GSA weighs Section 803 changes

Two recommendations of a congressionally chartered advisory panel have procurement analysts pondering what the proposed rule changes could mean for federal agencies and contractors.

The Acquisition Advisory Panel, created by the Services Acquisition Reform Act, recommended in July that the entire government apply the Defense Department’s Section 803 acquisition rule pertaining to services procurement.

The panel also recommended creating a separate General Services Administration schedule for information technology services. Companies would not offer prices on this schedule. Instead, they would set pricing when bidding for individual task orders.

The recommendations are among a total of 10 the panel has made.

Emily Murphy, GSA’s chief acquisition officer, said the agency has been considering some procurement rule changes similar to those the panel recommended. “It’s confusing to have two different sets of rules in place,” she said at FCW Events’ itsGov conference in July. “If [Section] 803 is good and really encourages competition, we need to explore applying it governmentwide.”

Section 803, part of the Defense Authorization Act of 2002, requires DOD agencies that issue task orders for services worth more than $100,000 to seek a broad range of competition. When using the GSA schedule contracts, DOD agencies may choose to alert all companies on the contract and give them a chance to bid, or they may opt to alert fewer companies. If they choose the latter option, DOD agencies must inform enough companies to receive at least three bids.

When ordering from multiple-award contracts other than GSA’s schedules, agencies must provide fair notice to all contractors offering the required service.

Civilian agencies must alert only three potential bidders on a GSA schedule to satisfy competition requirements, said Alan Chvotkin, senior vice president of the Professional Services Council (PSC).

The council was cautious about Section 803 when it was first enacted for DOD in 2002, but it was not as burdensome as the organization had feared, Chvotkin said. Although PSC does not believe the measure needs to apply governmentwide, “we wouldn’t strongly oppose it,” he said.

The new schedule proposal is more troublesome, he said. “We’ve recognized that schedule pricing operates as ceiling prices,” Chvotkin said. “Nobody should be paying retail schedules prices. Most of them are negotiable and the [Federal Acquisition Regulation] rules encourage contracting officers to seek price reductions. But I think it’s going to be difficult to have no benchmarks. At that point, you can’t do any market research.”

Service providers find it difficult to describe services without setting a price, Chvotkin said. However, the policy change could be a boon for industry. “If you don’t have that ceiling staring you in the face with every proposal, you might be able to negotiate a higher price,” he said.

“Ironically, this can make schedule procurements more competitive than open-market procurements that allow the government to proceed even if only one response is received,” said Larry Allen, executive vice president of the Coalition for Government Procurement. “There is nothing magical about getting three quotes.”

Allen downplayed the importance of expanding the Section 803 requirements. “It hasn’t been a big issue for contractors or customers,” he said. Because DOD is GSA’s single largest customer and already operates under the rule, most schedule contract holders are used to it and would not be fazed if more agencies adopted it, he added.

Allen said the potential changes could redefine the role of the schedule contracts. “I’m not sure it undermines it, although I’m sure some people will look at it that way,” he said. “I think it is a new way of looking at the program.”