The Department of Veterans Affairs (VA) is planning on implementing substantial changes to the way it negotiates pricing for Federal Supply Schedule (FSS) 621 I, which is used to contract for almost $500 million in Professional & Allied Healthcare Staffing support each year.

In response to the VA Office of Inspector General (OIG) report, 08-02969-165, the VA will make changes to the Commercial Sales Practice (CSP) and price proposal format that will apply to both existing contract holders as well as companies pursuing a Schedule 621 I.

The VA’s new pricing methodology will involve two parts: a staffing fee and employee compensation rate.

  • Staffing Fee.  A fixed hourly fee for each individual labor category. This fee will include all cost related elements, including overhead, profit, insurance, etc, and will be the same across all geographic locations.
  • Employee Compensation. A flexible amount covering the fees paid directly to the service worker.  Vendors will be able to offer varied compensation rates based on geographic location or service worker qualifications.  Examples include: state-by-state pricing, regional pricing, and locality based pricing tiers. The fee and the rate will be added together to form the FSS net price for each covered location.

A significant change that could have a major impact on contractors is that the VA will require a single, fixed staffing fee across all labor categories and locations. Typically in government contracting, the burdens, such as overhead cost, general and administrative cost, profit, etc. are added to a labor rate as a percentage of the labor cost and thus vary category to category.  Consequently, your actual costs may differ from what you are allowed to bill and could cause you to lose money on certain categories.

The VA sought input from industry through October 4, 2013 and is still considering the feedback they received on the viability of the methodology.  You can read more about the VA’s proposed pricing methodology change at Stay tuned to the Coley Blog for the latest information as it is released from the VA.

As VA FSS and GSA Schedule contract specialists, contact Coley if you need help negotiating your pricing when the new methodology is released.

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