presents GSA Schedule Contracts: Opportunities and Legal Risks Complying With Complex Federal Regulations and Avoiding False Claims Act Violations A Live 90-Minute Teleconference/Webinar with Interactive Q&A Today's panel features: Michael F. Mason, Partner, Hogan Lovells US, Washington, D.C. Holly A. Roth, Partner, Manatt Phelps & Phillips, Washington, D.C. JCthiJ. Catherine Kunz, Par tner, Cll&MiCrowell & Moring, WhitWashington, DCD.C. Thursday, September 2, 2010 The conference begins at: 1 pm Eastern 12 pm Central 11 am Mountain 10 am Pacific You can access the audio portion of the conference on the telephone or by using your computer's speakers. Please refer to the dial in/ log in instructions emailed to registrants. For CLE purposes, please let us know how many people are listening at your location by • closing the notification box • and typing in the chat box your company name and the number of attendees. • Then click the blue icon beside the box to send. For live event only. • If you are listening via your computer speakers, please note that the quality of your sound will vary depending on the speed and quality o f your in terne t connec tion. • If the sound quality is not satisfactory and you are lis ten ing v ia your compu ter spea kers, please dial 1-866-873-1442 and enter your PIN when p r om pt ed. Oth erwi se, pl ease sen d us a chat or e-mail [email protected] immediately so we can address the problem. • If you dialed in and have any difficulties during the call, press *0 for assistance. GSA MAS Contracts: Overview, Pricing Disclosures, and Compliance Requirements By Michael F. Mason September 2, 2010 Email: [email protected] Agenda •Overview • Option Periods • Pre-Award Audits • CSP Disclosures (Requirements and Best Practices) • Price Reductions Clause (Requirements and Best Practices) © 2010 Hogan Lovells US LLP. All rights reserved. 5 Overview • The GSA MAS program is touted as the premier commercial acquisition program within the Federal Government • More than $20 billion dollars of goods and services sold during first half of FY 2010 • The program has grown from $10 .5 billion in FY 1999 to more than $38 billion in FY 2009 • There are more than 18,000 MAS contracts spread across 42 different “schedules” • Services have become an increasingly significant portion of MAS sales – today more than half of MAS revenue is derived from services • GSA MAS program has preferential status under Federal Acquisition Regulation (FAR) 8.002 © 2010 Hogan Lovells US LLP. All rights reserved. 6 Overview • A MAS contract’s base term is five years, followed by three five-year options • A MAS contractor is guaranteed no sales – nearly half of all contracts in recent years had no recorded sales • AMASA MAS con trac tit is a kin to a “license ”t” to mar ke ttht through ou ttht the Federal Government and to other eligible ordering activities • Also, state and local governments may use the program under certitain sc hdlhedules an dfd for cer titain pro duc t/ts/serv ices • Purchasing agencies use streamlined buying procedures that significantly reduce time and effort required under traditional GtGovernment procurement tthd methods • MAS prices are determined to be “fair and reasonable” – purchasing agencies are not required to conduct further price analyses © 2010 Hogan Lovells US LLP. All rights reserved. 7 Overview • GSA reports it needs anywhere from 30 to 120 days to process a viable offer;;,g however, negotiations often take lon ger • Basic initial requirements: – DUNS number – Register with the Central Contractor Database – Complete representations and certifications in Online Representations and Certifications Application (ORCA) – Open Market Ratings must be obtained using the Dun and Bradstreet system – Develop Subcontracting Plan • Prior to award, offeror discloses its “commercial sales practices” (CSP), which GSA uses to negotiate pricing • GSA’s stated objective is “most favored customer” pricing • For purposes of price protection , the contract’s GSA pricing is linked to negotiated “basis of award” customers or category of customers • A negotiated pricing relationship between GSA pricing and basis of award pricing is maintained during contract performance via a Price RdReduc tions Clause © 2010 Hogan Lovells US LLP. All rights reserved. 8 Option Periods • At the end of each five-year period, the contract is up for “renewal” • Prior to GSA determining whether or not to exercise the option to extend the contract, the contractor is required to update its CSP disclosures • The contractor may also be asked to represent whether all required price reductions under the Price Reductions Clause have been reported to GSA • The process may include a pre-award audit and the contract’s pricing may be renegotiated • A vast majority of pre-award audits occur in connection with the contract extension process – which often is when problems with a contractor’s disclosure and/or administration of the contract are disclosed • The opti on ext ensi on process requi res si gnifi cant att enti on and represents an opportunity to “clean up” a contract • GSA may extend the existing 5-year period while negotiating pricing for the new period © 2010 Hogan Lovells US LLP. All rights reserved. 9 Pre-Award Audits • Prior to award of a new MAS contract or at the time of the option extension • For option extensions, GSA contracting officer notifies contractor 210 days prior to contract period’s expiration of impending OIG pre-award audit • OIG’spre s pre-award audit objectives include determining whether: – the CSP information submitted by the company is current, accurate and complete – the company’s sales monitoring and billing systems will ensure proper administration of the price reduction provisions and billing terms of the contract – the company can adequately accumulate and report schedule sales for Industrial Funding Fee (IFF) payment purposes – employees are qualified for the labor position to which they are assigned (for services) – the company has an adequate accounting system for the segregation and accumulation of labor hours, materials, and other direct costs (ODCs) on time-and-materials task orders (for services) • OIG will present recommended pricing to the GSA contracting officer © 2010 Hogan Lovells US LLP. All rights reserved. 10 Faulty Perceptions • Many contractors hold faulty perceptions regarding the nature o fGSAShdlf GSA Schedule con trac ts: – MAS contracts include only commercial-like terms and conditions and pose no government-unique risks – MAS contract pricing impacts only your federal sales efforts – MAS contractors must offer GSA its lowest prices © 2010 Hogan Lovells US LLP. All rights reserved. 11 CSP Disclosure Requirement • Contractor is requested to disclose Commercial Sales Practices (CSP) data as part of its proposal package • The standard CSP form requests that you: – State total projected annual sales to the Government under the contract for the contract term, excluding options, for each SIN offered. – State whether the discounts and any concessions you are offering to the Government are eqqpyual to or better than the best price offered to any customer – Complete a matrix listing (i) customer categories; and (ii) best discounts per written policy or standard practice (where written policies do not exist) for each customer categgyory that receives a better pricin g than GSA – State whether any deviations from your disclosed written policies or standard practices ever result in better discounts (lower prices) or concessions – Explain any deviations from the written policies and standard practices, including the frequency of occurrence • The information provided is “expected” to be current, accurate, and complete as of 14 calendar days prior to its submission • You are requested to update the information with any changes prior to close of negotiations © 2010 Hogan Lovells US LLP. All rights reserved. 12 CSP Disclosure Requirement Except from standard CSP-1 Form © 2010 Hogan Lovells US LLP. All rights reserved. 13 CSP Disclosure Requirement • After contract award, CSP data must be submitted and/or re- affirmed (i) w hen items are a dde d to the con trac t; an d (ii) a t the time of contract extension • There is no requirement to “certify” the data, although GSA contracting officers often request, and receive, certified data • For manufacturers: if you are using resellers: – Typically will be requested to submit CSP data if the reseller has insignificant sales to the general public – If the manufacturer submits a CSP form , it will also be requested to agree to government pre-award audits © 2010 Hogan Lovells US LLP. All rights reserved. 14 CSP Disclosure – Best Practices • Perform sweep and analysis of sales policies and data prior to proposal submission and contract extensions – Iden tify a ll curren t wr itten pr ic ing po lic ies – Pull and analyze commercial sales data and agreements to determine actual sales practices and deviations from policies and standard practices – Analyze sales data for possible anomalies – ensure data is usable, consider reconciling to G/L – ItIntervi ew sa les, finance, an dld lega l personne lil invo lve did in commercial sales process to further identify practices and deviations from those practices – DtDocument process tititikf“kldid”to mitigate risk of “reckless disregard” allegations © 2010 Hogan Lovells US LLP. All rights reserved. 15 CSP Disclosure – Best Practices • Prepare a narrative to accompany disclosure form – No one’s data will be perfect -- explain your efforts to compile da ta an d c harac ter ize in terms o f “goo d fa ith” – Include appropriate disclaimers based on limitations or questions concerning the data – Explain whether disclosed customer categories are categories used in your commercial practice (often they are not) – Iden tify an d exp la in the dev ia tions from wr itten po lic ies or standard practice – Indicate whether you reserve the right to continue with iden tifie d dev ia tions w ithou t be ing cons idere d tr igger ing events under the Price Reductions Clause (also include statement in your Final Proposal Revision and the ultimate contract) © 2010 Hogan Lovells US LLP.