Turnabout: GSA pulls back major contract

Editor's Note: The story was updated to say that the e-mail correspondence was "nearly three weeks" apart. Read GSA's reponse to the incident.

General Services Administration officials quickly rescinded a recent initial e-mail message sent to small businesses that announced the award of spots on its major small business IT governmentwide contract, according to an e-mail message obtained by Federal Computer Week.

Officials wrote in the follow-up message, which came nearly three weeks after the award notice, that they were checking prices again for the 8(a) Streamlined Technology Acquisition Resources for Services (STARS) II governmentwide acquisition contract. The message contained an unsubtle suggestion that bidders might want to offer lower prices.

“Any part of previous communications from GSA stating or implying that offerors were deemed apparently successful is hereby rescinded," agency officials wrote. “This discussion e-mail serves as notice that GSA has made the decision to hold additional discussions, with an emphasis on pricing.”

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Read GSA's response to the email.

Prices are becoming a central theme in the government as Congress attempts to cut funding and the Obama administration pushes austere spending.

GSA is giving the 8(a) small businesses time to reexamine the prices they offered in their initial bid proposals and adjust the pricing to “amplify its potential to be favorably considered,” according to the follow-up message.

The opportunity for revisions is not merely a request for an update, but it will play into GSA’s comparisons.

“This is a competitive 8(a) procurement where comparative analysis with other offerors’ pricing in response to this [Final Proposal Revision] opportunity, and possibly other price analysis, will occur in order to assess price reasonableness [or] unreasonableness,” GSA wrote.

In the rescission e-mail message, GSA gave companies pricing averages from the initial bids as a guide for what’s been offered so far to let companies know where their prices compare to other bidders.

Observers speculated that someone may have sent out an email too soon, or a senior management official could have recognized in the 12th hour that the agency needed look over the prices again.

"Oops," Larry Allen, president of Allen Federal Business Partners, said about the initial message.

Either way, the STARS GWAC is “a crown jewel” of GSA and its small business contracts. It’s next to the GSA’s Schedules in importance to the agency, he said.

The follow-up rescission message may be awkward, but, Allen said, it’s better than being criticized throughout the life of the contract because of high prices.

Nevertheless, the small-business aspect, such as getting a good mix of various business types, likely would get officials’ attention from the outset before prices, he said. STARS offers customer agencies an avenue to boost their small-business contacting percentages, which has helped to make the GWAC successful.

Across the government though, pricing has become another essential topic in a time when funding is set to diminish. It’s important enough that the Defense Department made Shay Assad, a senior procurement policy official, the first director of defense pricing in May.

That appointment points to the weight of the pricing issue, said Hope Lane, a government contract consultant at Aronson Consulting.

“The government has to start implementing austerity measures,” said Lane, who focuses on GSA Schedules.

It isn’t surprising that GSA may have rescinded its award notice in order to make contractors improve their prices, she said. As agencies hunt for the best value for their money, GSA’s STARS GWAC has to prove that it can actually save money, or GSA will lose business to another IDIQ hosted by another agency, she said.

“IT, in particular, is a competitive market among GWACs,” she said.

This mix-up may cost GSA by way of protests to the contract. Allen said the likelihood of protests just jumped much higher.