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95–526 2015

GSA’S PROPOSED TRANSACTIONAL DATA RULE 

AND ITS EFFECT ON SMALL BUSINESSES 

HEARING 

BEFORE THE

SUBCOMMITTEE ON CONTRACTING AND 

WORKFORCE 

OF THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

HEARING HELD 

JUNE 25, 2015 

Small Business Committee Document Number 114–017 

Available via the GPO Website: www.fdsys.gov 

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Congress.#13
(II) 

HOUSE COMMITTEE ON SMALL BUSINESS 

STEVE CHABOT, Ohio, Chairman 

STEVE KING, Iowa 

BLAINE LUETKEMEYER, Missouri 

RICHARD HANNA, New York 

TIM HUELSKAMP, Kansas 

TOM RICE, South Carolina 

CHRIS GIBSON, New York 

DAVE BRAT, Virginia 

AUMUA AMATA COLEMAN RADEWAGEN, American Samoa 

STEVE KNIGHT, California 

CARLOS CURBELO, Florida 

MIKE BOST, Illinois 

CRESENT HARDY, Nevada 

NYDIA VELA ́ ZQUEZ, New York, Ranking Member 

YVETTE CLARK, New York 

JUDY CHU, California 

JANICE HAHN, California 

DONALD PAYNE, JR., New Jersey 

GRACE MENG, New York 

BRENDA LAWRENCE, Michigan 

ALMA ADAMS, North Carolina 

SETH MOULTON, Massachusetts 

MARK TAKAI, Hawaii 

KEVIN FITZPATRICK, Staff Director 

STEPHEN DENNIS, Deputy Staff Director for Policy 

JAN OLIVER, Deputy Staff Director for Operation 

BARRY PINELES, Chief Counsel 

MICHAEL DAY, Minority Staff Director 

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C O N T E N T S 

OPENING STATEMENTS 

Page 

Hon. Richard Hanna ................................................................................................ 1 

Hon. Mark Takai ..................................................................................................... 2 

WITNESSES 

Ms. Sheila A. Armstrong, Partner, Morgan, Lewis & Bockius, LLP, Dallas, 

TX .......................................................................................................................... 3 

Mr. John Stanford, Vice President, NextWin Services, Washington, DC, testifying on behalf of Women Impacting Public Policy ........................................... 5 

Mr. Roger Waldron, President, The Coalition for Government Procurement, 

Washington, DC ................................................................................................... 6 

Mr. John Horan, Partner, McKenna Long & Aldridge, LLP, Washington, 

DC .......................................................................................................................... 8 

APPENDIX 

Prepared Statements: 

Ms. Sheila A. Armstrong, Partner, Morgan, Lewis & Bockius, LLP, Dallas, TX ............................................................................................................ 19 

Mr. John Stanford, Vice President, NextWin Services, Washington, DC, 

testifying on behalf of Women Impacting Public Policy ............................ 29 

Mr. Roger Waldron, President, The Coalition for Government Procurement, Washington, DC ................................................................................. 34 

Mr. John Horan, Partner, McKenna Long & Aldridge, LLP, Washington, 

DC .................................................................................................................. 50 

Questions for the Record: 

None. 

Answers for the Record: 

None. 

Additional Material for the Record: 

SIA - Security Industry Association ................................................................ 56 

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(1) 

GSA’S PROPOSED TRANSACTIONAL DATA 

RULE AND ITS EFFECT ON SMALL BUSINESSES 

THURSDAY, JUNE 25, 2015 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

SUBCOMMITTEE ON CONTRACTING AND WORKFORCE, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 10:00 a.m., in Room 

2360, Rayburn House Office Building. Hon. Richard Hanna [chairman of the subcommittee] presiding. 

Present: Representatives Hanna, Hardy, and Takai. 

Chairman HANNA. We will be called to votes, but I am confident 

that if they have not done it yet, they will do it in about 15 minutes. But the way it works is you still have—it takes quite a while 

to get through it, through the vote series, and we will probably be 

able to get the testimony of all of you, I think. We will certainly 

try, if that is all right with Congressman Takai. We will try that 

and we will just see how it goes. 

I have an opening statement and a gavel that Emily is about to 

remind me I have to hit. 

I want to thank you all for being here, incidentally, and apologize 

in advance for the nature of these meetings. We have no control 

over when they call votes, and if we did, it would not matter because everybody would have a different time. 

So I will call this hearing to order, and I have an opening statement. 

Good morning. Every June since I have been chairman of this 

Subcommittee, we have held a meeting of the General Services Administration, the GSA. This has not been by design but because 

every year they come out with a new idea that threatens the viability of small contractors. 

Unfortunately, 2015 is no exception. Today, we will talk about 

the recent proposed rule to improve transparency into federal contracting. While I fully support any effort to give citizens and small 

business greater confidence in how their tax dollars are spent, this 

is a case of the cure being worse than the disease. 

As one witness will testify, in its first year, this rule will cost 

twice as much as the total value of the federal contracts awarded. 

The price tag could be $800 billion. The proposed rule could mean 

that small businesses would need to have one employee spend 

three months a year just entering data. Keep in mind, this is data 

the government already has but does not collect centrally. While I 

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2 

am all in favor of creating jobs, I do not think forcing small businesses to hire employees to provide data a second time is a worthwhile use of their dollars or tax dollars, because somebody has got 

to pay for this. 

Finally, despite what GSA says, we will end up paying for this 

new rule. Data is not free. Businesses will decide it is better to sell 

independently of GSA, which will improve the government’s cost to 

buy, or the small businesses will drop out of the federal market altogether, decreasing competition. In fact, we have already lost over 

100 small contractors in the past two years. We cannot afford to 

exacerbate the problem. 

I look forward to hearing from our witnesses today about the effects of GSA’s proposed rule and any alternative they would suggest to improve how the government buys whatever it buys. 

I now yield to the ranking member for his opening statement. 

Mr. TAKAI. Thank you, Mr. Chairman, and good morning. 

The federal procurement marketplace provides an important customer base for small businesses. For many firms, getting listed on 

the GSA schedules provide an efficient way to ensure their products and services are considered when agencies are making purchases. Purchases made by these agencies off the schedules account 

for more than $32 billion, or approximately 10 percent of all federal 

procurement dollars. 

In Fiscal Year 2014, 35 percent, or $11 billion, went to small 

businesses through these orders. That is a significant infusion into 

the small business economy, helping entrepreneurs grow their enterprises, retain staff, and even create new jobs. 

The GSA schedules have a number of benefits for both vendors 

and purchasing agencies. Most notably, it creates a simpler system 

that allows contracting officers direct access to the products and 

services of numerous firms without the need of issuing multiple solicitations for every requirement. 

For small businesses with limited resources, relative inexperience navigating the procurement process, landing on a GSA schedule can be an important first step towards securing the federal government as a customer. 

Despite these advantages, there are a number of concerns from 

the small business perspective with how the GSA schedule system 

functions and whether small businesses fully benefit from how it 

operates. For instance, many entrepreneurs have previously presented testimony to this Committee detailing how the adoption of 

the federal strategic sourcing initiatives have negatively harmed 

their sales and even caused some layoffs. 

As this type of vehicle has expanded to additional industries and 

products through the government’s new category management initiative, there are continued reservations among small business. 

And likewise, small firms have expressed similar concerns regarding GSA’s proposed rules on transactional data. The rule requires 

that firms that hold schedule contracts while other governmentwide acquisition contracts report transactional data through an 

electronic system. While it appears that much of this data is already available to the GSA, the new rule increases the frequency 

of reporting and expands what information firms are required to 

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provide. For small businesses, this could mean significant new burdens and perhaps a decline in their GSA schedule participation. 

Mr. Chairman, Congress has long recognized that when small 

businesses provide services or products to the federal government, 

it results in a win-win. Agencies and taxpayers benefit from quality 

products that are provided at competitive pricing, while small businesses are afforded a chance to grow. 

As GSA continues seeking efficiencies, it is important that maintaining transparency in the procurement process is not achieved at 

the expense of small business participation. I hope we can all work 

together to ensure that these two factors are properly balanced. 

With that, I thank the witnesses for testifying today, and I yield 

back. 

Chairman HANNA. Thank you. 

If Committee members have an opening statement, I ask that 

they be submitted for the record. And as you know, you have five 

minutes. We want to hear what you say, so we will be a little bit— 

I will be a little bit flexible on that, or try to be. 

We have one panel today. Our first witness is Sheila Armstrong, 

who is a partner with the law firm of Morgan Lewis and Bockius 

LLP. Bockius, is that how you pronounce it? 

Ms. ARMSTRONG. Bockius. 

Chairman HANNA. Bockius. In Dallas, Texas. She also served as 

co-chair of the Commercial Products and Services Committee, one 

of the committees of the American Bar Association’s Public Contract Law Section. 

Ms. Armstrong, you may begin. Thank you. 

STATEMENTS OF SHEILA ARMSTRONG, PARTNER, MORGAN 

LEWIS AND BOCKIUS LLP; JOHN STANFORD, VICE PRESIDENT, NEXTWIN SERVICES; ROGER WALDRON, PRESIDENT, 

COALITION OF GOVERNMENT PROCUREMENT; JOHN 

HORAN, PARTNER, MCKENNA LONG AND ALDRIDGE 

STATEMENT OF SHEILA ARMSTRONG 

Ms. ARMSTRONG. Good morning, Mr. Chairman, Mr. Takai. 

As mentioned, I am a partner with the law firm of Morgan Lewis 

and Bockius. I primarily counsel government contractors on commercial item contracting. So I work with quite a few GSA schedule 

contractors. And also as mentioned, I do serve as a co-chair of the 

American Bar Association’s Public Section of Contract Law Commercial Products and Services Committee. 

I would like to thank you for inviting me here today to talk to 

you about GSA’s proposed Transactional Data Rule. GSA published 

this rule in March of this year. What the rule requires is monthly 

reports from a variety of GSA contractors. This includes both the 

schedule contractors, as well as those who hold IDIQ, indefinite delivery, indefinite quantity contractors, and what we call GWACs, 

Government-wide Acquisition Contracts, to prepare these monthly 

reports of all federal sales made during the prior month. 

For GSA contracts, the rule will be implemented through a pilot 

program, which will apply to a limited number of schedules initially. For those contractors who participate in the pilot program, 

they will be alleviated from a burden, what we call the price reducSBREP-219 with DISTILLER

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tions clause, which is another compliance clause that is in GSA 

contracts. 

In the public meeting that GSA held on April 17th, I attended 

virtually. My perception of that meeting is that everyone in the 

room had concerns about the rule, including GSA’s own inspector 

general. I think GSA was a little surprised about the negative reaction to the rule. There is a transcript that is supposed to be published of that hearing, but I have not yet seen that transcript. 

The proposed rule raises a variety of concerns. There are four 

which I would like to address briefly today. The first, which I am 

sure you will hear from all our panel members about, is the cost 

of implementation and compliance. GSA has estimated that it will 

take six hours for contractors to implement systems to comply with 

this rule. I would suggest that for some contractors, it will take six 

hours for them to figure out which of their IT systems hold the various data elements that GSA has required for this rule. That does 

not allow any time for developing a report, ensuring that the report 

is accurate, and training its personnel on how they will submit that 

report on a monthly basis. 

Likewise, the 31 minutes that GSA estimates it will take on average to prepare the monthly reports is grossly underestimated. 

This could not possibly allow any time for the contractors to actually review the reports to ensure that the data is correct. There is 

nothing in the proposed rule that suggests what would happen if 

the contractors submit incorrect data or if they simply remove data 

because it is obviously incorrect. I think these factors will have a 

disproportionate impact on small businesses who do not always 

have in-house resources for things like IT systems, and so they will 

have to go to vendors on an hourly basis to bring in expertise to 

help write these reports and prepare the transactional data. 

The second problematic area is the potential expansion of what 

we call commercial sales practice requirements. GSA contractors 

are required to submit commercial sales practices prior to contract 

award and during contract performance when certain things happen, like if they go to add products to a contractor’s increased 

prices. The proposed rule allows GSA to ask for CSPs at any time. 

GSA should, although I am not sure that it understands the implications of preparing these CSPs, or even checking the box to say 

that CSPs have not changed. This requires contractors to go into 

their data systems and look at actual discounts on transactions. I 

mean, we see press release after press release from the Department of Justice stating that contractors have fraudulently provided 

this information when in reality they just have not checked. So this 

is a big concern. 

The next concern is the cost benefit to collecting this information. 

We know it is going to cost a lot to collect the information, but 

what is not clear is what benefit GSA is going to receive from the 

information. 

And then finally, is the confidential and proprietary nature of the 

information. Transactional data pricing has always been protected 

by the courts under FOIA, and GSA does not appear to appreciate 

based on comments made at the meeting that this is the case. 

So I want to thank you again for inviting me to speak, and I am 

happy to answer any questions. 

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Chairman HANNA. Thank you. 

Our second witness today is Mr. John Stanford, who is vice president of NextWin Services. NextWin assists commercially successful 

small businesses enter and grow into the federal market. 

You may begin, Mr. Stanford. Thank you. 

STATEMENT OF JOHN STANFORD 

Mr. STANFORD. Good morning, Chair Hanna, Ranking Member 

Takai. Thank you for the opportunity to testify. 

As noted, I am John Stanford, and vice president of NextWin 

Services. Part of our work is monitoring procurement policy 

changes, engaging their real world impact on businesses. Today’s 

topic, GSA’s proposed transactional data regulation, certainly gives 

us cause for concern. As noted, the rule would require vendors to 

share their pricing information through a new online reporting system. This pricing data in turn is a critical part of a larger GSA effort to create a common acquisition platform, an online marketplace with best in class government-wide contracts, all reforms 

with impacts on the small business community. 

In our view, such impacts can be measured by three criteria. 

Cost, complexity, and opportunity. When viewed through these 

lenses, GSA’s proposed transactional data requirement fails to best 

serve small businesses. The first, cost, considers how reforms will 

change the bottom lines of contractors, either through changing 

compliance burdens, pricing requirements, or altering resources 

needed to win work. Simply put, business owners ask themselves, 

will a given change increase or decrease the cost of doing business 

with the federal government. 

As written, small businesses would face increased costs under 

the proposed rule. GSA recognizes the additional reporting requirement will undoubtedly have a cost for affected businesses. SBA’s 

Office of Advocacy and GSA’s own inspector general noted that estimates in the proposed rule appear drastically understated. I know 

others here today have completed more comprehensive measurements of this cost, and I will defer to them on providing those details. So estimates of this cost requirement may vary, but nonetheless, there will certainly be a cost. 

Complexity, on the other hand, measures if a policy change will 

make selling to the government harder or easier. Essentially, will 

the federal market be more or less difficult to understand? Or as 

I often hear from business owners, am I going to need to hire someone for this? 

While GSA contents its reporting solution will be user-friendly, 

our experience is that government data systems are anything but. 

After implementation, a successful GSA contractor would be required to monitor and update five government systems—GSA’s 

eBuy Marketplace, the system for award management, Fed Biz 

Ops, the 72(a) Quarterly Reporting System, and now, the new 

Transactional Data Reporting System. For small businesses, this 

may often be in addition to SBA systems or certification requirements. All in all, a lot of government systems, each with their own 

complexities. 

The third criterion is whether a change expands or limits opportunity to win contracts. When considering a policy, business owners 

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ask, ‘‘Will I have more opportunity to compete and win?’’ In our 

view, small businesses may see fewer opportunities from GSA contracts and vehicles in light of this proposed rule. Horizontal pricing, whereby the government can compare costs of similar items, 

makes price the critical factor in awarding a contract. Often, however, small businesses offer tailored and innovative solutions that 

in conjunction with competitive pricing make for best value in procurement instead of lowest price. 

While GSA suggests that pricing will only be one factor in determining best value, it lends significant weight. The words ‘‘price’’ or 

‘‘pricing’’ appear 165 times in the regulation, while ‘‘best value’’ 

only appears seven. Because it is unclear how, if at all, GSA would 

differentiate similar products to agencies seeking goods or services 

besides price, we are left to assume that agencies will have to use 

price as the determining factor. To the extent that this happens, 

especially for services, small business will suffer. 

We do applaud efforts to streamline the acquisition process. The 

simplification of competition and removal of unnecessary costs associated with managing duplicative contracts benefits all parties. 

We believe, however, that the responsibility for aggregating pricerelated data should fall on GSA instead of the private sector. 

Citing the cost of upgrading its data systems, GSA is proposing 

to ask vendors to report to GSA the details of what was purchased 

through GSA. This is like asking retailers selling on Amazon to report to Amazon what it sold on Amazon. This seems to be an inefficient way to collect data. 

Finally, and speaking to the driver behind this regulation, we 

continue to be concerned about a vision of government procurement 

that seeks to categorize customized services into narrow categories. 

Individual agencies and programs under them have unique requirements. While the acquisition process is in need of modernization, 

a rushed process of aggregating similar but not identical purchases 

seems ill-advised. 

It is our recommendation that GSA rethink its approach to transactional data, putting the collection burden on the agency rather 

than the vendor. One option, upgrading the systems to automatically collect this data, seems to be a common-sense solution that 

ultimately will have to be done. Why not now? 

Thank you for holding this hearing today and shining light on an 

important issue. I am happy to answer any questions. 

Chairman HANNA. Thank you, Mr. Stanford. 

Next, we have Mr. Roger Waldron, who is president of the Coalition of Government Procurement. Believe it or not, we have time. 

We can break now but I think we do have time to get through. As 

you can see, there are 400 people who have not shown up yet. So 

you may begin. Thank you. 

STATEMENT OF ROGER WALDRON 

Mr. WALDRON. Chairman Hanna, Ranking Member Takai, and 

members of the Subcommittee, thank you for the opportunity to appear before you today to address the effect of GSA’s proposed transactional data reporting rule on small businesses. 

The Coalition for Government Procurement is pleased that the 

Subcommittee is focusing on the role of GSA’s multiple awards 

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schedule program and promoting strategic acquisition and opportunities for small business concerns. 

The Coalition is an association of small, medium, and large firms 

selling commercial services and products to the federal government. Our members hold contracts under the multiple awards 

schedule program, ITG WAC, and major individual agency contracts. 

The multiple award schedule program is one of the most successful government-wide contracting programs available, with over 30 

percent of the dollar volume of purchases going to small business 

concerns. Our members support the program as a valuable entre 

into the federal market, but they are increasingly concerned with 

GSA initiatives that increase the cost of contracting without corresponding value to customers and the American people. 

One such initiative is GSA’s proposed rule requiring that contractors collect and report transactional data on all sales made through 

GSA schedules and ITG WAC contracts. Coalition members oppose 

this rule for several reasons. 

First, the reporting and compliance burden imposed upon contractors will be enormous. GSA estimates this burden will be six 

hours for initial setup and 31 minutes thereafter to administer. A 

survey of our members indicated that the actual burden greatly exceeds that amount. Respondents to the survey overwhelmingly said 

that their existing systems do not currently collect the data points 

GSA is seeking. In order to implement transactional data reporting 

on a monthly basis, systems would need to be built, or existing systems would have to be customized to collect, consolidate, and report 

the information to GSA. 

Small business respondents to the survey reported that it would 

take on average 230 hours for initial startup time. Large and medium-size companies estimated that it would take on average 1,190 

hours to implement. 

The monthly administrative compliance cost also greatly exceeds 

GSA’s estimate of 31 minutes. Small businesses reported that it 

would take 38 hours per month on average to administer the new 

requirement. Large and medium-size businesses estimated that it 

would take on average 81 hours per month. 

The actual burden of the proposed rule is significant and cannot 

be absorbed without raising prices under multiple award schedule 

contracts, resulting in increased prices and costs for GSA customers. Moreover, and most fundamentally, this is data the government already has in in its possession. 

It is GSA’s position that the rules compliance cost is offset by 

changes to the price reduction clause. The price reduction clause is 

one of the most costly provisions of MES contracts, and our members would welcome a real change. The coalition has long taken the 

position that the clause should be eliminated as it has outlived its 

usefulness in ensuring that awarded contract prices remain fair 

and reasonable throughout the contract term. 

GSA confirms this view in the proposed rule by noting that only 

three percent of price reductions result from application of the 

tracking customer provision of the price reduction clause. Our written testimony addresses this matter in detail, and we note that the 

changes to the price reduction clause proposed by GSA are cosmetic 

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and do not change the legal liabilities or the burden on contractors. 

Continuous competition at the taskor as required by the Federal 

Acquisition Regulation, assures that prices remain reasonable and 

eliminates the need for the costly and competitive price reduction 

clause. 

Second, the proposed rule does not achieve the objective of providing GSA contracting officers information to negotiate fair and 

reasonable prices. The federal acquisition regulation provides that 

when conducting a price analysis using prior prices, the prior price 

must be a valid basis for comparison. If there has been a significant time lapse between the last acquisition and the present one, 

if the terms and conditions of the acquisition are significantly different, or if the reasonableness of the prior price is uncertain, then 

the prior price may not be a valid basis for a comparison. 

In other words, the data has to be sufficient for a contracting officer to make an apples to apples comparison. The task order data 

to be collected is simply not comparable to contract-level pricing. 

And I might add, there are over 7,500 different varieties of apples. 

Finally, a system that seeks to drive down pricing through constant comparison of individual and hypothetical transactions leads 

to a downward spiral in pricing that is inconsistent with the dynamics of the commercial marketplace and is not sustainable by industry over the long term. Such an approach will have a significant 

cost as it will compromise the government’s long-term strategic interests in fostering competition, ensuring best value mission support, supporting small business, and accessing priceless commercial 

innovation. 

I want to thank you for your time, and I look forward to answering your questions. 

Chairman HANNA. Thank you. And I think because votes are 

going on and Congressman Takai is going to introduce our next 

witness, then we would like to get some questions in, it is probably 

an appropriate time to break, adjourn for a few minutes. It will 

probably be 20 minutes because this vote has to go through, and 

as you can see, no one is quite there yet. Almost no one. And there 

is one vote after this. So I would guess 20 minutes will do it. 

Thank you, and relax. 

[Recess] 

Mr. TAKAI. Thank you, Mr. Chairman. 

It is my pleasure to introduce Mr. John Horan, partner at the 

firm of McKenna Long and Aldridge here in Washington, D.C. Mr. 

Horan works in the firm’s Government Contracting, Litigation, and 

White Collar Criminal Defense Practice Groups. He has spent 25 

years working in government contract law and regularly assists clients selling commercial items on both the GSA and the VA schedules. Additionally, Mr. Horan serves on numerous American Bar 

Association Committees, including serving as the co-chair for the 

Consumer Products and Service Committee and the vice chair of 

the Procurement Fraud Committee. 

Welcome, Mr. Horan. 

STATEMENT OF JOHN HORAN 

Mr. HORAN. Thank you. 

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Good morning, Chairman Hanna and Ranking Member Takai. 

Thank you for inviting me to testify. 

In my view, GSA’s proposed transactional data rule is afflicted 

with three of the most fundamental problems that a procurement 

regulation can have. One, it creates a significant, unnecessary, and 

underestimated burden on contractors, a burden that will be felt 

more acutely by small businesses. Two, the anticipated benefit to 

the government is poorly defined and is not likely to be realized. 

Three, the proposed rule is subject to misuse that can result in considerable harm to contractors, particularly small business contractors. 

As we have heard, GSA estimates that it will take six hours to 

initially implement the procedures required to capture the transactional data, and an average of 31 minutes per month for ongoing 

reporting. GSA does not provide sufficient detail to analyze how 

these estimates are flawed, but virtually every informed party who 

has weighed in on these estimates believes they are inaccurate, including such diverse parties as major industry associations, such as 

the Coalition for Government Procurement and GSA’s own Office 

of Inspector General. 

Based on my experience, the effort required by the proposed rule 

will take significantly more time and expense than estimated by 

GSA. A contractor cannot simply gather and report the information 

but also must ensure that the information is current, accurate, and 

complete. Otherwise, the contractor will risk an allegation of fraud 

under the False Claims Act, as has been the case with essentially 

every other form of cost report submitted by contractors to the government. 

Small businesses, which GSA estimates to be 80 percent of the 

contracts affected by this rule, are especially vulnerable to these 

added expenses because they often operate with fewer internal resources and lower margins than larger businesses. Industry also 

views the imposition of the burden as unnecessary because the 

data, as we have heard, is already available within the government. Ironically, GSA rejected modifications to its own databases 

to fully capture this data as too costly and unreliable and then imposed these requirements on contractors. 

GSA anticipates that the transactional data will assist government buyers in determining the best value to the government when 

making a purchase. GSA also recognizes a point very important to 

industry; that price itself is not the only element of best value, but 

there are many other information points in determining best value. 

According to GSA, important considerations include total cost, desired performance levels, delivery schedules, unique terms and conditions, time considerations, and customer satisfaction. 

The rule provides no means to obtain to connect this other important information to the transactional pricing data. Without this information, the transactional pricing data required by the rule will 

be of little or no value in determining the best value to the government, which is GSA’s purchase for the rule. 

Perhaps the most fundamental concern of industry is that GSA 

and government buyers will use this transactional data to drive 

down prices without consideration of these other value-added terms 

and conditions. Contractors that rely on the other value-added 

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terms and conditions will be unable to compete and will eventually 

leave the government market. 

This is not an unfounded concern. I have seen contracting officers ignore these other considerations and focus primarily on price 

repeatedly in contract negotiations. GSA itself acknowledges that it 

has used transactional data under strategically sourced contracts 

to drive down prices. Again, small businesses are most vulnerable. 

Small businesses often operate as value-added resellers or otherwise distinguish themselves based on the value they add to a 

transaction that is not captured by transaction price. 

Another fundamental concern of industry shared by small businesses is that the transactional data will not be adequately protected from disclosure. The rule does not describe the procedures 

that will be used to protect the data submitted by contractors. Industry is concerned that sensitive data will make its way into the 

hands of competitors, either through Freedom of Information Act 

requests, disclosures during negotiations, breeches of GSA systems, 

or other unintended disclosures. 

In my view, GSA should not proceed with implementation of this 

rule until these fundamental issues have been addressed. 

Thank you for hearing me on this important issue. And I am 

happy to answer any questions. 

Chairman HANNA. Thank you. 

I am going to ask Ranking Member Takai if he would like to ask 

the first questions since we have no other—okay, I will be happy 

to. 

It really seems like GSA and everyone else are living in alternate 

universes. Often, you go to a hearing and you really have questions. It seems like this is so, on its face, a bad idea. I wish that 

GSA was here to defend this. It would be a much more interesting 

conversation, but I do not think it would be any more helpful since 

the preponderance of this is that they do not want to do it because 

it is too expensive for them, and yet they are asking you to do it, 

which clearly, even if you took the numbers that are suggested and 

cut them in half, you would have to say it is not worth it, particularly since they already have the information and they simply have 

to use it the way they want to use it. 

In my time as chairman of the Subcommittee, I have seen GSA 

demand based efficiency models, their strategic sourcing model, the 

acquisition hallways and category management embraced by GSA. 

Now, we are in transitional data. 

Mr. Waldron, it seems that there is something bigger going on 

at GSA. I know you monitor this agency. Maybe you can give us 

some idea of what you think is driving this, what appears to be 

counterproductive, harmful to small business, widely expensive, 

and pointless. 

Mr. WALDRON. I think—— 

Chairman HANNA. Not to put words in your mouth. 

Mr. WALDRON. What do I say after that, right? 

Well, you know, I mean, I think from GSA’s perspective, and I 

cannot really speak for them, they are searching for what they believe and implementing what they believe will drive lower prices. 

I think that is a huge focus of the leadership is driving lower pricing on their contract vehicles. And as the other panelists here have 

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indicated and you have mentioned as well, you know, best value in 

that context with regard to procurement is vital to meeting customer needs. And I think many of these things, whether it is the 

demand-based model, it is data reporting, they also have brand 

part number reporting requirements now and UPC code reporting 

requirements that despite conversations with GSA about the costs 

imposed by those, they are driving to a lower price model. 

And in doing so, I do not know if it is counterintuitive or contradictory because to get to where they want to go, they are increasing costs for contractors. They are increasing—this rule is a 

prime example of that. It is being asked as part of—there is a new 

initiative, too, the competitive pricing initiative that is going on 

where GSA is not doing its own independent evaluation of the information with regard to horizontal pricing; they are shooting it 

over the transom to the contractor and asking the contractors to do 

the analysis to try to explain why their price is not as low as some 

other company’s price, and there is issues whether it is unauthorized resellers. You know, there are gray market items. There are 

all kinds of other issues that GSA should be looking at as well. And 

the increased complexity to try to drive to this lower priced model 

fundamentally is making it harder for companies to compete. They 

are increasing in complexity. Our members would like to see a 

focus on streamlining the process; emphasizing competition at the 

task order level; investing in the electronic systems, whether it is 

GSA Advantage or eBuy to make it more efficient, more effective, 

more transparent. That would provide more opportunities for small 

businesses across GSA’s program. 

And fundamentally, what we are seeing at the end of the day— 

I like to put it in these terms. When you are performing at a government contract, there are two types of costs. There is a direct 

cost of performance that is actually accomplishing the task or delivering the product that the government wants. Then there is overhead cost, which is all the administrative costs of compliance with 

government unique requirements. In the context of the GSA Schedules program, that overhead cost is becoming a larger and larger 

piece of the pie, and that is not value-added to the government or 

the American people. And the direct cost, the actual performance, 

is getting smaller. And that is not a recipe for best value in the 

long run. So at the same time you are seeing a drive to lower 

prices, you are seeing increased complexity to try to get to those 

lower prices and it just does not work together. 

Chairman HANNA. So is it safe to say that all these reforms cost 

money and push people out of the market, add to bureaucracy but 

do not help the process, and at the end of the day actually cost 

more? 

Mr. WALDRON. I think that is a fair description of much of 

what is with regard to the GSA Schedules program in particular. 

Chairman HANNA. This is not anecdotal evidence. This is something better than that. 

Mr. WALDRON. Well, our members, for example, the Transactional Data Reporting Survey that we did, our members indicated clearly that it would significantly increase their costs of doing 

business with GSA and, and we had over 10 percent, about 11 percent of our members, we did not ask this question, but they indiSBREP-219 with DISTILLER

12 

cated that they would seriously consider leaving the GSA market 

as a result. They volunteered that information. That was not a 

question we asked in our survey. That they would seriously consider leaving the GSA market if this rule went through. 

Chairman HANNA. Thank you. 

I yield to Ranking Member Takai. 

Mr. TAKAI. Thank you, Mr. Chairman. 

Mr. Horan, the initial implementation of this rule is designed as 

a pilot program with other contracts being included if, in fact, the 

pilot is successful. Given your conclusions that the anticipated benefit of the rule to the government is poorly defined and unlikely to 

be realized, how do you think GSA is supposed to figure out if the 

pilot is successful? 

Mr. HORAN. Well, the way I would like then to figure it out is 

if it actually produces a better value, best value to the government, 

considering the cost to the contractors. I do not think they can do 

that based on the manner in which the proposed rule is implemented here. What I think we will see from GSA is some type of 

calculation of, in their view, of cost savings that will be based entirely on prices and without consideration of the complexity of that 

type of analysis where you should be determining whether the 

prices would have lowered based on a competition at an order level 

and also the offset to those lower prices based on the loss of these 

other value-added services. And the finally, the consequence of 

pushing all contractors to lower prices regardless to the competition on GSA schedules, because I think you will see businesses, 

particularly small businesses, leaving the schedule as it continues 

in this direction. 

Mr. TAKAI. Thank you. 

I have been in the state legislature for 20 years, so we have dealt 

with these types of issues in regards to purchasing from a certain 

vendor for the lowest price versus the best value. And I know many 

of you had mentioned that this morning. Small businesses are 

known for the added value they can provide agencies with benefits 

such as customer service. Big corporations or big companies cannot 

do that. 

Mr. Horan, you stated in your testimony that the new rule does 

not account for such added value. What could this omission mean 

not only to small vendors but also to the agencies that purchase 

their goods and services? 

Mr. HORAN. I think those other terms that lead to best value 

could be lost. Again, that it could be—the procurement could be 

driven to low price only, and as a result of that, the contractors 

who offer some of these other terms and services that provide best 

value will lose sales at a minimum, perhaps be driven out of the 

market. And the flipside of that is eventually government purchasers will lose the opportunity to purchase from those type of 

contractors that provide best value in a manner that is not limited 

to price or low price. 

Mr. TAKAI. Because they are out of the business or they are just 

not bidding anymore? 

Mr. HORAN. Because they are out of the business. I mean, there 

are other issues as well. Because there is such pressure on contracting officers to look at only low price that sometimes they will 

SBREP-219 with DISTILLER

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exclude consideration of best value but ultimately, I think they 

could be out of the business. 

Mr. TAKAI. Okay, thank you. 

The quotient for government procurement survey in its survey, 

small businesses indicate that it would take on average 232 hours 

to comply with the GSA’s proposed rule. 

Mr. Stanford, has your business done its own estimate on the 

hours it will take to comply with the new requirement, and do you 

find the results of the survey to be more accurate than GSA’s own 

analysis? 

Mr. STANFORD. We have not. And while we have looked at 

their study and the ABA work, we are also encouraged in accepting 

their conclusion because also SBA Office of Advocacy and GSA’s 

own inspector general determined that those costs seem understated. 

Mr. TAKAI. Their, meaning the coalition, not GSA’s? 

Mr. STANFORD. Yes; correct. 

Mr. TAKAI. Okay. 

Other than our spin on compliance, can you discuss some other 

costs that companies like yours will have to face because of this 

rule? 

Mr. STANFORD. I will not speak to our company individually, 

but speaking to the companies we work with as they enter the federal market, the costs beyond compliance are—for small businesses 

are initial costs up front. So if you are getting a schedule, that is 

an enormous barrier for small businesses. Actually getting into the 

GSA eBuy system can be a barrier. As we make that more complicated, as we add additional systems, what we hear from businesses is they simply do not have the resources. I think one of the 

other panelists pointed to a conclusion that this rule would require 

an extra employee. For the case of a small business that has an 

innovative solution, they do not have that extra employee. And one 

conversation we often have with small businesses is whether or not 

they are ready to take on working with the federal government as 

it is a unique customer and this is just adding to the conversation 

that they are not ready, which is a cost to the government. 

Mr. TAKAI. Thank you. I yield back. 

Chairman HANNA. Mr. Horan—Hardy? Excuse me. 

Mr. HARDY. Thank you. I apologize for being late. 

Mr. Stanford, in your testimony, you had talked about Amazon 

as an example of how the GSA—and I hope somebody has not 

asked this question already—would place the burden on contractors 

and report contract information although the agency already has 

the data awarded to the contract. To me this is just another addon of frustration to contractors. Being a small business individual, 

I have had to deal with federal contracts before. It appears to me 

that this is just another way of government trying to solve their 

issue rather than take care of the problems themselves that they 

have the information at their hands. 

Would you agree to that in somewhat of that fashion? I have a 

little bit harder way of saying it, but that is—— 

Mr. STANFORD. Yes. And I think the chairman put it well. It 

is data that the government already has, and it does seem counterintuitive and there is consensus amongst the panel that this does 

SBREP-219 with DISTILLER

14 

not make any sense. And there really—in the commercial world, it 

really would not make sense for the person who is acting as the 

platform to procure the goods, to then need to be told what those 

goods and services cost. 

Mr. HARDY. Does anybody believe that GSA has maybe underestimated the real cost of what this is going to impact the businesses? Does anybody care to address that? 

Mr. WALDRON. Our members at the Coalition for Government 

Procurement, we conducted a survey and I think that is one of the 

biggest areas—it is the biggest area of disconnect between government and industry on this particular rule, the burden itself. And 

the burden goes to creating barriers to entry in the federal marketplace, the GSA. The burden goes to increasing costs for the taxpayer and for customer agencies who use GSA. Looking at it, we 

have addressed it in our written testimony. But at the end of the 

day, based on our estimates and our feedback from our members, 

and we conducted a survey where we were going to try to use 

GSA’s language that they used in the rule, in their formula to come 

up with the numbers based on feedback from our members, it 

would cost over $800 million just to implement this rule across the 

GSA Schedules program. And at the same time, GSA estimated $24 

million. And at the same time, GSA indicated in the rule that it 

would be too costly for the government or for it to adjust its systems. 

I believe, if I recall, we were talking in the tens of millions of 

dollars, and what they failed to, I think, appreciate, or to their 

credit, having a public meeting and asking comment on it, they 

failed to understand or appreciate the hundreds of millions of dollars that it will cost industry who participate in the GSA Schedules 

program to comply. 

Mr. HARDY. I will take it another direction. 

Being a business guy, you know, I work on bids. I was a general 

engineering contractor, so I put out bids. Now they are asking you 

to detail everything you got. All your information that you have 

that might put you in the competitive motion, they are wanting us 

to provide that information, which they ask for line item bids. I do 

not have a problem with numbers because my clients and the rest 

of the stuff, do you not see that being a problem with the way that 

we are getting hacked around here in this federal government of 

maybe those issues of privacy out there? Anybody? 

Mr. HORAN. I agree. I think it is a significant concern, and my 

clients have essentially universally voiced that concern. It is 

viewed, I think, in industry as competitively sensitive information. 

The rule is not clear on how it can be used, or more importantly, 

I think, how it will be protected. So, and it will be in the hands 

of many, many folks according to the GSA’s plans. So I think I can 

say that generally, industry is very concerned about that, that competitively sensitive information will be out there for competitors to 

obtain. 

And I guess I would also add that this information could cause 

harm if it is out there to contractors both in the commercial marketplace and the government marketplace because this type of pricing information would be valuable for commercial competition as 

well. 

SBREP-219 with DISTILLER

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Mr. HARDY. Thank you. My time is expired. I yield back. 

Chairman HANNA. I yield to Ranking Member Takai. 

Mr. TAKAI. Thank you, Mr. Chairman. I do appreciate the extra 

time. I have three more questions. 

We have heard from all of you about the problems associated 

with this rule. 

Ms. Armstrong, in your opinion, is there anything that can be 

done to reduce the costs associated with this rule to make compliance easier for small business, or should GSA start from scratch? 

Ms. ARMSTRONG. In my view, I think GSA should start from 

scratch and look at its own federal internal resources for this data. 

As we discussed, there is a great risk for contractors providing information to GSA. If the information is not correct, they can receive 

allegations that potentially would subject them to False Claims Act 

liability. So there is a great risk in contractors providing information to the government, which means they have to assure that the 

information they provide is correct. And that is one of the things 

that substantially increases the costs. And we are talking here 

about federal orders. We are not talking about commercial orders. 

GSA is seeking information on federal orders. So that information 

is within the government. I think GSA needs to look at its own systems and develop a way that they can make use of the information 

already in their possession. 

Mr. TAKAI. Thank you. 

Mr. Stanford, some have argued that the GSA will use this new 

information to make businesses—force them to lower their prices 

if they feel the vendor is no longer offering a competitive price. 

However, small business margins, as many of you mentioned, are 

extremely low and they, at times, cannot afford bulk discounts like 

the big companies. Is it clear to you what would happen if the GSA 

wanted to lower a price but a small business was unable to do so? 

Mr. STANFORD. I think you would have two options. Either the 

small business would leave the federal market if they could no 

longer bear the small margins to make sure they were profitable. 

Or, as in the case for some small businesses that rely 80–90 percent of revenue in the federal market, they would go out of business. 

Mr. TAKAI. Okay. Thank you. 

And my last question, and I think many of you mentioned this, 

has to do with the inability of GSA to really figure this thing out 

themselves due to their antiquated computer system. So I just 

wanted to dig a little deeper, and maybe, Mr. Horan, you can spend 

some time talking about that comment you made in your testimony 

about it would be just easier for them to upgrade their system so 

that they can track and monitor the information that they are requesting on their side, rather than leave it to the burden of the 

small businesses. 

Mr. HORAN. Yeah. I am not certain it will be easier, but it will 

be certainly—they would have to face some of the same complexities that they are willing to impose on contractors. But the point 

I was trying to make is that GSA, likely anticipating the criticism 

that they are imposing this obligation on contractors, took a look 

at their system and indicated in the role itself the preference to the 

rule changes that their systems would require changes because all 

SBREP-219 with DISTILLER

16 

this data is not contained in a single spot and they would have to 

undergo the effort. And that is the same effort that concerns contractors. So they were unwilling to take that expense despite the 

data being equally available to GSA as the contractors, and are 

willing to impose that on contractors. 

GSA having access to this information though could readily create a database or modify databases to do exactly what they want 

to do. They could gather this information either directly or through 

transactions from other agencies. They are just unwilling to incur 

that expense. 

Mr. TAKAI. Anybody have any more comments regarding this 

particular question? 

Mr. WALDRON. Yes. I do not know if it is the irony of the situation or not, is that GSA is going to have to spend money to build 

systems in any event. Because of the avalanche of data that they 

would be receiving under this rule, they are going to have to build 

systems. So why do they not take a look internally and see what 

is most efficient for them, for the government to try to figure out 

to manage its own data. Because they are going to have to build 

systems. We are talking, when you talk about monthly reporting 

across the GSA Schedules program, you are talking of hundreds of 

thousands of transactions, millions and millions of data elements 

to be reported, accessed, collected. They are going to have to build 

their own systems as well. 

Just a couple other points. With regard to the access, the question was great about, you know, with recent events, security of the 

confidential information, you know, there is even another area, and 

GSA did not—I think the public meeting that was held on the rule, 

they gained an appreciation of the level of concern across industry 

with regard to this issue, and even in that context they have contractors supporting their effort. And there have been questions that 

I have received of what are the restrictions on those contractors 

with regard to use of the information that they are already getting 

that may be commercially proprietary information from other companies. 

And lastly, just a thought on the question about whether people 

would have to leave, you know, if they are told lower your price, 

we get reports regularly of companies being asked to either lower 

their price or remove the item from the contract. And the GSA 

leadership is taking the position that that is not, and they have, 

to their credit, have said that is not the goal here from their perspective, but at the working level and the operational level, contracting officers almost daily are asking companies to either lower 

their price because they found a lower price on a horizontal comparison. If you do not lower that price, you need to delete the item 

from the contract. 

Mr. TAKAI. Thank you, Mr. Chairman. 

Chairman HANNA. Do you mean to say—is that not in a strange 

way collusion, knowing someone else’s price and calling someone 

else and saying—another bidder for the same item and saying, 

‘‘You are too high, lower your price’’? I mean, it is a harsh word 

but—— 

Mr. WALDRON. I would say it is misguided. I think it is not 

good procurement policy because in this issue, you get into the relSBREP-219 with DISTILLER

17 

ative terms and conditions, and is somebody an authorized reseller; 

are they not an authorized reseller? Is it a gray market product; 

is it not? These are things—due diligent things that GSA needs to 

be looking at. 

And ultimately, really what we all want for our customer agencies and for the American people is a fair and reasonable price, a 

good price to be paid. And it seems like GSA is focusing so much 

on the contract level price at this level. When the price is paid is 

at the task order level, which is the level below competition under 

the contracts. And the focus is more on this rather than let us get 

the best, you know, a good price and a best value solution at the 

task order level. And that is where, from our membership’s perspective, the focus needs to be. How do you enhance, streamline, 

and embrace competition at the task order level so that the American people, customer agencies get best value products and solutions—commercial best products and solutions. 

Chairman HANNA. So they are asking for something that they 

are not prepared to take from a group of contractors who will incur 

enormous expense and ultimately GSA would also incur an enormous expense to accept this, and yet already admits it does not 

have the capacity really to use it. Is that fair? 

Mr. WALDRON. I think it is fair to say that a lot more thought 

needs to go into the current approach. Our members oppose this 

rule. We think GSA should start over from scratch and look internally. Our written testimony includes several different recommendations. I will point to one. GSA conducting its own internal 

pilot of collecting its own information or other information of other 

agencies and seeing how—first of all, what data elements are really 

important? And much of what is being collected ignores the best 

value context or the nexus of it and terms and conditions that drive 

price. And most fundamentally, you are talking about transactional 

price, that task order pricing that is subject to competition. And to 

the extent they are using it to compare to contract pricing, as I said 

earlier in the testimony and we make clear in our written testimony, that is apples and, I do not know, watermelons. It is such 

a complete difference in terms of the terms and conditions. And 

that focus it seems to me does not get to the important thing—how 

do you get a better deal and a good business deal for both sides 

at the task order level? Because ultimately that is what leads to 

better government and better performance on behalf of the American people. 

Chairman HANNA. Well, we have unanimity here today everywhere. 

If there are no further questions for these witnesses, I want to 

thank all of them for being here today, and thank you for patience 

during votes. 

When drafting this rule, GSA clearly did not understand the burden it was creating for small contractors. I am going to send a 

transcript of this hearing to GSA and to the Office of Internal Government Regulatory Affairs. I hope the GSA will either abandon 

this approach and start over or seriously rework the rule before it 

becomes final. This is an issue the Subcommittee will be monitoring and will continue to monitor, and we look forward to having 

another opportunity to meet with you if that is important. 

SBREP-219 with DISTILLER

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I ask unanimous consent that members have five legislative days 

to submit statements and supporting materials for the record. 

Without objection, so ordered. 

This hearing is now adjourned. And thank you again. 

[Whereupon, at 11:33 a.m., the Subcommittee was adjourned.] 

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A P P E N D I X 

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Insert offset folio 19 here 95526.001
20 

1 80 Fed. Reg. 11619 (March 4, 2015). 

1. Introduction 

Mr. Chairman and Members of the Committee, my name is Sheila Armstrong. I am a partner with the law firm Morgan, Lewis & 

Bockius, LLP. My primary practice area is government contracts. 

I counsel a wide variety of businesses, both large and small, regarding issues related to commercial item contracts with the federal government. In particular, I counsel clients regarding contract 

compliance requirements under the General Services Administration Federal Supply Schedules (FSS) program. I also serve as a CoChair of the Commercial Products and Services Committee, one of 

the Committees of the American Bar Association’s Public Contracts 

Law Section. 

I would like to thank you Mr. Chairman and the Committee for 

inviting me here today to speak to you about GSA’s proposed 

Transactional Data Rule.1 GSA published its proposed Transactional Data Rule on March 4, 2015. Upon publication, the Proposed Rule immediately drew criticism from contractors, the legal 

community and even the GSA’s own Inspector General’s office. GSA 

also held a Public Meeting on the Transactional Data Rule on April 

17, 2015 which was widely attended both in person and virtually 

through GSA’s Internet meeting platform. 

The essence of the Proposed Rule is that GSA seeks to implement a pilot program under which it will exchange a most favored 

customer pricing provision found in all GSA Multiple Award Schedule contracts known as the ‘‘Price Reductions Clause’’ for a more 

burdensome transactional data reporting requirement requiring 

contractors to report transactional data relating to all federal 

sales made by the contractor. The Proposed Rule also applies to 

both GSA’s Federal Supply Schedule (FSS) contracts, as well as its 

non-FSS Indefinite Delivery Indefinite Quantity contracts and Governmentwide Acquisition Contracts. The Proposed Rule does not 

apply to VA FSS contracts in the pilot program. 

The problems with the Proposed Rule are many. The four that 

I am going to discuss today are particularly relevant to small businesses. First, GSA grossly underestimates both implementation 

costs and compliance costs of transactional data reporting. These 

increased costs and burdens likely will have a disproportionate effect on small businesses who often have limited resources. Second, 

while GSA temporarily will suspend Price Reductions Clause compliance obligations for those contracts that are included in the 

Transactional Data Rule pilot program, it does not propose to suspended, and in fact potentially will expand Commercial Sales Practice (CSP) disclosure requirements, another arguably more burdensome and higher risk compliance requirement found in GSA Multiple Award Schedule Contracts. Preparation of CSPs takes a considerable amount of time and any increase in this requirement 

could have a disproportionate effect on resource-strained small 

businesses. Third, it does not appear that GSA is certain how it 

will use the voluminous amount of data that it seeks to collect 

under the Proposed Rule, but the potential for downward pricing 

SBREP-219 with DISTILLER

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2 80 Fed. Reg. 11625. 

3 Id. 

4GSA estimates a range of two minutes (for contractors with $0 in sales) and four hours (for 

contractors with greater than $50 million in sales). See id. 5 Id. 

6 Id. 

7 Id. at 11628. 8 Id. at 11625. 9 Id. 

pressure that likely will result from transactional data reporting 

may have a disproportionate effect on small businesses who rarely 

win a ‘‘race to the bottom’’ on pricing. Fourth and finally, it appears that GSA has not fully considered the confidential and proprietary nature of the data that it seeks to collect under the Proposed Rule. Line item pricing has long been exempt from disclosure 

under the Freedom of Information Act (FOIA) due to its confidential and proprietary nature. This data also is protected from disclosure under the Trade Secrets Act. 

II. Select Congress Regarding the Proposed Transactional 

Data Rule 

A. Estimated Implementation and Reporting Costs of 

the Transactional Data Rule 

GSA estimates that the public reporting burden for its contractors to initially set up systems for transactional data reporting at 

six hours.2 This estimated six hours includes ‘‘the time for reviewing instructions, searching existing data sources, gathering and 

maintaining the data needed, and completing and reviewing the 

collection of information’’ as well as ‘‘training, compliance systems, 

negotiations, and audit preparation the new clause may require.’’3

GSA estimates that the monthly burden thereafter will average 4

approximately 0.52 of an hour or 31 minutes per month.5 According 

to GSA: ‘‘[t]his number takes into consideration the distribution of 

contract values (i.e. sales) and assumes monthly reporting burden 

rises with vendor sales based on the distribution of sales and obligations within FSS contracts and non-FSS contracts.’’ 6 What GSA 

allows no time for is system enhancements that may be required 

should GSA elect to change the fields of data to be reported as it 

would have the right to do upon 60 days notice under the Proposed 

Rule.7 In addition, these estimates of six hours for initial set-up 

and 31 minutes per month for ongoing reporting are grossly underestimated. 

1. Initial Set-Up Likely Will Far Exceed Six Hours 

GSA estimates that its contractors will spend approximately six 

hours to set up its systems to generate the monthly report required 

by the Transactional Data Rule.8 This six-hour estimate includes 

the time that GSA estimates will be required for reviewing instructions, searching existing databases and other sources of information, and gathering and reviewing the collected information.9 This 

estimate also includes the effort that GSA anticipates contractors 

will be required to make to institute changes to contractor training, 

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10 Id. 11GSA Comments to GSAR Case 2013–G504: General Services Administration Acquisition 

Regulation; Transactional Data Reporting, at 6. Available at: https://www.gsaig.gov/ 

?LinkServID=6A41DF8F-063D-0652-27F3AAF1F2F09E33&showMeta=0. 

12 Id. 13 As noted in the ABA’s Comments to the Transactional Data Rule: 

The Section suggests that the hours required will in fact be much higher. Typically, any new 

reporting requirement will require extensive efforts to assess the availability of data, test the 

accuracy of the data, and determine the system enhancements needed to accommodate the new 

requirement. Many contractors may require substantial changes or upgrades to business systems in order to provide the data sought by GSA in a form that will allow for meaningful and 

accurate pricing comparison as intended. For example, the fields required by GSA for transactional-data reporting may not reside in the same IT system; few accounting systems include 

both manufacturer part number and contractor part number in the same system when those 

part numbers differ. Thus, contractors may need custom development to merge data elements 

from accounting and other systems (e.g., materials management) to meet the requirements of 

the Proposed Rule. These and other needed changes would require coordination among functions 

gathering, reporting, and information-technology (IT) systems to 

accurately and efficiently report the data required by the Proposed 

Rule.10 GSA’s own Inspector General’s office acknowledges that 

contractors likely will spend far more than six hours to set up business systems for transactional data reporting.11 As the GSA Office 

of Inspector General notes in its comments to the Proposed Rule: 

During GSA OIG preaward audits, Schedule contractors 

are asked to provide a sales database—including GSA 

transactional data—with at least 21 specific data fields for 

the contractor’s last complete fiscal year. We consistently 

find that contractors maintain their transactional data in 

varying systems, using multiple formats, and unique data 

fields. Given this, we question whether GSA’s estimate of 

6 hours per contractor to configure their systems for reporting is accurate.12

This six hour estimate must assume that all data fields reside 

in the same IT system and that the report can be set up by one 

person without consultation with others inside or outside the company. However, neither of these assumptions is viable. As noted by 

the GSA Inspector General, contractors frequently maintain data 

in various systems throughout the company. Invoicing data, which 

will contain some of the field required by the Transactional Data 

Rule, will include fields such as line item price and contractor part 

number; however, this system likely will not include manufacturer 

part number. That field instead will reside in a purchasing database. In many cases, the systems that house the various fields GSA 

is requesting in its monthly report are not set up to communicate 

with one another. Accordingly, some contractors will need to manually compile the information required for transactional data reporting, or may need to upgrade their IT systems in order to comply. 

In addition, the estimated six hours of set-up time cannot possibly include time for company personnel to confer with management and contract administrators regarding the data fields required and the accuracy of reports generated. For some contractors, 

particularly small businesses, setting up systems to capture and report transactional data may involve consultation with professionals 

outside the company at hourly rates thereby increasing the costs 

to the contractor. These estimated costs are not factored into GSA’s 

six hour estimate for set up.13

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such as the contractors’ IT departments and change management teams as well as responsible 

executives. The time needed just to search for, extract, review, and test such data, and implement system modifications, will well exceed six hours. 

See ABA Public Contracts Law Section Comments on GSAR Case 2013–G504, General Services Administration Acquisition Regulation (GSAR); Transactional Data Reporting; 80 Fed. Reg. 

11619 (March 4, 2015) available at: http://apps.americanbar.org/webupload/commupload/ 

PC407500/sitesofinterest—files/GSAComment.pdf. 14 80 Fed. Reg. 11628. 

2. GSA’s Estimated Monthly Compliance Burden is Overly Optimistic 

GSA’s estimate that contractors will spend an average of 31 minutes per month to report transactional data is overly optimistic. 

This estimated time cannot possibly include any substantive review 

of the data to ensure its accuracy prior to when the contractor reports the data to GSA. In addition, should a contractor find any 

anomalies in the data (as is often the case when reviewing raw 

data) the contractor will need to review source documentation to 

verify whether the transaction is accurately recorded in the contractors IT systems. Furthermore, the estimated 31 minutes per 

month does not include any time allowed for ongoing maintenance 

of data, including but not limited to changes by GSA to the data 

fields required as permitted by the Proposed Rule.14 Given the unknown ramifications on a contractor should it provide data to GSA 

that is inaccurate or incomplete, contractors will need to review the 

transactional data prior to submission which could take hours depending upon the size of the contract. When the contractor identifies transactions that appear to be anomalies, zero dollar transactions for example, it will be required to perform additional research to determine whether the transaction is properly recorded 

or whether revisions to the transaction are required. 

B. GSA’s Proposed Expansion of Commercial Sales 

Practice Disclosure Requirements is Unduly Burdensome 

All GSA contractors must prepare and submit CSPs prior to 

award and at certain key times during performance of a GSA contract. For example, when a contractor seeks to increase prices or 

add items to the contract GSA requires either new CSPs, or a 

statement from the contractor that the CSPs have not changed 

since the time they were last submitted. In CSP submissions, GSA 

contractors must disclose current, accurate and complete information. This is one of the most critical and most burdensome requirements for all contractors participating in the Federal Supply 

Schedule program. A contractor’s failure to submit current, accurate and complete CSPs open the contractor to unnecessary risks 

including potential liability under the Civil False Claims Act. Both 

the GSA Inspector General and the Department of Justice have 

settled many matters for hundreds of millions of dollars based on 

allegedly inaccurate CSPs submitted by a FSS contractor under the 

Multiple Award Schedules program. While GSA proposes to temporarily suspended Price Reductions Clause compliance requirement 

for those contracts that are included in the Transactional Data 

Rule pilot program, it has not suspended, and in fact potentially increases, CSP disclosure requirements. 

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15 Id. at 11623. 16See Major Issues from Multiple Award Schedules Audits, Audit Memorandum Number 

A120050-3, Mar. 25, 2013. Available at: http://www.gsaig.gov/?LinkServID=CBDFF5C2-B1C0- 

0A65-5F7701BBDFA9CE5D&showMeta=0. 17 Id. at 11621. 18See Major issues from Multiple Award Schedules Audits, Audit Memorandum Number 

A120050-3, Mar. 25, 2013. Available at: http://www.gsaig.gov/?LinkServID=CBDFF5C2-B1COOA65-5F7701BBDFA9CE5D&showMeta=O. 

19 Id. 20See id. at 11622 (‘‘The availability of prices paid information will lead to better prices for 

the taxpayer by improving the agency’s ability to conduct price analysis. It will also improve 

the quality of both contract and order level competition because vendors will know that their 

customers have greater market intelligence on what other agencies have paid in similar situations.’’). 

GSA acknowledges in the Proposed Rule that ‘‘contractors continue to struggle to comply with the sales practice disclosure requirements.’’ 15 A 2013 GSA OIG audit reports also confirm this 

point and highlights that for the majority of the contracts audited, 

CSP disclosures were not current, accurate and/or complete.16 Yet, 

the Proposed Rule does not remove contractors’ obligations to prepare CSP disclosures, and, instead potentially expands this requirement. The Proposed Rule provides: 

GSA would maintain the right throughout the life of the 

FSS contract to ask a vendor for updates to the disclosures 

on its commercial sales format—which is used to negotiate 

pricing on FSS vehicles—where commercial benchmarks or 

other available data on commercial pricing is insufficient 

to establish price reasonableness.17

Due to the potential financial risks created by inaccurate CSP 

disclosures, contractors must spend considerable time reviewing 

sales data and preparing current, accurate and complete CSPs 

when they are required to do so. Even a statement that the CSPs 

have not changed requires extensive review of transactional sales 

data to confirm that this statement is correct at the time that it 

is made. Many contractors engage outside accounting and legal professionals at great expense to assist in preparing CSPs. This is especially true for small businesses who often do not have in-house 

resources available to complete this burdensome task. GSA’s potential expansion of this requirement without any discussion of the estimated burden this places on contractors is unreasonable. 

C. Use of Transactional Data Collected 

While GSA is proposing to collect voluminous amounts of data 

under the Transactional Data Rule ‘‘to improve GSA’s ability to 

conduct meaningful price analysis and more efficiently and effectively validate fair and reasonable pricing on both its non-FSS and 

FSS vehicles,’’ 18 it has not clearly articulated, in either the Proposed Rule or at the Public Meeting, how it intends to use this data 

once collected. In addition, while ‘‘GSA recognizes that use of prices 

paid information must be done within the context of seeking to obtain the best value for the taxpayer,’’ 19 GSA’s focus appears to be 

on driving prices down in the marketplace and the savings that the 

Transactional Data Rule promises for GSA.20 However, as GSA 

also recognizes in the Proposed Rule, for most commercial items, it 

is the commercial market and not the government market that is 

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21 Id. at 11622. 22 5 U.S.C. § 552(b)(4). 23 18 U.S.C. § 1905. 24See Canadian Comm’l Corp. v. Air Force, 514 F.3d 37, 39 (D.C. Cir. 2008). 25 CNA Financial Corp. v. Donovan, 830 F.2d 1132, 1140 (D.C. Cir. 1987). 

the market driver.21 Accordingly, GSA has not explained how collection of data on government sales transactions from contractors 

will achieve this lower pricing. 

Based on GSA’s recent activities with its GSA contractors, it 

seems that GSA may use transactional data to attempt to reduce 

GSA list price which is a ceiling price that can be, and frequently 

is, discounted by contractors based on the terms and conditions of 

a particular order and competition in the marketplace. In recent 

weeks, GSA has been issuing communications to its FSS contractors across various FSS schedules. The sample text of these communications is attached to this Statement as Exhibit A. I have 

had several clients who have received similar communications that 

are transmitted with a spreadsheet showing list prices offered by 

other GSA contractors for what allegedly are the exact same contract items. If GSA were to implement a similar exercise using the 

transactional data it receives under its pilot program, which notably does not include a field to identify the reason for any additional 

discount that may have been granted, this downward pricing pressure could have a detrimental effect on small businesses. Small 

businesses often do not have the buying capacity and/or overhead 

structure that allows them to compete with this type of pricing 

pressure. 

D. Protection of Confidential and Proprietary Information 

The transactional data that GSA seeks to obtain through the 

Transactional Data Rule, in particular line item pricing information, is recognized as confidential and proprietary information 

under the Freedom of Information Act (FOIA) 22 and the Trade Secrets Act.23 FOIA Exemption 4 protects ‘‘matters that are . . . trade 

secrets and commercial or financial information obtained from a 

person and privileged or confidential.’’ 24 In addition, the Trade Secrets Act prohibits unauthorized disclosure of ‘‘practically any commercial or financial data collected by any federal employee from 

any source in performance of the duties of his or her employment.’’ 25 At a minimum, the reporting of line-item pricing contemplated by GSA under the Proposed Rule is protected from disclosure by FOIA Exemption 4 and prohibited from disclosure by the 

Trade Secrets Act. 

The Proposed Rule does not state how GSA will protect the 

transactional data it receives from contractors from public disclosure. In addition, based on comments made by GSA personnel at 

the Public Meeting, it appears that GSA has not fully considered 

the confidential and proprietary nature of the data that it seeks to 

collect under the Proposed Rule. The type of data required by the 

Proposed Rule frequently is provided by contractors to the government with a legend identifying the confidential and proprietary nature of the data. GSA should consider how contractors can include 

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such a legend when reporting confidential and proprietary data 

through an electronic transactional-data reporting system. GSA 

also should explain how it intends to ensure that this confidential 

and proprietary line item pricing is protected from disclosure outside of the government. Finally, the proposed rule should provide 

remedies for contractors in the event of improper disclosure of this 

protected data by GSA. 

III. Conclusion 

As discussed in my statement, and as is evident from reading the 

comments submitted on the Transactional Data Rule, the Proposed 

Rule, as drafted, raises significant concerns for all types of parties 

involved in GSA contracting. GSA should refrain from issuing a 

final rule unless and until it is able to address the concerns raised 

in the various comments submitted. In addition, GSA should further analyze the actual cost of compliance to contractors, as well 

as the additional costs that will be incurred by GSA to manage the 

tremendous amount of data that it would receive, and compare that 

to the benefits that GSA believes it actually will receive from the 

data collected under the Proposed Rule. As proposed, it appears 

that the costs of the Proposed Rule will far outweigh any perceived 

benefit that GSA will receive. 

Mr. Chairman, I again thank you for inviting me to speak to the 

Committee today and I am happy to answer any additional questions. 

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Exhibit A 

Subject: RESPONSE REQUIRED WITHIN [XX] DAYS - Addressing Price Variability under the Federal Supply Schedules Program 

The Federal Acquisition Service (FAS) is committed to providing 

a Federal Supply Schedules (FSS) program that continues to deliver to our customers a best-in-class contract solution for commercial items that is adaptable and competitive in the Federal marketplace. 

Our customers tell us they turn to the FSS program for its speed, 

compliance, and access to small businesses. They also tell us that 

they want a more competitive pool of contractors at the contract 

level to improve competition at the task order level. 

An analysis of the FSS program has revealed wide pricing disparities across identical items. This has resulted in customer confusion and decreased confidence in the ability of the FSS program to 

provide best-value solutions. In response to these customer concerns and changing market conditions, FAS will be working with 

our FSS suppliers on an initiative to review the wide range of 

prices for identical products that are offered to our customers. 

This competitive pricing initiative is aimed at identifying and addressing price variability across the FSS program. This will be accomplished with the help of a pricing tool that has the ability to 

perform in-depth horizontal pricing analyses of the more than 45 

million awarded items on GSA Advantage! and eMall. Horizontal 

pricing analysis simply means that offered prices will be compared 

to other awarded FSS prices for the exact same item. FAS recognizes that both price and nonprice factors (such as contract terms, 

warranties, etc.) play an important role in the determination of 

competitive pricing. The horizontal pricing tool is a market research resource that aids in the identification of potentially uncompetitive pricing. The tool ‘‘flags’’ supplies in cases where an item 

has an awarded price that greatly exceeds prices awarded for identical items. This flag is cause for a further review, wherein the contracting officer seeks additional information from the contractor in 

order to determine the rational for the higher price. 

A recent pilot program making use of the pricing tool and analysis demonstrated that some suppliers provided with competitive 

pricing intelligence were able to make price adjustments that increased their Federal revenue. 

FAS needs your help to further improve and expand the FSS program. By addressing price variability, the program will better meet 

our customers’ expectations and help you be more competitive in 

the Federal marketplace. 

You are receiving this letter because we have identified supplies 

on the referenced contract with prices that are much higher than 

other FSS partners for the same item. We recognize that pricing 

is but one component of best value, and would like to work with 

you to ensure that FSS pricing is competitive. 

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Please review the identified items and data in the attached 

spreadsheet and consider what the pricing intelligence reveals 

about your competitiveness in the marketplace. We are undertaking this effort in partnership with our suppliers in order to help 

the FSS program remain the go-to solution for our Government 

customers and to help you grow your business through increased 

sales and revenue. 

If you feel there is additional information that supports the competitiveness of the currently awarded price, you may submit this 

information for consideration under the ‘‘Comments/Justification’’ 

column. Alternatively, you may propose a reduced price under the 

‘‘Revised Schedule Price’’ column. Responses should only be entered 

under these two columns - do not alter the remainder of the 

spreadsheet. Please notify your Schedule contracting officer if any 

identified items are included under established Blanket Purchase 

Agreements (BPAs) that would be affected by pricing changes. 

I would appreciate a response to this request by [date] and am 

happy to discuss and work through this process with you. 

Thank you, in advance, for your cooperation, as we partner to 

make the FSS program the obvious first-choice solution for Government buyers. We are happy to answer any questions you may have 

regarding this request - please contact [name] at [contact information] for further assistance. 

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1Transactional Data Reporting, 80 Fed. Reg. 11,619 (March 4, 2015) 

Good morning. Chair Hanna, Ranking Member Takai and distinguished Members of the Subcommittee, thank you for the opportunity to testify. 

My name is John Stanford. I am the Vice President of NextWin 

Services, a consulting firm designed to assist commercially successful businesses enter and grow in the federal market. Part of our 

work is monitoring procurement policy changes and gauging their 

real-world impact on businesses. We also work closely with entrepreneurial organizations, like Women Impacting Public Policy 

(WIPP), that actively participate in procurement dialogue and support many of the small business procurement reforms initiated by 

this Committee. Thank you for the many reforms over the last 

three years that have enabled more small businesses to compete for 

government contracts. 

Today’s topic, proposed transactional data regulation from the 

General Services Administration (GSA), gives us cause for concern. 

The proposed rule would require vendors to share their pricing information for goods and services sold through GSA contracts to 

other government agencies. It would also create an online reporting 

system to enable the reporting of that pricing data. This pricing 

data, in turn, is a critical part of a larger GSA effort to create a 

Common Acquisition Platform—an online marketplace to identify 

best-in-class contracts across the government. 

Specifically, contractors would be required to report prices of 

goods and services delivered through Federal Supply Schedule 

(FSS) contracts (with the exception of FSS contracts at the Department of Veterans Affairs), GSA Governmentwide Acquisition Contracts (GWACs) and GSA Governmentwide Indefinite-Delivery Indefinite-Quantity (IDIQ) contracts. Required transactional data includes unit measure, quantity of items sold, Universal Product 

Code, price paid per unit, and total price.1 Under the proposed 

rule, this data would be reported monthly through an online portal. 

For non-FSS contracts (GSA GWACs/IDIQs) the requirement would 

take effect immediately. The FSS contracts, which already report 

some data through the price reduction clause, would undergo a 

pilot program in select schedules. 

These efforts are part of a broader acquisition reform called ‘‘category management,’’ in which the government seeks to unify purchases of goods and services in the same category governmentwide. 

Evaluating GSA’s Proposed Rule 

In our view, the effect of most contracting reforms on small businesses can be measured by three criteria: cost, complexity, and opportunity. When viewed through these lenses, GSA’s proposed 

transactional data requirement fails to best serve small businesses. 

Cost 

The first criterion, cost, considers how reforms will alter the cost 

of doing business with the federal government—either through 

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2 Id. at 11,625. 3SBA Office of Advocacy, Comments on Transactional Data Reporting, p. 3, available at 

http://www.regulations.gov/#!documentDetail:D=GSA-GSAR-2014-0020-0022; GSA Office of Inspector General, Transactional Data Reporting, p. 10, available at https://www.gsaig.gov/ 

?LinkServID=C82E3F6B-D054-1D53-16D86346751A2527&showMeta=0. 

changing compliance burdens, the impact of pricing requirements, 

or altering the resources needed to win work. Simply put, will a 

given change increase or decrease the cost of doing business with 

the federal government? 

Small businesses would face increased costs if the proposed rule 

were implemented as written. In the proposed rule, GSA recognizes 

the additional reporting requirement will undoubtedly have a cost 

for affected businesses.2 The Small Business Administration (SBA) 

Office of Advocacy and GSA’s own Inspector General noted that estimates in the proposed rule appear understated.3 So, although estimates of this requirement vary, there is a cost. 

Complexity 

Complexity, similarly, measures if a policy change will make selling to and working with the government harder or easier for small 

businesses. It is important to note that complexity and cost, while 

related, are not the same. Even simple compliance charges can 

drive up cost. Essentially, will the federal market be more or less 

difficult to understand? Or, as we often hear from business owners, 

‘‘will I need to hire an expert for this?’’ 

While GSA contends its reporting solution will be user-friendly, 

our experience is that government data systems are anything but. 

Should this be implemented as is, a successful GSA contractor 

would be required to monitor and regularly update four government systems: the GSA eBuy marketplace for schedule-related opportunities, the System for Award Management (SAM) for registrations, FedBizOpps for additional opportunities that could be procured through the schedule, and either the 72A Quarterly Reporting System or the new transactional data reporting system. For 

small businesses this may often be in addition to SBA systems (e.g. 

Dynamic Small Business Search) or certification requirements. 

Another way to consider complexity for small businesses approaching the federal market is to examine differences between 

government contracting and the commercial sector. The need to report data on what a customer buys through a platform and at what 

price to the platform is a departure from standard business practices and only adds to the complexity of an already complex system. 

Opportunity 

Lastly, small businesses view reforms in the context of expanding 

or shrinking opportunity to win business with the government. Recent shifts in acquisition policy to focus on limited-participant vehicles to award large contracts are examples of policies that generally 

took away opportunities from the bulk of small businesses (versus 

open competition for such goods and services). Business owners are 

essentially asking, does this mean more opportunity to compete? 

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Small businesses may see fewer opportunities from GSA contracts and vehicles in light of this proposed rule. Simply put, this 

implementation of ‘‘horizontal pricing’’—whereby the government 

can compare costs of similar items—makes price the critical factor 

in determining best value. Often, small businesses offer tailored 

and innovative solutions that, in conjunction with competitive pricing, make for best value in procurement. It is the stated objective 

of the federal government to seek best value in certain procurements, of which pricing may be only one factor. 

While GSA suggests that pricing will only be one factor in determining best value, it lends significant weight; the words ‘‘price’’ or 

‘‘pricing’’ appear 165 times in the regulation while best value only 

appears 7 times. 

Because it is unclear how, if at all, GSA would differentiate similar products to agencies seeking goods or services besides price, we 

are left to assume that agencies will have to use price as the determining factor. To the extent that this happens—especially for services—small business will suffer. 

Missed Opportunity for Automatic Data Collection 

We applaud GSA’s effort to streamline the acquisition process. 

Indeed, the rule identifies how much can be gained by both vendor 

and customer. The simplification of competition and removal of unnecessary costs associated with managing duplicative contracts 

would be beneficial to all parties. 

We believe, however, that the aggregating of price-related data 

responsibility falls on GSA instead of the private sector. Citing the 

cost of upgrading its data systems, GSA is proposing to ask vendors 

to report to GSA the details of what was purchased through GSA. 

This is like asking retailers selling through Amazon to report to 

Amazon what it sold, through Amazon. To take this example one 

step further, Amazon would then use that information to advertise 

pricing to other consumers, on Amazon. This seems to be an inefficient way to collect data. 

While not a perfect comparison, GSA in many ways operates as 

an Amazon-like part of the acquisition process. The intent behind 

this rule is seeking to make a best-in-class contracting marketplace. Yet, GSA has decided to pass on investing in a data collection system that could gather this information automatically. 

Small Business Impact of Category Management 

Speaking to the larger issue of which transactional data reporting is one component, we are concerned about the impact of larger 

acquisition reforms on the small business community. What was 

formerly known as ‘‘strategic sourcing’’ has now morphed into the 

term ‘‘category management’’ and poses threats to a diverse industrial base complete with small business participation. 

While there are certainly benefits to procurement vehicles, including federal supply schedules, GWACS and IDIQs, they all constrain small business participation. Government acquisition experts 

may consider them necessary for 21st century procurement, but by 

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their very definition, they limit competition—inhibiting the ability 

of small businesses in particular to pursue certain opportunities. 

The initial costs of these contract vehicles are much harder for 

small businesses to bear than their larger counterparts, both in 

terms of resources and time (e.g. the nearly year long waiting period to get on an FSS). This proposed rule does little to address 

this concern, and even cements the use of such acquisition mechanisms for decades to come. 

Similarly, we continue to be concerned about a vision of government procurement that seeks to categorize customized services into 

narrow categories. Individual agencies, and programs under them, 

have unique requirements. While the acquisition process is in need 

of modernization, a rushed process of aggregating similar (but not 

identical) purchases seems ill advised. 

It is our recommendation that GSA rethink its approach to transactional data, putting the collection burden on the agency rather 

than the vendor, especially smaller businesses. One option—upgrading systems to automatically collect this data—seems to be a 

common sense solution that ultimately will have to be done. An 

automatic reporting solution gives the government the best data to 

consider procurement strategies and lessens the burden on businesses. 

Thank you for holding this hearing today and shining light on an 

important issue. I am happy to answer any questions. 

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MCKENNA LONG & ALDRIDGE, LLP 

STATEMENT OF JOHN G. HORAN, ESQ. 

PARTNER, MCKENNA LONG & ALDRIDGE, LLP 

BEFORE THE 

COMMITTEE ON SMALL BUSINESS 

SUBCOMMITTEE ON CONTRACTING AND WORKFORCE 

UNITED STATES HOUSE OF REPRESENTATIVES 

JUNE 25, 2015 

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1 80 Fed. Reg. 11619 (March 4, 2015). 

2 80 Fed. Reg. 11625. 

3SBA Office of Advocacy Comments to GSAR Case 2013-G504: General Services Administration Acquisition Regulation; Transactional Data Reporting, at 3. 

1. Introduction 

Mr. Chairman and distinguished members of the Committee, 

thank you for inviting me to testify. My name is John G. Horan 

and I am a partner at the law firm McKenna Long & Aldridge 

LLP. I have over twenty-five years of experience in the practice of 

government contracts law. My practice is focused on representing 

companies, both large and small, selling commercial items to the 

federal government, particularly through the General Services Administration and Department of Veterans Affairs Federal Supply 

Schedule (FSS) program. I regularly assist companies in ensuring 

compliance with the contract, regulatory, and statutory requirements applicable to the FSS program. I also serve as a Co-Chair 

of the Commercial Products and Services Committee, and as a 

Vice-Chair of the Health Care Contracting and Procurement Fraud 

Committees of the American Bar Association’s Public Contracts 

Law Section. 

In my view, GSA’s proposed Rule to amend its acquisition regulations to implement a pilot program to require contractors to report 

transactional data of GSA FSS sales and other GSA governmentwide contract vehicles—which has become known as the Transactional Data Rule—is afflicted with three of the most fundament 

problems a procurement regulation can have.1 One, it creates a significant, unnecessary, and underestimated burden on contractors— 

a burden that will be felt more acutely by small businesses. Two, 

the anticipated benefit to the government is poorly defined and is 

not likely to be realized. Three, the proposed Rule is subject to misuse that could result in considerable harm to contractors, particularly small business contractors. 

While analyzing the proposed Rule, I reviewed many of the comments prepared by both industry groups and government agencies, 

and the concerns that I am expressing are shared by many of these 

parties. This is a rare example of a proposed Rule that is opposed 

by both the GSA Inspector General and industry associations. 

II. The Rule Imposes a Significant, Underestimated, and 

Unnecessary Burden 

GSA estimates that it will take six hours for a contractor to accomplish all tasks required to understand the reporting requirements, prepare its systems and personnel, and establish the procedures necessary for creating the required reports, and an average 

31 minutes per month for ongoing reporting.2 GSA does not provide 

sufficient detail to analyze how these estimates are flawed, but virtually every informed party who has weighed in on these estimates 

believes they are inaccurate. 

The Small Business Administration’s Office of Advocacy reports 

that small businesses and their representatives are concerned that 

GSA ‘‘under estimates the burden and resources.’’ 3 The Council of 

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4 CODSIA Comments to GSAR Case 2013-G504: General Services Administration Acquisition 

Regulation; Transactional Data Reporting, at 4. 5The Coalition for Government Procurement Comments to GSAR Case 2013-G504: General 

Services Administration Acquisition Regulation; Transactional Data Reporting, at 8. 6 80 Fed. Reg. 11624. 

Defense and Space Industry Associations views the estimates as 

‘‘grossly underestimated,’’ as failing to ‘‘account for costly modifications to information systems that will be required to accurately and 

completely capture the data elements required by the rule’’ or to 

‘‘sufficiently account for the time required to perform quality control on draft submissions and investigation into potential data 

anomalies that frequently arise with transactional data reporting.’’ 4 Based on its experience with pre-award audits of contractor 

systems, the GSA Office of Inspector General ‘‘question[s] whether 

GSA’s estimate of 6 hours per contractor to configure their systems 

for reporting is accurate’’ and ‘‘contend[s] the projected burden of 

monthly reporting as 0.52 hours per month is also understated.’’ 

Based on a survey of Coalition for Government Procurement’s 

members, ‘‘small business respondents reported that it would take 

on average 232 hours’’ and ‘‘[l]arge and medium size contractors estimated that it would take on average 1192 hours’’ for the initial 

setup.5 According to the Coalition, ‘‘small businesses reported that 

it would take 38 hours per month on average[,]’’ and ‘‘[l]arge and 

medium size businesses estimated that it would take an average of 

68 hours per month’’ for the monthly reporting. 

According to these comments, GSA likely failed to adequately 

consider one or more of the following requirements: 

• the time to modify existing systems to accurately and completely capture the data required by the Rule; 

• the time required to establish written procedures and protocols for the collection and reporting of the data; 

• the time required for training company employees on the 

Rule, protocols, and their responsibilities in collecting and reporting the data; 

• the time required to review, investigate and confirm the 

accuracy of the data. 

GSA relies on a perceived offset of the burden by elimination of 

the burden for complying with the Price Reductions clause. GSA 

fails to recognize, however, the current burden on contractors also 

arises out of complying with the demands and obligations imposed 

by the submission of commercial sales practices data, which will remain and is expanded under the proposed Rule. GSA can require 

a contractor to submit updates to its commercial sales practices at 

any time upon request under the proposed Rule.6 Industry views 

the offset as illusory in light of the continued commercial sales 

practices burden. 

Based on my experience, even without the benefit of knowing 

precisely how and why, GSA’s estimates are grossly inaccurate. 

Having worked with companies gathering information for commercial sales practices and other pricing disclosures, gathering, producing and ensuring the accuracy of such data will take signifiSBREP-219 with DISTILLER

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7 ;80 Fed. Reg. 11625. 

8 80 Fed. Reg. 11621. 

9 80 Fed. Reg. 11623. 

10 Id. 11 Id. 

cantly more time and expense than estimated by GSA. In my view, 

a contractor cannot simply gather and report the information, but 

is well advised to ensure that the information gathered and reported is current, accurate and complete. Otherwise, the contractor 

will risk an allegation of fraud under the False Claims Act, as has 

been the case with essentially every other form of price or cost reports submitted by a contractor to the government. Importantly for 

this hearing, small businesses will bear the largest part of this burden—GSA estimated that out of 15,738 vendors holding contracts 

that would be subject to this Rule, 12,590 are small businesses. 

Small businesses are especially vulnerable to harm from these 

added expenses given that they often operate with fewer internal 

resources and lower margins than large businesses. 

Industry also views the imposition of the burden as unnecessary 

because the data, or similar pricing data, is already available within the government. The purchasing agencies, of course, have access 

to the transaction data for their own transactions and could report 

this data to GSA. Existing GSA databases, such as GSA Advantage! permit price comparisons and commercial databases that we 

are all familiar with, provide commercial pricing data. Ironically, 

GSA rejected modifications to its own databases to fully capture 

this data as too costly and unreliable.7

III. The Anticipated Benefit is Poorly Defined, and Not 

Likely to be Realized 

GSA anticipates that the transactional data will ‘‘improve GSA’s 

ability to conduct meaningful price analysis and more efficiently 

and effectively validate fair and reasonable pricing’’ on its contracts 

and will permit government purchasers ‘‘to compare prices prior to 

placing orders.’’ 8 GSA also recognizes a point very important to industry—that price paid is only of many ‘‘information points’’ in determining the best value to the government.9 Equally important 

are other considerations, ‘‘such as total cost, desired performance 

levels, delivery schedule, unique terms and conditions, time considerations, and customer satisfaction.’’ 10 We can also add customer 

service, product support services, warranty, and other terms to this 

list. GSA ‘‘envisions that this [price paid] information would be 

used as one information point in conjunction with [these] other considerations.11 GSA and the proposed Rule fail to define how GSA 

or government purchasers will use the transactional data in conjunction with these other considerations to determine best value to 

the government. 

The proposed Transactional Data Rule is not structured to permit buyers to fulfill GSA’s ‘‘vision.’’ Despite GSA’s recognition of 

the importance of these other factors to determining best value to 

the government and taxpayers, the Rule provides no means to obtain this other equally important information. GSA does not even 

suggest any basis for a government purchaser to connect the prices 

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12 80 Fed. Reg. 11622. 

obtained through this Rule with this other equally important information and industry does not see any basis. So, according to GSA’s 

own analysis, this burden imposed on contractors will provide the 

government with only one of the necessary information points— 

transactional price—without any means to obtain the other information points necessary to evaluate price. Without access to, and 

consideration of, this other important information, the price information is of little value at best and can be very misleading at 

worst. In short, the data required by this Rule will be of little or 

no value in determining best value to the government and taxpayers without these other terms and conditions applicable to the 

transaction, and the Rule provides no means to obtain this other 

information. 

In my view, the inability of the Rule to capture these other nonprice factors could be especially harmful to small businesses. Small 

businesses often operate as value-added resellers or otherwise distinguish themselves in the competitive market based on the value 

they add to a transaction, such as customer and product service capability, that is not captured by transaction price. The Rule has no 

means to capture or account for this value. Thus, small businesses, 

as well as other contractors, are likely to assessed only by the price 

they offer and not the other value they bring to the transaction. 

GSA attempts to gloss over this likely consequence to the competitiveness of small business by stating that ‘‘[t]he reduction in 

duplicative and inefficient procurement transactions removes barriers to entry into the Federal marketplace,’’ primarily by reducing 

the administrative costs of holding multiple contracts.12 This benefit, if realized, fails to consider that small businesses likely will 

be less competitive under these fewer contracts if best value decisions are based entirely on price. 

IV. The Rule is Subject to Misuse that Could Result in 

Considerable Harm 

Perhaps the most fundamental concern of industry is that the 

Rule is subject to misuse that could result in considerable harm to 

contractors. Again, small businesses would be especially vulnerable 

to this harm. Industry’s fundamental concern is that GSA and government buyers will use the transactional data to drive down 

prices across all contractors to the lowest transactional price without consideration of the other terms and conditions that provide 

value to the government purchaser. Armed with this pricing data 

and having no access to the other value terms of the transaction— 

such as customer service, product service, delivery speed, and warranty—GSA will eliminate higher-priced, higher-value items and 

services from the contracts, or buyers will refuse to purchase items 

or services at a higher price regardless of the other value offered 

by the contractor along with the higher prices. Contractors that 

offer and rely on the other valuable terms and conditions will be 

unable to compete and will eventually leave the government market. In my view, small businesses are most vulnerable to this conSBREP-219 with DISTILLER

55 

13 80 Fed. Reg. 11621. 

sequence because they often find it more difficult to compete purely 

on price. 

This is not an unfounded concern. My colleagues and I have seen 

government purchasers ignore these other considerations and focus 

entirely on price repeatedly in contract negotiations, and GSA acknowledges that it has used transactional data, when available 

under strategically sourced contracts, to drive down prices further 

from the fair and reasonable prices established by competition.13

A second fundamental concern of industry, shared by small businesses, is whether the transactional data will be afforded adequate 

protection from disclosure by GSA and government buyers. Elements of the transactional data, including transactional prices and 

customer lists, are fundamental components of a contractor’s business, pricing and proposal strategies for both the government and 

commercial market. Not surprisingly, industry views this information as competition sensitive and is concerned that contractors will 

be harmed in both the government and commercial market by disclosure to competitors. The Rule does not describe the procedures 

that will be used to obtain access to, disclose, or protect the data 

submitted by contractors. In the absence of any description of the 

protection of this highly sensitive data, industry is concerned that 

it will make its way into the hands of competitors either through 

Freedom of Information Act requests, disclosure during negotiations, breach of GSA’s systems, or other unintended disclosures. 

V. Conclusion 

In my view, GSA has failed to consider the burden the proposed 

Rule will place on contractors, particularly small business contractors, the benefit to GSA and government purchasers of the proposed Rule, or the potential harm of misuse of the proposed Rule, 

especially to small businesses. Until GSA has addressed these fundamental issues, GSA should withdraw the proposed Rule. 

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SBREP-219 with DISTILLER


Insert offset folio 56 here 95526.019
57 

Good morning Chairman Hanna, Ranking Member Takai and 

distinguished members of the Subcommittee. I am Lynn de Seve, 

President of GSA Schedules Inc., a company that helps manufacturers, resellers and service providers entering the government 

marketplace understand and utilize the GSA Multiple Award 

Schedule Contract Program. 

Today I am testifying on behalf of the Security Industry Association, where I chair the association’s Procurement Policy Working 

Group. SIA is a non-profit international trade association representing nearly 600 companies that develop, manufacture and integrate electronic and physical security solutions. 

We appreciate that the Committee is closely examining a proposal from the General Services Administration (GSA) that has 

been described as the most sweeping change to GSA policies in 

nearly 30 years. 

The proposal would amend the General Services Administration 

Acquisition Regulation (GSAR) to include clauses that requiring 

vendors to report all transactional data for orders and prices paid 

by ordering activities through GSA contracting vehicles, and begin 

phasing out requirements under the price reduction clause (PRC). 

We understand that for Federal Supply Schedules (FSS) programs the initial pilot will not include schedule 84 (law enforcement and security) and schedule 70 (IT programs), which encompass most security solutions offered by our members on the supply 

schedules. Under the proposal GSA would extend the new data reporting requirements to other schedules if the pilot results demonstrate that it is an ‘‘effective pricing model.’’ 

We share the agency’s goal of providing products and services at 

the best value possible for government customers and the American 

people. However, we have significant concerns whether analysis of 

item level pricing could be successfully applied to complex engineered systems without compromising the best value proposition. 

The key advantage to federal customers for using GSA contracting 

vehicles is that contractors are vetted to ensure they can provide 

quality products at reasonable prices. In pursuit of that goal of ensuring that quality products are provided at reasonable prices, the 

PRC system currently in place does recognize the differences between the complex systems provided by different vendors because 

the comparison is to commercial customers of the same vendor. 

Because of those differences between the products and systems 

provided by different vendors, comparisons between vendors often 

result in an ‘‘applies to oranges’’ comparison. For example, currently there are a multitude of GSA FSS contractors with the same 

part numbers on their contracts at different prices because of differing features, warranty periods or other value-added services. By 

providing a vertical price comparison the PRC system takes such 

differences into account, while a horizontal comparison does not. 

Ultimately, if the objective of the proposal is simply to obtain 

lower pricing, and effectiveness is measured by the extent prices 

can be pushed down based on differences between offerors on individual items—there is a significant risk that high quality providers 

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58 

of engineered systems may find it untenable to continue supplying 

government customers under FSS contracts. For example, it is important to differentiate schedule 84 from other schedules in that 

schedule 84 solutions are usually dealing with complex integrated 

life safety systems and that the overall best cost of the whole functioning system is more relevant than the individual price of the 

hundreds of items making up a customized system. 

How GSA will utilize the information collected is also a key concern. In the proposal GSA states that the data will aid staff in conducting horizontal price comparisons, and that evaluation of prices 

paid information must be within the context of seeking to obtain 

best value for the taxpayer. It is intended to be ‘‘one information 

point’’ among others for consideration by the contracting officer, including total cost, performance level, delivery schedule, unique 

terms and conditions, etc. 

Our members report inconsistent treatment under current horizontal price comparison methods, in some cases resulting in price 

considerations overriding others. So we are concerned whether the 

information would be evaluated properly in light of current practices. Further, FSS contractors frequently offer ‘‘spot pricing’’ and 

special discounts to federal customers, perhaps due to geographic 

location, ease of service or volume, and under the PRC they have 

the ability to explain such discounts. It is unclear from the proposal how such practices would not be counterproductive to sustain 

under the reporting requirements, unless special provisions or exceptions are provided. 

The transactional data required to be reported under the proposal also appears to include a great deal of proprietary price information. In implementing any reporting requirement, GSA should 

provide a secure portal for transmission and storage of the data 

and ensure contracting officers are trained and equipped to handle 

their obligations to protect the information. 

Based on input from our members, we also believe the administrative savings for contractors assumed in the proposed rule are 

vastly overestimated. First, initiation of monthly reporting of transactional data will require a significant change in IT infrastructure 

and staff training, and changes in staffing needs would be necessary in most cases to meet ongoing requirements. The data elements GSA initially listed as reportable are not necessarily collected by current contractor IT systems, which vary widely based 

on unique needs and business models, adding to the IT infrastructure changes required. 

Moreover, most complex solution security providers/integrators financially measure their business on a project level basis, therefore 

requiring transactional data (line item) measurements in most 

cases would require significant and costly changes to business practices and IT infrastructure. These additional requirements could 

easily cost small businesses tens of thousands of dollars depending 

on the existing systems in place. Further, replacing the PRC’s 

tracking customer requirement with transactional data reporting 

will not relieve schedule contract holders from the burden of maintaining commercial sales format information, which under the proSBREP-219 with DISTILLER

59 

posed rule could be required by GSA at any time during the life 

of the contract. Ultimately, if transactional data reporting proves 

to be more burdensome than the PRC in practice, this could provide an incentive for small businesses to scale back their GSA FSS 

offerings. 

The 2009 Multiple Award Schedules (MAS) Advisory Panel, on 

which SIA served, recommended replacing the PRC with a better 

check on pricing. We support fostering greater price competition at 

the contract and order level. However, due to the multiple variables involved in the evaluation and purchase of complex engineered systems, we question whether the GSA proposal would in 

fact be an improvement over the PRC. 

The Security Industry Association is committed to supporting 

and improving GSA contract vehicles, to benefit U.S. businesses 

and taxpayers alike. We stand ready to answer any additional 

questions or provide any further information you may need. Thank 

you. 

Æ 

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