GSA is moving forward with their new service model to facilitate the “Strategic” plan designed to improve the GSA Schedules program in the upcoming fiscal years 2014-2018. The plan was drafted to link GSA’s Management objectives to the GSA programs. GSA Management’s bottom line intent is to save the government money by reducing pricing throughout the GSA marketplace.
What is the Price Paid Tool?
One of the most recent initiatives of the “Strategic” plan began only a month into 2014 with GSA’s launch of the Price Paid Tool. The Prices Paid Tool is an instrument used by buying agencies to effectively lower prices at both the order and contract level, rather than only at the contract level. The tool establishes a database that provides buying agencies with transparency into the prices paid by other agencies at the task or delivery order level.
The tool is still admittedly a “work-in-progress”, but it has been through a few test runs by a few registered users and has been rolled out Government-wide. It is GSA’s aim that the price tool will allow GSA contracting officers to perform more accurate market research, negotiate prices, and track and change behaviors that drive total costs in the GSA market. Find more information of the Prices Paid Tool here.
Tool Presents New Competitive Challenges
The tool may have an effect on your product or service pricing. Those vendors that frequently cut prices at the order level to win business will begin shaping the expectations for future government customers in a way they may have not intended. When agencies use this tool, the steeply discounted prices may become the norm and all vendors will be forced to compete to the lowest price. As a result, its possible vendors will not only be competing against their competitors, they may also be competing against themselves. The pricing tool has the unintended consequence of restricting free competitive market pressures in negotiations on a case-by-case basis to your Federal customers; as it may mean that you will be required to offer that same discount to all other purchasing agencies.
We have also seen the pricing tool pull competitive product pricing from a vendor that has not updated pricing in three years and was now lower than the cost of the product. The indolent vendor artificially kept pricing low, when we confronted the issue we were informed that technically an agency could still buy it and therefore pricing was relevant.
Review your Pricing Strategies.
All vendors should invest the time and resources to thoughtfully propose the price for their products and services. We recommend establishing consistent government pricing practices to minimize steep discounts without justification. You should leave room for further negotiations on a task order basis when possible.
It’s become apparent that GSA has made a grave investment into this integrated strategy by leaning further towards reducing pricing in their marketplace. We understand and support the goal of saving tax payers money even if we may not agree with the application of these new tools and methodologies to remove competitive practices and dictate prices and terms. This is the future with GSA – all items are being commoditized, prepare to be aggressive and responsive. When price is not a good determination of value, it is essential that you make the effort to impart this with the CO/KO and End Users.
For over 20 years, Coley GCS has helped companies worldwide successfully win and manage more than $3 Billion in Government Contracts. We specialize in GSA Schedules but support any contracting vehicle. We build long term relationships with clients –many who have put their trust in our advice for over two decades.