MAS audits irk vendors

The petition, authored by the Government Electronics and Information Technology
Association of Arlington, Va., and believed to be the first use of a little-noticed
provision of the OFPP Authorization Act, contends that the pricing and audit clauses are
inconsistent with the Federal Acquisition Regulation. The group plans to submit the final
petition next month.


OFPP administrator Deidre A. Lee said last week that she has seen the draft petition.
She said she will review the association’s claims closely when it files the final
version and will take no position on the matter now. “We will consider it,” she
said.


Association president Dan C. Heinemeier, in a letter to Lee that accompanied the draft
petition, said the provisions impose “enormous business risks and infrastructure
costs for commercial companies.”


He also called the clauses inconsistent with the FAR, procurement reform initiatives of
the Federal Acquisition Streamlining Act and commercial business practices.


Attorney Robert J. Sherry of the San Francisco law firm McKenna & Cuneo, who wrote
the petition, said the clauses violate the requirements in the FAR and FASA that
procurement rules only include items that are required by law or are consistent with
standard commercial practices.


“None of the three clauses discussed here reflects customary commercial
practice,” Sherry said.


The petition includes a study by Richard Wall and Louis Rosen of the Ernst & Young
accounting firm that is critical of the provisions.


Government officials, however, were adamant in their defense of the provisions. Ida M.
Ustad, GSA deputy associate administrator for acquisition policy, said there is no
requirement that the government is limited to commercial practices.


“In fact, there is language to the contrary that says to the maximum extent
practicable, which means you have some room to do other than commercial practices,”
she said.


Regardless of whether the practices are done in the private sector, Ustad said,
“if it’s something the government believes needs to be done and it’s in its
interest to do it, the statute gives you the flexibility to do that.”


William N. Gormley, assistant commissioner for GSA’s Federal Supply Service, said
FSS has spent a lot of time with industry working, in vain, to resolve the issue.


“At some point you have to make a decision,” Gormley said. “We feel that
the government has a right to be able to determine that it has fair and reasonable prices
in the schedules area.”


The association based the petition on an OFPP Authorization Act clause that gives the
administrator the right to review “any regulation relating to procurement on the
basis that such regulation is inconsistent with the Federal Acquisition Regulation,”
Heinemeier said.


The law gives the administrator authority to take whatever action is necessary. After
she receives the final petition, OFPP’s Lee will have 60 days to respond.


Industry groups have often complained, sometimes bitterly, about the provisions but
failed in earlier attempts to get them overturned.


Steven Kelman, the former OFPP administrator who negotiated the current rule with
Ustad, Gormley and industry leaders, said industry is backing out of an agreement it once
called a good compromise.


“My concern is that this petition could undermine the whole rationale for the
schedule program,” he said. Kelman accused industry of taking a “what’s
mine is mine and what’s yours is mine” stance on the issue.


Such provisions are necessary, he said, because of the unusual nature of the MAS
program, which is unlike anything in the commercial marketplace.


“It’s not a standard competitive contract,” he said. “More or less
anybody can get a schedule. The prices are not determined by head-to-head competition. In
that environment, obviously government is going to need some sort of information” in
exchange for a vendor being allowed to solicit business given few limits.


The Government Electronics and Information Technology Association has received support
from other industry groups. The Information Technology Association of America, also of
Arlington, decided this month to support the petition.


Larry Allen, executive director for the Coalition for Government Procurement of
Washington, said his association has long supported eliminating the price reduction
clause.


Even if there are commercial precedents, he said, “there are no civil or criminal
liabilities connected to those clauses, making the federal clause somewhat
unique.” 


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