Provision might hurt pricing

A price-cut provision in the General Services Administration's proposed cooperative purchasing rule could lead to higher prices and less flexibility for everyone, a law professor warned during a public hearing today.

The provision is part of a proposed rule published in January to let state and local governments use the federal GSA schedule contracts for information technology purchasing. The provision would require manufacturers to lower prices across the board when a reseller named in the vendor's GSA schedule contract agrees to reduce a price for a customer, said Christopher Yukins, associate professor of government contracts law at the George Washington University School of Law in Washington, D.C.

It could spur vendors to create partnerships with dealers under which the dealers would have less flexibility to agree to lower prices in individual cases, blunting the ability of state and local governments to bargain for better deals, he said.

The provision would not apply to dealers using their own GSA schedules, Yukins said during a public hearing on the proposed rule.

Roger Waldron, director of GSA's Federal Supply Service Acquisition Management Center, said the provision is a holdover from an attempt to create cooperative purchasing rules in the mid-1990s. GSA will strongly consider whether to modify or drop it from the current proposal, he said.

GSA has not yet received any comments that would call for extensive changes to the proposed rule, said David Drabkin, GSA's deputy associate administrator for acquisition policy. The agency could issue a final rule by mid-April, he said. The deadline for public comment is March 24.

The most common concern that state government officials have expressed is that the rule will not let them modify the terms of a GSA contract, said Neal Fox, assistant commissioner for commercial acquisition.

"Many states might have some environmental law or another provision that must be inserted into each contract," he said. Some states may be unable to use the cooperative purchasing provision with that restriction in place, he said.

GSA's own largest concern is a possible rush of small businesses trying to get onto the schedule in order to continue dealing with state and local government customers, Fox said. His office is already running full steam to keep up with demand, he said.