In a Report dated March 8, 2013, the General Services Administration ("GSA") Office of Inspector General ("IG") once again reported rampant contractor non-compliance in the pricing disclosures submitted by contractors under the GSA Schedule program as reflected in preaward audits conducted by the GSAIG during FY 2011. The findings follow a similar report by the GSAIG relating to preaward audits in FY 2010.
This time, the GSAIG reported that 69% of the preaward audits conducted during FY 2011 found that contractors failed to provide current, accurate or complete commercial sales practices disclosures as required by the GSA Schedule program. In addition, the GSAIG reported that nearly one third of the contractors audited had virtually no commercial sales because they conduct business primarily with the Government. The GSAIG reported that one third of the contractors providing services who were audited failed to provide personnel meeting the minimum labor qualifications in their GSA Schedule contracts. And, the GSAIG reported that one third of contracts lack adequate financial systems capable of tracking orders under their GSA Schedules and remitting the .75% industrial funding fee required under the GSA Schedule contracts to GSA. Finally, the GSAIG expressed concern that GSA contracting officers achieved only 36% of the cost avoidance found by the GSAIG and reported to GSA contracting officers in preaward audit reports during negotiations with contractors.
There are a range of potential conclusions that one might reach from these findings. Undoubtedly, some will argue that they reflect contractor malfeasance and bad will. We would suggest however that the price disclosure process is simply too complicated and burdensome, and doesn't suit its intended purpose. Rather than looking at a contractor's past pricing practices, perhaps the GSA should be looking to the commercial marketplace for pricing information, particularly since the GSA Schedules are limited to "commercial items" about which pricing information should be discernible. Alternatively, GSA might look to the immense population of past pricing practice reflected in the Government's competitively awarded contracts. These measures would be more likely to achieve reasonable pricing, especially in light of the finding that approximately one third of contractors audited had no commercial sales. In addition, such measures would be far less burdensome to contractors, many of whom are commercially oriented companies, that struggle to prepare adequate disclosure documents meeting GSA prescribed formats and definitions that sometimes have little to do with their sales practices or data readily maintained by these companies.
Finally, the GSAIG's admonition that contracting officers seem to be failing to achieve the potential cost savings reflected in GSAIG preaward audit reports may not represent a failure on the part of the contracting officers; rather, this failure may reflect that the GSAIG needs to do a better job in preparing preaward audits that contain reasonably supported findings and actionable information. In other words, this finding reflects just as badly on the GSAIG as it does on the contracting officers who use the GSAIG preaward audits to support their negotiations.
In any case, these findings coupled with the significant penalties that can arise from inadequate disclosures under the current GSA Schedule program, represents yet another reminder to contractors to approach preparation of their CSP submissions with utmost care and diligence.