Download - MAS Contract Systems Review June 18 2009
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SURVIVIVING A GSA SCHEDULESURVIVIVING A GSA SCHEDULECONTRACT SYSTEMS REVIEW:CONTRACT SYSTEMS REVIEW:A CHECKLIST FOR COMPLIANCEA CHECKLIST FOR COMPLIANCE
G. Matthew Koehl, Esq.June 18, 2009
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Presentation OutlinePresentation OutlinePresentation OutlinePresentation OutlinePresentation OutlinePresentation Outline Overview of the General Services
Administration (GSA) Multiple AwardSchedule (MAS) Program
Contract systems review process and scope
Contractor Report Card
Critical MAS contract issues, rules andcommon contractor problems
MAS Contract compliance systems
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MAS Program OverviewMAS Program OverviewMAS Program OverviewMAS Program OverviewMAS Program OverviewMAS Program Overview MAS Contract Program has grown substantially
since mid-1990s
$36 billion in Government FY 08 sales >17,000 MAS contracts
Premier contract to sell commercial itemproducts and services to the federal government
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MAS Program OverviewMAS Program OverviewMAS Program OverviewMAS Program OverviewMAS Program OverviewMAS Program Overview GSA is the lead procurement agency
GSA establishes long-term schedule contracts withpre-negotiated prices and terms and conditions
Contracts open to all Federal agencies and manyquasi-Government agencies and internationalorganizations
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Contract Systems ReviewContract Systems ReviewProcessProcess
Contract Systems ReviewContract Systems ReviewProcessProcess
Contract Systems ReviewContract Systems ReviewProcessProcess
GSA conducts routine reviews of MAScontractors contract management systems
Regular event for large + problem
contractors
Performed by Federal Acquisition Service(FAS) and not the Office of Inspector General(OIG)
Potential for referral to OIG and Departmentof Justice (DOJ) if serious problems discovered
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Evolving Scope of MASEvolving Scope of MASContract S stem ReviewContract S stem ReviewEvolving Scope of MASEvolving Scope of MAS
Contract S stem ReviewContract S stem ReviewEvolving Scope of MASEvolving Scope of MAS
Contract S stem ReviewContract S stem Review Late 1990s - superficial analysis of
written procedures for tracking MAScontract sales and paying Industrial
Funding Fee (IFF) IFF is a contract usage fee, MAS
contractors collect from ordering
agencies and remit quarterly to GSA(.075%)
Substantial incentive to audit IFF
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Evolving Scope of MASEvolving Scope of MASContract S stem ReviewContract S stem ReviewEvolving Scope of MASEvolving Scope of MAS
Contract S stem ReviewContract S stem ReviewEvolving Scope of MASEvolving Scope of MAS
Contract S stem ReviewContract S stem Review Scope expands over time
Is the contractor overcharging agencies?
Is the contractor is selling unapproved items?
Detailed analysis of 6-12 months of sales data Alternatively, FPDS sample orders
Report Card with 27 contract requirements Exhibit A
Some of 27 requirements N/A to individual MAS contractors
Some reviewed closely (e.g., IFF), others receive onlysuperficial review (e.g., Trade Agreements Act)
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Contractor Report CardContractor Report CardContractor Report CardContractor Report CardContractor Report CardContractor Report Card Category One - 10 critical Report Card items
Failure to meet any critical item = SeriousConcerns Exist Rating
1. Contract scope2. Trade Agreements Act3. Current MAS Pricelist4. IFF payments5. Minimum contract sales6. Basis of award customer tracking7. Overcharges vs. MAS pricelist8. Economic Price Adjustment clause9. Small Business Subcontracting Plan10. Identifying products with environmental attributes
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Contractor Report CardContractor Report CardContractor Report CardContractor Report CardContractor Report CardContractor Report Card
Category Two - 11 mandatory butnon-critical items 1 failure = Very Good
2-3 failures = Satisfactory 4 or more failures = Marginal
Category Three 6 additional items
Exceptional rating available if Very Good inCategory Two and 1 or fewer failures inCategory Three
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Contract Systems Review vs.Contract Systems Review vs.OIG AuditOIG Audit
Contract Systems Review vs.Contract Systems Review vs.OIG AuditOIG Audit
Contract Systems Review vs.Contract Systems Review vs.OIG AuditOIG Audit
Important to distinguish the contractsystems review from GSA OIG audits Pre-award OIG pricing review
Post-award OIG contract compliance audit
Exhibit B. Contract Systems Review
Exhibit C. OIG Audits
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IFF Payments The RulesIFF Payments The RulesIFF Payments The RulesIFF Payments The RulesIFF Payments The RulesIFF Payments The Rules Contract usage fee, MAS contractors collect from
ordering agencies and remit quarterly to GSA(.075%)
GSA : federal agency orders for MAS items are
subject to IFF unless the contractor establishesthe agency did not intend to use the MAS program
Arguably unreasonable contract interpretation
But, generally less expensive and better businessfor the MAS contractor to close out the review by
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Common IFF PaymentCommon IFF PaymentProblemsProblems
Common IFF PaymentCommon IFF PaymentProblemsProblems
Common IFF PaymentCommon IFF PaymentProblemsProblems
Commercial order entry systems used to identifyMAS orders are not designed for simple and easyIFF payment compliance
Systems tend not to be fully automated anddepend upon accurate data entry by contractorsales staff
Contractors most frequently to miss certain types
or categories of orders
High risk order categories in Attachment B toCourse Materials
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MAS Order Pricing - The RulesMAS Order Pricing - The RulesMAS Order Pricing - The RulesMAS Order Pricing - The RulesMAS Order Pricing - The RulesMAS Order Pricing - The Rules
MAS contracts contain a discounted ceilingprice which GSA has determined fair andreasonable Cannot charge in excess of ceiling
Also, approved price is usually benchmarkedagainst other indices: discount from a commercial list price commercial customer sales price
acquisition cost (resellers)
Price reductions based upon benchmark changes mustbe granted automatically on the same date and for thesame duration as the change to the pricing benchmark
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Common MAS Pricing ProblemsCommon MAS Pricing ProblemsCommon MAS Pricing ProblemsCommon MAS Pricing ProblemsCommon MAS Pricing ProblemsCommon MAS Pricing Problems
Sales staff unaware of the price ceilingand issue MAS quotes based on highercommercial pricing and practices
Order processing staff unaware of theprice ceiling and accept orders in excessof the approved ceiling price
Benchmark triggering price reductiondoes not get reflected in MAS contractpricelist
Benchmark triggering event category of price
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Unapproved Item SalesUnapproved Item Sales The RulesThe Rules
Unapproved Item SalesUnapproved Item Sales The RulesThe Rules
Unapproved Item SalesUnapproved Item Sales The RulesThe Rules
Federal agencies are authorized to purchaseapproved products and services through MAScontracts using streamlined ordering procedures
MAS orders may not include unapproved (i.e.,open market) products or services in excess of$3,000, even where related to the MAS productsor services
To meet its competition obligations, the federalagency must receive accurate information fromthe contractor about whether items are approvedfor sale under the MAS program
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Unapproved Item SalesUnapproved Item Sales Common ProblemsCommon Problems
Unapproved Item SalesUnapproved Item Sales Common ProblemsCommon Problems
Unapproved Item SalesUnapproved Item Sales Common ProblemsCommon Problems
Sales staff are unaware of which products andservices are currently MAS-approved
GSAs often slow contract modification approvalprocess creates differences between commercialand GSA-approved offerings
Intentional misrepresentation as MAS approved
Express misrepresentation
Quote referencing MAS contract with some MAS itemsbut not separately identifying other items as openmarket or not approved
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Trade Agreements Act Trade Agreements Act The RulesThe Rules
Trade Agreements Act Trade Agreements Act The RulesThe Rules
Trade Agreements Act Trade Agreements Act The RulesThe Rules
TAA implements trade treaties granting equal treatment in governmentprocurement to member companies China, India, Thailand, Vietnam not approved
Designated Countries FAR 52.225-5
Taiwan becomes designated country in July (est.)
Not a pricing preference absolute prohibition on non-designedcountry products (absent waiver)
The TAA applies to all MAS contracts
Except set aside Special Item Numbers (SINs) Order size not relevant
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Trade Agreements Act Trade Agreements Act The RulesThe Rules
Trade Agreements Act Trade Agreements Act The RulesThe Rules
Trade Agreements Act Trade Agreements Act The RulesThe Rules
TAA product country of origin is established by the substantialtransformation test
Products are TAA-eligible if last substantially transformed in a membercountry into a new and different article of commerce
Substantial transformation test is not satisfied by simple manufacturingefforts that dont affect the products essential use
End products that are last substantially transformed in non-designatedcountries are prohibited
TAA applies to services, but no enforcement to date. Country of origin is country where firm providing the services is established FAR25.402(a)(2).
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Trade Agreements ActTrade Agreements Act Common ProblemsCommon Problems
Trade Agreements ActTrade Agreements Act Common ProblemsCommon Problems
Trade Agreements ActTrade Agreements Act Common ProblemsCommon Problems
Contract systems review now includes TAA Only superficial analysis by GSA IOAs Heavily audited by GSA OIG
MAS reseller buys from distribution withoutobtaining manufacturer TAA certification
MAS reseller lacks good process for obtainingupdated manufacturer product country of origindata
Manufacturer product development functionchanges point of production without notice toMAS Contract administrator
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Trade Agreements ActTrade Agreements Act
Common ProblemsCommon Problems Inventory control and SKU management
issues
Failure to archive country of origin
information Hardware and software production migrates to China,
India and other non-designated countries
Industries struggle with TAA compliance Hardware items Medical products IT hardware Software
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Small Business SubcontractingSmall Business SubcontractingPlan The RulesPlan The Rules
Small Business SubcontractingSmall Business SubcontractingPlan The RulesPlan The Rules
Small Business SubcontractingSmall Business SubcontractingPlan The RulesPlan The Rules
Requirement for all large MAS contractors
Good faith effort to award percentages ofsubcontract dollars to various small
business categories Liquidated damages for failure to make a good faitheffort. FAR 52.219-16.
Annual or semi-annual report of plan goal
achievement Subcontracting Plan goal achievement now
part of contract systems review process
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Small Business SubcontractingSmall Business SubcontractingPlan Common ProblemsPlan Common Problems
Small Business SubcontractingSmall Business SubcontractingPlan Common ProblemsPlan Common Problems
Small Business SubcontractingSmall Business SubcontractingPlan Common ProblemsPlan Common Problems
Commercial Subcontracting Plan is notupdated on an annual basis
Companys purchasing function is not
properly trained and lacks procedures tomeet good faith effort steps specified inPlan
Failure to file annual SF 295 Report showing
progress on plan goals Failure to obtain regular business size status
representations from subcontractors
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Preparing For A GSAPreparing For A GSA
1. Scope. Written procedure to specifically identify any non-MASitems in MAS contract proposals and quotes
1. Scope. Written procedure for providing most updated MASpricelist to federal sales staff
2. Trade Agreements Act. Written TAA compliance procedure (ifapplicable) Resellers examples of manufacturer Letter of Supply certification to TAA
3. Current MAS Pricelist. Contract modifications with approved
MAS pricelists for the entire period of review
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Preparing For A MAS ContractPreparing For A MAS ContractS stems ReviewS stems Review
Preparing For A MAS ContractPreparing For A MAS ContractS stems ReviewS stems Review
Preparing For A MAS ContractPreparing For A MAS ContractS stems ReviewS stems Review
4. Industrial Funding Fee. Written procedure for trackingMAS orders and calculating IFF payments Be prepared to show how MAS order flows through entire order
processing system and is identified for IFF payment
Address MAS dealers, Contractor Teaming Arrangements, Blanket
Purchase Agreements and leasing payments
4. Industrial Funding Fee. Back-up documents for thequarterly IFF payment calculations for the entire period ofreview
4. Industrial Funding Fee. Copies of 72A reports and receiptsshowing timely payment of IFF for the past 36 months
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Preparing For A MAS ContractPreparing For A MAS ContractS stems ReviewS stems Review
Preparing For A MAS ContractPreparing For A MAS ContractS stems ReviewS stems Review
Preparing For A MAS ContractPreparing For A MAS ContractS stems ReviewS stems Review
5. Minimum Contract Sales. Copies of 72A reports for period ofreview
6. Basis of Award Tracking. Written procedure identifying triggeringevents for tracking customer or other BOA Include discount to pricelist, if applicable Copies of commercial pricelist, if applicable
7. Overcharges vs. MAS Pricelist. Contract modifications withapproved MAS pricelists for the entire period of review
7. Overcharges vs. MAS Pricelist. Written procedure to verify MAS
order pricing at time of MAS contract quoting and order acceptance
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Preparing For A MAS ContractPreparing For A MAS ContractS stems ReviewS stems Review
Preparing For A MAS ContractPreparing For A MAS ContractS stems ReviewS stems Review
Preparing For A MAS ContractPreparing For A MAS ContractS stems ReviewS stems Review
8. Economic Price Adjustment clause. Contractmodifications with approved MAS pricelists for the entire period ofreview
9. Identifying Environmental Attributes. Contractmodifications with approved MAS pricelists for the entire period ofreview
10. Small Business Subcontracting Plan. Copy of current approvedplan document
10. Small Business Subcontracting Plan. Copy of most recentlysubmitted SF 295 report
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Preparing For A GSA ContractPreparing For A GSA ContractS stems ReviewS stems Review
Preparing For A GSA ContractPreparing For A GSA ContractS stems ReviewS stems Review
Preparing For A GSA ContractPreparing For A GSA ContractS stems ReviewS stems Review
Miscellaneous. Qualified professional servicesemployees (not on Report Card) Written procedure and employee resume files
Miscellaneous. Binder showing compliance with the 17non-critical Report Card requirements
Define compliance (y/n) on your terms (e.g., timely delivery) Fix items that can be fixed quickly (e.g., contractor records
location) Systematic approach to long-term compliance
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Preparing For A GSA ContractPreparing For A GSA ContractS stems ReviewS stems Review
Preparing For A GSA ContractPreparing For A GSA ContractS stems ReviewS stems Review
Preparing For A GSA ContractPreparing For A GSA ContractS stems ReviewS stems Review
Sales Transactions. If possible, review allidentified sales transactions before on-site contractsystems review. If a MAS contract or authorizeduser order
Items approved on then-effective MAS pricelist? Items priced below ceiling in then-effective MAS pricelist? IFF paid on order?
If not MAS, how to establish? If errors made on order, why?
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Compliance SystemsCompliance SystemsCompliance SystemsCompliance SystemsCompliance SystemsCompliance Systems
Regular internal audits
MAS pricing
MAS-approved items
Price reductions based on discounts and concessions tobenchmark customers
Price reductions based on reductions to commercial listprice
Trade Agreements Act
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ConclusionConclusionConclusionConclusionConclusionConclusion All MAS contractors with material sales volumes should
experience one or more contract systems audits during each5-year contract period
MAS contractors often encounter the same compliance
problems
Problems are not obscure but require advance attention toensure proper compliance
Contract systems review implicates some key requirements
that are reviewed only superficially but can presentsubstantial risk in a post-award OIG audit, take theopportunity to address correctly
Trade A reements Act