When a contractor enters into this 12 to 16 month window, we recommend that they conduct a review of their actual sales data, discounting policies, and pricing controls.  Any control weaknesses or noncompliant pricing practices should be remedied before entering into the 12 month sales period preceding renewal.  This will help prevent unwanted surprises when it comes time to disclose historical pricing data to the GSA and during pricing negotations.

Contractors typically receive a letter from the GSA notifying them of their upcoming contract expiration and the renewal timeframe 6 to 12 months before contract expiration.  This letter usually includes a list of items the contractor will need to submit to the GSA if it wishes to renew its contract.  If a contractor has not received the renewal notification before it enters the final 6 months of the option period the company should contact its contracting officer and request a renewal notification letter.

The option period renewal package must be submitted no later than 4 months in advance of the contract expiration.  (Contractors will be informed of this in their renewal notification letter.)  Procrastination and last minute preparation is not advised, as the contractor is certifying that the information in the submission package is current, accurate, and complete to the best of its knowledge under the threat of penalties.  We find that contractors that begin preparations early consistently experience easier and less stressful contract renewals.

Finally, we recommend that all modifications of the current contract should be completed, if possible, before submission of the contract option renewal package.  Although GSA has consistently maintained that there is no policy requiring contracting officers to withhold action on requests to modify existing contracts while a renewal application is pending, in practice, certain contracting officers will not accept modifications during this time except under “emergency” circumstances.  To be safe, we recommend that our clients get their modifications in as soon as possible before going through a contract renewal.

Compiling Current Contract Information

It is always a good idea to have all information related to your GSA schedule on hand and readily available for compliance and administration purposes.  We recommend that contractors re-assess their GSA Schedule documentation and note key disclosures and contract provisions when entering the final year of their current contract period.  This will facilitate preparations for contract renewal and will prepare the contractor for a pre- or post-award audit if one occurs.

Items that we recommend contractors have on hand or stored in an easily obtainable form include the following items:

• Best and Final Offer to GSA
• Commercial Sales Practices Disclosures (CSP-1) Form(s) and any accompanying narrative
• Contract modifications
• EPA modifications and justifications
• Current and prior pricelists
• GSA order documentation
• GSA related policies and procedures
• GSA sales and IFF remittance documentation
• Key correspondence
• Contractor Assistance Visit (CAV) report cards and any audit reports.
• Make sure all information in CCR is up to date and labeled “Active.”

Preparing Commercial Sales Practice Disclosures

One of the most important parts of the GSA schedule renewal process is the disclosure of a contractor’s commercial sales practices.   It is imperative that the contractor disclose its practices accurately and completely.  This information could be subject to a pre-award audit and failure to disclose properly could lead to potential defective pricing and False Claims Act allegations.

Surprisingly, companies are frequently unsure of their true sales practices.  We find that far too often price discounting is not controlled and decentralized sales forces apply pricing policies inconsistently.

Contractors must disclose their actual sales practices.  This requires an analysis of historical sales data which is often not readily available.  Contractors approaching renewal should ensure that their systems are capable of generating sales data in a format that easily lends itself to analysis.  Once the historical sales data is obtained, prices and discounts should be analyzed by customer type (e.g. resellers, state and local governments, commercial, etc.) and disclosed in the CSP-1 form. 

We recommend contractors include a pricing narrative accompanying the CSP-1 form to accurately disclose any discounting practices, terms, or concessions that cannot easily be depicted in the CSP-1 chart.  Contractors should ensure they fully describe all types of discounts, concessions, and non-standard terms offered to each customer class.  In short, disclosures should be current, accurate, and complete.

Other Tasks Involved in Renewal Package Submission

In addition to disclosing commercial sales practices, contractors should also complete the following tasks before submitting a renewal submission:

• Update Online Representations and Certifications Applications (ORCA).
• For product companies, ensure that all products on schedule are Trade Agreements Act compliant.
• For service companies, ensure that labor categories are accurately mapped to Basis of Award customer labor categories. 
• For service companies, ensure that for the Basis of Award customers and GSA customers, employees performing on contracts meet the labor category requirements.
• Ensure that non-GSA items or labor categories are labeled “open market” items on GSA orders.
• Ensure that GSA Advantage is updated for the contractor’s most recent pricelist and is otherwise current, accurate and complete.
• Assess and set subcontracting goals.
• Prepare latest versions of the GSA and commercial pricelists.
• Certify the correct size of your business.  Companies are now required to recertify at each option period renewal.  Check size limit for your primary NAICS code and average revenue over last 3 years.  (See Clause 52.219-28)
• If GSA requests, prepare financial capability support including financial statements and GSA Form 527.  (Not required for all submissions).

Final Offer and Negotiation

As mentioned previously, proposal packages must be submitted at least four months before contract expiration.  The final renewal package should provide support for a Basis of Award (“BOA”) customer or customer class and should propose a price-discount relationship to GSA customers.  By way of example, a contractor could offer the GSA a Basis of Award customer class of “Preferred Commercial Customers” and a guaranteed discount of at least 10% below pricing offered to “Preferred Commercial Customers.”  Contractors submitting a renewal application will have the option of changing or keeping the current Basis of Award from the prior contract period.  However, contractors should make sure that all Basis of Award customers are still active customers and can be supported by the pricing disclosures as the “Most Favored Customer.” 

The GSA will want to tie its pricing to the pricing of the contractor’s best customers to ensure that it gets a fair and reasonable price throughout the life of the contract.  Good BOA customers will be supported by the contractor’s pricing disclosures.  In other words, a good BOA customer will be a customer that the contractor can argue, based on its disclosed historical sales to all customers, represents its best customer or customer class. Contractors should also try to negotiate the narrowest BOA customer as possible.  BOA pricing must be monitored throughout the life of the contract and the smaller the customer or customer class, the less of a burden it is to control pricing to the BOA. 

The offered BOA customer, price discount relationship, and other key contract terms should be submitted in a Best and Final Offer letter along with the other renewal documentation.

• Starting the contract renewal preparation process too late.  It sounds simple, but adequate preparation and attention results in a less stressful renewal submission and, ultimately, a better contract.  Not starting soon enough can result in a contract lapse or the need for burdensome temporary contract extensions.

• Difficulty obtaining pricing data from the sales system.  Many contractors find it more difficult than expected to produce contract pricing data by customer category.  This can result in increased delay during last minute preparation and a less-than-perfect pricing disclosure to the GSA.

• Contractors making no attempt to negotiate a narrow Basis of Award customer or customer class.  A Basis of Award of “All Commercial Customers” means that the contractor must monitor and control its pricing to all commercial customers to ensure that the GSA price-discount relationship is maintained throughout the life of the contract.  If the contractor can negotiate a narrower BOA customer or customer class, this will result in less compliance risk and administrative burden in the future.

• Contractors prompting a pre- or post-award audit by disclosing sales practices dramatically different from the pricing practices disclosed at the beginning of the prior option period.

• Contractors not having any sales on their contract, not tracking and paying IFF in a timely manner, not getting good grades on their Contractor Assistance Visit report cards, or receiving bad past performance feedback from Government customers.

Conclusion

The goal of a GSA contract option renewal is to obtain a contract for the new option period that provides favorable pricing and promotes compliance.  Achieving these goals is not as simple as it sounds.  It takes time and preparation.  Inexperienced contractors or contractors without sufficient resources during the key months leading up to a contract renewal could benefit from the assistance of outside experts.  Argy consultants are experienced helping contractors with all aspects of their GSA schedules including option period renewals.  If your company is approaching an option period renewal and has questions or needs assistance please contact Mary Karen Wills or Nick Dunn at (703)893-0600.