Will buying from MAS be all it's cracked up to be for the states?

Ironically enough, many state and local observers thought that the solution could be
found inside the Beltway. Several years ago, for example, California lawmakers authorized
its state agencies to use the General Services Administration's schedule contracts to buy
computers and related items.

At first, Uncle Sam wasn't keen on partnering with the states. Then GSA came up with
what it calls industrial funding, a 1 percent fee that GSA charges for each schedule sale.
"User fee" would be a more apt description, because vendors negotiate this fee
into their prices. Whatever you call it, the surcharge suddenly made broadening GSA's
scope seem like a winning proposition.

In the 1994 Federal Acquisition Streamlining Act, Congress authorized GSA to let
nonfederal government agencies buy goods and services through GSA's Multiple-Award
Schedule contracts.

First, GSA officials indicated they would not set special terms and conditions to
benefit nonfederal buyers. Some states have unique socioeconomic policies or other
statutory requirements that require separate terms and conditions.

Second, GSA provided no mechanism for handling state and local buying disputes. That
initial GSA proposal would require states and localities to use alternative dispute
resolution procedures or the cumbersome federal Contract Disputes Act process.

Even if a state, county or municipal government would yield to a federal arbitrator or
judge, how would decisions be enforced? The proposal envisioned federal attorneys
appearing in state courts to enforce federal decisions, judgments and related claims
against local customers-not a pretty prospect.

Aside from this and other legal problems, practical business obstacles abounded.
Manufacturers with well-established channels in state and local markets protested that
competition from federal resellers would upset their distributor relationships. GSA's most
favored customer pricing policy threatened profit margins vendors enjoyed in nonfederal

Small local businesses, often protected behind buy-local rules or culture, also
expressed fears about their ability to compete with GSA schedule sales.

Congress responded by doing an about-face. The Federal Acquisition and Reform Act of
1996 slapped an 18-month moratorium on GSA's proposal. It ends this August. FARA also
required the General Accounting Office to assess the threats of what has come to be called
cooperative purchasing to local and tribal governments and small businesses.

GAO's report was inconclusive, but it recommended that GSA complete a new and detailed
implementation plan for state and local use of the schedule contracts as part of the
agency's report to Congress.

Although GSA plans to open MAS to cooperative purchasing in August, long-time observers
caution that Congress might extend the moratorium. This development wouldn't surprise
anyone familiar with the agonizing reappraisals that typically accompany congressional
scrutiny of the GSA schedules program.

In the meantime, states with substantial IT requirements should consider establishing
their own schedule contracts.

California is a leader in this area. In just over three years, California has signed up
hundreds of vendors, manufacturers and resellers to participate in the California
Multiple-Award Schedule program. Annual sales now exceed $203 million.

Though the state uses the GSA schedule contracts as a baseline for pricing, CMAS
contract negotiations are fast and straightforward. Many vendors prefer CMAS because it
lacks the complicated price adjustment processes found in GSA schedules.

State and local governments might wish to consider use of GSA schedules, but this
should be part of an overall assessment.

Robert J. Sherry is a partner with law firm of McKenna & Cuneo LLP. He heads the
government contracts practice in its San Francisco office, counseling IT companies on
federal, state and local issues.

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