules program today is basically
a sound program. The speakers that we have had today have all basically
said that the program is inherently sound, that there are some things
that need changing to it, thus the creation and formation of this panel.
But I don\'t think it is correct to say that the schedules program is a
basic function is something that is in dire straights.

As several, Jackie most recently, several of my other panel members have
pointed out, Jackie and Ms. Scott both were very eloquent in talking
about how they do some of the things they do.

I talked a lot today about contractor disclosures and the Price
Reductions Clause. And I think my view would be to say that it is not so
much the contractor disclosures that are in the regulations that are in
the concern. The concern is the consistency which Steve Kempf spoke to
at the outset of this morning\'s sessions. The problem that you have
today, one of them, is that there are a lot of inconsistency over the
type of data that is required. And a number of entities sometimes will
invent their own data disclosures schemes. Some of them will even go so
far as to set up their own pricing formulas that they will subsequently
not share with anyone. And that is what makes it kind of difficult to
figure out, if you are a contractor, what is it that the government
wants.

So, I think that coming up with a streamlined and commonly applied
baseline for what is required would probably go a long way. Before you
even talk about what data ought to be required, I don\'t think
realistically we are going to get away from data being required, but I
do think that if you are going to require from somebody that is going to
be a business partner of yours the least you can do is be clear and
consistent about exactly what data it is you are going to require of
them and not make it a moveable target.

Also, then, so that is the data disclosures. That is separate and
distinct and it is important to remember that it is separate and
distinct from what the Price Reductions Clause is. The Price Reductions
Clause is merely a mechanism, one of several mechanisms that the
government currently uses to ensure the price reasonableness of products
and services on schedule. I would argue that it is not the primary nor
most effective mechanism for doing that but it is one of several.

And we ought to not confuse the two, data collection versus the clause
itself, when we are talking about what it is we want to do in this
arena.

We have talked a lot about pricing at the task order level. And I am not
sure that it is merely what industry wants. I think that what industry
and the other witnesses from around industry have been showing and
telling us is that this is a roadmap. I the desired outcome is to
improve prices and competition, then I think all of the industry
witnesses have been fairly clear in saying that the best way to drive
good pricing is to give people a specific piece of business on which to
compete or for which to compete and that will drive the pricing. So it
is not a self-serving thing. I think it is more like industry is saying,
here is a roadmap. If you want to know what it is that drives it, this
is what drives it. Specific opportunity and the specific circumstances
at the time. That is what drives it and I think it ought to be viewed
that way.

I also think that it is fairly clear what the benefit of GSA and its
schedules program is or should be. They vet the companies. They educate
the customers. Arguably, some of that customer education could be done
better. But I think that a lot of it goes on today. They also have
started to educate the customer or contractors now. I have my own issues
with the Pathways to Success Program but nevertheless, there is that
effort out there. They also put in and maintain e-Buy and Advantage.

And the underlying premise of why having a GSA is important is because
it frees up other agencies to focus on their own core missions.

And so again, that gets back to my original statement on what schedules
are and the fact that I think they are basically a sound program. I
don\'t think any of our speakers today have suggested otherwise.

A couple of things that I see. Fair and reasonable and pricing seems to
be the way that a lot of people are saying we should go. I remember the
panel\'s discussion from the last time we met. There seemed to be a lot
of discussion from my government colleagues on the panel that of you are
not really getting MFC, you shouldn\'t call it that and I agree.

It is worth noting that the last time GSA tackled this issue in the
1990s, they came within a hair\'s breath of doing away with MFC as well.
And there was a healthy discussion at the time about fair and
reasonable. So, I think if you are going to call it, you might as well
call it what it is. And there is no crime in that.

I also think we ought to take a look on following up on one of the SARA
panel recommendations to at least consider an un-priced schedule as a
pilot. I understand and I agree with the comments made by some of the
other panelists that, looking at smaller agencies, there is a benefit to
having a price on schedule. I think that is a good argument. One that I
hadn\'t really thought about a lot.

But I think that also if you are looking at ways to be inventive, maybe
one recommendation is considering a pilot project that would show you
what you get when you cap prices at the task order level as a going in
proposition. So, fair and reasonable and considering an un-priced
schedule would be two of the recommendations I have.

My last comment is one that would again echo what Jackie just said. Have
we invited specific customers to testify here? If not, I think we really
ought to develop a list of specific customer agencies who might be
inclined to come visit with us. I know I have a list of customer
agencies that I know do business with the schedules program. I would be
most happy to share that with Ms. Brooks, if that is something that the
panel would like me to do to forward the cause of having customer
agencies come visit.

So, and that is what I have to say. Thank you.

CHAIR BRANCH: Tom.

MR. ESSIG: While I was sitting here this afternoon, I received a request
for an interview from the media about some DHS Enterprise-wide
contracts. And that raises an issue that came up this morning about the
proliferation of Enterprise-wide contracts. We have heard a lot about
that in the past year or two. And I believe what we are seeing is
effectively the result of a cultural change. And so first off, I think
it is a mistake to attempt to stifle Enterprise-wide contracts without
really understanding what is motivating their creation and their
expansion. As I said, I think you are seeing a cultural change.

The schedules as they exist today were set up to provide speed of
transaction, flexibility, and customer choice. They were also set up for
decision-making at a transactional level by the individual user. So,
when we talk about having users come in and talk to us today, that is
the level we will be talking to.

And I think what has changed culturally are a couple of things. One, we
now realize that we can get significant savings from making decisions at
an enterprise level. It is not enough just to \-- not only do we get
savings associated with not buying 20 different configurations of motors
because I can leverage my buying, but my lifecycle support costs are
decreased significantly because I now have to maintain and support fewer
configurations of the motors. Those decisions cannot be made on a user
by user level. They have to be made at the enterprise level and we are
moving towards that.

The second thing. So, talking to individual users will give you that
transaction level perspective. I am not sure that is what is motivating
the change you are seeing through these Enterprise-wide decisions.

Secondly, one of the things that I think that has not kept pace, we
talked about it this morning, is the fee associated with transactions.
0.75 percent. If I have a million dollar transaction, it is \$7,500
dollars. That is the deal. I\'ll do that every time.

I now make an Enterprise-wide sourcing decision and my contract value is
a billion dollars. And that is not that unusual. That is \$750,000,000
of fee. And I really challenge GSA to tell me where I am getting
\$750,000,000 of benefit by using that vehicle.

So, I think the structure that is set up, does not reflect the cultural
change we are seeing in sourcing and buying decisions in the
departments.

We talked about this a bit, the issue of services. One thing that
surprised me this morning was to hear that 65 percent of the schedule
orders are now on services. I view that as problematic for a variety of
reasons. One, I would really like to understand why that is happening.

Secondly we talk about, there is a lot of discussion on pricing. In many
services, and I would argue possibly in most services and a lot of
supplies, value is more important to me than price.

I look at this. A vendor that charges me \$10 an hour and gets the job
done in 12, is no better than a vendor who charges me \$12 an hour and
gets the job done in ten hours. It is exactly the same price to me. If
the quality of the work is the same, why do I give an advantage to the
one that has the lower rate?

The Price Reduction Clause for services today focuses exclusively on
that labor rate. And I think that that is just absolutely one small
piece of the price equation. And I think that is a mistake.

Third, we talk about schedules and one of the things we have been
hearing for days here is, I think, one size does not fit everybody\'s
needs. And so I am concerned that as a group, if we try to come up with
the lowest common denominator, we will end with something that doesn\'t
really meet any of our needs.

So this might be a case where, for certain departments, a particular
schedule does not make sense. For other departments, it provides
tremendous value. We have talked about the advantages for firm pricing,
for small agencies, but not for somebody on the size of DoD who is doing
billions. And so maybe again, the answer should not be the same for
every department.

I think everything else I have here has pretty much been touched on. So,
I will end it at that. Thank you.

CHAIR BRANCH: Okay, I guess the question is, we have a lot of issues
certainly thrown out. And the hour is getting a little late and the
weather looks like it is about to turn as we say in the Navy, heavy. So,
this is what I would like to suggest.

I would like the panel members to kind of take some time on their
commute and think about this. And I would like you to come back tomorrow
with your top three issues or up to top three issues, let me put it that
way.

And I would like to suggest come in the nominal group technique
approach. So, if you have one issue that you are just absolutely rabid
about, you know, say that is my one issue and that gets three votes. You
know, if you have got two issues, you know, decide what the order and
kind of split your priority between those two issues. And if you have
three issues that are each equally important to you, give them that
weight. And then possibly at least kind of rank order some of the things
we have heard today.

And then I think tomorrow, using that rank order, we can kind of start
to take a look at how we \-- what are the most important issues for us
to attack and in what order.

Judith?

MS. NELSON: Maybe it would be helpful if we could get some, I don\'t
know how anybody else feels about this, but I can\'t do it in my head.
So maybe we could get a board \--

CHAIR BRANCH: Yes.

MS. NELSON: \-- and maybe some Sticky Notes and affinitize them. Like if
we brought them up here and just do \--

CHAIR BRANCH: Okay.

MS. NELSON: \-- an old fashioned affinity board or something like that.

CHAIR BRANCH: Can we do that? Okay. Pat has got that for action.

Okay. Yes, April.

MS. STEPHENSON: Elliott, I have a conflict in the morning and I will not
be able to be here until 11:00 or slightly later.

CHAIR BRANCH: Okay.

MS. STEPHENSON: But I will certainly get here as soon as I can.

CHAIR BRANCH: All right. Very good. Thank you.

Any last thoughts before we adjourn for the afternoon? Glenn?

MR. PERRY: Maybe it is just me. I know I said some things. I am feeling
a little hamstrung with the lack of data and I was wondering if people
could think about what data we would like. I know everybody doesn\'t
want to ask for it but we are saying a lot of things that if we had had
a little more data, I guess I would feel like I was making better
summarizations of my feelings. And I will admit to I am kind of going on
kind of what I heard and what I think it is. And it is pretty anecdotal
in some cases.

So, just I would think about it. Can we talk about it tomorrow?

CHAIR BRANCH: Absolutely. I think it would be important to talk about
data. Tom?

MR. SHARPE: Yes, I would like to second that. I, too, have echoed
concerns about the value. Can we not have some examples of proven out
where there is price value? I mean, I heard comments on the services.
And I guess we are talking two points of comparison, what we pay and
what we think a good price is.

Because I don\'t want to be unfair to the schedules but I have yet to
see any data. And if we are talking price, we ought to have data that
supports those comments one way or the other.

CHAIR BRANCH: Yes, I think tomorrow it probably would be useful to have
a discussion about how we have pulled that data together. Because I
think, and the GSA folks in the room will correct if I am incorrect, but
they have no way of going down to the ordering activity level and saying
to us, you know, for SIN 84-2, you know, Agency A, B, or C bought this
many hours and this was our price.

MR. SHARPE: I might suggest the exercise being two steps, at the
contract level and then at the order level. Because what I am hearing is
there are value at the contract level for those prices. How do we know
that one way or the other?

CHAIR BRANCH: Good point. But I think we want to talk about a road ahead
on that tomorrow so we don\'t kind of go off willy-nilly with respect to
our data collection methodology.

So, I absolutely agree with you but I think we need to have a considered
view of how we want to collect that data. That is my only point.

Any last comments? Okay, so it is 4:09. We will adjourn. We will be back
again at 0900 tomorrow, 9:00.

(Whereupon, at 4:09 p.m., the meeting was adjourned to reconvene on
Tuesday, June 17, 2008 at 9:00 a.m.)